Business Acquisitions Australia Pty Ltd v Renshall

Oaths Act 1900, s.25 LEGISLATION CITED : Real Property Act 1900, ss.74F(5), 74H(1)(b), 74K(2), 74L, 74MA Real Property Regulation 2003

Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) NSW ConvR 56-143 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 CASES CITED : Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) NSW ConvR 56-137 Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 Summers v The Commonwealth (1918) 25 CLR 144 Troncone v Aliperti (1994) 6 BPR 13,291

Business Acquisitions Australia Pty Limited - Plaintiff PARTIES : Robert Renshall - First Defendant Christopher Frederick - Second Defendant HTT Huntley Heritage Pty Ltd - Third Defendant

COUNSEL : Mr A.D. Campbell - Plaintiff Mr M.W. Sneddon - Defendant

SOLICITORS : Gillard Consulting Lawyers - Plaintiff Edwin Davey Commercial and Litigation Lawyers

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5703/06 BUSINESS ACQUISITIONS AUSTRALIA PTY LIMITED v ROBERT RENSHALL & 2 ORS JUDGMENT 1 On 16 November 2000, I heard an application for orders under s.74MA of the Real Property Act 1900 relating to three caveats lodged by Business Acquisitions Australia Pty Limited which is the plaintiff in the proceedings. The application is an application by the registered proprietors of the three affected parcels of land for orders that the plaintiff remove the caveats. At the end of the hearing, I made the orders sought in respect of two of the caveats, indicating that I would give my reasons later. In the third case, I reserved judgment on the application. 2 The three caveats relied upon the same set of circumstances. In September 2005, an agreement in writing was made among the plaintiff, Business Acquisitions Australia Pty Limited (which I shall call "BAA"), HTT Huntley Heritage Pty Ltd ("HTT"), Robert Renshall ("Renshall"), Christopher Frederick ("Frederick") and Ken Tugrul. By the agreement (referred to as a "mandate agreement"), HTT retained BAA to perform services BAA was to seek out for HTT a source of loan finance answering a certain description. Clause 2.3 of the mandate agreement was in these terms: "The 'OWNER' [ie, HTT] will subject to acceptable terms accept Finance secured by BAA as above and sign all necessary documents in order to draw down Finance for the Purpose required by 'OWNER'. In default of compliance with this clause, 'OWNER' hereby appoints BAA and each of its directors jointly and severally, as its attorney, with full power and authority, in its name and on its behalf, to execute all documents required by the lender to advance Finance, as if such documents were being executed by 'OWNER', and otherwise to enable the procuring of the Finance." 3 There follow in clauses 3.1 to 3.4 provisions about the quantum and payment of a "Brokerage Fee" to be paid by HTT for the services to be provided together with interest thereon. Then comes clause 3.5: "'OWNER' acknowledges and consents to the granting of a charge over the Property with its obligation to pay the Brokerage Fee and Interest as above, and authorises BAA to lodge a caveat against the title of the Property noting BAA's interest in the Property noting BAA's interest in the Property [sic] preventing any dealings on the title until the Brokerage Fee and interest have been paid." 4 There is, in clause 1.1, a definition of "Property": "'Property' means Hutley [sic] Colliery, Avondale Road, Avondale, NSW". 5 Renshall, Frederick and Ken Tugrul (the last irrelevant to these proceedings) are designated "Guarantors". The provisions affecting them are in clause 10 of the mandate agreement: "10. GUARANTEE AND INDEMNITY 10.1 Each Guarantor hereby guarantees to BAA the due performance by the 'OWNER' of all the obligations including without limitation the payment of all amounts due to be paid hereunder and in the event of default by 'OWNER' the Guarantors will be deemed to become a principal debtors to BAA. 10.2 This guarantee and indemnity shall not in any way be affected by BAA granting any time, credit, forbearance, or other indulgence to 'OWNER' and the guarantee and indemnity shall bind the personal representatives of the Guarantors. 10.3 This guarantee and indemnity is irrevocable and continuing and, in particular but without limitation thereto, shall not be discharged by any payment made by 'OWNER' to BAA in whole or partial satisfaction of its obligations hereunder. 10.4 The Guarantors shall not prove or claim in any administration, liquidation or other external administration of 'OWNER' until BAA has received 100 cents in the dollar in respect of any monies due, owing or payable by 'OWNER' to it and shall hold in trust for BAA such proof and claim and any dividend received from it. 10.5 The Guarantors agree to indemnify BAA and to keep it indemnified at all times from and against any loss, damages or claims which it may suffer or incur subsequent upon or arising directly or indirectly out of any breach or non-observance by 'OWNER' of any of the obligations hereunder to be performed and observed by 'OWNER'. Such indemnity may be relied upon if for any reason the guarantee set out above shall become discharged." 6 On or about 19 September 2006, the three caveats to which the application relates were lodged. The first was lodged in respect of land of which HTT is the registered proprietor. It is accepted, as I understand it, that that land is (or forms part of) the "Property" as defined by the mandate agreement. The second caveat was lodged in respect of land of which Renshall and his wife are the registered proprietors. The third caveat was lodged in respect of land of which Frederick and his wife are the registered proprietors. 7 Each caveat includes, in section K, a statutory declaration made by Gaurav de Fontgalland, the caveator's solicitor. He declared, by reference to the Oaths Act 1900, that to the best of his knowledge, information and belief the caveator (BAA) "has a good and valid claim to the estate or interest set out in Schedule 1". A statutory declaration in these terms formed part of the caveat affecting the land of Renshall and his wife and the caveat affecting the land of Frederick and his wife, as well as the caveat affecting the land of HTT. 8 Schedule 1 to all three caveats was in exactly the same terms. In the space reserved for "Nature of the estate or interest in the land" appear these words: "Charge and entitlement to lodge caveat arising from an exclusive mandate." 9 In the following space marked "By virtue of the instrument referred to below" appears a reference to an instrument described as "exclusive mandate" dated "September 2005", the parties being "The caveator and the registered proprietor". In the next space marked "By virtue of the facts stated below" appear the words: "exclusive mandate executed by the registered proprietor and the subsequent conduct of the registered proprietor and by reference to the loan offer set out in the letter from Lenders Direct Pty Limited." 10 As I have said, the particulars just set out appear in identical terms in each caveat. But, of course, the identical words carry a different meaning in each case, given that there are different registered proprietors. Hence, "the subsequent conduct of the registered proprietor" refers, in one case, to "subsequent conduct" of HTT, in another to "subsequent conduct" of Renshall and his wife (or, perhaps, one of them) and, in the third, to "subsequent conduct" of Frederick and his wife (or, perhaps, one of them). The reference to the "exclusive mandate" of September 2005 is, in each case, a reference to the single agreement to which I have referred. 11 As I have said, I have already made orders under s.74MA requiring the removal of the caveat affecting the land of Renshall and his wife and the caveat affecting the land of Frederick and his wife. This is because no provision of the mandate agreement of September 2005 - clearly stated in each such caveat to be the source of the claimed estate or interest - refers directly or indirectly or even by suggestion or hint to the land in folio identifier A/403100 (of which Renshall and his wife are registered proprietors) or the land in folio identifier 6A/417459 (of which Frederick and his wife are registered proprietors). Nor is there any conceivable basis in which it could be thought that the agreement of September 2005 is concerned in any way with unidentified land of which Renshall (alone or otherwise) is registered proprietor or unidentified land of which Frederick (alone or otherwise) is registered proprietor. 12 The only submission made in support of the validity (or viability) of the claim evidenced by the caveats affecting the land of Renshall and his wife and the land of Frederick and his wife was, in essence, that the effect of clause 10 was to import, as against Renshall and Frederick, the promise of HTT contained in clause 3.5. That submission must, of course, be rejected out of hand. By clause 10, each of Renshall and Frederick, along with Tugrul, guaranteed to BAA the due performance by HTT of all its obligations (including payment obligations) under the agreement and agreed to indemnify BAA against loss occasioned by breach on HTT's part. The obligations of HTT may have included some form of obligation of HTT under clause 3.5 requiring future performance by HTT. But any such obligation related solely to "the Property", that is, the colliery property at Avondale owned by HTT. By clause 10, Renshall and Frederick agreed to answer for any default on HTT's part in performing its obligations under the mandate agreement (including any obligation of HTT with respect to its property at Avondale) and to indemnify BAA against loss. But that was the full extent of their engagement. The agreement was, quite simply, not concerned in any way with any land of which Renshall or Frederick was a registered proprietor. On no conceivable basis whatsoever could the agreement be viewed as the source of an interest on BAA's part in any such land. It is for these reasons that I made orders under s.74MA in relation to the Renshall and Frederick caveats at the conclusion of the hearing. Each caveat was patently bad and an abuse because it did not relate to any interest whatsoever of BAA in the affected land. 13 I am bound to say that I find it impossible to understand how any solicitor, acting conscientiously after due consideration and inquiry and with the sanction clearly provided by s.25 of the Oaths Act in mind, could conceivably have come to the conclusion stated in paragraph 1 of Mr de Fontgalland's statutory declarations forming part of the caveats affecting the Renshall and Frederick properties. 14 I turn now to the caveat affecting HTT's property and to the outstanding question whether an order for the removal of that caveat should be made. It was accepted by both parties that that question must be approached on the basis that it is for BAA, as caveator, to show that the caveat should remain. BAA sought to do so by reference to evidence that it had performed finance procurement services for HTT resulting in a loan offer from Lenders Direct Pty Limited, so that an obligation of HTT to pay the fee under the mandate agreement had become due for performance before lodgment of the caveat. Because HTT had not paid any such fee at the time the caveat was lodged, it is the contention of BAA that it had, by virtue of clause 3.5, a right to resort to HTT's colliery property as security for the unpaid fees and that an interest in that property accrued to BAA accordingly. 15 At first glance, there is merit in BAA's claim as stated in the caveat affecting HTT's land, having regard to clause 3.5 of the mandate agreement. But it was submitted on behalf of HTT that the caveat suffers from two vices, either of which is sufficient to warrant an order that the caveat be withdrawn. 16 Mr Sneddon of counsel submitted on behalf of HTT that there is no serious question to be tried as to the continuing existence of any interest in HTT's property on the part of BAA arising from the agreement of September 2005 because that agreement had come to an end by the time the caveat was lodged. In this regard, reference is made to a course of discussion and correspondence between representatives of HTT and representatives of BAA which commenced in July 2006. 17 It is clear that, in that month, the possibility of a "new mandate" was discussed. This followed a period in which various loan proposals had been raised and considered by reference to the mandate agreement of September 2005. Reference to a new mandate appears in email correspondence of 4 July 2006. Mr Lazar of BAA wrote to Mr Johnson, a representative of HTT: "I need the mandate executed and then I will get the updated letter." 18 Mr Johnson replied: "They will not sign a mandate without the letter. I have told them about the arrangement and they have agreed to execute simultaneously." 19 Mr Lazar, in his affidavit, refers to a conversation with Mr Johnson in or about July 2006 in which Mr Johnson said to him: "That the directors of Huntley agree that you can rely on your old mandate for your fees and I'll get another document executed which will give you a caveatable interest which will protect your fees. I will prepare and everything will be hunky dory." 20 The evidence does not, however, show that any such statement on behalf of HTT was either made in response to some equivalent proposal by BAA (so that the statement might be considered acceptance by HTT of an offer made by BAA) or met by an unequivocal indication of assent by BAA (so that the statement might be considered an offer which BAA later accepted). 21 It is, of course, possible for a contract to come to an end even though there is neither repudiation and acceptance nor a supervening contract that puts an end to it. The parties may, by conduct, abandon or abrogate the contract: see, for example, Summers v The Commonwealth (1918) 25 CLR 144; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423. On the evidence before me, however, it could not be said that the mandate agreement of September 2005 came to an end in any of the ways I have mentioned, or at all. Indeed, the statement attributed to Mr Johnson by Mr Lazar was consistent with an intention that that agreement should have continuing effect as a source of an entitlement of BAA to be paid fees by HTT. 22 I am not satisfied that it has been shown that, at the time of the lodgment of the caveat affecting HTT's land or at any later time, clause 3.5 of the mandate agreement had ceased to have contractual force between the parties with respect to HTT's colliery land. 23 I turn therefore to the second contention of HTT, namely, that the caveat affecting its land is bad in form and, for that reason, should be removed. In advancing that submission, counsel for HTT made particular reference to the judgment of Brereton J in Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) NSW ConvR 56-143 and the emphasis placed by his Honour on the requirements imposed, via s.74F(5), by the Real Property Regulation 2003 regarding the content of a caveat. The legislation requires that certain particulars be specified in a caveat. I quote from Brereton J's judgment: "Those prescribed particulars are to be found in Real Property Regulation 2003 which provides, by clause 7, that a caveat must specify the particulars set out in Schedule 3 in relation to the estate or interest to which a caveator claims to be entitled. Schedule 3 specifies those particulars as follows (emphasis added): 1 Particulars of the nature of the estate or interest in land claimed by the caveator .

2 The facts on which the claim is founded, including (if appropriate) a statement as to the manner in which the estate or interest claimed is derived from the registered proprietor of the estate or interest or the primary or possessory applicant against which the caveat is to operate.

3 If the caveator's claim is based (wholly or in part) on the terms of a written agreement or other instrument, particulars of the nature and date of that agreement or instrument and the parties to it.

4 If the caveator claims as mortgagee, chargee or covenant chargee, a statement of the amount (if readily ascertainable) of the debt or other sum of money charged on the land (or, if the amount is not readily ascertainable, the nature of the debt, annuity, rent-charge or other charge secured on the land).

(a) whether the estate or interest claimed is legal or equitable, or (b) the quantum of the estate or interest claimed (except as provided in paragraphs 4 and 5), or (c) how the estate or interest claimed ranks in priority with other estates and interests in the land." 24 After referring to the effect of s.74H(1)(b) (which states that a caveat does not prohibit the recording of dealings except to the extent that the recording "would affect the estate, interest or right claimed in the caveat") and s.74K(2) (directing attention to whether the caveator's "claim" has, or may have, substance), Brereton J continued: "These provisions, taken together, make clear that the characterisation and description of the nature of the estate, interest or right claimed by a caveator is more than a mere formal requirement of the provisions of the Act relating to caveats, but goes to the heart and substance of the operation of those provisions. Without the estate interest or right claimed being described, neither the Registrar General nor a person reading the caveat can know, for purposes of s 74H(1)(b), whether a dealing would affect the estate claimed. Nor can the court know, for purposes of s 74K(2), whether the caveator's claim has, or may have, substance." 25 The caveat considered by Brereton J described the estate or interest claimed by the caveator as "an equitable interest". Its source was described as a "lease agreement" of a particular date between the caveator and one of the registered proprietors and the "charging clause in clause 17 of that agreement". The clause in question was one by which the person concerned (designated "lessee") "hereby charges" his interest in any land owned by him, as security for payments. 26 Brereton J held that "an equitable interest" was an insufficient description of the estate or interest claimed, having regard to the provisions of the Real Property Regulation. The expression is, he said, one of "enormous generality" and not apt to delineate the claim. His Honour added that since the regulation says that it is not necessary to describe the claimed interest as legal or equitable, acceptance of "an equitable interest" as adequate would compel the conclusion that "an interest" is also adequate, a proposition that simply flies in the face of the stated requirement that there be a statement of the "nature" of the interest. 27 Brereton J went on to consider whether the situation was saved by the added reference to the "charging clause" as the source of the interest. He decided that it was not since "charging clause" has no fixed meaning and might, as in a well, refer to a provision permitting the charging of costs or fees. 28 Mr Sneddon also referred to the decision of Campbell J in Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) NSW ConvR 56-137. In that case too, the estate or interest claimed was described simply as "equitable interest" and there was a reference to the instrument from which the interest was said to arise. His Honour held the caveat to be defective - the description "equitable interest" could, as he said, "relate to a multiplicity of interests …". 29 In the present case, there is a more precise description of the estate or interest claimed. It is described by reference to two particular concepts: "charge" and "entitlement to lodge caveat". The word "charge" does not entail the same imprecision as "equitable interest" (or merely "interest"). It is understood generally - and particularly by lawyers - as connoting a security interest in property or a right to resort to property for satisfaction. Likewise "entitlement to lodge caveat", when allied with "charge" conveys a message (of the type exemplified by Troncone v Aliperti (1994) 6 BPR 13,291) of a claim to entitlement to exercise a hold over property. I am satisfied that "charge" and "entitlement to lodge caveat", used together, sufficiently describe a species of estate or interest by way of security for some obligation that would be adequately understood by persons having basic familiarity with concepts of land ownership and interests in land. 30 These conclusions - coupled with the conclusion that clause 3.5, on its face, may well operate as an equitable charge - mean that the caveat in respect of HTT's property is not open to the objections of imprecision referred to by Brereton J and Campbell J in the cases to which I have referred. In saying what I have said about clause 3.5, I intend to indicate no more than it gives rise to a serious question to be tried as to the existence of an equitable charge. 31 Having regard to the requirements of the Real Property Regulation, however, there is another respect in which this particular caveat does not comply. Mr Sneddon pointed out that it contains nothing at all in compliance with paragraph 4 of the requirements relating to specification of the amount or the nature of the debt concerned. That criticism is well taken. But Mr Campbell of counsel submitted on behalf of BAA that that imperfection is, in these proceedings, covered by s.74L of the Real Property Act: " Strict compliance with formalities with respect to caveats not necessary

If in any legal proceedings a question arises as to the validity of a caveat lodged under a provision of this Part, the court shall disregard any failure of the caveator to comply strictly with the requirements of this Part, and of any regulations made for the purposes of this Part, with respect to the form of the caveat." 32 Mr Campbell relied, in this respect, on the decision of Palmer J in FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 which concerned a mandate agreement similar (but not identical) to that now before me. After expressing the opinion that "charge and entitlement to lodge caveat arising from exclusive mandate" sufficiently described the estate or interest claimed, Palmer J dealt with the submission based on absence of any statement of the amount or nature of the debt: "It seems to me that Real Property Regulation Schedule 3 paragraph 4 itself recognises that the statement in a caveat of the amount secured by a charge is not essential to the validity of the caveat. This is so because the amount claimed to be secured is to be stated only if 'readily ascertainable' . It seems to me, therefore, that a failure to state the amount secured by the charge is, of its nature, curable by RPA s.74L: see also Tolhurst v Crickett Pty Ltd (in liq) (2001) 10 BPR 19,087, at paras 6-7 per Young CJ in Eq."

His Honour concluded that s.74L applied in respect of this aspect. 33 I am satisfied that, in the present case, the position is the same as that in FTFS Holdings, namely, that the description of the estate or interest claimed is adequate and complies with the requirements of the legislation; and that the non-specification of the amount or nature of the debt, to the extent that it involves failure to comply, is within s.74L, so that the defect or failure must, in obedience to that section, be disregarded in these proceedings. 34 Because BAA has shown an arguable case in favour of the existence of the interest claimed and the alleged defects in the caveat have not been found to be fatal, there is a prima facie entitlement to have the caveat maintained. I describe it as a "prima facie entitlement" because the court may be disposed to order the removal of a perfectly valid and regular caveat which represents what Young J, in Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987, described "as a blackmailing device" - in other words where a caveat affects a property of much greater value than the amount of the debt involved. 35 In the present case, it appears that the maximum amount that HTT could be required to pay as the brokerage fee provided for in the mandate agreement is $150,000. HTT has offered to pay $150,000 into court to abide the outcome of the parties' dispute, as the price of obtaining an order for removal of the caveat. BAA says that the charge created by clause 3.5 secures a sum greater than $150,000 because of costs of recovery action and the like. That contention is not supported by the terms of the agreement. The clause 3.5 charge relates only to the brokerage fee and interest on the brokerage fee, which interest is, under clause 3.3, computed only from drawdown of finance. There has been no drawdown in this case and therefore interest has not begun to accrue. 36 Subject to payment into court by HTT of a sum of $150,000 as outlined, there will be an order under s.74MA that the caveat affecting HTT's property be removed. 37 I direct that agreed short minutes of the orders to be made to give effect to this decision be delivered to my Associate within seven days. Costs are for the time being reserved. I direct that written submissions on costs be exchanged and delivered to my Associate within 14 days.

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