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Interlocutory Injunction Applications | Mortgage Disputes | Genuine Dispute | Balance of Convenience

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Successfully obtaining an Interlocutory Injunction to Restrain the Exercise of a Power of Sale in a Mortgage Dispute

In a recent ruling by the Supreme Court of Queensland, our client successfully obtained an interlocutory injunction to restrain the respondent from exercising a purported power of sale over the applicant’s property. This case involved significant legal principles surrounding the exercise of mortgage powers, the general rule in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; [1972] HCA 74, and the balance of convenience factors considered by courts in interlocutory injunction applications.

The General Rule from the Inglis Case

The general rule governing the ability of a court to grant interlocutory injunctions in cases involving mortgage disputes was outlined in Inglis v Commonwealth Trading Bank of Australia. The High Court in Inglis established that, as a general rule, if a mortgagor seeks interlocutory relief to restrain the exercise of a power of sale, the mortgagor must provide security for the debt owed to the mortgagee. Specifically, under the rule, the applicant mortgagor must pay into court the amount of mortgage debt. This rule is designed to protect the mortgagee’s interests while the dispute is resolved.

Expectations to the General Rule in Inglis

However, Inglis also recognises exceptions to this general rule, particularly in circumstances where the mortgagor disputes the validity of the mortgage or the exercise of the power of sale. If there is a genuine dispute regarding the existence of the debt or the right to exercise the power of sale, the court may, in its discretion, allow interlocutory relief without requiring payment into court. That is to say, a mortgagor may obtain an interlocutory injunction to prevent their property being sold without having to pay the amount of the alleged debt into Court.

In the current case, the applicant, Mr Lloyd-Williams, disputed that the principal amount under a loan agreement was advanced. The applicant’s evidence indicated that no funds had been advanced under the loan agreement secured by the mortgage, meaning there was no debt to secure and, therefore, no legitimate right for the mortgagee to exercise the power of sale. This situation fell within the exception outlined in Inglis and was a key factor in the court’s decision to grant the interlocutory injunction. The mortgagee, James Slipper, did not file any affidavit evidence to show the Court that the principal amount under the loan agreement had been advanced.

Interlocutory Injunction Applications

Courts generally look at two issues in applications for interlocutory injunctions.

The first issue is whether there is a serious question to be tried. The Second issue is the balance of convenience.

Serious Question to be Tried

The Court must determine whether there is a serious issue to be resolved at trial. In this case, Mr Lloyd-Williams’ evidence was that there was no debt secured by the mortgage, and thus no legitimate power of sale for the respondent to exercise. The Court found this was a serious question to be tried.

Balance of Convenience

The Court in interlocutory injunction applications must weigh the balance of convenience, which involves comparing the harm that would be caused to the applicant if the injunction were refused against the harm to the respondent if the injunction were granted. Several factors may be relevant to deciding the balance of convenience in these sort of applications:

1. Risk of Prejudice to the Applicant: If the injunction were not granted, the applicant faced the risk of losing his home, with no possibility of reclaiming it should he ultimately prevail in the dispute. Additionally, the property, which had a value of up to $3 million, could be sold quickly in a forced sale, potentially at a lower price than it would fetch on the open market.
2. Risk of Prejudice to the Respondent: The respondent on the other hand, was not likely to face significant prejudice if the injunction were granted. The court noted that the respondent already had secured by way of its mortgage and there was a significant amount of equity remaining in the property. Therefore, granting an interlocutory injunction did not put the respondent’s security at risk.
3. Adequate Remedy at Trial: The court also considered whether the applicant would have an adequate remedy if the injunction were refused. In this case, the potential harm to Mr Lloyd-Williams, including displacement from his family home and the risk of losing the property permanently, was deemed irreparable if the injunction were not granted.

Outcome

Justice Ryan granted the interlocutory injunction, restraining the respondent from exercising the power of sale until the trial or further order. The balance of convenience favored the granting of the injunction without requiring payment of the principal amount of the alleged debt into Court as is often the case in accordance with Inglis. The significant equity in the property and the irreparable harm the applicant may suffer if the injunction were not granted were key factors during the hearing.

Conclusion

This case serves as an important reminder of the legal complexities involved in mortgage disputes, particularly when there is a challenge to the existence of a debt or the right to exercise a power of sale. The decision confirms the exceptions to the principle in Inglis in determining whether an interlocutory injunction should be granted to restrain the exercise of power of sale and the importance of the balance of convenience.

If you are facing a similar dispute regarding the validity of a mortgage or the exercise of a power of sale, it is crucial to seek legal advice as soon as possible. Aitken Whytes Lawyers has experience in acting for both mortgagees and mortgagors in these disputes.

Focused on Results

Mortgage disputes can be complex and challenging to navigate.

It is important to seek the advice of experienced commercial lawyers if facing a mortgage dispute. We can help you understand your rights and obligations, and work towards a resolution.

Aitken Whyte Lawyers team of skilled commercial litigation lawyers are well-versed in handling such disputes. We can provide you with the guidance and support you need to achieve a successful outcome.

Aitken Whyte lawyers can assist you with:

• all applications for urgent Court interlocutory orders; as well as
• any other civil or commercial dispute.

Office Location and Contact Details

Brisbane

Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000

Ph: 07 3229 4459
Fax: +617 3211 9311
E: enquiries@awbrisbanelawyers.com.au