In the case of Bosi Security Services Ltd v Wright [2013] WASC 431, in which the court granted an interlocutory injunction preventing the sale of land by receivers despite acknowledging that the applicants’ case under the Trade Practices Act and Australian Consumer Law was not a strong one and had obvious deficiencies.

Facts

The defendants in the matter were directors of a company, which was carrying out major property development in the Perth central business district. The company had entered into written agreements with two bank lenders, the plaintiff being the security trustee (Agreement). Pursuant to the Agreement, the lenders provided the company with a maximum loan of $202 million in return for the defendants personally guaranteeing the debt and giving security over their farm land.

The defendants defaulted on the Agreement and receivers were appointed under the mortgage to take possession of and sell the farm land.

The defendants brought an application seeking an injunction to restrain the sale of land at an urgent hearing held three days before a contract of sale of the land was to be executed. They claimed that the guarantee was void under the Trade Practices Act and Australian Consumer Law for various reasons including that the lenders had breached a contractual duty to the company and the defendants and had engaged in misleading and unconscionable conduct.

Decision

Justice Allanson of the Supreme Court of Western Australia noted the principles behind granting an injunction – including the need for defendants to show a sufficient likelihood or probability of success at the final determination to justify preserving the status quo until the trial. His Honour stated that, in this case, the plaintiff’s entitlement to sell land under a mortgage essentially depended on whether the defendants had any liability under the guarantee.

Allanson J rejected most of the arguments put forward by the defendants, except for the claim under the Trade Practices Act and the Australian Consumer Law which he noted had obvious deficiencies but could not be dismissed. 

On the balance of convenience argument Allanson J expressed the view that, as a general principle  damages are viewed as an inadequate remedy for the loss of land. The defendants had commenced proceedings against the plaintiff which had not yet been determined.  Therefore, if the farm was sold and the defendants’ case against the plaintiff was ultimately successful, the detriment that would have been suffered by the defendants outweighed the plaintiff’s lost opportunity to sell the land, as the plaintiff could sell the land at a later point in time for a comparable price. Therefore, even though the defendants had not demonstrated a strong case, they at least had a sufficient case to justify granting the injunction.

Comment

Whilst this decision highlights that courts have discretion to restrain receivers from exercising their powers to deal with property over which they have been appointed, it must be remembered that such applications are determined on a case by case basis. In general, courts are reluctant to restrain a receiver from exercising its powers without a strong case for doing so.