In the matter of Sundara [2015] NSWSC 1694

A lender appointed receivers to four borrowers and sold the secured properties. The sole director of each borrower claimed that the loans were farm debts and the lender contravened the Farm Debt Mediation Act by failing to give notice to permit mediation and hence its enforcement action and sale of the properties was void and claimed damages in excess of its debts. As three of the four companies were in liquidation, the director sought leave from the court to bring proceedings in the name of the companies and leave under section 237 of the Corporations Act in respect of the company not in liquidation.

The court found that only one of the borrowers had a solid case that it was a farmer (the other being wine producers not farmers) and it’s property a farm but that its claim against a registered purchaser for value of the property that has the benefit of indefeasibility, given it had no notice of the alleged wrongdoing, would face very substantial risks. The Real Property Act establishes a system of title by registration and a registration that results from a void instrument is effective, irrespective of the reason the instrument is void. The court refused leave, noting that the director could not provide an effective indemnity to protect the company, its creditors and liquidator against the risk of its claim failing. In relation to the other borrowers, the claims were found not to be solid or serious and in any case, the director was not in a position to offer a worthwhile indemnity in respect of the costs of the proceedings. The court refused leave.

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