Choy v Hoang

LEGISLATION CITED : Real Property Regulation 2003 (NSW) Real Property Act 1900 (NSW)

Warden v Mortgage House No. 1 Pty Ltd [2006] NSWSC 1462 CASES CITED : Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880 Troncone v Aliperti (1994) 6 BPR 13,291

PARTIES : Stephen Jong Choy -v- Diana Dulan Hoang

COUNSEL : P. Ryan (Plaintiff) F. Sinclair (Defendant)

SOLICITORS : Accentro Legal (Plaintiff) Segal & Associates (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1361/07 - STEPHEN JONG CHOY v DIANA DULAN HOANG JUDGMENT 1 HIS HONOUR: By summons dated 2 February 2007 the plaintiff, Stephen Jong Choy, seeks declaratory relief that he has a caveatable interest with respect to land known as 334 Birrell Street, Bondi in the state of New South Wales folio identifier 1/210786 the subject of a caveat dated 8 November 2006 registered number AC727254 ("the caveat") together with an order that the caveat be extended or that, pursuant to s 74O of the Real Property Act 1900 (NSW), the plaintiff be given leave to lodge a further caveat in respect of that land claiming an interest as chargee pursuant to Deed of Loan between the parties dated 11 July 2003.

2 On 11 July 2003 the defendant entered into a Deed of Loan as borrower under which she borrowed from the plaintiff and one Ka Lai Lam, who I was informed from the bar table is the plaintiff's wife, the sum of $300,000 to be repaid under clause 1 of the deed on or before 11 July 2004.

3 Under paragraph 2 of the Deed of Loan interest is payable on the outstanding principal at a substantial rate. Clause 6(c) of the deed provides that: "In the event of default the lender may elect that the lender shall have the right to sell the borrower's property at 334 Birrell Street, Bondi..." 4 Should the borrower be in continued default for one month beyond the repayment date clause 7 of the deed provides as follows: "The borrower acknowledges that she is the owner of the property known as 334 Birrell Street, Bondi in folio identifier 1/210786 and hereby irrevocably agrees that the lender's loan creates a caveat over the property known as 334 Birrell Street, Bondi in folio identifier 1/210786." 5 The defendant gave evidence and was cross-examined. The evidence established that she prepared the Deed of Loan from an electronic template and proffered it to the plaintiff for his signature. For about 14 years the defendant had worked for the National Australia Bank starting as a teller, becoming a junior clerk and ultimately working her way up to management. At some time she was a mobile mortgage manager with that bank, her job being to source home loans for clients. She is familiar with loan and mortgage documentation. She went to school in Australia and speaks good English. There is no dispute that the loan monies were advanced and there is apparently no dispute that they are repayable.

6 The nature of the estate or interest in the land is specified in the caveat as "equitable interest" and no more.

7 In Schedule 1 of the caveat under the heading "By virtue of the facts stated below" the following words appear: "Caveator loaned monies to Registered Proprietor to build, reconstruct, and renovate property." 8 Counsel for the defendant firstly put that the caveat is in its terms fatally defective in that the equitable interest it is alleged to protect is not defined or particularised. For that proposition reliance was placed on the decision of Brereton J in this court in Warden v Mortgage House No. 1 Pty Ltd [2006] NSWSC 1462, in particular the passage at paragraph 15 where his Honour quoted with approval the decision of Campbell J in Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880, that "a caveat that merely claims "an equitable interest" is inadequate to specify the interest claimed by the caveator, as required by the Real Property Regulation 2003 (NSW) reg 47, Sch 3, Item 1". Brereton J went on to say that a caveat in that form disclosed "not a mere formal requirement; it goes to the heart of the operation of the caveat provisions of the Real Property Act 1900 (NSW), and is not susceptible of being cured under section 74L."

9 The position here is indistinguishable from that considered in Warden and I uphold the submission that the caveat here is manifestly defective. The defect is also not cured by the statement of the facts contained in the caveat because, as was also the case in Warden it admits of the possibility of a range of different types of equitable interest. 10 The next question which then arises is whether the plaintiff should be given leave to lodge a further caveat. 11 The answer to that question turns on whether the provisions of the Deed of Loan agreement create an interest capable of sustaining a caveat. The terms of clause 6(c) of the deed which gives the lender a right to sell the property and the acknowledgements in clause 7 of ownership and irrevocable agreement on the part of the defendant that the loan creates a caveat over the property is, in my view, at least as strong as the position was in Troncone v Aliperti (1994)6 BPR 13,291.

12 In that case a loan agreement provided for the repayment of the loan and for payment of interest. It did not provide, in terms, for any security for repayment of the loan. However, clause 5 provided: "The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors (sic) to protect his interest." 13 Mahoney JA, with whom Priestley JA and Meagher JA agreed, applied a fundamental principle of construction stated by His Honour to be, "Whosoever grants a thing is deemed also to grant that without which the grant itself would be of no effect," and went on to hold that the grant of an authority to lodge a caveat carried with it by implication such an estate or interest in land as necessary to enable the authority to be exercised. There was in that case, His Honour went on to say, no intention to the contrary.

14 As I have said above, the position here appears to me to be stronger than that in Troncone v Aliperti in that, in addition to clause 7, here there is the express conferral of a power of sale in clause 6(c) of the deed. That being so, I am of the opinion that the provisions of the deed give rise to an interest in land sufficient to sustain a caveat. In the circumstances the plaintiff will be given leave to lodge a further caveat reflecting that interest.

15 There is however, a further aspect of the matter which requires to be dealt with. There was evidence by affidavit from the defendant about the circumstances under which the deed was signed including evidence upon which she was cross-examined, that she was not asked whether she agreed to or understood the terms of the agreement which she herself had prepared and proffered, nor did the plaintiff ask whether she had sought legal advice about the agreement, nor had he asked whether she wanted to speak to a lawyer, and the plaintiff did not give or send to the defendant a copy of a signed agreement. The evidence was that she did not consult a lawyer, did not obtain legal advice, did not fully understand the document and did not know at the time what a caveat or caveatable interest was. She further gave evidence that she did not ever discuss the issue of a caveat with the plaintiff and he did not ask her whether she would agree to allow him to register a caveat against the title of the property. She also was not asked to sign any documents authorising the plaintiff or his nominee to lodge a caveat and she would never have agreed to borrow the monies from the plaintiff if she had been required to sign a mortgage or caveat over the property.

16 No submissions were directed to the Court, nor could they in my opinion on this material have properly been, that the defendant was non est factum in this case. There is also no cross-claim before this Court to set aside the deed on common law, equitable or statutory grounds. The evidence referred to accordingly has no forensic significance with respect to the disposition of these proceedings.

17 As to the appropriate orders, the form of the declaration in par 1 in the summons fails in its terms because what is sought is a declaration as to a caveatable interest, the subject of the caveat dated 8 November 2006. I have found that there is no caveatable interest properly described in that caveat, hence a declaration in that form must fail.

18 The declaration sought in par 2 of the summons that the lapsing notice caused to be sent be set aside, fails for the same reason, so too does order 3 sought in the summons. 19 The plaintiff has succeeded with respect to the relief sought in par 4 of the summons and is entitled to a declaration as to the caveatable interest which has been found. 20 On 13 March 2007 Registrar Musgrave ordered that the defendant pay the plaintiff's costs in the proceedings up to and including 13 March 2007. The order was made on the application of the plaintiff on the basis that the defendant had not appeared when the matter was listed on that day. No other relief, apart from an adjournment of the proceedings, was sought on that day. 21 By motion dated 27 March 2007 the defendant seeks an order that that order be set aside. 22 The motion is brought by way of UCPR Pt 49 r 49.19 under which the Court may, on the application of any party, review any direction, order or act of the Registrar. 23 In my view, the Registrar's decision to award costs of the entire proceedings which went back, amongst others, to the extension of the caveat on earlier occasions by other judges of this court, had no justification. The lack of justification would have been evident had the Registrar inquired at the time the order was made what the position would have been had the defendant ultimately been successful in the proceedings. The result would have been that notwithstanding success by the defendant on all counts, she would have been liable for all the costs of the proceedings up until and including 13 March 2007 as a consequence of her non-appearance on that single day. Such an outcome would be self evidently unsustainable. 24 I consider that in ordering those costs the Registrar acted on a wrong principle and I discharge the order made by the Registrar on 13 March 2007.

25 In the proceedings as a whole, I consider that the costs of the motion should be reflected as having been taken into account in the order for costs I will make in the proceedings. 26 In my view, taking into account the discharge of the Registrar's order which has occurred on the defendant's motion, and the fact that there were distinct arguments directed towards the terms of the caveat by the defendant which succeeded, I consider that the plaintiff should be entitled to only fifty percent of his costs of the proceedings. 27 Short minutes of order are to be brought in.

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