Mortgagor cannot restrain sale of mortgaged property without paying debt into court

Original post can be viewed on Robert's BLOG here

There is a general rule that an injunction to restrain the exercise by a mortgagee of powers given by a mortgage will not be granted until the amount of the mortgage debt, if it is not in dispute, or the amount claimed by the mortgagee, if the amount is disputed be paid into court: see Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, 164-165. Walsh J said:

…if the debt has not actually been paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.

The rule applies even where a debtor raises claims for damages against a mortgagee. The reason for the rule is that the benefit of having security for a debt would be diminished if a debtor were allowed to prevent enforcement of a security until after the litigation of the damage claims had been completed: Jacobs, McCarthy & Neggo Injunctions: Law and Practice, [6.200].

The rule may be relaxed where the mortgagor’s proceeding involves an attack upon the enforceability of the security documents: Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 97 ALR 315, 319. In Town & Country the mortgagor sought relief against the mortgagee based on alleged misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (now s 18 of the Australian Consumer Law). The Full Court of the Federal Court, in considering the broad powers to grant an injunction under s.87 of the Trade Practices Act 1974 (see now s.243 of the Australian Consumer Law), said at 319:

As a matter of discretion the relaxation of such a requirement [the general rule] in this court usually would be restricted to cases where the allegations which ground the plea for the use of the court’s powers… are clearly arguable and not merely colourable and to cases which show an obvious nexus between the allegations of misleading or deceptive conduct in contravention of s 52 of the Act and the formation of the security document sought to be varied or rendered unenforceable by the exercise of those powers.

In a similar vein, Pincus J in Mainbanner Pty Ltd v Dadincroft Pty Ltd [1988] ATPR 40-896 said at 49,633:

In my opinion, it would, in general, not be correct to exercise that discretion in favour of an applicant in such a case such as this, merely on it being shown that there is a prospect, however, modest, of success on an allegation of oral misrepresentation. If that were so, the rule [the general rule] would be, in effect, reversed, and would be that where misrepresentation is alleged in such a way that one could not deny the seriousness of the question to be tried, and the applicant claims rescission, prima facie the contract the mortgagor and the mortgagee have made must be suspended.

It seems that the adoption of any such principle would be, in the long run, pernicious, because it would tend to destroy or weaken people’s confidence in such bargains and in the rights of holders of security.

The general rule arising from Inglis was applied recently in Yousha v Terziovski and others [2025] VSC 780 where a mortgagor in default sought an injunction to prevent the mortgagee selling mortgaged land below a price specified by the mortgagor. The mortgagor did not offer to pay the mortgage debt into court. Craig J rejected the mortgagor’s application. His Honour held that the general rule arising from Inglis applied because the mortgagor was seeking to fetter the mortgagee’s power of sale by imposing a reserve price and the mortgagor’s claims against the mortgagee did not give rise to a sufficiently strong “serious question” to fetter its rights as mortgagee in possession. The morgtagor was also unable to provide a security to support an undertaking as to damages.