Property developer Warren Thompson and his corporations were involved in litigation over several years, seemingly as a result of the Global Financial crisis. Warren Thompson was apparently made bankrupt as a result of being unable to meet his obligations to lenders.
The culmination of the litigation occurred in August 2013, when a dispute landed in the Supreme Court over luxury Toorak Road mansion Towart Lodge, which is sprawled over 165 squares and features five upstairs bedrooms with marble ensuites, its own cinema, a wine cellar with room for 1008 bottles and a six-car garage.
In Thompson v National Australia Bank Ltd [2013 VSC 400], the owner of Towart Lodge, Amanda Thompson, the wife of Warren Thompson, sought an injunction to restrain the National Australia Bank from taking possession of the property and selling it as mortgagee.
Photo: obtained from www.realestate.com.au
The Bank claimed that Amanda Thompson defaulted on the mortgage in 2012 owing over $8 million. By July 2013, with interest, the debt had grown to nearly $10 million.
On 9 July 2013, Mrs Thompson successfully sought a temporary injunction preventing the NAB from selling the property.
The dining room at Towart Lodge.
The basis for the injunction was that Mrs Thompson had leased the property for $8000-a-week to Carlton Football Club board member Raphael Geminder and his wife, Fiona Geminder (the daughter of the late Visy chairman and billionaire Richard Pratt) for 2 years.
At some point after Mrs Thompson's default, the Geminders' rent was paid directly to the bank.
Mrs Thompson claimed that the Geminders had also agreed to buy the property for $8.5 million, with an option for her to buy it back at the end of the lease. The judgment of Elliott J does not make it clear how the 2 year lease and the purchase and buy back agreement were to sit together.
Mrs Thompson was trying to negotiate a deal with the NAB that once the property was sold, the $8.5m would be paid in settlement of all the money owed to the NAB.
The evidence before the court was that by July 2013, the Geminders no longer wanted to buy the property. They claimed there was no concluded agreement about the purchase.
As a part of her application for the injunction, Mrs Thompson also sought to enforce the purchase and buy back agreement against the Geminders.
In refusing to extend the injunction beyond 5 August 2013, Justice Elliott said there was a real risk, particularly in relation to the value of the property.
Clearly, the property is a prestige property and there is a significant risk of the value of the property decreasing if an injunction were granted until the trial and determination of the proceeding [including any possible appeals].
At the time of the hearing, the bank had a buyer ready and willing to purchase the property for $8,550,000.
I accept that there must be a real risk that, if the sale to the alternate purchaser is not allowed to proceed in the near future, that prospective purchaser may not be either able or willing to acquire the property in the event that [Mrs] Thompson were unsuccessful at trial.
The only prejudice to Mrs Thompson was the loss of the option to buy the property back. Elliott J concluded that there was no evidence to show she would be able to do that in any event, given that Mrs Thompson and Warren Thompson appeared to be in a perilous financial position.
The case is confirmation that the high end of the real estate market is still in a state of malaise in Melbourne, despite there having been some mild boom conditions throughout 2013 and early 2014.
The case is also confirmation that the Supreme Court will usually be reluctant to restrain a mortgagee from acting on its rights to sell a property after default by a borrower unless the mortgagee's position can be secured in some other way (such as payment of the amount owed under the mortgage into court).