Beulah Matumbi Pty Ltd & Ors v The Trustee Company (PTAL) Limited as custodian of the Balmain MMT Mortgage Trust & Ors [2016] NSWSC 206

Supreme Court New South Wales

Medium Neutral Citation: Beulah Matumbi Pty Ltd & Ors v The Trustee Company (PTAL) Limited as custodian of the Balmain MMT Mortgage Trust & Ors [2016] NSWSC 206 Hearing dates: 6 March 2016 Decision date: 06 March 2016 Jurisdiction: Equity - Duty List Before: Black J Decision: Interlocutory injunction granted for a short period. Catchwords: PROCEDURE — Interlocutory injunctions — where Plaintiffs sought interlocutory injunction preventing a mortgagee and receivers appointed by the mortgagee from taking possession of property – whether there is a serious question to be tried – whether balance of convenience warrants grant of interlocutory relief. Legislation Cited: - Australian Securities and Investments Commission Act 2001 (Cth) - Real Property Act 1900 (NSW) Cases Cited: - Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 Category: Principal judgment Parties: Beulah Matumbi Pty Ltd (First Plaintiff) Amanda Helen Mbakwe (Second Plaintiff) Samuel Chinemema Mbakwe (Third Plaintiff) The Trustee Company (PTAL) Limited as custodian of the Balmain MMT Mortgage Trust (First Defendant) David Allan Ingram (Second Defendant) Blair Alexander Pleash (Third Defendant) Representation: Counsel: D C Eardley (Plaintiffs)

Solicitors: PMF Legal (Plaintiffs) File Number(s): 2016/71956

Judgment – ex tempore (revised 8 march 2016) 1. By Summons filed by leave today, Sunday 6 March 2016, the Plaintiffs, Beulah Matumbi Pty Ltd ("Company"), Ms Amanda Mbakwe and Mr Samuel Mbakwe seek a range of relief, including both relief on an interim basis and on a final basis, and including injunctive relief. The application has proceeded on an ex parte basis, and has been heard by the Duty Judge on a Sunday, because it has arisen out of events which occurred on a Saturday, to which I will refer below. In drawing attention to those events, I do not disregard that the matter also has a much longer antecedent history, to which I will also refer below. Attempts were made by the Plaintiffs to give notice to the Defendants' solicitors of this application, after it was first mentioned and prior to it going to hearing today, and also to the Second and Third Defendants ("Receivers"), who are receivers appointed by the First Defendant, The Trustee Company (PTAL) Ltd ("PTAL") as custodian of Balmain MMT Mortgage Trust. Those attempts were not successful. 2. Mr Eardley, who appears for the Plaintiffs, has made comprehensive submissions, which included a detailed identification of the arguments which could be put against the Plaintiffs in respect of the relief which they have sought. That was an appropriate course, in an ex parte application, and the arguments which Mr Eardley identified as arguments that could be put against the relief sought by the Plaintiffs will be apparent from the transcript. I will not seek to record them all, in a judgment delivered ex tempore in a duty application of this kind. 3. By way of a broad outline of the background, the Company operates a child care centre at Randwick, and Ms Mbakwe is its director and sole shareholder. That child care centre has been operated for nearly twenty years, since March 1996. It is operated from a property owned by Ms Mbakwe and her estranged husband, Mr Mbakwe, at Randwick. The First Defendant is the lender in respect of that property, and the Second and Third Defendants are receivers appointed by the lender. Ms Mbakwe's evidence is that the child care centre has on average about 23 children attending each day, whose parents will normally drop their children off early in the morning en route to work. Mr Mbakwe expresses understandable concern that, if the child care centre is unable to open tomorrow, in circumstances to which I will refer, then it is likely that there will be considerable inconvenience to the parents, and potentially distress to the children, as well as significant damage to or possibly destruction of the business of the child care centre. 4. It appears that Ms Mbakwe and her estranged husband borrowed from PTAL in 2008, and they fairly accepted, in this application, that they are in default in repayment of the principal due under that facility and in several other respects. There have been other proceedings, both in this Court by way of possession, and in the Family Court of Australia in respect of these events, and attempts have been made by Ms Mbakwe and the Company to refinance the relevant mortgage. There is in evidence a loan offer dated 1 February 2016, but significant difficulties appear to have arisen in implementing that loan offer, by reason of difficulties in dealing with the position of the trustee in bankruptcy for Mr Mbakwe, or the former trustee in bankruptcy for Mr Mbakwe, in respect of the property. It appears that Mr Mbakwe is a discharged bankrupt, so that no question of any cause of action he has vesting in the trustee arises, but it appears that the trustee retains possession, or claims to retain possession, of rights in respect of the relevant property. 5. Ms Mbakwe's affidavit refers to a suggested arrangement which had been reached with Mr Mbakwe's trustee in bankruptcy to compromise claims in respect of the bankruptcy, which Mr Eardley fairly notes is likely to be contested by the trustee. It appears that attempts were made to refinance the property, which were not successful by reason of difficulties in respect of the security arrangements, but a new financier, which provided the offer to which I referred above, has accommodated some concerns previously identified by the trustee in bankruptcy for Mr Mbakwe in that regard. Ms Mbakwe refers to information provided by the solicitor for PTAL to her solicitor at the Family Law Court proceedings on 17 November 2015, to the effect that nothing would be done to act on a sale of the property before that matter was heard. It is not entirely clear whether that matter is still ongoing, in circumstances that orders have now been made in it by consent. Those orders are significant for present purposes, although the Company is not party to them, because they included a provision that Ms Mbakwe undertook to the Family Court of Australia that, inter alia, if the mortgage was not discharged on or before 26 February 2016, she would vacate the relevant property and not take any step to obstruct or delay or prevent a sale of the property by PTAL or the Receivers. It is apparent that Ms Mbakwe has not vacated the property, although Mr Eardley points to the continuing attempts to refinance the property to which I have referred, and there is a real question whether the commencement of proceedings by Ms Mbakwe, and indeed by the Company which is under her control, may be inconsistent with the undertaking not to take any step to obstruct or delay or prevent the sale of the property. No attempt has been made, so far as the evidence goes, to vary those undertakings, including to extend the time for Ms Mbakwe to vacate the property. 6. Mr Eardley draws attention to the fact that the Company is not party to those proceedings. However, it should be noted that the Company is under Ms Mbakwe's control, and to the extent that it is not party to earlier proceedings in this Court, or indeed in the Family Court of Australia, it was plainly open to Ms Mbakwe to cause it to intervene in those proceedings, if it wished to do so. 7. Completing the chronology of events, at least in the brief version which I set out for the purposes of this judgment, the orders made by the Family Court on 10 December 2015 contemplated that Mr Mbakwe's trustee in bankruptcy would negotiate with Ms Mbakwe in good faith to reach an agreement to enable refinancing the mortgage with PTAL. As I noted above, it appears that such an agreement has ultimately not been achieved. In the last week, there has been correspondence between the solicitors for Mr Mbakwe's trustee in bankruptcy and Ms Mbakwe's solicitor, and also between the solicitors for PTAL or the Receivers and Ms Mbakwe's solicitor. In particular, on 2 March 2016, the solicitors for PTAL, or the Receivers, identified an asserted breach of Ms Mbakwe's undertaking to the Family Court to vacate the property by 26 February 2016, to which I have referred above, and indicated that PTAL was prepared to allow Ms Mbakwe until 4 March 2016 to discharge the mortgage and, failing that, PTAL and/or the Receivers "will immediately commence steps to obtain vacant possession of the company property". By a further letter dated 4 March 2016, the solicitors for PTAL again referred to the Family Court's orders dated 10 December 2015, again asserted a breach of those orders and of Ms Mbakwe's undertaking to the Court to vacate the property and a failure to repay the debt and noted that "for the avoidance of any doubt, [PTAL] may take steps to enforce the securities without further notice". 8. The Receivers did indeed take steps, of a kind which they and PTAL had not identified in that correspondence, to enforce PTAL's securities. It appears that, on mid Saturday, 5 March 2016, representatives of the Receivers and security persons attended the child care centre and changed the locks, and indicated that they would put up signs that the property was to be sold as a mortgagee sale. Ms Mbakwe's evidence is that those locks have now been changed and she cannot get in, and that there are security persons present to prevent her changing the locks back. That matter is of some significance, as I will note below, given that the premises are operated as a child care centre and given Ms Mbakwe's evidence as to the circumstance that children are often dropped off in the early mornings, commencing tomorrow, Monday 7 March. 9. With that factual background, Mr Eardley identifies, in particular, a claim brought by the Company, although he has taken me to other aspects of the position, by way of full disclosure, including the attempts made by Ms Mbakwe to refinance which, as I have noted, have not been successful to date by reason of the structural difficulties involved in dealings with the trustee in bankruptcy. Before turning to the way in which Mr Eardley puts the claim, I should note that, in determining whether to grant an interlocutory injunction of the kind sought by the Company, I should apply the principles set out by the High Court of Australia in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 at [65], to which Mr Eardley draws attention. In order to obtain interlocutory relief, the Company, and indeed the other Plaintiffs, must demonstrate a prima facie case or serious question to be tried as to its entitlement to the relief sought at the final hearing, but also that damages would not be an adequate remedy, so as to warrant the grant of injunctive relief, and that the balance of convenience favours the grant of an injunction on an interlocutory basis. The considerations whether the applicant has a seriously arguable case for final relief and the balance of convenience are interrelated. The greater the extent to which the balance of convenience favours one course over another, the less strong a case for final relief might be required to justify an injunction. 10. The primary case put by the Company is that it has a lease over the relevant premises. It concedes that that lease is unregistered, and would therefore take effect only in equity and not as a registered lease under the Real Property Act 1900 (NSW). The evidence on which the Company relies is contained in paragraphs 57 to 59 of Ms Mbakwe's affidavit, where she indicates that the child care centre is owned and operated by the Company; the Company has never had a written lease over the child care centre; and the mortgage repayments for the child care centre are paid by the Company. Mr Eardley fairly, and correctly, concedes that that evidence provides a very slender basis for the characterisation of any such arrangement as a lease. Mr Eardley also points out, in fairness, that the affidavit has been prepared under circumstances of extreme urgency, and has had to cover a significant amount of material, by reason of the complexity of the background, and the Plaintiffs' duty of disclosure, and that may well have constrained the extent of evidence which could be led as to this matter. It also seems to me that, at best, the arrangement by which the Company occupies the premises could potentially be characterised as an unregistered lease, although the evidence as it stands does not indicate how that lease came into existence, or possibly as a licence over the premises, or possibly as an informal arrangement by which the Company was simply permitted to occupy the premises, on the basis that it paid the relevant mortgage repayments. 11. It also seems to me that, even if I were to assume that a serious question to be tried were established as to a lease, or alternatively a licence, the Company would face formidable obstacles in seeking to obtain interlocutory relief on that basis. The most significant, and a very substantial, obstacle would be delay. There have been proceedings on foot for a considerable time in this Court, and in the Family Court of Australia, and the Company appears to have taken no step to actively involve itself in those proceedings, so as to assert the existence of the rights which it now asserts, or to protect those rights. The Company must have been aware of those proceedings, because Ms Mbakwe was party to them, and it would know what she knew, as its sole director. It seems to me that that delay would be a significant, and possibly an overwhelming, obstacle to the grant of interlocutory relief at this late stage. 12. In the course of submissions, Mr Eardley also referred to, but fairly put in a somewhat qualified way, the possibility that dealings with the Receivers or with PTAL, including the conversation in respect of the assertion of rights that took place in the course of the Family Court proceedings, to which I referred above, may have given rise to an estoppel or some other form of limitation on PTAL's ability to exercise such rights. Mr Eardley also fairly acknowledged the fact that it would be put, against that proposition, that PTAL by its solicitors has since indicated the intention to exercise such rights. It seems to me to be preferable, given the conclusion which I have reached on other grounds, to simply note that issue and not to determine it, even on a preliminary basis, at this point. 13. Mr Eardley also referred, however, to the circumstances in which this matter has come before the Court, and it seems to me that there is significant force in the Company's and Ms Mbakwe's complaints in that respect. No doubt, this matter has had a long history, and it may seem, from the evidence presently before the Court, that there have been extended delays in an attempt to refinance the premises by Ms Mbakwe. Having said that, by letter dated 2 March 2016, PTAL, by its solicitors, provided only the most general indication that it would take steps to obtain vacant possession of the property, without indicating what they might be. By the further letter dated 4 March 2016, it again noted that PTAL "may take" steps to enforce its securities without further notice. 14. Mr Eardley submits, and it seems to me that there is a significant likelihood, that by 4 March 2016, PTAL and/or the Receivers and their solicitors must have had more in mind than merely that it "may" take steps to enforce its securities, in circumstances where the next day the Receivers had changed the locks with the assistance of security personnel. It seems to me that each of these letters was, at best, incomplete in terms of providing any fair advice to Ms Mbakwe or the Company as to what would occur on that day. It seems to me that the incompleteness of those letters is the more regrettable given that it must have been apparent to PTAL and the Receivers that the Company was not, for example, operating a milk bar or a coffee lounge, where it was a matter of mild inconvenience to its customers if it was unable to open for business on the Monday. It was, instead, operating a child care centre, where the circumstances of not opening, at the time that parents and children arrived, when parents were en route to their work, was capable of causing great inconvenience and potentially distress to those parents and to the children and significant damage to the Company. 15. It seems to me that, in those circumstances, the Company does have at least a seriously arguable case that the circumstances of exercise of rights by PTAL and the Receivers are unconscionable at general law, or may contravene the statutory provisions relating to unconscionability either under the Australian Securities and Investments Commission Act 2001 (Cth) or the credit legislation. It may be that pointing to such a contravention will deliver little ultimate benefit, to Ms Mbakwe or to the Company, because it could readily be addressed by engaging in a more transparent and more orderly process by which PTAL and the Receivers allowed the Company a fair opportunity to give notice to parents of the circumstances which had affected it. However, the fact that a contravention of those provisions, as to which a seriously arguable case has been established, may be cured, does not mean that it does not exist. 16. It seems to me that, so far as the balance of convenience is concerned, the present position is capable of causing significant prejudice to the Company, and significant prejudice and inconvenience, at the least, to members of the community. The difficulties which will arise from the manner in which this has occurred could have been avoided by fair notice to the Company of what was likely to occur, which made clear that the Receivers would retake possession of the premises on a particular date, so as to allow the Company to give notice to parents that that would occur, and an opportunity for them to place their children in care elsewhere, or the Company to obtain temporary premises to offer such care. That notice was not given, and in those circumstances the balance of convenience seems to me to favour the grant of interlocutory relief, at least for a short period. 17. Mr Eardley has fairly drawn attention to the fact that PTAL, and the managed investments scheme for which it is trustee, may suffer disadvantage from a continuance of the lending arrangements, in circumstances where that managed investments scheme is presently the subject of a winding up. It does not seem to me that that disadvantage weighs heavily in the balance of convenience, where the steps which would have been required to give fair notice and allow an orderly closure of the child care centre would not have been difficult to undertake. 18. In these circumstances, albeit on somewhat narrower grounds than those for which the Company initially contended, I am satisfied that injunctive relief should be granted for a short period. It is possible that, having regard to the basis on which I have reached that view, that injunctive relief would not be continued for a long period, but that is a matter that can be addressed when the matter is returned before the Court. 19. I make orders in accordance with the short minutes of order as amended by me and placed in the file. I grant liberty to apply on one hour's notice specifying the relief sought.