BIZCAP AU PTY LTD -v- SHARMA [2024] WASC 198 (30 May 2024)

1. The applicant's evidence is that on 23 October 2023, the applicant entered into a written loan agreement with JVA (WA) Pty Ltd, trading as Skin Rejuvenate Cosmetic Clinic (Company), whereby the applicant agreed to loan the Company $165,000 (Agreement). The Company's obligations under the Agreement are guaranteed by, among others, the first respondent.
2. At the time agreement was entered into, it is not in dispute that the first respondent was a director of the Company. I am also satisfied a company associated with the first respondent and her husband (the second respondent) is a 50 per cent shareholder in the Company.
3. The signature of the first respondent that appears on the copy of the Agreement relied upon by the applicant has been affixed electronically through use of Docusign. The Agreement records her email address as ankjshar@gmail.com.
4. Pursuant to cl 8 of the Agreement, where the initial loan amount is greater than $30,000, each Transaction Party granted a Security Interest in all its Secured Property to the Lender.
5. Under the Agreement:

(a) Transaction Party means 'the Borrower and each Guarantor' (cl 1.1);

(b) Amount Owing means 'at any time, all amounts that: (a) are owing or Payable by a Transaction Party to the Lender' (cl 1.1);

(c) Security Interest is defined to include 'Security for payment of money, performance of Obligations or protection against default (including any ... charge ...); ...' (cl 1.1, sub (b) of definition); and

(d) Secured Property is defined to include any real or personal property of a Transaction Party.

1. Pursuant to cl 8.2 of the Agreement, each Transaction Party unconditionally consented to any registration in connection with a security, including a caveat, against the title of any property secured.
2. As at 2 May 2024, the amount owing under the Agreement (excluding costs) was $118,718.56.
3. The first respondent denies that she signed the Agreement or any agreement with the applicant. Her evidence is that she is no longer a director of the Company, having resigned on 20 February 2024 prior to administrators being appointed to the Company by the applicant on 12 March 2024. It was only about the time of the appointment of the administrators that she became aware of any loan agreement with the applicant.
4. The first respondent's first affidavit annexes a previous caveat that was lodged over the property by Bizcap AU Pty Ltd. This caveat, being Caveat P861363, was lodged on 22 January 2024 over the Property. The grounds for this caveat refer to a mortgage dated 30 June 2023. On 21 March 2024, the first respondent lodged an application for this Caveat to be removed. On 2 April 2024, the applicant's solicitors advised the first respondent that this Caveat would be withdrawn. The first respondent's evidence is that this did not occur, that no application was brought in relation to this Caveat and it lapsed after 21 days, namely at midnight on 16 April 2024.
5. In the correspondence, which is annexed to Ms Sharma's first affidavit, concerning the withdrawal of the earlier caveat, no mention was made of the applicant's intention to lodge a further caveat over the Property.
6. Prior to the lapse of this caveat, on 2 April 2024, the applicant lodged the Caveat the subject of this application. On 17 April 2024, the first respondent was advised of the lodgement of the Caveat.
7. On 23 April 2024, the first respondent requested the third respondent issue a notice pursuant to s 138B of the Act, which was issued to the applicant's solicitors that day.
8. The first respondent's evidence is that she has not consented to the lodgement of the Caveat and does not believe the applicant obtained any order from the court to lodge the Caveat.
9. The first respondent denies that she has ever had the email address recorded in the Agreement and that as a director of JVAF Pty Ltd, she used a business email address of 'info@skinrejuventate.com.au'. This email address was used by her in approving, authorising and signing other business loans of the Company.

1. The Caveat identifies the interest of the applicant as a charge contained in an agreement dated 23 October 2023 and is lodged as an absolute caveat. That is, the Caveat forbids the registration of any instrument. The Caveat is lodged only as against the interest of the first respondent in the Property.

1. The general principles the apply to the extension of a caveat are well-established and were not in dispute. In essence, in assessing whether to grant the extension of the caveat, there are two broad issues that must be considered by the court.[1]
2. First, whether the caveator's claim in respect to the estate or interest in land has or may have substance. Second, whether the balance of convenience favours the retention of the caveat and the appropriate orders to be made.
3. The first issue is sometimes expressed as whether the caveator can show that there is a serious question to be tried or whether they have a prima facie case. In assessing this, the court does not ordinarily evaluate the applicant's evidence or undertake a preliminary trial. The requirement that the caveator's claim of substance be in respect of a claim of an estate or interest in land has been held to mean that the claim must concern a proprietary interest in land. The second issue is the balance of convenience in extending the caveat. In this regard, the court considers whether it should exercise its discretion to extend the caveat. This is an exercise that is not independent of the strength or weakness of the caveator's claim. Rather, the apparent strength or weakness of the case for relief at trial is a relevant consideration on the balance of convenience.
4. An important factor in considering the balance of convenience is the question as to whether a failure to extend a caveat will have the effect of destroying or substantially impairing the benefit of the proprietary interest which is claimed.
5. A caveatable interest must exist at the time a caveat is lodged and cannot be lodged to protect a future interest,[2] nor must it go beyond the legitimate claim necessary to protect the rights of the caveator.[3]
6. In dealing with an application to remove a caveat, it is now generally accepted that the power to make such order as the court considers appropriate or as to the court seems fit in dealing with an application to remove a caveat, but it includes the power to order the amendment of a caveat as a condition of its retention. That said, the preponderance of authority in Australia is that this power does not empower the court to order an amendment of a caveat which would result in the substitution of a different estate or interest than the estate or interest claimed in the caveat.[4]
7. In exercising its discretion, the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then fixed up later. Caveats act as a form of interlocutory injunction albeit by an administrative act and can have powerful and serious consequences. Wrongly formulated caveats should not be easily tolerated. In exercising its discretion as to whether to amend the caveat, the court should have regard to the overall merits of the case.

Disposition Does s 138D of the Act apply?

1. Section 138D of the Transfer of Land Act provides that:

(1) If a section 138A caveat -

(a) is withdrawn after a notice under section 138B(1) is served on the caveator but before the caveat could lapse under section 138B(2); or

(b) has lapsed under section 138B(2); or

(c) no longer has effect because of the operation of an order made, or a dismissal, under section 138C by the Supreme Court,

then the caveator cannot lodge with the Registrar any further section 138A caveat in respect of the same land unless -

(d) the consent of the proprietor to do so and, if the notice issued under section 138B(1) was issued on the application of a judgment creditor, the consent of the judgment creditor to do so are endorsed on the further caveat; or

(e) the Supreme Court has made an order giving leave for the lodgment of the further caveat and a copy of that order has been served on the Registrar.

(2) If a caveat has been withdrawn before a notice under section 138B(1), if any, is served on the caveator then nothing in subsection (1) prevents the caveator from lodging a further section 138A caveat in respect of the same land.

29 The first respondent says that because of the lodgement and the lapsing of the earlier caveat, the applicant was not entitled to lodge the Caveat as of right and that, for this reason alone, the orders sought by the applicant should not be made. The applicant denies that s 138D of the Act applies for two reasons. First, the Caveat the subject of this application was lodged prior to the expiration of the previous caveat. Second, and in any event, it contends that by the express terms of cl 8 of the agreement, the first respondent has consented to the lodgement of the Caveat.

1. The question as to whether s 138D of the Act applies is a matter of statutory construction. Pursuant to s 138D(1) of the Act, a caveator is prevented from lodging a caveat in three circumstances:

(a) where the caveat has withdrawn the caveat after a notice is lodged but before it has been lapsed;

(b) where the original caveat has lapsed; and

(c) where the caveat is no longer effective because of an order of the court.

1. In this case, the evidence before me is that the original caveat lapsed at midnight on 16 April 2024. Before this occurred, the applicant lodged the Caveat that is the subject of this application. That is, at the time that the Caveat was lodged none of the subsections of s 138D applied. On this basis, I accept the applicant did not require the first and second respondent's consent to the lodgement of the Caveat, nor was it necessary for the applicant to obtain an order of the court.
2. In this regard, I accept the submission of counsel for the applicant, that this, despite the submission of counsel for the first and second respondents, is not an absurd result. This is because s 138(4) of the Act prevents a caveat being renewed in respect of the same estate or interest. In this case, I accept that the original caveat referred to a different interest arising under a different agreement than the one that is the subject of the Caveat that is the subject of this application.

Does the applicant's claim to an interest in the land have or may have substance?

1. The second issue that was raised by counsel for the first and second respondents in opposing any extension of the Caveat was the question as to whether the Agreement was enforceable, either as a deed or an agreement. Counsel for the applicant in reply confirmed that there was no submission advanced that the agreement was a deed and contended that there was consideration given for the agreement as a single transaction, namely the lending of money to the company. Ultimately, for the reasons that follow, it has been unnecessary for me to form a final view on this issue.
2. The onus is on the applicant to demonstrate that the caveatable interest it claimed has or may have substance.[5] In this case, the interest that is claimed is a charge said to arise from cl 8 of the Agreement. If the Agreement is valid and enforceable against the first respondent, then I accept the charge is an interest which is capable of supporting a caveat.
3. In this case, there was a factual dispute between the parties as to whether the first respondent signed the Agreement. A factual dispute cannot generally be resolved on an application to extend a caveat which proceeds by way of affidavit.
4. The applicant has adduced in evidence a copy of the Agreement, which is apparently signed by the first respondent by means of Docusign. At the time the Agreement was entered into, the first respondent was a director of the company. However, no other evidence has been adduced by the applicant in respect of the signing of the document by the first respondent. The evidence of the first respondent is that she denies signing the document and has, by email, informed the applicant that she has made a complaint to the police about this. At this time, the first respondent's evidence is that this complaint is currently under investigation by the police.
5. The first respondent also refers to a number of matters which she says, supports her evidence that she did not sign the document. These include the difference in timezone stamps between the copies of the Agreement. In the copy signed by Mr Mills, the time and date stamp refers to AWST. In contrast, the copy said to have been signed by Ms Sharma refers to AEDT. At this time, both Ms Sharma and Mr Mills were located in Perth.
6. The first respondent also referred to the purpose of the loan, which was, in part, to repay the arrears of another Bizcap loan. From investigations she has undertaken, she has been provided with copies of other documents said to have been signed by her as guarantor. The first respondent denies signing any of these documents and says she would not have approved entry into these agreements as the income from the Company could not have sustained the repayment obligations.
7. Section 10 of the Electronic Transactions Act 2011 (WA) sets out the requirements for a valid electronic signature under the laws of Western Australia. Relevantly, it provides that:
   1. Signatures

(1) If, under a law of this jurisdiction, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if -

(a) a method is used to identify the person and to indicate the person's intention in respect of the information communicated; and

(b) the method used was either -

(i) as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or

(ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence;

(c) the person to whom the signature is required to be given consents to that requirement being met by the use of the method mentioned in paragraph (a).

(3) The reference in subsection (1) to a law that requires a signature includes a reference to a law that provides consequences for the absence of a signature.

1. Having regard to the affidavit evidence before me, I consider there is sufficient doubt as to whether the first respondent electronically signed the Agreement. In addition to the matters raised by the first respondent, I note that the signatures of the first respondent and another guarantee appear to be in the same handwriting and the 'signatures' simply handwrite the relevant person's name as opposed to being a signature. It also appears, in respect of the first respondent's signature, the document was initially signed as 'Anita' and a 'k' has been added afterwards. I also take account of the fact that the applicant has not adduced any evidence as to the method it used to identify the first respondent, or the matters on which it relies as being the indications that the first respondent intended to sign the guarantee. Those matters are important given the method used has to be as reliable in light of the circumstances, including the relevant agreement. In this case, the agreement is a guarantee under which the guarantors agree to secure all real property.
2. It is my view that some steps should have been taken by the applicant to verify that the first respondent's electronic signature was applied with her consent. There is no evidence before me that this is the case. In these circumstances, I am not satisfied the applicant has discharged its onus to demonstrate there is a sufficient likelihood of success in its claim of an equitable estate that would justify the continuation of the Caveat.

1. In any event, even if I am wrong in this assessment, it is my view that neither the balance of convenience supports the continuation of the Caveat, nor should the Caveat be amended in the circumstances to an absolute caveat to what it should have been, which was a subject to claim caveat. Very briefly, the reasons for those conclusions are as follows.
2. In Navarac Pty Ltd v Moondancer Holdings Pty Ltd,[6] Pullin JA (with whom Miller and Newnes JJA agreed) stated that balance of convenience issues are usually of little or no significance where the caveator claims an estate in fee simple or a leasehold estate. In these fairly common cases, his Honour expressed the view that it would be 'unusual' that balance of convenience issues would result in removal of the caveat once an arguable case was made out by the caveator that there was a caveatable interest. However, where the interest claimed by the caveator is a security interest or an interest in competition with another claimant against the registered proprietor, Pullin JA stated that balance of convenience issues may prove to be decisive.[7]
3. In this case, while I accept that the interest created by the equitable charge is proprietary in nature, the essence of the underlying agreement is to establish a security arrangement in favour of the applicant to secure the performance of the Company's obligations under the Agreement. As this is a security arrangement, the interests relevant to the balance of convenience need to be weighed carefully rather than approaching the matter from an assumption that the removal of the Caveat would be unusual.
4. I consider the following matters are relevant to the balance of convenience. First, the amount that is outstanding under the agreement, which is only $118,718.56. Second, the strength of the claim that is brought by the applicant, which, for the reasons that I have expressed, I consider not to be strong on the evidence before me.
5. For these reasons, even if I were convinced there was a serious question to be tried, the same factors that I have referred to would mean that I do not consider the balance of convenience favours the extension of the Caveat.

1. As indicated, in exercising the discretion of whether or not to allow the amendment of a caveat, the court should not readily act in a way that might encourage the belief that caveats can be imprecisely formulated and fixed up later.
2. In having regard to the overall merits of the claim that is brought by the applicant, I do not consider that in the circumstances of this case, I should exercise my discretion to allow any amendment of the Caveat.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Bride v The Registrar of Titles [2015] WASC 11 [11] ‑ [16].

[2] Gangemi v Gangemi [2009] WASC 195 [38] ‑ [45].

[3] Midland Brick Company Pty Ltd v Welsh [2006] WASC 122.

[4] Palazza Homes Pty Ltd v Goh [2010] WASC 407 [9] ‑ [11].

[5] Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50 (Owen J).

[6] Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150.

[7] Navarac Pty Ltd v Moondancer Holdings Pty Ltd [22].