In these proceedings the Plaintiff seeks the removal of caveat AR295470, which I shall refer to as the "Current Caveat", lodged by the Defendants in respect of a property at 15 O'Donnell Street Port Kembla, which I shall refer to as "the Property". The caveat asserts a beneficial interest in the trust and refers to "A Beneficial interest in Trust", and asserts:
"Constructive trust for caveators in a share proportionate to the caveators' contribution to the acquisition of the land pursuant to a joint endeavour between the registered proprietor and the caveators. The caveators made financial contributions totaling $510,000 to the acquisition of the land."
There are two registered mortgages on the property; one in favour of The Trust Company (PTAL) Ltd ("PTAL") which secures a debt of approximately $386K and the second, which is now held by Ageist Pty Ltd ("Ageist"), the Plaintiff, secures a debt of approximately $1M.
On 11 December 2020 Ageist exercising its power of sale and the agreement of PTAL entered into a sale contract with Ms Eva Nordstrom for $650K (see Exhibit A page 109 and following). The sale has not been able to proceed because of a number of caveats lodged on title firstly by the registered proprietor Samuel M Holdings Pty Limited ("SMH"), by Bosilka Stojcevska (the mother of the Defendants), by the two Defendants themselves, and now the Current Caveat.
In relation to the SMH caveat I should note that SMH has for some long time had appointed a receiver and manager. The receiver and manager was not a party to the caveat and indeed apparently accepted that the caveat should be withdrawn. These matters are referred to in the judgment of her Honour Justice Henry to which I will return in a moment.
All of the caveats other than the Current Caveat have been ordered to be removed. One was ordered to be removed by Darke J and two were ordered to be removed by Henry J. Her Honour's judgment is dated 6 August 2021: Ageist Pty Ltd v Samuel M Holdings Pty Ltd (Receiver and Manager Appointed) [2021] NSWSC 988. I shall refer to it as "the SMH Judgment".
The Plaintiff was not aware of the Current Caveat and its lodgement until after the hearing before Henry J but before judgment was handed down by her Honour. The Plaintiff raised the matter with her Honour when her Honour handed down her judgment, but her Honour refused to deal with the Current Caveat at that time. This is the reason for what are now fresh proceedings in relation to the Current Caveat.
Ms Nordstrom is currently renting a property and she negotiated departure from that property for February 2021 in the expectation that settlement on the Property would occur by then. Her current landlord has recently indicated (see page 206 of Exhibit A) that he has arranged for building work to commence on the premises this week and he encouraged Ms Nordstrom to leave the premises as they will be uninhabitable once the building work has commenced.
The matter was listed before me last week on Wednesday, 18 August 2021 for directions, on which occasion Mr AG Martin of Counsel appeared for the Plaintiff, as he does now, and Mr D Carbone (solicitor) appeared for the Defendants, as he does now. The Plaintiff was seeking an urgent hearing and I fixed today at 10:00am as the time and date for that hearing. Mr Carbone indicated that he wished to file evidence in support of the Defendants' opposition to the removal of the caveat and I ordered that the Defendants file and serve their evidence and any submissions on which they wished to rely by 10:00am on Sunday, 22 August 2021. No submissions and no evidence was served or filed by Mr Carbone on behalf of the Defendants. At 9:56am today Mr Carbone sent to my Associate a proposed Cross Summons. I refused to permit that to be filed or relied on. No leave has been sought or given in respect of such a document and the Defendants have not put any evidence forward in support of their opposition to the Plaintiff's application. I note that Henry J refers to a proposed Cross Summons in the SMH Judgment.
The Court Book is Exhibit A and it contains the submissions of Mr Martin. The Plaintiff submits that the caveat should be removed because there is no serious question to be tried and no injunction would be granted to the caveators to preclude the sale to the purchaser and, even if there was, the balance of convenience favours the removal the caveat. Mr Martin drew the Court's attention to the decision of the Court of Appeal in Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39. Mr Martin contends that if he was unsuccessful on his other points and it was necessary to venture into this question, there is a lack of bona fides on the part of the Defendants and also that the balance of convenience firmly supports removal of the caveat allowing the transaction with Ms Nordstrom to proceed.
It should be noted, as Henry J noted in her judgment, that the Court approaches an application such as this by applying the principles analogous to an application for an interlocutory injunction. The caveator has the onus of establishing that there is a serious issue to be tried as to the existence of the interests claimed in the caveat. Once the caveator has discharged that onus the continuation or removal of the caveats depends on the Court's assessment on the balance of convenience. Relevant to that question is the strength of the caveator's claim to an interest in the land. That is consistent with the well-established principle that the apparent strength of each party's case is a material factor in assessing the balance of convenience on an application for an interim injunction: Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 at [77] and [79].
It is clear that the debt under the second mortgage will not come close to being satisfied by a sale of the property. The sale proceeds of $650K is insufficient by a long margin to meet both the first and second registered mortgage debts.
The equitable interest claimed by the Defendants cannot defeat the interests of the registered mortgagees by reason of the protection derived from registration and s 42 of the Real Property Act 1900 (NSW) and the consequence is that the caveat can have no utility. This idea of a lack of utility is reflected in the Court of Appeals decision in Bayblu (supra) at [42] per Campbell JA, with whom both Tobias and Macfarlan JA concurred. Within [42] there is this passage:
"In the situation where the caveator would receive no money from maintaining of the caveat and establishing that he had the interest claimed in it, it is usually not possible for the caveator to show that the balance of convenience favours the maintenance of the caveat."
I should note that the Court of Appeal did go on to say that that is a matter of evaluation of the facts of each case, not that there is a principle of law whereby a caveat can never be maintained in such a situation.
That idea of a lack of utility is also picked up in the judgment of Pembroke J in the case of Lew v Bluescope Distribution Pty Ltd [2010] NSWSC 794 at [11]. In particular his Honour said:
"If there will be no money left over after satisfaction of the monies due to the registered mortgagee, the chargee's equitable interest recorded in its caveat secures nothing. There is no utility in maintaining the caveat. It will only cause difficulty to parties dealing in the land without securing a legitimate advantage to the defendant."
Finally in connection with the first point, one of the decisions which is referred to in Bayblu (supra) at [42] is a decision of Young CJ in Equity (as his Honour then was): Dunecar Pty Ltd (in liq) v Colbron [2001] NSWSC 1181, in which his Honour said at [18]:
"If it is more probable than not that even though the caveator has an interest in the land, that interest in the land is overridden by a superior interest in the land, then the caveat should almost always be removed."
Thus, even accepting that the interest claimed in the caveat is legitimate and putting aside the fact that it was a claim made in August 2021 when the Property had already been sold in December 2020 and other matters to which I shall return in a moment, the Court would not grant an injunction to prevent the sale to an innocent third party without notice of the alleged claim. There is simply no utility in the caveat because there could be no balance over which the Defendants can make a claim.
It is not strictly necessary to consider the other issues that were raised but in relation to the bona fides point there are several factors which are pertinent to the assertion made by the Plaintiff:
1. The Defendants (in addition to SMH via Mr Steven Murabito) lodged a caveat that Henry J dealt with and ordered removed. The interest the defendants in the SMH proceedings was not put in the same terms as the interest asserted in the caveat the subject of these proceedings: see [82] of the SMH Judgment.
2. Secondly, the Defendants, their mother (Bosilka), and Lila's partner Mr Murabito (apparently in his role as director of SMH) advanced other claims the subject of caveats which have all been ordered to be removed either by Darke J or by Henry J.
3. Bosilka, the Defendants' mother sought to purchase the Property for $650K, so it was alleged by the Defendants, shortly prior to the contract with the current purchaser, and her Honour Justice Henry deals with this in her judgment. That contract did not proceed for reasons which her Honour deals with in her judgment. But it is relevant that the Defendants or Bosilka at least, were promoting a case based upon a sale contract alleged to have been made with their mother (for $650K).
4. Mr Carbone told me today that his clients' claim that their mother was improperly pressured to transfer the property to SMH, if I have understood him correctly, and they assert that this was with the knowledge of the Plaintiff to avoid the strictures of the National Credit Code. That claim is not the claim advanced in the Current Caveat.
In addition to these four matters mentioned above and the lodging of the other caveats referred to at [68] of the SMH Judgment, I am not convinced that the Current Caveat is bona fide and I will order its removal on that basis as well.
Finally on the balance of convenience for the reasons that are explained by Henry J in her judgment, and I think by Darke J in his earlier judgment, the balance of convenience strongly favours the progress of the sale to Ms Nordstrom. The sale has been delayed since February this year by a string of caveats advanced by the Defendants, Mr Murabito and SMH.
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Decision last updated: 01 September 2021