Abraham v Abraham

Relevant legal principles 8The principles to be applied by the court in determining whether to order removal of a caveat under s 74MA are the same as those the court applies in determining whether a caveat should be extended under s 74K. In each case, the question is whether an interlocutory injunction would be granted to protect the interest claimed in the caveat. That, in turn, raises two questions. The first is whether there is a serious question to be tried concerning the interest claimed in the property that is sought to be protected. The second is whether the balance of convenience is in favour of maintaining the caveat: see Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465 at [6] per Brereton J; Lew v Bluescope Distribution Pty Ltd [2010] NSWSC 794 at [5] per Pembroke J; Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 at [19] per Campbell JA. Although the application is brought by the party seeking to remove the caveat, it is the caveator who bears the onus of proving that there is a serious question to be tried and that the balance of convenience favours a continuation of the caveat: Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465 at [6] per Brereton J. 9It is not possible to list all the factors relevant to the balance of convenience. Each case must be considered on its own merits. However, three particularly important factors should be mentioned. The first is whether the caveat prevents the registered proprietor or a person whose title is clearly superior from the legitimate exercise of rights in respect of the land, such as the rights of the registered proprietor to sell or refinance the land in appropriate circumstances or the rights of a first mortgagee to exercise its security: Warner v Andrews [2011] NSWSC 956 at [11] per Brereton J. The second is whether removal of the caveat will derogate from the caveator's claim. In relation to this factor, Brereton J said in Warner v Andrews [2011] NSWSC 956 at [11]: [I]t is a rare case indeed, if there is any, that a valid caveat will be removed for reason of balance of convenience, if that will result in a derogation of priority of the caveator's claim ... A third "highly relevant" factor is the adequacy of the undertaking as to damages: Szanto v Bainton [2011] NSWSC 278 at [3] per White J. 10In applying these principles to this case, however, it must also be remembered that what the first defendant in effect seeks to do is vary consent orders already made by the court - that is, the orders permitting the plaintiff to lodge the caveat under s 74O of the Act in return for his undertaking as to damages. 11In Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46, McLelland J said: The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. As his Honour went on to point out, in applying that overall principle, rules of practice have been developed in accordance with which the court will generally act in particular circumstances. One such rule of practice is that, where interlocutory orders of a substantive nature have been made following a contested hearing in contemplation that they will operate until the final disposition of the hearing, the court will not generally vary those orders unless it is satisfied that circumstances have changed so as to justify the variation or the applicant has discovered new material which could not reasonably have been put before the court at the hearing of the original application. 12The position is not as clear where, as in this case, the original interlocutory orders were made by consent. One question that arises in relation to consent orders is whether they operate as an agreement between the parties and, if so, whether that agreement restricts the circumstances in which the orders can be varied subsequently. As Lord Denning MR explained in Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189: It should be clearly understood by the profession that, when an order is expressed to be made "by consent," it is ambiguous. There are two meanings to the words "by consent." ... One meaning is this: the words "by consent" may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words "by consent" may mean "the parties hereto not objecting." In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties. In the case of interlocutory consent orders which are expressed to operate "until further order", it is clear that the parties must be taken to have agreed that it was open to either of them to make an application to vary those orders. But even in the absence of those words, the parties will normally be presumed not to have intended to displace the court's power to vary interlocutory orders. As Woodward and Foster JJ said in R D Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389 at 390-1: It is convenient to begin by considering whether there was in fact a binding contract between the parties expressed by the consent order, or whether this was one of the frequent cases in which an interlocutory order is made on the application of one party with the other party or parties consenting - in the sense of not objecting - but without there being any intention of entering into a formal and binding contract; see Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189; 1 All ER 377 at 380. Courts are very familiar with the circumstance in which parties reach an agreement, either after a good deal of negotiation or perhaps quite readily, about the orders that should be made for the future conduct of an action. We would be most reluctant to reach any conclusion which tended to inhibit the ready consent of practitioners to the making of sensible arrangements in such cases. It would normally be understood by them that, if circumstances arose which made it necessary, they would be entitled to apply to the court for a variation of the orders to which they had consented. No doubt the fact of their consent would be a relevant consideration for the court in deciding whether to order a variation, but it would be understood by all that the ultimate decision was in the court's hands. See also Short v Crawley (No 42) [2009] NSWSC 1110 at [55] per White J. 13Another question that arises in relation to consent orders is whether the normal rules of practice apply to applications to vary them. In Council of Shire of Warringah v Industrial Acceptance Corporation (Supreme Court of New South Wales, 22 November 1979, unreported), McLelland J said: The circumstances in which an interlocutory injunction may be granted or an interlocutory undertaking given may differ widely. However, where the parties agree upon the manner in which an application for interlocutory relief is to be disposed of and relief is granted pursuant to that agreement, whether by way of injunction or the acceptance by the Court of an undertaking, without any contest, any subsequent application for the variation of that relief must be approached on the basis of what justice requires as between the parties. In the normal case this will depend in large measure upon what was in their mutual contemplation at the time the original relief was agreed to. ... The obligation under the form of undertakings (both to the Court and to the other party) agreed to in each case is expressed to endure "until further order of the Court". In the absence of any countervailing circumstances and of any reference to the final hearing of the proceedings, I take this phrase to express the mutual contemplation by the parties that at some time pending the final hearing of the proceedings the question of whether the second defendant should continue to be restrained from selling or completing any contract of sale of its land might properly be submitted for determination by the Court, such determination to supersede the agreed undertakings. 14Whether the words "until further order" are sufficient to displace the normal principles that apply to the variation of substantive interlocutory orders is doubtful following the decision of the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170. In that case, Philip Morris had applied for an interlocutory injunction. After 5 days of hearing and when the application was still part heard, Adam P Brown offered an undertaking "pending the hearing and determination of the action or until further order" which Philip Morris accepted. Later, Adam P Brown applied to vary the undertaking it had given. Smithers J permitted it to do so. That decision was reversed by majority of the Full Court following an appeal by Philip Morris. Adam P Brown then appealed to the High Court. The High Court reversed the Full Court's decision. It did so on the ground that the circumstances did not warrant interference with the trial judge's discretion by the Full Court. In doing so, Gibbs CJ, Aickin, Wilson and Brennan JJ stated the applicable principle in these terms: Just as an interlocutory injunction continues "until further order", so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust ... Of course, the changed circumstances must be established by evidence ... (at 178). 15This passage suggests that the normal rules of practice applying to a variation of substantive consent orders (which require a change in circumstances or the discovery of new material) apply even in the case of consent orders expressed to apply "until further order". It is true that the orders in Adam P Brown were expressed to apply "pending the hearing and determination of the action or further order", whereas McLelland J's comments were concerned with a case where there was no reference to the final hearing. However, in my opinion, the two cases are not distinguishable on that ground. The plurality in Adam P Brown, in stating the principle in the terms that it did, made no reference to the fact that the orders were expressed to be orders pending the determination of the proceedings (or further order). Moreover, as the plurality pointed out, interlocutory orders generally are implicitly, if not explicitly, made until further order. Consequently, it is difficult to read a great deal into the fact that the parties have made explicit what is already implicit. 16It is clear, however, that the undertakings given in Adam P Brown were given in order to resolve what had become a lengthy contested interlocutory hearing. The parties must have intended the compromise they had reached to continue to apply until the disposition of the proceedings; and in those circumstances it is to be expected that the compromise the parties reached would be treated in the same way as an order of the court following a contested hearing. That explains why the plurality stated the relevant test in the terms that it did. I do not, however, read the plurality's judgment as rejecting the general approach adopted by McLelland J - namely, that whether it is in the interest of justice to vary consent orders depends in large measure on what was in the mutual contemplation of the parties at the time the original orders were made. Where no compromise is involved and a party simply consents to interlocutory orders, it can be more readily be inferred that that consent was not intended to operate for an indefinite period of time.

17The first defendant did not approach the current application as an application for the variation of an interlocutory order already made. Rather, he approached the application on the basis that it was for the plaintiff to establish that there was a serious question to be tried and that the balance of convenience favoured a continuation of the caveat. He accepted that there was a serious question to be tried but submitted that the balance of convenience did not favour a continuation of the caveat. Consequently, the first defendant did not seek to lead any evidence concerning the circumstances in which he had agreed to an order being made under s 74O of the Act. Nor did he seek to justify the orders he now seeks by explaining how circumstances have changed since the time the order under s 74O of the Act was made. Nonetheless, in my opinion, he should be permitted to raise the issue now. 18As I have said, the order was made under s 74O by consent by the Registrar without any form of hearing. The order was expressed to operate "until further order". Consequently, there was clearly no agreement between the parties that a further application concerning the caveat would not be made before the final determination of the proceedings. The circumstances of the case also suggest that it was not in the mutual contemplation of the parties that the normal rule relating to the variation of interlocutory orders would apply - that is, that there must be a change in circumstances or new material discovered since the original order was made before the order may be varied. The consent orders do not appear to have been made to compromise what would otherwise have been a contested hearing. For reasons which I will explain, it is difficult to see that the plaintiff was ever entitled to prevent the sale of the Clemton Park property. It may therefore be inferred that the first defendant was willing to consent to a continuation of the existing state of affairs simply to avoid incurring the costs of a contested interlocutory application. I do not think, however, that it can be inferred from his consent that he was willing to consent to a continuation of that state of affairs indefinitely, even where there has been no relevant change in the circumstances or no new evidence discovered. 19Mr Simpkins SC, who appeared for the first defendant, made three main submissions in support of an order under s 74MA. First, he submitted that the current state of affairs put the plaintiff in a better position than he could ever be in following a final hearing. Even if the plaintiff establishes that he has an interest in the Clemton Park property, the first defendant would still be entitled to an order under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of statutory trustees for the sale of the property. The orders sought by the first defendant simply seek that result now. Second, and following on from the first point, Mr Simpkins SC submitted that removal of the caveat and the sale of the property would not derogate from the plaintiff's claim. The net proceeds of sale would be paid into court or a joint account controlled by the parties and would be available to meet any judgment that the plaintiff obtains. Third, Mr Simpkins SC submitted that a continuation of the existing state of affairs would cause the first defendant hardship. The plaintiff has excluded the first defendant from the property and asserts a right of exclusive possession but pays the first defendant nothing for that right. Moreover, the first defendant is liable for substantial mortgage repayments and the evidence suggests that he will not be able to meet those payments indefinitely and that he will not be able to recover the payments he is required to make, or any other loss he may suffer if the property is not sold, from the plaintiff in accordance with the undertaking as to damages. The plaintiff is 69 years old. He receives a pension from Centrelink and approximately $1,000 per month from a superannuation fund. He has no other assets of significant worth and clearly would not be able to pay any significant amount in accordance with the undertaking. 20In response to these submissions, Mr Bolger, who appeared for the plaintiff, submitted that the caveat had been in place for some time, that there had been no change in circumstances which would justify its removal now and that any delay in having the case heard was caused by the first defendant. He also submitted that no weight should be put on the first defendant's liability to pay mortgage repayments because the mortgage in question was not the mortgage granted to finance the purchase of the property. Rather, it was a further mortgage that the first defendant had taken out over the property without the plaintiff's consent after the original mortgage had been repaid. The result is that the plaintiff's claim in respect of the Clemton Park property is substantially greater than the net value of the first defendant's interest in that property. Moreover, the first defendant had not established that he could not continue to meet the mortgage repayments. The evidence only suggested that at some time in the future he may not be able to do so. Lastly, Mr Bolger submitted that the orders sought by the first defendant would cause the plaintiff great hardship. The Clemton Park property had been the plaintiff's home since 1977. He had limited resources with which to pay for alternative accommodation. If the plaintiff is successful in the proceedings, he may be in a position to buy the first defendant out or purchase the property when it is put on the market. 21In my opinion, the critical question in resolving the current dispute is whether there is a real prospect that the plaintiff would be able to remain in the Clemton Park property following the conclusion of the hearing if the caveat is not removed. If there is, that would provide a strong ground for not removing the caveat. However, if there is not, then in my opinion the orders sought by the first defendant should be made. For the reasons I have given, this is not a case where the first defendant must establish that there has been a change in circumstances to justify the orders he seeks. He should not be taken as having agreed to a continuation of the caveat until a final hearing, whenever that might be. The first defendant is incurring substantial mortgage repayments. If the first defendant succeeds, the likelihood is that he will be entitled to recover those payments (or at least the interest component of them) under the undertaking as to damages. However, it is highly doubtful that he will be able to do so because of the plaintiff's financial position. In my opinion, it does not matter that the delays in the proceedings have been caused by the first defendant. If the position is that the plaintiff will have to move out of the property at the conclusion of the hearing whatever the outcome, then he has benefited by the delay. I accept that the plaintiff will suffer hardship if he has to move out of the Clemton Park property. But unless he can buy the property, he will suffer that hardship in any event. The hardship may be less if he succeeds in the case because he will recover money which he can put towards alternative accommodation. However, any additional hardship he suffers in the meantime will be temporary, since, if he succeeds, he will be in a position to look for better accommodation at that time. 22In my opinion, the plaintiff has not demonstrated that there is a real prospect that he will be able to acquire the Clemton Park property. The plaintiff gives no evidence that that is his intention if he is successful or how he would achieve that result. The possibility was simply raised by Mr Bolger from the bar table. Having regard to the plaintiff's age and financial position, he has no realistic prospects of borrowing any money to fund the purchase. There is no evidence before me from which I could conclude that the plaintiff has any real prospects of recovering sufficient money from the defendants to permit him to buy the Clemton Park property outright. 23In those circumstances, in my opinion, the caveat should be removed. Having regard to the conduct of the plaintiff in the past and the relationship between the plaintiff and the first and second defendants, there is no real prospect that the first defendant could sell the property while the plaintiff remains in possession. Consequently, the first defendant should also be entitled to an order for possession. However, the plaintiff should be given a reasonable time to find alternative accommodation. In my opinion, a reasonable time would be in the order of two months.

Should the first defendant have access to the Clemton Park property to identify his goods? 24In my opinion, the first defendant should be given an opportunity to inspect the Clemton Park property for the purpose of identifying property that belongs to him. The first defendant is the registered proprietor of the property and, even on the plaintiff's case, has rights in relation to it. He is entitled to access to the property. I accept the first defendant's evidence that it is difficult for him to recall all the items that he claims belong to him without inspecting the property. 25The only reason the plaintiff advances for why the court should not grant relief permitting the first defendant to inspect the property is that the relationship between the plaintiff and first defendant is already very acrimonious and inspection by the first defendant is only likely to make the position worse. In my opinion, that is not a sufficient reason to deny the first defendant his legal rights. 26The inspection should occur in the presence of the parties' solicitors by no later than 20 April 2012. The first defendant should then provide the plaintiff with a list of items which he says belongs to him. The plaintiff should identify which items on that list he accepts belong to the first defendant and should make those items available for collection at a mutually convenient time before 4 May 2012. At the time of inspection, the plaintiff should provide the first defendant with any documents belonging to the first defendant which are currently stored at the Clemton Park premises. Any dispute about which items claimed by the first defendant belong to him will have to be resolved as part of the final hearing.

27The court makes the following orders and gives the following directions: (1)An order under section 74MA of the Real Property Act 1900 that the plaintiff withdraw caveat AG60232 upon the first defendant undertaking to the court to pay the net proceeds of any sale of the subject property (the Property) (after allowing for the discharge of any secured debt and the costs of sale) into an interest bearing account in the joint names of the solicitors for the plaintiff and the first defendant to abide the outcome of these proceedings and further undertaking to the court not to further encumber the Property prior to the completion of any such sale. (2)An order that the plaintiff deliver up possession of the Property to the first defendant by 1 June 2012. (3)An order that the first defendant have leave to issue a writ for possession forthwith if the plaintiff does not deliver up possession by such date. (4)Direct that the parties bring in short minutes of order that give effect to paragraph 26 of this judgment and that provide for such other directions as are necessary to prepare the case for hearing. (5)Direct that, if agreement cannot be reached on the terms of the short minutes of order referred to in (4) by 5 April 2012, the matter be relisted at 9.30 am one morning in the week commencing 10 April 2012 by arrangement with my Associate for further argument. (6)Costs reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 March 2012