CITI NOMINEES PTY LTD -v- SKIPWORTH & ANOR [2007] WASC 145 (29 June 2007)

3 Mrs Skipworth is the estranged wife of the first named defendant, Mr Skipworth. On or about 2 May 1988 the defendants became the registered proprietors of an estate in fee simple in the property at 15 Park Lane, Kardinya ("the Property") as joint tenants. The defendants mortgaged the Property to RAMS. For some time prior to April 2006 Mr Skipworth was in business. The details of his business are not clear but it appears that he conducted at least some of his business operations through a company called Clad (WA) Pty Ltd, of which he was the sole director. In the course of his business activities Mr Skipworth entered into loan or credit agreements which purported to create charges over the Property to secure borrowings, advances or his liability for the supply to him or his company of goods and services. According to Mrs Skipworth, as deposed in her affidavits, Mr Skipworth did this without her authority, and, furthermore, he forged her signature on credit or loan documents purporting to create charges over the Property to secure the monies owing.

4 Mr Skipworth has gone bankrupt. On 12 April 2006 a sequestration order was made against the estate of Mr Skipworth and Kim David Holbrook was appointed as trustee of the bankrupt estate of Mr Skipworth.

5 On 11 October 2006 the trustee of the bankrupt estate of Mr Skipworth disclaimed property of the bankrupt, including the Property. On Mr Skipworth's bankruptcy his estate in the Property vested in the trustee. This constituted a disposition of Mr Skipworth's estate in the Property. The disposition severed the joint tenancy and from then, until the disclaimer, the Property was held in law as a tenancy in common in equal shares, with the bankrupt's undivided equal share, subject to the RAMS mortgage, being held by the trustee and the other undivided half share being held by Mrs Skipworth. Upon the notice of disclaimer being given by the trustee of Mr Skipworth's interest in the Property all Mr Skipworth's right, title and interest in the land terminated (without affecting the mortgagee's interest). Mrs Skipworth remains as the owner of a one undivided half share as tenant in common but, in the absence of a vesting order made under s 133(9) of the Bankruptcy Act 1966 (Cth). Mr Skipworth's interest will revert or escheat to the Crown: RAMS Mortgage Corporation Ltd v Skipworth & Anor [2007] WASC 24 at [82].

6 The certificate of title to the Property records a number of caveats having been lodged together with the registered mortgage to RAMS. It appears that a number of the caveats have been removed or lapsed following the issue of notices to remove the caveats which Mrs Skipworth caused to be issued under s 138B of the Transfer of Land Act 1893 (WA) ("TLA"). The four caveats the subject of this application remain in place. They are caveats by Citi Nominees Pty Ltd (J148142), PMB Plasterboard Pty Ltd (I980968), Harry Robinson (J000500) and Chequecash Pty Ltd (I963052).

7 Mrs Skipworth says that these four caveats rely upon charges which she never authorised or ratified and in respect of three of which Mr Skipworth forged her signature. Mr Skipworth has been charged with having committed a number of alleged offences involving fraud or forgery in relation to these credit or loan agreements.

8 Mrs Skipworth submits that the caveats are invalid and ineffective. However, in her present application Mrs Skipworth does not argue that the caveators' claims do not have substance and should be removed for that reason. In this application, Mrs Skipworth submits that the order extending the operation of the caveats by Miller J should be set aside on the ground that they were made as a result of material non-disclosure by the caveators who are the plaintiffs in each of these proceedings.

9 In December 2006 Mrs Skipworth caused the Registrar of Titles to issue to the plaintiff in each of these proceedings a notice under s 138B of the TLA that the caveat would lapse within 21 days unless the plaintiff obtained that order extending the operation of the caveat. The plaintiff in each of these proceedings applied to this Court ex parte during the Christmas recess period seeking orders extending the operation of the caveats. Those applications came on for hearing before the duty Judge, Miller J, on an ex parte basis. Faced with evidence of a purported charge having been granted by both registered proprietors, Miller J made orders extending those caveats. Mrs Skipworth had no notice of those applications.

10 Mrs Skipworth does not contest the validity of the RAMS mortgage. In May 2006 RAMS commenced an action in this Court seeking an order for possession of the Property as a result of defaults by Mr and Mrs Skipworth in the due payment of instalments under the mortgage. On 19 September 2006 judgement was entered against Mr and Mrs Skipworth ordering them to deliver up vacant possession of the Property. The judgement was entered in favour of RAMS in default of appearance. On 30 November 2006 RAMS obtained leave to issue an order for possession, known as a property (seizure and delivery) order under the Civil Judgments Enforcement Act 2004 (WA) ("the property seizure order"). The property seizure order was due to be executed by the sheriff on 18 January 2007. On 17 January 2007 Mrs Skipworth applied, as an urgent matter in the duty Judge list, for a stay of execution and other relief in respect of the judgment and Property Seizure Order. On 17 January 2007 the duty Judge, E M Heenan J, made an order in the nature of an injunction staying enforcement of the Property Seizure Order pending further hearing and determination of the application. That hearing occurred on 25 January. On 8 February 2007, E M Heenan J delivered reasons for judgment (RAMS Mortgage Corporation Ltd v Skipworth & Anor [2007] WASC 24) and ordered that the parties make further submissions as to the effect, if any, which Mr Skipworth's trustee's disclaimer of the mortgage property has on RAMS' ability to proceed with its action or effect any sale of the Property without a vesting order being made under s 133(9) of the Bankruptcy Act of Mr Skipworth's former interest in the land.

11 There was a further hearing before E M Heenan J on 1 March 2007. At that hearing his Honour was informed that Mrs Skipworth had, by then, obtained approval for a loan to repay the RAMS mortgage and was, through her solicitors, pursuing the question of the potential removal of the caveats over the land that are the subject of the present application. His Honour referred to s 133(9) of the Bankruptcy Act. E M Heenan J concluded his reasons for judgement delivered on 29 March 2007 (RAMS Mortgage Corporation Ltd v Skipworth & Anor (No 2) [2007] WASC 75 at [29] - [30]):

"Both the course of established authority dealing with the position of mortgagees of land which has been disclaimed by a trustee of bankruptcy, or a liquidator of an insolvent company, and these considerations of principle, point to the need for a mortgagee seeking to exercise its powers in respect of property over which it has security, but where one or more of the mortgagors has become bankrupt and his or her trustee has disclaimed the property, to obtain a vesting order under s 133(9) of the Bankruptcy Act, or await the vesting of the property in some other person who can then be joined in the enforcement proceedings, before steps can be taken to obtain possession of the property, or to sell it under the provisions of the mortgage or, where action for the possession of a sale has already been commenced, before that can be continued.

Consequently, the absence of any such vesting order of the mortgaged property in favour of the plaintiff, or any other person such as Mrs Skipworth, or some other person having or claiming an interest in the land, means that in my view the plaintiff is presently unable to proceed to enforce this judgment for recovery and possession of the land. This is another, and more considerable, reason for staying execution of that judgment and I will order that the present stay of execution should be extended until further order, with liberty for any affected parties to apply."

12 On 21 March Mrs Skipworth filed an application in the Federal Magistrates Court applying for an order that the former interest of Mr Skipworth in the Property vest in Mrs Skipworth pursuant to s 133(9) of the Bankruptcy Act 1966.

13 Mrs Skipworth has also brought proceedings in the Family Court. On 28 August 2006 Mrs Skipworth filed an application under the Family Law Act 1975 (Cth) in the Magistrates Court, 150 Terrace Road, Perth. The respondents to the application are Mr Skipworth and Hubert Horace Dufall and Ronda Gail Dufall. On 8 November 2006 the Magistrates Court made the following orders:

"1. The application of the applicant for an interim injunction restraining RAMS Mortgage Corporation Ltd from proceeding to exercise its rights as mortgagee to sell [the Property] be and is hereby dismissed.

1. Until further order of the court, [RAMS] be and is hereby restrained by injunction from paying to, or permitting the payment to, any other encumbrancer of the title to the said property, from the net proceeds of the proposed sale of the said property.
2. As soon as practicable following the settlement of the proposed sale of the said property, [RAMS] pay into the Supreme Court of Western Australia by way of interpleader proceedings the whole of the net proceeds of the proposed sale of the said property."

14 The plaintiff in CIV 2373 of 2006 ("Citi Nominees") traded as Australian Gypsum Suppliers, having taken over the business from the plaintiff in CIV 2374 of 2006 ("PMB Plasterboard"), on 1 November 2004. By a document described as Application for Credit Account and dated 11 November 2004 ("the Credit Application") Clad (WA) Pty Ltd applied to Citi Nominees for a credit account. The terms of the Credit Application included a term that the persons named in items 1 and 2 guaranteed to pay all moneys due and owing and to become due and owing in respect of credit given and agreed to indemnify Citi Nominees against any loss or damages incurred by Citi Nominees as a result of Clad failing to pay Citi Nominees any moneys owing to Citi Nominees in respect of the supply of goods or service on credit ("the Guarantee"). The terms also included a term that in order to secure the guarantors' liability under the Guarantee the guarantors charged all their real property with payment of any amount falling due under the Guarantee ("the Charging Clause").

15 The guarantors named are the defendants, that is, Mr and Mrs Skipworth. On 12 January 2005 Citi Nominees lodged caveat J148142 claiming an estate or interest in the Property pursuant to the terms of the Charging Clause of the Credit Application dated 11 November 2004 said to have been made between the caveator, Citi Nominees, "and the Registered Proprietor, wherein the registered proprietors are shown as [Mr and Mrs Skipworth]". Citi Nominees received a letter from the Department of Land Information dated 11 December 2006 stating that the defendants had lodged an application under s 138B of the TLA requesting the Registrar of Titles to serve Citi Nominees with a notice to the effect that, unless Citi Nominees obtained an order extending the operation of the caveat within 21 days the caveat would lapse.

16 Citi Nominees applied to this Court by originating summons for an order that the operation of the caveat be extended until further order of the court pursuant to s 138C of the TLA. The application was supported by an affidavit of Peter Boccamazzo sworn 19 December 2006. Mr Boccamazzo is the sole director of Citi Nominees. Mr Boccamazzo deposed that Clad owed $73,764.58, plus interest to Citi Nominees for goods and services supplied. Mr Boccamazzo said that the interest or late payment fee was to accrue at the rate of 1 per cent per day and the late payment fee from 1 January 2005 to 31 October 2006 had accrued to the sum of $493,485.04. Mr Boccamazzo stated that the defendant was indebted to the plaintiff in that sum. Mr Boccamazzo annexed to his affidavit copies of the Credit Application and the caveat.

17 The plaintiff in CIV 2374 of 2006 is PMB Plasterboard Pty Ltd ("PMB") and the defendants are Mr and Mrs Skipworth. The background to the proceedings is in substance the same as the background to CIV 2373 of 2006. Mr Boccamazzo is the sole director of PMB. He swore an affidavit on 19 December 2006 which annexes an application by Clad for a credit account on the same terms and conditions as the Credit Application made by Clad to Citi Nominees for credit. However, the only guarantor named on the form is Mr Skipworth.

18 PMB lodged a caveat over the Property claiming an estate or interest pursuant to the terms of the charging clause on the credit application form. PMB received a letter from the Department of Land Information dated 11 December 2006 stating that the defendants had lodged an application under s 138B of the TLA requesting that the Registrar give notice to PMB that the caveat would lapse within 21 days unless PMB obtained an order extending the operation of the caveat.

19 By originating summons filed on 20 December 2006, PMB applied for an order that the operation of caveat I980968 be extended until further order of the court pursuant to s 138C of the TLA. The application was supported by an affidavit sworn by Mr Boccamazzo on 19 December 2006. Mr Boccamazzo deposed that PMB had provided goods and services to Clad and that as at 29 September 2006 the total amount outstanding to PMB was $379,820.89, including the late payment fee which accrued at the rate of 1 per cent per day. Mr Boccamazzo annexed to his affidavit copies of the credit application and the caveat.

20 Harry Robinson is the plaintiff in CIV 2375 of 2006. The defendants are Mr and Mrs Skipworth. By originating summons of 20 December 2006 Mr Robinson applied for an order that the operation of caveat J997612 be extended until further order of the court. The originating summons incorrectly stated the caveat number. The caveat that had been lodged by Mr Robinson was caveat J000500. That caveat was lodged by Mr Robinson on 27 August 2004 and claims an estate or interest in the Property by virtue of a mortgage dated 5 August 2004 made between Mr Robinson as mortgagee and the defendants as mortgagor.

21 Mr Robinson's application to extend the caveat was supported by an affidavit sworn by Mr Boccamazzo on 19 December 2006. Mr Boccamazzo swore that as a result of default in payment of interest due under the mortgage the total amount owing by the defendants to Mr Robinson as at 15 October 2006 was $159,740. Mr Boccamazzo deposed that on 15 March 2006 Harry Robinson assigned the debt to Citi Nominees. Mr Boccamazzo annexed to his affidavit copies of the mortgage and the caveat.

22 Chequecash Pty Ltd is the plaintiff in CIV 2376 of 2006. Mr and Mrs Skipworth are the defendants. By originating summons of 20 December 2006 Chequecash applied for an order that the operation of caveat J997614 be extended until further order of the court pursuant to s 138C of the TLA. The application was supported by an affidavit sworn by Mr Boccamazzo on 19 December 2006.

23 The affidavit does not explain the plaintiffs' case as explicitly as it might have done. Mr Boccamazzo swore that by deed dated 20 March 2006 Chequecash had assigned to Citi Nominees its debt due from the defendants. Mr Boccamazzo swore that as at 31 October 2006 the total sum owed to Chequecash was $49,156.06, being the amount of a Local Court judgment in the sum of $20,002.74 plus interest. Exhibited to Mr Boccamazzo's affidavit is a copy of what is said to be a loan agreement between Chequecash as credit provider and the defendants as customers and is stamped 11 August 2004. The loan agreement purports to be signed by each of Mr and Mrs Skipworth. A clause of the agreement provides that the customers agree to a charge over the Property for the amount of the loan advanced. The default provisions include a provision that if the customers are in default then Chequecash may take possession of the property charged and sell it. In his affidavit Mr Boccamazzo does not expressly say that the Local Court judgment in favour of Chequecash was based upon default and the amounts owing under the loan agreement. However, I infer from Mr Boccamazzo's affidavit and what was said by counsel for Chequecash to Miller J that that is the plaintiff's case. Mr Boccamazzo's affidavit exhibits a copy of the order made on 8 November 2006 in the Magistrates' Court, 150 Terrace Road, Perth under the Family Law Act to which I have already referred.

24 The four originating summonses came on for hearing before Miller J on 29 December 2006. Ms You appeared as counsel for each of the plaintiffs. There was no appearance for the defendants. Each of the originating summonses is in the form of Form 75, that is an originating summons - appearance not required. The transcript of the hearing before Miller J discloses that his Honour had read the originating summonses and the affidavits in support of them. His Honour asked Ms You for an overview of the matter. There was discussion between his Honour and counsel. At the conclusion of the hearing his Honour made an order that the operation of each of the four caveats be extended until further order of the Court and that the defendants pay the plaintiff's costs of the application in any event.

25 Mrs Skipworth applies to set aside the orders made by Miller J on 29 December 2006 on the ground of material non-disclosure.

26 A party applying for an ex parte order has a duty of candour and frankness to the court: Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681 - 682. The duty is to make full and frank disclosure to the court of material facts. Material facts are facts which it will be material for the Judge to know in determining the application. The issue of materiality is to be decided by the court and not by the applicant or by the applicant's legal representatives. The extent of the disclosure required in each case will depend on its own facts. The applicant must make a full and fair disclosure of all matters within its knowledge which are material to the proceedings and which tend in favour of the other party: Bell Group NV (in liq) v Aspinall (1998) 19 WAR 561 at 570. The duty to make full and frank disclosure of material facts is not restricted merely to facts actually known. The applicant must make proper enquiries. The duty of disclosure applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such enquiries: Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1356 per Ralph Gibson LJ; Liberty Financial Pty Ltd v Scott [2002] FCA 345; Bell Group NV (in liq) v Aspinall (supra); Surefire Holdings Pty Ltd v Oxley Sports Drome Pty Ltd [2001] QSC 85 at [14] per Atkinson J.

27 The principles relating to setting aside an ex parte order on the ground of non-disclosure were discussed in detail by Gillard AJA in Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639. In that case, Savcor Pty Ltd ("S"), which carried on the business of construction engineering, issued, but did not serve, a writ against Cathodic Protection International ("CPI") for damages for alleged breach of contract, negligence and misleading or deceptive conduct in connection with the design and supply of a cathodic protection system which S had contracted with the Roads Corporation to design, supply and install on the Philip Island Bridge at San Remo. S had earlier made a claim against the Roads Corporation which had been referred to arbitration, and the corporation counterclaimed for damages alleging that the delays arose because of the failure of the cathodic protection system. S, which had earlier engaged Dr Chess (the managing director of CPI) to provide it with technical assistance and to give expert evidence in the arbitration, refrained from serving its writ on CPI and did not inform it of the possibility of making a claim against CPI. On the eve of the expiry of the writ and when the arbitration was still pending, S applied ex parte to a Master for an order extending the period of the validity of the writ. S relied on an affidavit of its solicitor, who deposed that the writ had not been served so as not to prejudice the ability of S to lead the evidence of Dr Chess in the arbitration, and that CPI had full knowledge of the circumstances of the matter. The Master renewed the writ for six months and S served it at the conclusion of that period. CPI filed a conditional appearance which became unconditional when it took no steps to set aside the service of the writ. Eight months later, after various interlocutory steps had been taken by both CPI and S, CPI successfully applied to Byrne J to have the Master's order discharged and service of the writ set aside on the ground of the non-disclosure of material facts.

28 The Victorian Court of Appeal allowed an appeal by S. Gillard AJA, with whom Ormiston JA and Buchanan JA agreed, said at [25] that the rule requiring full and fair disclosure of all the material facts on an ex parte application applies not only to an ex parte order to serve a writ out of the jurisdiction or an ex parte injunction but applies whenever an order is made ex parte and that the obligation requiring full disclosure must be complied with on pain of a penalty that the order will be set aside. At [27] Gillard AJA said that whether or not the order should be set aside is a matter of discretion and referred to a statement of Lord Wright in Lazard Bros & Co v Midland Bank Ltd [1933] AC 289 at 307. Gillard AJA continued at [28]:

"Modern cases have recognised that the court does have a discretion whether or not to set aside an order where there has been a failure to disclose material facts. In Victoria Teachers Credit Union Ltd v KPMG (a firm) [2000] VSCA 23; (2000) 1 VR 654 at 659-60 Tadgell JA referred to the cases which recognised a dispensation from the strict application of the rule in circumstances that warranted it and went on to observe:

'If driven to the point, I should hesitate to say that the rule of practice such as that now in question is utterly wanting in adaptability; cf Spry, Equitable Remedies, 5th edition (1997) pp 497-8."

Gillard AJA then referred to the statement in the sixth edition of Spry where the learned author opined that it was not an inflexible rule that the order should be set aside as a matter of course and agreed with that statement. His Honour said at [29]:

"In my view it is not an inflexible rule that a non-disclosure of a material fact in an ex parte application invariably leads to the order being set aside. Of course if there is a high degree of culpability in the sense that a party has set out to mislead a court, a court in most if not all cases would be reluctant to excuse the intentional misconduct. Each case will depend upon its own circumstances. Justice is the determinant. I respectfully agree with Balcombe LJ in Brink's Mat Ltd v Elcombe [1998] 1 WLR 1350 where his Lordship said in relation to an ex parte injunction:

'But it also serves as a deterrent to ensure the persons who make ex parte applications realise that they have this duty of disclosure and of the consequences (which may include a liability in costs) if they fail in that duty. Nevertheless, this judge-made rule cannot be allowed itself to become an instrument of injustice. It is for this reason that there must be a discretion in the court to continue the injunction, or to grant a fresh injunction in its place, notwithstanding that there may have been non-disclosure when the original ex-parte injunction was obtained." (Emphasis added)

Gillard AJA quoted Ralph-Gibson LJ in Brink's Mat Ltd v Elcombe (supra) to a similar effect and then continued at [31]:

"Whether a court will set aside an order will depend upon many factors. The court should not overlook the practical effect of such a step. What would be achieved by setting aside the order? Absent deliberate and intentional non-disclosure or misleading information (which usually leads to a discharge), the court must weigh all relevant material. An important matter is that the setting aside of the order will not necessarily preclude another application being made. See Fitch v Rochfort [1849] EngR 509; (1849) 18 LJ Ch 458 and The Hagen [1908] P 189 at 201. The practical effect would be a waste of time and costs. The point was made by Morton J in Ellinger v Guinness Mahon & Co [1939] 4 All ER 16 at 25. His Lordship said:

'Counsel for the applicants ... argues that, if there has been non-disclosure of any material fact on the ex parte application, the ex parte order ought to be set aside, even if the judge, on being fully informed of the facts, thinks that the case is a proper one for allowing service of the notice of the writ out of the jurisdiction. In my judgment that argument cannot succeed. In the absence of any attempt to deceive the court I do not think it would be right for a Judge to take this course. The only result would be to put the applicant to the expense of making a further application under RSC O 11, r 1 which would be bound to succeed.'"

"In my opinion a court does have a discretion to not set aside an order despite a material non-disclosure or misrepresentation of law or fact. Setting aside does not follow as a matter of course. Relevant to the discretion is whether the material non-disclosure was serious or otherwise the importance or weight that should be attached to the omitted fact in the decision making process and also any hardship if the order was set aside. The approach is different if the plaintiff has acted culpably in the sense that the omission to disclose relevant matters was done deliberately to mislead the court. The most likely result in those circumstances would be that the order would be vacated.

Other relevant matters are delay in moving to have the order set aside resulting in prejudice which cannot be overcome, acquiescence under an order and, depending upon the particular order in question, the irregularity may be waived.

The obligation is to disclose all material facts. What is a material fact is a matter which is relevant to the court's determination. To be material, it would have to be a matter of substance in the decision making process.

In Brink's Mat v Elcombe [supra], Ralph Gibson LJ conveniently summarised the principles. His Lordship noted that 'the material facts are those which it is material for the Judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisors'. His Lordship observed that the applicant must make proper enquiries before making an application. If a material non-disclosure is established the court would be astute to ensure that the plaintiff obtaining an ex parte order without full disclosure is deprived of any advantage he may have derived, and further that whether a fact not disclosed 'is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the facts to the issues which were to be decided by the judge on the application'. His Lordship pointed out that the innocence or otherwise of the non-disclosure and the failure to understand its relevance are important factors to take into account."

29 Gillard AJA said at [95] that if it was a material non-disclosure not to state the full extent of Dr Chess' involvement in preparing a witness statement, it was in the context not a serious transgression bearing in mind that the Master was aware that the existence of the writ was kept from Dr Chess. If there was material non-disclosure, justice dictated that the order extending the validity of the writ should not have been set aside.

30 Citi Nominees' right to lodge a caveat against the Property depended upon the right to charge the land pursuant to the Charging Clause of the Credit Application. In his affidavit sworn on 19 December 2006 Mr Boccamazzo exhibited a copy of the Credit Application and stated "the Defendant [had] signed a personal guarantee for monies owed pursuant to the credit account and charged his real property with payment of any amounts falling due under the guarantee and indemnity". The "defendant" is Mr and Mrs Skipworth. The Credit Application annexed to Mr Boccamazzo's affidavit purports to be signed by each of Mr and Mrs Skipworth. In her affidavit sworn 22 March 2007 Mrs Skipworth swore that what purported to be her signature on the Credit Application was forged by Mr Skipworth. She further swore that Mr Skipworth has been charged with eight fraud offences and that some of these fraud charges relate to the fraud committed by Mr Skipworth in relation to the Credit Application.

31 Mrs Skipworth swears in her affidavit that in the Family Court proceedings in or about October or November 2006, in the presence of Mr Boccamazzo, she made oral submissions to the effect that the Credit Application was procured as a result of fraud by Mr Skipworth in forging her signature.

32 Mrs Skipworth annexes to her affidavit a transcript of the proceedings before Miller J on 29 December 2006. The transcript shows that the following exchanges took place between Judge and counsel:

"MILLER J: Alright, thank you very much. Ms You, we have four applications here all related to the same parties and perhaps you could just give me a bit of an overview of them. It would appear from my reading of the papers that the Skipworth signed guarantees. Is that correct?

MS YOU: Loan agreements, yes.

MILLER J: Yes.

MS YOU: Mr [Boccamazzo] I think his name is, deposes that the registered proprietor has charged the land to secure credit provided by the company, which I understand the registered proprietors are the directors.

MILLER J: Right, Yes. That's Jeffrey Donald Skipworth and Janet-Jane Turnbull Skipworth?

MS YOU: Yes. Essentially, a significant amount is due.

MILLER J: They are said to have signed - they have guaranteed loans in relation to about three or four different entities. Is that correct? There's [Citi] Nominees. There's [PMB] Plasterboard, then Harry Robinson who has signed the loan and Chequecash.

MS YOU: Yes. Essentially, the plaintiffs are one and the same either by being the director having taken over another company or by assignment of the debt."

Later, Miller J referred to the Family Court order.

33 The case presented to Miller J was that the Credit Application was signed by each of Mr and Mrs Skipworth. That is the effect of the affidavit of Mr Boccamazzo and the statements made by Ms You on the hearing of the application. That was misleading or at the very least a non-disclosure. Mr Boccamazzo knew that Mrs Skipworth alleged that her purported signature on the Credit Application had been forged by Mr Skipworth. Mr Boccamazzo knew that Mr Skipworth had been charged with fraud and that it was alleged by the prosecution that he had forged Mrs Skipworth's signature on the Credit Application. Mr Boccamazzo did not disclose those matters in his affidavit. I assume Ms You was not aware of those matters when she made the misleading statement to Miller J that Mr and Mrs Skipworth had signed the guarantees and guaranteed loans. Nevertheless, her statements to the Court were misleading and the true state of affairs was known to Citi Nominees by its director Mr Boccamazzo.

34 Mr Boccamazzo swore a further affidavit on 24 April 2007. Mr Boccamazzo swears that he understands that Mr Skipworth has not entered pleas to the charges relating to Citi Nominees and does not admit any fraud. He gives the following explanation why he did not disclose to the Court the dispute concerning the forging of Mrs Skipworth's signature:

" ... I did not disclose to the court the fact that Jeffrey Donald Skipworth has been charged with fraud in relation to the credit application as Jeffrey Donald Skipworth denies fraud whereas Janet-Jane Turnbull Skipworth alleges it. At this point I do not know if there has been any fraud."

35 Mr Boccamazzo goes on to admit that he was aware of the allegations made by Mrs Skipworth in the hearing in the course of the Family Court proceedings to which I have already referred. Mr Boccamazzo further deposes that in February 2006 he had a meeting with Mrs Skipworth and her lawyer where they discussed selling the Property and paying out the debt to Citi Nominees and all other debts secured against the Property.

36 Mr Boccamazzo's explanation of the plaintiffs' non-disclosure to the Court entirely misses the point. He, and through him Citi Nominees, knew that Mrs Skipworth alleged that her signature on the Credit Application had been forged by Mr Skipworth and that the police had charged Mr Skipworth with having done so. He did not disclose those facts to the Court.

37 The next issue is whether the non-disclosure was material. I find that it was. Citi Nominees' case presented to Miller J was that Citi Nominees' right to lodge a caveat depended upon the guarantee given by each of Mr and Mrs Skipworth. Before me, counsel for the plaintiffs submitted that if Citi Nominees had disclosed to the Court that Mrs Skipworth alleged that she had not signed the guarantee the Court may still have granted an extension of the caveats. That is because s 138C(2)(a) of the TLA provides that on the hearing of the application the court if satisfied that the caveator's claim has or may have substance may make an order extending the operation of the caveat. Counsel submitted that the court may have been satisfied that Citi Nominees' claim had or may have had substance notwithstanding that Mrs Skipworth alleged that she had not signed the guarantee.

38 I have earlier stated that a court has a discretion to not set aside an ex parte order despite a material non-disclosure. The court may either not set aside the ex parte order or might dissolve the order and issue a fresh order on the merits. Relevant to the discretion is whether the material non-disclosure was serious or otherwise the importance or weight that should be attached to the non-disclosure in the decision making process. In Behbehani v Salem [1989] 2 All ER 143, Woolf LJ said at 148, in relation to whether or not there should be a discharge of an existing injunction and a re-grant of a fresh injunction where there has been non-disclosure:

"In this connection counsel for the plaintiff at one stage of his argument submitted that the acid test was whether or not the original judge who granted the injunction ex parte would have been likely to have arrived at a different decision if the material matters had been before him. I do not regard that as being the acid test. Indeed, although I regard it as a relevant matter when considering the question of discharge and regrant of injunctions, I do not regard it as a matter of great significance unless the facts which were not disclosed would have resulted in the refusal of an injunction."

39 In the course of considering Mrs Skipworth's application for a stay of the Property Seizure Order in favour of RAMS, E M Heenan J in Rams Mortgage Corporation Ltd v Skipworth [2007] WASC 24 said at [20] that Mrs Skipworth has a good arguable case that if her signature on the charge documents relied upon by the plaintiff caveators are forged then the charges are invalid and ineffective to create any interest in the Property, even an interest in the undivided share in the Property held by Mr Skipworth. His Honour referred to Rogers v Resi-Statewide Corporation Ltd (No 2) [1991] FCA 535; (1991) 32 FCR 344. In that case Von Doussa J considered a mortgage in favour of Resi purported to have been signed by Mr and Mrs Rogers. Mrs Rogers' signature on the mortgage was forged by Mr Rogers and she had no knowledge of the transaction. Von Doussa J said at 349 - 350:

"The first issue is whether the Resi mortgage is void for all purposes by reason of the forgery of Mrs Rogers' signature, or whether it has efficacy against the estate and interest of Mr Rogers in the property. A similar question was left open in Australian Guarantee Corp Ltd v De Jaeger [1984] VicRp 40; [1984] VR 483 at 499. However, in the Full Court of South Australia in Daniell v Paradiso (1991) 55 SASR 359 King CJ, with whom Cox and Olsson JJ agreed, held that a document which purported to be a mortgage of the estate in fee simple in the whole of the land owned by two brothers as tenants in common, where one brother's signature was forged, was a nullity as against each of them even if the mortgage had been entered into by the duly authorised agent of the second brother. The argument in favour of a memorandum of mortgage being a nullity where the signature of one of two registered proprietors is forged is in my view even stronger where they are registered as the proprietors as joint tenants. While it lies in the power of one joint tenant to mortgage his or her interest in land registered under the Real Property Act, and to do so without thereby severing the joint tenancy (Lyons v Lyons [1967] VR 169), that is not what the Resi mortgage purports to do. In my opinion the Resi mortgage cannot be treated, even in equity, as a mortgage of Mr Rogers' interest alone. The Resi mortgage by reason of the forgery is null and void for all purposes."

40 That does not mean that Miller J would not have granted the extension of caveat if Mrs Skipworth's allegation that her signature on the Credit Application had been forged had been disclosed to him. It might be that Miller J would have granted the extension of caveat if Citi Nominees had made full disclosure of Mrs Skipworth's allegations that Mr Skipworth had forged her signature on the Credit Application without her knowledge. Miller J may have been satisfied that there was a serious question to be tried that Mrs Skipworth's signature on the Credit Application was genuine and that Citi Nominees claim that the Credit Application created a caveatable interest in the Property had or may have had substance. However, that would have been a different case than the one that was presented to his Honour. His Honour may have gone on to consider whether or not the balance of convenience favoured extending the operation of the caveat or may have declined to deal with the matter until Mrs Skipworth was given notice of the application and an opportunity to oppose it.

41 There are two principal reasons for the rule that an ex parte order will be discharged if it was obtained without full disclosure. First, the court will be astute to ensure the claimant is deprived of any advantage he may have derived from that breach of duty: Brink's Mat Ltd v Elcombe (supra) per Ralph Gibson LJ at 1357, Balcombe LJ at 1358. Secondly the rule serves as a deterrent to ensure that persons who make ex parte applications realise that they have a duty of disclosure and of the consequences if they fail in that duty: Brink's Mat per Balcombe LJ at 1358, Slade LJ at 1359. Nevertheless, this judge-made rule must not be allowed itself to become an instrument of injustice. It is for this reason that there must be a discretion in the court to confirm the order, or to grant a fresh order in its place: Brink's Mat per Balcombe LJ at 1358.

42 Whether the fact non-disclosed is sufficiently material to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the Judge on the application: Brink's Mat per Ralph Gibson LJ at 1357. In this case, the fact that was not disclosed to Miller J was crucial. The case presented to the Judge was that the plaintiffs' caveatable interest arose from the charge signed by both registered proprietors of the land.

43 Another factor to be considered is whether the non-disclosure was innocent, in the sense that the relevance of the fact was not perceived by the plaintiff. In Brink's Mat Ralph Gibson LJ said that that was an important consideration but not decisive because of the duty on the applicant to make all proper enquiries and to give careful consideration to the case being presented. In Behbehani v Salem (supra) Woolf LJ said at 148:

"In practice in most cases it will be extremely difficult for a defendant who is applying to discharge injunctions which have been granted ex parte to show that the matters which were not disclosed, but which should have been disclosed, were the subject of any decision not to disclose which was made in circumstances where it was appreciated that there should have been disclosure. In the majority of cases the matter has to be approached on the basis of considering the quality of the material which was not disclosed without making any final decision whether or not there has in fact been bad faith. If, of course, it can be established that there has been bad faith, either on behalf of the parties or their legal advisors, that will be a most material matter in considering whether injunctions which have been granted should be discharged, and, if they are discharged, whether it is appropriate in the circumstances to regrant injunctions either in the same terms or in similar terms."

A little later in his judgment Woolf LJ said at 148:

"In deciding in a case where there has undoubtedly been non-disclosure whether or not there should be a discharge of an existing injunction and a regrant of fresh injunctions, it is most important that the court assess the degree and extent of the culpability with regard to the non-disclosure, and the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court."

44 In this case, the non-disclosure was serious. Mr Boccamazzo knew that not only did Mrs Skipworth allege that Mr Skipworth had forged her signature on the Credit Application but that the police had charged Mr Boccamazzo with fraud by forging Mrs Skipworth's signature on the Credit Application. Mr Boccamazzo's only explanation for his failure to disclose those matters to the court is that Mr Skipworth denies fraud and Mr Boccamazzo does not know if there had been any fraud. Mr Boccamazzo does not state the basis for his statement that Mr Skipworth denies fraud and it appears to be nothing more than that Mr Skipworth has not entered pleas to the charges. In any event, that Mr Boccamazzo does not know whether Mr Skipworth forged Mrs Skipworth's signature is no mitigation of his failure to disclose that Mrs Skipworth alleged the forgery and the police had charged Mr Skipworth with fraud.

45 On the face of it, the order extending the operation of the caveat should be discharged. There should be a further order extending the operation of the caveat, or giving the plaintiff leave to file a further caveat, only if the refusal to do so would itself amount to an injustice.

46 Citi Nominees claims that Clan and Mr Skipworth are indebted to it. That does not appear to be contested. However, Citi Nominees has done nothing to pursue its claim against Mrs Skipworth or its charge over the Property. Counsel for the plaintiffs said in effect, that the plaintiffs have sought to maintain their caveats over the Property and await sale of the Property by RAMS in the hope and expectation that RAMS would then pay out to the plaintiffs the amounts they claim to be secured by their caveats.

47 Counsel for the plaintiffs misunderstands the effect of the TLA. TLA, s 109 does not give priority to a person claiming to be a chargee merely because they have lodged a caveat. On a sale by a mortgagee, after paying the expenses of the sale and amounts due under the mortgage or similar the next payment is to be made to subsequent mortgagees and chargees. However, if the claimed charge was not an enforceable charge then the mortgagee who paid any part of the sale proceeds to the claiming chargee would not receive a valid discharge and would remain liable to the registered proprietor. Accordingly, the mortgagee is likely to take interpleader proceedings in relation to the amount claimed by the plaintiff under its claimed charge. In short, if the plaintiff wishes to enforce its claimed charge it will have to take proceedings to do so.

48 As I have said, the Magistrate's Court made an order under the Family Law Act on 8 November 2006 that restrains RAMS from paying any of the proceeds of the proposed sale of the Property to Citi Nominees or any other encumbrancer of the title to the Property and requires RAMS to pay into this Court by way of interpleader proceedings the whole of the net proceeds of the proposed sale of the Property. Furthermore, RAMS is restrained from selling the Property by the order of E M Heenan J to which I have earlier referred.

49 Mrs Skipworth wants the caveat discharged so that she can use the Property as security to borrow funds to pay out the mortgage to RAMS. The plaintiffs will not be disadvantaged by such a course of action provided that Mrs Skipworth does not sell the Property or deal with it in any way except for the purpose of using it as security to borrow funds which are used for no purpose other than discharging the RAMS mortgage.

50 In all the circumstances, justice will be served if Mrs Skipworth is restrained by injunction from dealing with the property except for the purpose of using it as security for funds to discharge the RAMS mortgage or Mrs Skipworth gives an undertaking to that effect.

51 The facts in CIV 2374 of 2006 are similar to those in CIV 2373 of 2006 except for the following. The Credit Application and the guarantee and indemnity in favour of PMB Plasterboard are signed by Mr Skipworth only. The affidavit in support of the application for an extension of the caveat sworn by Mr Boccamazzo on 15 December 2006 annexed a copy of the relevant Credit Application to which, Mr Boccamazzo deposed, "the defendant signed a personal guarantee for monies owed pursuant to the credit account and charged his real property ...". That might be ambiguous in that "the Defendant" is Mr and Mrs Skipworth not Mr Skipworth alone but Mr Boccamazzo referred to "his" real property not "their" real property. However, Mr Boccamazzo also annexed a copy of the certificate of title to the Property which he deposed was owned by "the Defendant". Importantly, counsel for the plaintiff informed Miller J, in effect, that the guarantee had been signed by both defendants.

52 Counsel for the plaintiff claimed that the Credit Application and guarantee is effective to create a charge in relation to Mr Skipworth's interest in the Property. Whether or not the Credit Application is effective to create a charge in relation to Mr Skipworth's interest in the Property depends at least upon the proper construction of the Credit Application. The certificate of title to the property records that caveat I980968 by PMB Plasterboard is "as to the interest of [Mr Skipworth] only". However, whether that is so or not, that is a different case than that which was presented to Miller J. The ex parte order should be discharged.

53 The relevant facts and circumstances of CIV 2375 of 2006 are relevantly indistinguishable from those in CIV 2373 of 2006. The ex parte order extending the operation of the caveat should be discharged.

54 The facts and circumstances of CIV 2376 of 2006 are relevantly indistinguishable from those of CIV 2373 of 2006. The order extending the operation of the caveat should be discharged.

55 The order of 29 December 2006 extending the operation of each of the caveats should be discharged. Mrs Skipworth should give an undertaking, or an injunction should be issued, restraining Mrs Skipworth from dealing with the Property except for the purpose of use as a security for raising funds to pay out the RAMS mortgage. I will hear from the parties as to the appropriate orders to give effect to these reasons.