Perpetual Nominees Limited v Salad Express Pty Limited [2013] NSWSC 651

Supreme Court New South Wales

Medium Neutral Citation: Perpetual Nominees Limited v Salad Express Pty Limited [2013] NSWSC 651 Hearing dates: 7 May 2013 Decision date: 07 May 2013 Before: McCallum J Decision: Application for stay of execution of writ of possession refused Catchwords: POSSESSION - application for stay of writ of possession - refinance proposal - uncertainty as to whether borrower able to meet new lender's terms Category: Interlocutory applications Parties: Perpetual Nominees Limited (plaintiff) Salad Express Pty Ltd (first defendant) G Macri (second defendant) Macri Fruit Distributors Pty Ltd (third defendant) S Macri (fourth defendant) Representation: Counsel: Solicitors: P Reese, Bransgroves Lawyers (plaintiff) R Mitry, CK Lawyers (defendant) File Number(s): 2012/186995 Publication restriction: None

JUDGMENT - ex tempore 1HER HONOUR: Before the Court is an application for a stay of the execution of a Writ of Possession issued at the request of Perpetual Nominees Limited. 2The motion came before Latham J last week. I was informed that her Honour granted a stay only until today, ordering the defendant to serve an affidavit providing further information as to a refinance proposal outlined in the evidence before her Honour. 3The proceedings have an unhappy history. I accept without equivocation the plaintiff's submission that, to date, it has been generous in its approach to the enforcement of its security. 4In particular, leave to issue a writ was first obtained on 11 September 2012 after judgment had been entered against the defendant. The Sheriff executed that writ on 20 November 2012. Shortly afterwards, however, the plaintiff and the defendants entered into an agreement pursuant to which the defendant re-entered the premises on terms. The terms included that the defendant would pay monthly interest to the plaintiff for three months and would vacate the premises after the end of February 2013 if a refinance had not been obtained by that time. The defendant paid the monthly interest but did not give possession of the premises in accordance with that agreement. 5It must be acknowledged that there is a body of information before the Court suggesting that the defendant has not been dilatory in its efforts to obtain refinancing. The difficulty seems to be whether that is feasible. 6Extensive negotiations were conducted with a first financier, LM Investment Management Limited. As late as 31 January 2013, the defendant anticipated obtaining that refinance within seven days. However, that did not eventuate. Mr Mitry informed me from the Bar table that that was due to difficulties encountered by LM Investment and nothing to do with any outcome of their due diligence in respect of the defendant. Whilst it is not appropriate to accept such assertions from the Bar table in place of evidence, I accept Mr Mitry's assurance that the position of LM Investment is a matter of public record. On that basis, I do not draw any adverse inference concerning the defendant's financial position on the strength of the fact that those first loan negotiations fell through. 7Further attempts to obtain refinance from National Australia Bank evidently did fall through due to the defendant's failure to meet the bank's terms. However, as Mr Mitry observes, that bank is an institutional lender more likely to be subject to stricter lending constraints than some lenders. 8Most recently, the material set out in the affidavit filed in response to Latham J's order reveals negotiations with an entity which appears to be a mortgage broker, called Pacific Credit Group Holdings Pty Limited. Correspondence from Pacific suggests the possible and conditional availability of funds in the sum of $4.7 million against security valued by the directors of the defendants at a total of $11.5 million, the funds evidently being likely to be available, or possibly available, on a loan to value ratio of 40 percent. 9Troublingly, however, later material in the evidence suggests, for reasons more fully canvassed in argument this afternoon, that I should disregard $4.5 million of that security and, so far as today's application is concerned, approach the matter on the basis that the defendants would need to borrow something in the order of $4.3 to $4.4 million against security which has an indicative sales opinion (not a valuation) of $6.9 million to $7 million, taking the borrowing to a loan to value ratio of 65 percent or roughly thereabouts. 10The material before me suggests that it is possible the broker Pacific Credit Group would be able to settle a loan on that basis, but I have to say that there does appear to be a measure of speculation and optimism in that respect. 11Against those concerns, are the following considerations: the fact revealed in the evidence of the defendants that the security premises are being successfully operated as a bowling alley and generating important income for the defendants, and that the premises have been the subject of an extensive and expensive fit-out, with the attendant risk of waste of that asset or investment were the plaintiff to go into possession again immediately; the natural reluctance of the Court to put the kibosh on an operating business if there is some reasonable prospect of refinance and the fact, very fairly conceded on behalf of the plaintiff, that at present it does not appear that the plaintiff's equity is being eroded, there evidently being enough security at least to meet current outstandings and an offer on the table to continue to meet monthly interest and, indeed, to pay that amount in advance. 12I am not satisfied that it is appropriate, against the evidence I have briefly summarised under constraints of time, to grant a further stay of the execution of the writ. However, I am satisfied that a fair way of meeting the interests of both the plaintiff and the defendants would be, as suggested during argument, to order that the writ lie in the office until the end of May (which, it is suggested, may be enough time for the defendants to complete the refinancing) on two conditions. One is that the plaintiff be at liberty now to re-schedule the execution of the writ for shortly after that date. The second is that the defendants continue, as they have previously done, to pay monthly interest. That interest should be paid in advance, as offered in open correspondence by the defendants. On those conditions, the plaintiff stated that it would not oppose that course. 13Upon the defendant making payment of interest as accrued for the months May 2013 and June 2013 to the plaintiff within seven days of today, I make orders 1, 2 and 3 in the document signed by the parties, which I will initial and place with the papers.