Alanbert Pty Ltd v Bulevi Pty Ltd

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HIS HONOUR: 1 I have heard argument concerning the costs of two motions in this matter, each being an application by the third defendant, Elliot & Tuthill (Mortgages) Pty Ltd, for an order that a caveat be withdrawn. The caveats were over two of the lots of a subdivision which are in contention in these proceedings between the plaintiff on the one hand and the first and second defendants on the other hand. The third defendant was initially joined as third defendant in the proceedings and there were, at that stage, claims by the plaintiff that it had an interest in the land taking priority over the interest of the third defendant as mortgagee thereof. However, those claims were eschewed and the third defendant was dismissed from the proceedings at an early stage. It was subsequently rejoined for the purpose of dealing with the caveats the subject of this costs application. 2 The caveat concerned in the first application for withdrawal was caveat no 2785228, which was over both lots 11 and 12 in the subdivision. The interest claimed in that caveat was in terms: "as purchaser of the fee simple in possession pursuant to contract dated 2 March 1994 from Davhand Pty Ltd and Bulevi Pty Ltd." On 22 October 1998 the third defendant gave the first and second defendants, as proprietors of the land, the notice pursuant to s 57(2B) of the Real Property Act 1900 ("the RPA") necessary to be given before power of sale is exercised. It did not give notice, or a copy of the notice, to the plaintiff, Alanbert Pty Ltd, as the caveator. 3 The first ground on which the plaintiff sought to resist an order for costs in relation to the first motion was that the occasion for exercise of the power of sale had not arisen because s 57 had not been complied with, since it had not been given a copy of the s 57 notice, which it said was required by the provisions of s 57(2B)(1)(ii) of the RPA. However, to be entitled to a copy notice under that section the caveator must be one: "who claims as an unregistered mortgagee or chargee to be entitled to an estate or interest in the land mortgaged or charged." The plaintiff says that it was entitled to a mortgage interest in the property as a result of the terms of the contract of sale referred to in the caveat. I need not investigate whether this is so, because it seems to me that the claim referred to in s 57(2B)(1)(ii) must be a claim that appears on the face of the caveat, and no claim as a mortgagee or chargee appears on the face of the caveat. The plaintiff was, therefore, not entitled to notice of the caveat and, once the notice given to the registered proprietors had expired, the occasion for sale had arisen. At one stage the plaintiff suggested that it did not know that the s 57(2B) notice had been given to the registered proprietors, but that suggestion was refuted by the tender of a letter dated 18 November 1998 from the third defendant's solicitors to the plaintiff which clearly communicated the fact that such notice had been given. 4 However, the plaintiff also relies on a further basis in relation to the costs of the first motion for withdrawal. This is, that, from some time in November 1998 onwards, the third defendant and the plaintiff were in negotiation for the sale of lot 12 to a person associated with the plaintiff, and, indeed, it was agreed between the parties, for the purposes of these costs applications, that Mr B O Bernoth, a brother of Mr Bernoth, the principal of the plaintiff, did in fact enter into a contract to buy lot 12 on 23 or 24 December 1998 and that that contract was completed on 29 January 1999. That contract was at a price of $120,000. It is not clear at what point of time the price of $120,000 was agreed on, but the negotiations were always on the basis that Mr B O Bernoth would pay a greater price than was offered by another prospective purchaser of the lot, who had offered $110,000 for it. The full content of the negotiations is not before me. It is plain from what correspondence is before me that the negotiations continued from some time in early or mid-November through to their successful issue just before Christmas. There were various suggestions in submissions as to whether or not requirements made during the negotiations by the proposed parties to the contract that various terms be included in it were, or were not, reasonable. The third defendant took out the first motion for an order for withdrawal of caveat on 14 December 1998, and the motion first came before me on 17 December 1998. On 23 December 1998 I ordered by consent that the plaintiff withdraw the caveat by 4 pm on that day. It is obvious that it was at about that time that the negotiations came to final fruition and the contract with Mr B O Bernoth was exchanged. 5 The third defendant asks that the plaintiff be ordered to pay the costs of the first motion on an indemnity basis. It says that the entire situation was created by the mortgagor's default; that it was entitled to pursue its remedies so long as that default persisted; that the caveator had no right as against it to maintain the caveat, and that it was quite unreasonable for the plaintiff to do so; and that the plaintiff would always obviously fail in the motion. The plaintiff says that it at all times, through Mr B O Bernoth, had in the field an offer for the purchase of the lot which was superior to the other offer; that it would not, while that offer was in the air, be reasonable for the mortgagee to exchange contracts with the alternative purchaser at a lower price; and that it was not obliged, while that situation prevailed, to withdraw the caveat so as to permit the lower offer to be accepted. 6 A mortgagor, who is under default under a mortgage, is in a fragile situation. That flows through to anybody making a derivative claim through or under that mortgagor. Frequently orders for costs are made in favour of the mortgagee in respect of enforcement attempts, albeit enforcement action is not ultimately taken by the Court. But the situation is really rather different here. An associate of the mortgagor was at the material times negotiating to buy the mortgaged property at a better price than otherwise offered. First, I am certainly not convinced that the mortgagee ought have costs on an indemnity basis. I do not think that there was any unreasonableness in the plaintiff's conduct that would justify that. Furthermore, although the matter is perhaps somewhat finely balanced, I have come to the conclusion that there ought be no order for costs in respect of the first motion at all in the circumstances as I have set them out. 7 The situation, however, is radically different in relation to the second application for withdrawal of caveat. That arose in the following way. A replacement caveat was lodged by the plaintiff over lot 11 after the withdrawal of the previously mentioned caveat from lots 11 and 12. It was contemplated at the time the initial order for withdrawal was made that the plaintiff would be entitled to lodge a fresh caveat claiming the same interest over the remaining lot, lot 12. However, a formal order was not, at that stage, made under s 74O of the RPA. The matter of the second caveat was first agitated in Court before me on 10 March 1999, when the plaintiff sought an order that would overcome the Registrar General's objection to the second caveat on the basis of the lack of a formal s 74O order. At that time there were negotiations proceeding again between the plaintiff and the third defendant. These were not, however, negotiations regarding the destination of lot 11, but whether, and the terms on which, the third defendant would transfer the mortgage in respect of the balance of the debt to the plaintiff or someone associated with it after funds had come in on completion of the sale of lot 11, which would reduce, but not expunge, the moneys owing under the mortgage. There was no question at that time that the plaintiff, or anyone associated with it, would buy lot 11 when it was sold by the third defendant as mortgagee under power of sale, as was quite frankly and properly stated to the Court by Mr Fairbairn, of counsel for the plaintiff, on the hearing of the costs application. That was not possible because the plaintiff and his associates had "run out of money". Whether or not the third defendant would, after the sale of lot 11, transfer the balance of the mortgage to the plaintiff or some associate of his, had nothing whatever to do with whether lot 11 would be sold, or to whom. 8 I suggested in open Court, when the matter was before me on 10 March 1999, that it might well not be worth the plaintiff's while seeking to maintain the caveat in view of the lack of any grounds to do so. The plaintiff, however, continued to maintain the caveat, so that when the matter again came before me on 12 March 1999, the third defendant, having at my invitation already notified the plaintiff that they would make such an application, sought and obtained leave to file in Court that day a motion for the withdrawal of the second caveat and to move under that notice of motion for an order for its withdrawal. Thereupon the plaintiff indicated that it would consent to an order for withdrawal of the caveat and an order was made. Under those circumstances it seems to me it was quite unreasonable for the plaintiff to put the third defendant to the costs of bringing the motion filed in Court on 12 March 1999. It had at that time no right as against the third defendant to maintain the caveat and there was no possibility that the withdrawal would not be ordered. In those circumstances, I propose to order that the plaintiff pay the third defendant's costs of the notice of motion for withdrawal of caveat filed on 12 March 1999 on the indemnity basis. 9 There are two further matters I should advert to. The first is, that it may be that the third defendant, as mortgagee, has a right under the mortgage to have its costs of the first motion from the mortgagor. I do not say that it does. I do not enter into that. I regard that as quite irrelevant to my determination, which is of the costs of a proceeding in the Court. The order that I shall make will be made according to considerations arising from the nature and conduct of those proceedings. The other matter that I should refer to is that the first and second defendants did attend, at least to some degree, upon a hearing of both notices of motion. They ask that they have their costs of both motions from the plaintiff. Obviously, from what I have said, I shall make no order in respect of their costs of the first motion. Equally, whilst they made some submission in relation to the second motion for withdrawal, they really were not parties to that motion. Their participation was minimal and for their own purposes, and I do not think they should have in their favour any order for the costs of the second motion. There will be no order as to the first and second defendant's costs of the second motion for withdrawal of caveat. 10 I now make orders in accordance with the short minutes initialled by me and placed with the papers.

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