MPM Civil Pty Ltd v Ammbar Pty Ltd
[2004] QSC 79
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- Unreported Judgment
- MPM Civil Pty Ltd v Ammbar Pty Ltd[2004] QSC 79
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MPM Civil Pty Ltd v Ammbar Pty Ltd[2004] QSC 79
MPM Civil Pty Ltd v Ammbar Pty Ltd[2004] QSC 79
SUPREME COURT OF QUEENSLAND
CITATION: | MPM Civil Pty Ltd v Ammbar Pty Ltd [2004] QSC 079 |
PARTIES: | MPM CIVIL PTY LTD |
FILE NO/S: | SC No 2258 of 2004 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 5 April 2004 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 31 March 2004 |
JUDGE: | Mackenzie J |
ORDER: |
|
CATCHWORDS: | CONVEYANCING – LAND TITLES UNDER THE TORRENS SYSTEM – MORTGAGES, CHARGES AND ENCUMBRANCES – POWERS AND REMEDIES OF MORTGAGEE – POSSESSION – RECOVERY UNDER ATTORNMENT OR DEFAULT CLAUSES – where work not paid for – whether mortgage to secure debt is valid – economic duress - whether illegitimate or unlawful threats – whether unconscionable conduct – whether leave to defend should be conditional Uniform Civil Procedure Rule 293 Clarke v Japan Machines Australia (No 2) [1984] 1 Qd R 421, cited Commonwealth Development Bank of Australia Limited v Kerr [2001] QSC 234, distinguished Eltran Pty Ltd v Westpac Banking Corporation (1988) 32 FCR 195, cited Glandore v Elders Finance and Investment Co Ltd (1984) 57 ALR 186, considered Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, considered |
COUNSEL: | G Radcliff for the applicant J B Sweeney for the respondent |
SOLICITORS: | Woods Hatcher for the applicant MacGillivrays for the respondent |
- MACKENZIE J:This is an application for judgment under UCPR 293. The parties, commendably, are desirous of having the matter move quickly. Potential procedural obstacles were set aside by the parties. The defence was filed by leave at the hearing and no point was taken about the application being made on short notice.
- The applicant is an engineering company which has undertaken work on a subdivision at Yeppoon for the respondent. There is no dispute that work of a value in excess of $500,000 has been performed. The applicant claims that the value of the work exceeds $1 million.
- Certification for a progress payment of about $580,000 was made. If a defect in certification alleged by the respondent does not affect its validity, subject to another issue concerning whether the money was immediately payable, there was a debt of about $580,000 then immediately due. The other issue was whether the respondent was entitled to withhold payment because of the absence of evidence that the subcontractors had been paid by the applicant.
- However, the real focus of the immediate argument was not the contract itself but a mortgage granted by the respondent in the applicant’s favour over the real property comprised in the development. The matters mentioned previously are more concerned with the argument that the mortgage was obtained by economic duress than with contesting the existence of an obligation to pay a sum of money to the applicant at some time, although the precise sum is in dispute.
- According to the applicant there was a fixed price contract, which provided for progress payments, entered into in June 2003 between the applicant and the respondent. It was formulated in discussions between Mr McKean and Mr Gallus, who was at that time a director of the respondent. Mr Gallus had agreed to purchase shares held by Mrs Richardson in late 2002. He remained a director until 27 October 2003 when he was removed by a shareholders’ meeting after the agreement to purchase the shares was never perfected.
- According to Mrs Richardson she had nothing to do with the business affairs of the company in the period when Mr Gallus was a director from December 2002 to 26 October 2003. She became aware in mid-October 2003 that work was being done on the stage of the development which is at the centre of these proceedings.
- On 9 November 2003 Mr McKean came to Mrs Richardson’s home and produced an invoice for in excess of $1 million which he said was due and owing. According to Mrs Richardson she explained that, until she had received the invoice, she was unaware that the work was being done, at least to that extent. She explained the arrangement with Mr Gallus and that she had taken back control of the company from him. Mr McKean said he wanted security for his debt. If it was not given he would wind up the respondent.
- Mrs Richardson says she assumed that what Mr McKean had said was correct. She said she was concerned that any attempt to wind up the respondent might trigger default in other mortgages and, in particular, one involving her home as collateral. (There is no evidence that Mr McKean knew of the possible consequential effects of a winding up of the company with regards to Mrs Richardson’s personal assets.) Mrs Richardson said that she did not understand the arrangements to which Mr Gallus had committed the respondent. Nevertheless, the description of the debt secured referred to the two claims which comprise the alleged indebtedness, that sum is acknowledged to be payable, and duty was paid on it.
- In the next week or so Mrs Richardson’s husband, who is a real estate salesperson, and Mr McKean discussed arrangements to keep the project going (since Mr McKean had threatened to stop work). On 17 November 2003 there was a letter from Mrs Richardson to Mr McKean suggesting possible strategies and saying that he was prepared to hold off winding up the respondent. At some time within the next few days, Mr McKean produced a mortgage for her to sign. She says she signed it as sole director of the respondent. She felt that she was under pressure of losing her home. Mr McKean said he would arrange for Mr Gallus to affix the company seal, which he still had in his possession. Not long after, Mr McKean asked her to execute the mortgage again because he was having trouble getting Mr Gallus to return the first one.
- There was evidence from Mr Richardson that he and his wife had discussed the situation in the days after Mr McKean’s initial approach for payment. Neither his nor Mrs Richardson’s evidence condescended to detail of what was discussed or what, if any, investigations were made. All Mr Richardson says is that they did not “fully understand how the situation had arisen”. Mr Richardson also had an extensive discussion with Mr McKean about arrangements that might be adopted.
- According to Mr Gallus who, through his company, was project manager and joint venture partner for the development project, gave evidence that in mid-November Mr Johnston, who was the contract superintendent, came to him with the mortgage signed by Mrs Richardson and asked Mr Gallus, who still had the company seal, to affix it. According to Mr Gallus, Mr Johnston told him that the intention was to use it to show to the Commonwealth Bank to obtain back-up finance and that there was no intention to enforce it. He did not affix the seal at once, but after talking to Mr Richardson, did so.
- There is no evidence that the respondent disputed the amount claimed in the period before the mortgagee was executed or in the period immediately afterwards. The mortgage reflects the figure claimed.
- On 3 February 2004 notice of exercise of power of sale consequent upon failure to pay the amount under the mortgage was served and no payments were made to satisfy the sum claimed. The following day a letter saying, amongst other things, that the solicitors for the respondent had not yet received instructions as to payment being due and payable on 31 January 2004 was sent. On 10 February 2004 a letter from the respondent’s solicitors records an undertaking to refrain from attempting to exercise any power of sale until 30 days from 10 February 2004. The suggestion that such an agreement had been reached was refuted in a letter from the applicant’s solicitors dated 13 February 2004.
- On 24 February 2004 solicitors for the respondent advised that the previous stage of the project was expected to be settled during that week and that, after settlement, refinancing of the project was imminent. The respondent was confident that funds would be available to satisfy the monies owing to the applicant in the near future. A request was made to extend the period within which the notice of exercise of power of sale was to be complied with until 18 March 2004. For reasons related to the time prescribed for filing a defence and the requirement that the defence must be filed before the summary judgment application could be finalised, the applicant said that it would commence proceedings but agreed not to seek judgment until after 18 March 2004. If the mortgage was discharged, the action would be discontinued.
- On 3 March 2004 a number of issues with respect to the validity or voidability of the mortgage, the appointment of the superintendent, the value and certification of works and breach of contract were raised by the applicant. It was alleged that the value of the works was only about $518,000. The results of the investigation by engineers engaged by the applicant are somewhat provisional. Some issues about the quality of the work were raised, which may reduce that sum.
- On 4 March 2004, a reply was sent pointing out that no complaint had been made previously about the circumstances in which the mortgage was entered into or about the contractual matters. On 8 March 2004 a letter contradicting the claim of defects in the execution of the mortgage was sent. On 9 March 2004 a letter from the respondent’s solicitors denied that, by not challenging the efficacy of the mortgage, the respondent had accepted the value of the work already done and that signing the mortgage was an unequivocal admission of the debt alleged in it. There was a denial of indebtedness exceeding about $500,000 and an assertion that the signing of the mortgage was only an acknowledgement of putting the applicant in the position of a secured creditor, not for the purpose of securing all debts under the contract.
- According to Mr Richardson, at 30 March 2004 there were nine pre-sales contracts valued at $2.2 million out of the 28 lot subdivision. There is no evidence as to when those sales are due to be completed. Correspondence and Mr Richardson’s affidavit suggest that there were ongoing negotiations with a financier which already had several mortgages in priority to the applicant’s. It was alleged that all mortgages with priority amounted to about $780,000. Mr Richardson also deposed that there were seventy lots available in the next stage. In his opinion, the market was continuing to rise.
- It was conceded that there was a question to be tried and that summary judgment should not be granted. However, it was submitted that the respondent’s defence is shadowy and that leave to defend should be conditional. It was submitted that delaying the applicant’s right to exercise the power of sale was equivalent to granting an injunction in respect of exercising the rights under the mortgage. It was submitted that Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 and Glandore v Elders Finance and Investment Co Ltd (1984) 57 ALR 186 required that a fund representing security for the debt must be paid into court or otherwise secured. Alternatively, at least a portion of the claim should be ordered to be paid into court.
- On behalf of the respondent, it was submitted that unconditional leave to defend should be given. Leave conditional on payment of the mortgage amount into court was equivalent to giving summary judgment because such an amount could not be met. It was submitted, that in addition, the allegations went to the root of the mortgagee’s entitlement to enforce the mortgage. In respect of the first point, reliance was placed on Commonwealth Development Bank of Australia Limited v Kerr [2001] QSC 234, a decision which in my view relates to its own facts. With regard to the second point, Clarke v Japan Machines Australia (No 2) [1984] 1 Qd R 421 and Eltran Pty Ltd v Westpac Banking Corporation (1988) 32 FCR 195 were relied on.
- The defence focuses on the allegations that the mortgage was procured by illegitimate threats and unlawful threats and that, in the alternative, the application of pressure to execute the deed was unconscionable conduct. One thing that cannot be overlooked is that, subject to any valid argument about the quality of the work done, work costed at over $500,000 in value has been done on the respondent’s behalf by the applicant. There is a certificate for $580,000 for part of the work that the applicant alleges has been done. The estimate by the respondent’s engineers for the whole of the work is $518,000 with the qualification previously referred to. The question whether the applicant is entitled to sell the property by exercising the power of sale under the mortgage is, as in Eltran, central to the litigation. There is a claim for recovery of the amount of over $1 million but as the pleading is framed it is contingent upon the validity of the mortgage. If the mortgage fails, the claim as a whole fails. There is no money claim independent of the mortgage. Conversely, if the mortgage is not satisfied, the power of sale may be exercised. The applicant’s position remains protected until the mortgage is set aside, although payment of monies which, on the face of it, represent the value of work done, is being withheld.
- The case in my view falls into a category where an order may be moulded to suit the circumstances of the particular case. It is true that, in terms of the contract, it is argued that the respondent may have been able to defer payment since subcontractors of the applicant remain unpaid and certification of the second amount is informal. But according to its solicitor, the applicant is being pressed for payment by its own creditors in relation to works performed by its subcontractors on the project.
- There is a certain circularity about those arguments but in the end failure of the respondent to finalise finance for the project is the most probable principal reason for non-payment of the debt. The fact that what appeared for several months to be a conciliatory approach with a view to paying its debts has dissipated, on the part of the respondent, into arguments which will delay payment tends to confirm that impression.
- On any view of the matter there is no reason to think that work of a value of at least $300,000 can reasonably be disputed. That estimate is probably unduly favourable to the respondent but an exact balance at this stage is impossible. I therefore propose to make leave to defend conditional upon payment of $300,000 into court or alternatively the provision of security in a form acceptable to the Registrar for that amount. The orders are as follows:
- I allow abridgment of the time for seeking judgment pursuant to rule 293.
- The application for summary judgment is refused.
- Leave to defend is granted conditioned upon the respondent defendant making payment of the sum of $300,000 into court or alternatively giving security in that sum in a form acceptable to the Registrar within 21 days of this order.
- Costs of the application are reserved.