EQUITY - funds paid into Court by plaintiff mortgagee - funds represent surplus proceeds after mortgagee sale of property - two applications for payment out of Court - two competing equitable interests in land - priority - as both equities are equal, first in time prevails - whether one of the applicants' charge was created on the date when he was able to lodge a caveat, pursuant to the agreement, or when the caveat was actually lodged - consideration of Murphy v Wright and Troncone v Aliperti - agreement created contingency as to timing for the lodgement of the caveat - held that this applicant had to exercise his right to lodge caveat on the title of the property for it to be bound by an equitable charge - this applicant's equitable interest was created later than the other applicants - his application is dismissed - [2015] NSWSC 1587 - NSWSC 2015 case summary

Judgment

The present case involves a contest between two sets of claimants as to who has priority to claim an amount of $59,053.63 that has been paid into court by Westpac Banking Corporation pursuant to s 98 of the Trustee Act 1925 (NSW).
The amount paid into court represented the surplus after Westpac sold the property known as 14/26-34 McElhone Street, Woolloomooloo (the Property) to repay the amount due to Westpac under a registered mortgage granted to it by the registered proprietors of the Property.
On 14 May 2015, Ms Somy Ros and Mr Brian Kelly filed a notice of motion by which they sought an order that the money in court be paid out to them. They claimed as equitable mortgagees under a mortgage in registrable form over the Property, which had been executed by the registered owners of the property (the Guarantors) on 22 June 2011 to support a guarantee granted by them in relation to an advance of $350,000 by Ms Ros and Mr Kelly to a company called Wholesum Pty Ltd (the Debtor), which was a development company controlled by the Guarantors. The mortgage was not registered against the title to the Property, so it remained an equitable mortgage.
On 19 May 2015, Dr David Wai also filed a notice of motion seeking an order that the money in court be paid out to him. Dr Wai claimed that he was entitled to the money in court as an equitable chargee under a document called an Investor Agreement dated 31 August 2010, in respect of an advance of $100,000 that he had made to the Debtor, which he claimed had been guaranteed to him by the same Guarantors. Dr Wai lodged a caveat against the title to the Property on 11 October 2011.
The two notices of motion came on for hearing before me on 19 June 2015. I published reasons for judgment on 3 July 2015: Re Westpac Banking Corporation [2015] NSWSC 869.
For reasons that I explained at [7] of my reasons for judgment, I was not able to deal on that day with the notice of motion filed by Ms Ros and Mr Kelly. I dealt only with Dr Wai's notice of motion. Ms Ros and Mr Kelly had an interest in resisting Dr Wai's claim that he was entitled to exercise a charge over the Property, and they argued that the Guarantors were not parties to, or bound by the Investor Agreement; and even if they were, on the proper construction of the Investor Agreement, the Guarantors did not grant a charge to Dr Wai over the Property, whether by reason of the lodgement of the caveat, or otherwise.
I held that the Guarantors were bound by the terms of the Investor Agreement, and also that the Investor Agreement gave rise to a charge over the Property in favour of Dr Wai, at least from the time that he lodged a caveat against the title to the Property.
It will be convenient at this point to set out the relevant terms of Dr Wai's Investor Agreement. Clause 4 obliged Dr Wai to lend $100,000 to the Debtor for the purposes of a particular development project.
Clause 5 provided for the return on his investment to which Dr Wai was entitled in the following terms: 5. INVESTMENT FINANCE RETURN 5.1 In consideration for the provision of the Investor Finance the Developer will, subject to clause 5.3, pay the Investors Interest in the proportion outlined in schedule 2 to this deed. 5.2 The amount payable to the Investor pursuant to clause 5.1 must be paid by the Developer to the Investor on the earlier of: (a) 1 month after the completion date and (b) 1 month after the Developer notifies the Investor in writing that the Developer will pay the Investor the Investor's Interest Return. 5.3 The Developer will be entitled to any profit received by it on completion of the Project.
The Investor Finance is the advance of $100,000 (although the relevant amount is left blank in cl 1.1(f), and must be deduced from cl 4.2, where it is not blank). Clause 1.1(f) describes the Investor Finance as a "contribution of capital by the Investor to the Project in accordance with Clause 4". There is no definition of "Investors Interest Return". Clause 1.1(g) defines "Investor's Return on Investment" as meaning the "amount outlined in Schedule 2 to this deed".
Considerable difficulties arise in relation to ascertaining the meaning of cl 5. Schedule 2 is entitled "Investors Estimated Share of Project Profit". It contains a table that describes three scenarios, A, B and C. The three scenarios are described respectively as involving the existing 8 apartments over a 6 month period, or alternatively the construction of 4 new apartments over a period of 12 months, or both over 12 months. For each scenario, there is an estimate of the profit, and then there are two columns in the Schedule called "Investors Interest rate %" and "Investors Estimated Project Profit". The investors interest rate column contains the percentage 25% for each of the three scenarios. The table does not contain an estimate of the Investors' profit for any scenario. It is very difficult to interpret Schedule 2, but the better view would be, subject to the effect of cl 5.3, that Dr Wai was promised a 25% share of the profit from the development project. The problem with this interpretation is that cl 5.3 provides that the Debtor (who is described as the Developer in the Investment Agreement) will be entitled to any profit received by it on completion of the Project. There is a real question as to whether cl 5 is sufficiently certain to be enforceable. However, this is a question that was not raised by the parties in these proceedings.
This difficulty appears to be obviated because of the strange terms of the Investor Agreement, which appear at the one time to treat Dr Wai's payment of $100,000 as an investment of capital (cl 5) and a loan (cl 7). Clause 7 is headed "Risk" and provides: 7.1. The Investor acknowledges that, notwithstanding any other provision of this agreement; (a) The Investor Finance constitutes a debt owing by the Developer to the Investor. (b) If the Project suffers a loss and there is no profit the Developer will be liable to repay the Investor Finance to the Investor & any Interest that the Investor has earned from date of the investment funds being received. (c) The Developer guarantees to repay the Investor Finance to the Investor
In the present case, the development project undertaken by the Debtor failed, and I infer that the Debtor made a loss. Accordingly, the difficulties involved in construing cl 5 do not appear to be relevant. The Investor Agreement provides for Dr Wai's advance of $100,000 to be treated as a debt due by the Debtor in the present circumstances.
Clause 7.1(b) refers to "any Interest that the Investor has earned". "Interest" is defined in cl 1.1(l) as meaning "the amount outlined in Schedule 1 to this deed". There is no Schedule 1, only a Schedule 2. It would appear to follow that the Investor Agreement did not identify the interest rate payable to Dr Wai. That would not appear to matter in the present case, because the amount of the advance was $100,000, and the amount that has been paid into court is only $59,053.63, which is insufficient to cover any interest that might have been payable under the Investor Agreement in respect of the $100,000 advance.
Clause 22 is entitled "Caveat" and provides: 22.1. The Developer grants permission to the Investor to lodge a caveat for registration in respect of the a (sic) property that is owned by the Developers located at 14/26-34 McElhone Street, Woolloomooloo NSW; Granting of lodgement of such caveats will only be allowed in the event that any or all of the following occur (a) Should the maturity date being 4 months from the date of this agreement lapse and the Investor has not received their full investment in addition to all the interest earned. (b) The Investor has not received their initial investment or the interest earned within 1 month of the Completion date of the Project
There is no definition of "maturity date" in cl 1.1, and it follows that the term has the meaning set out in par (a). "Completion Date" is defined in cl 1.1(d) as meaning the date when the Debtor delivers written notice to the Investor confirming the Project has been completed. There is no reason explained by the evidence as to how it could have been expected that the event in par (b) could ever realistically have occurred before the event in par (a), but that does not appear to matter, as par (a) would have the effect that Dr Wai was permitted to lodge a caveat on the title to the Property, but only in the event that Dr Wai had not received repayment of the whole of the $100,000 advance by the date that was 4 months after the date of the Investor Agreement.
The result is that, notwithstanding the unsatisfactory wording of the Investor Agreement, as the development project failed, if the Debtor had not repaid the $100,000 to Dr Wai by 31 December 2010, Dr Wai was granted permission to lodge a caveat against the title to the Property.
In my earlier reasons for judgment, I principally relied upon the decisions of the Court of Appeal in Murphy v Wright (1992) 5 BPR 11,734; BC920350 and Troncone v Aliperti (1994) 6 BPR 13,291; BC94002483.
After I had stated my conclusion at [45] that the wording of cl 22 of the Investor Agreement had the effect of authorising Dr Wai to create a charge over the Property by lodging a caveat against the title, I made the following observations: [46] However, the judgment of Handley JA in Murphy v Wright would suggest that the charge was not created by clause 22 alone, but by the lodgement of the caveat as authorised by that clause. If that is correct, the charge over the Property to which Dr Wai is entitled was not created until 11 October 2011. [47] On the other hand, it is arguable that Troncone v Aliperti has the effect that an implied charge is created at the time the debtor authorises the creditor to lodge a caveat, because the interest in the land necessary to support the caveat must be created by the agreement, even if only by implication. [48] The issue of when the charge is created is likely to depend upon the proper construction of the relevant agreement, and the circumstances in which, and the time at which, the creditor is authorised to lodge the caveat. [49] The parties to Dr Wai's notice of motion did not address the question in their submissions of the time when Dr Wai's charge was created. As Ms Ros and Mr Kelly's notice of motion was not dealt with, the parties also have not dealt with the issue of the priority of the two charges, assuming that Ms Ros and Mr Kelly can substantiate the charge upon which they rely. [50] As the parties have not had an opportunity to make submissions, I will not enter into any further consideration of the question of when Dr Wai's charge was created. [51] As both charges, if valid, are equitable, the priority issue is likely to be determined by the maxim: where the equities are equal, the first in time prevails. [52] I have therefore concluded that it would be premature for the Court to make any final determination or orders in respect of Dr Wai's notice of motion. As I have found that Dr Wai had a charge over the Property, and accordingly has a charge over the money that is now in Court, it will be necessary for the Court to address not only the validity of the charge claimed by Ms Ros and Mr Kelly, but if that charge is found to be valid, it will also be necessary for the Court to determine the priority issue. [53] I will therefore not make any order at this stage. It will be necessary for the hearing of the two notices of motion to be relisted, so that the balance of the issues can be determined.
The applicants on both notices of motion appeared before me on 24 September 2015 to argue the point that I left open in my earlier reasons for judgment; that is, which of the applicants were entitled to priority in respect of payment out of court of the $59,053.63.
The position is that I have held that Dr Wai has an equitable charge over the Property to secure payment to him of the advance of $100,000. There is no contest about the validity of the equitable mortgage over the Property held by Ms Ros and Mr Kelly in respect of the advance of $350,000 made by them to the Debtor.
The parties are agreed that, as there are two competing equitable interests in the Property, and none of the applicants were guilty of any disentitling conduct, the maxim that, where the equities are equal, the first in time prevails, is applicable.
There is no doubt about the date on which Ms Ros and Mr Kelly's equitable mortgage was created. It was the date of the mortgage document, being 22 June 2011. There is a doubt about the date when Dr Wai's equitable charge was created. The alternatives are that the charge was created immediately after 31 December 2010, when Dr Wai first became entitled to lodge a caveat, and 11 October 2011 when Dr Wai's caveat was lodged.
Dr Wai will be entitled to priority if his equitable charge was created immediately after 31 December 2010, while Ms Ros and Mr Kelly will be entitled to priority if Dr Wai's charge was not created until 11 October 2011.
I have considered the reasoning in the two Court of Appeal decisions in my earlier reasons for judgment. The relevant contractual provision considered by the Court of Appeal in Murphy v Wright was: Twelfthly - In the event of default by the Borrowers in payment of monies due under the Security Documents or in performance or observance of any covenants therein then the Lender shall in addition to the rights set out herein or in the Security Documents be entitled to attach the debt due to any of the assets of the Guarantor or Guarantors whether such assets be real or personal and further that the parties hereto agree that in the event of such default the Lender may register a caveat against any property registered in the name of any or all of the Guarantors until the Monies Secured are repaid.
The significant feature of this term for present purposes is that it authorised the lender to do two things; first, to attach the relevant debt to any assets of the guarantor; and secondly, to register a caveat against any property registered in the name of any guarantor.
Handley JA (with whom Priestley JA agreed; Sheller JA dissenting) said at 11,737 to 11,739: Until default there is no entitlement and hence there can be no charge or agreement to charge any property of the Guarantor. On default an entitlement accrues to the lender but at that stage there is still no charge or agreement to charge. The language is not felicitous because the voluntary attaching of a debt to property requires some act by its owner but the clause contemplates that an act of the Lender will have this effect. However the Guarantor has agreed that the Lender may do this act. In my opinion the clause should be construed as an attempt to confer on the Lender an option which can be exercised on default. The Guarantor has agreed that in that event the Lender may attach the debt to any of her assets. The attachment of a debt to property by agreement is apt to create an equitable charge… In my opinion cl12 should be construed as a conditional contract by the Guarantor authorising the Lender to attach the debt to her property. On this basis the clause fails to confer an effective option on the Lender over the Guarantor's property other than her Torrens title land. As to such other property in the language of Gibbs J there are no "stipulated conditions" for the exercise of the option. To that extent the option fails because the manner of its exercise has not been specified. The position is otherwise in relation to Torrens title land because, once the "entitlement" has arisen, the Lender has the right to "register" a caveat. S74F(1) of the Real Property Act enables a person who claims to be entitled to an estate or interest in any land to lodge a caveat against the title. A registered proprietor cannot by contract confer a right to lodge a caveat where no caveatable interest exists. See Tooth & Co Ltd v Barker (1960) 77 WN (NSW) 231 at 233, 242-3. If the clause only confers a contractual right it will be ineffective. However the existence of this right suggests that the Lender was intended to have an equitable charge which would support a caveat. In my opinion the Lender's entitlement on default to attach the debt to Torrens title land of the Guarantor may be exercised by lodging a caveat against such property… It is now necessary to -consider the legal effect of the action of the Lender in attempting to exercise this option by lodging the caveat. The critical words are "be entitled to attach the debt due to any of the assets of the Guarantor"… The cases thus illustrate how a power over property conferred by its owner can, when exercised by the donee, create a specific security over that property. In my opinion the action of the Lender in lodging the caveat operated as an exercise of its option to attach its debt to the subject property, and created an equitable charge over that property.
The majority of the Court of Appeal in Murphy v Wright decided, in the application of cl 12 of the agreement: 1. There could be no charge or agreement to charge any property until there was a default. 2. When there was a default an entitlement accrued to the lender but there was still no charge or agreement to charge. 3. While ordinarily, only the owner of property can voluntarily attach a debt to the property, the effect of the clause was that the owner conferred an option on the lender to attach the debt to any of her assets. Clause 12 was a conditional contract authorising the lender to attach the debt to any of the property of the guarantor. 4. The attachment of a debt to property by agreement can create an equitable charge. 5. The option failed in relation to the guarantor's property generally, because cl 12 did not specify any mechanism for its exercise. 6. That was not the case for the guarantor's real property, in respect of which a caveat could be lodged, as the lodging of a caveat could be the mode of exercise of the option. 7. The lender's entitlement on default to attach the debt to Torrens title land of the guarantor could be exercised by lodging a caveat against that property. 8. A power over property conferred by its owner can, when exercised by the donee, create a specific security over that property. 9. The action of the lender in lodging the caveat operated as an exercise of its option to attach the debt to the property, and created an equitable charge over that property.
In Murphy v Wright, the lender was authorised to attach the debt to any of the guarantor's property. It seems obvious that, until an act of attachment occurred, there could not be a charge created in relation to any particular property. Otherwise, there would have been a charge over all of the guarantor's property from the date of the agreement, even without an act of attachment.
The question is whether it is essential for the lender to lodge the caveat before the charge is created, even where the right to lodge the caveat is granted in the agreement only in relation to a single, identified Torrens title property.
In Wilson v Graham (1997) 10 BPR 19,051; BC9701840, Santow J (as his Honour then was) said at 19,052 in respect of this aspect of Murphy v Wright (in what appears to be an ex tempore judgment on an ex parte application): A critical step in that reasoning was that the registration of the caveat was essential to create the equitable charge. It gives rise to this apparent dilemma. If the registration of a caveat pre-supposes a prior interest in land, could that interest be created by the very act of registering the caveat? If to register a caveat there must be a pre-existing interest in land, the answer would have to be no. But the answer must, by implication, be that the interest can arise simultaneously with registration. In any event, so far as a single judge of this Court is concerned, the matter is settled by binding precedent of the Court of Appeal.
Bergin J (as her Honour then was) referred to this passage with apparent approval in Nudd v Official Trustee in Bankruptcy [2002] NSWSC 399; (2002) 11 BPR 20,163 at [18].
In my view, the reasoning of Handley JA in Murphy v Wright has the effect that no charge will be created until the caveat is lodged, even where the agreement relates to a single, identified property. That is, where the owner of property authorises another party to create an estate or interest in the property after the occurrence of some condition, which gives the other party a choice as to whether or not to create the estate or interest, that estate or interest does not arise when the condition occurs, but when the right is exercised by the agreed method of exercise.
In Wilson v Graham, Santow J distinguished Murphy v Wright on grounds that do not require present consideration. It is true to say, however, that the clause under consideration by his Honour related only to a single identified piece of property. The facts in Nudd v Official Trustee in Bankruptcy were even further from the present, but it is also true in that case that only a single piece of property was involved. The two authorities provide some support for the proposition that Handley JA's conclusion that there could be no charge over the property until the caveat had been lodged did not depend on the fact that the authority given to the lender related to all of the guarantor's property, so that it was necessary in practical terms for the lender to attach the debt to particular property, but applies generally to cases where the right relates to a single, identified property.
I will return to this issue after I have considered the other decision of the Court of Appeal in Troncone v Aliperti.
In that case, the relevant clause provided as follows: The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors (sic) to protect his interest.
Again, the authority related to "any property" and involved an authorisation to lodge a caveat.
Mahoney JA said at 13,292: It was, in my opinion, the clear intention of the parties that the creditors should have from Mr Aliperti the authority "to lodge a caveat on any property owned by" him. In my opinion, CL5, on its proper construction authorised the person or persons described in the relevant agreement as "the Creditors" to lodge a caveat to protect the interest of that creditor or creditors… It is a fundamental principle of construction that "Whoever grants a thing is deemed also to grant that without which the grant itself would be of no effect" ("Cuicunque aliquis quid concedit concedere videtur et id sine quo res ipsa esse non potuit"): Broome's Legal Maxims (9th ed) at 307. The principle is said to go back at least to Shepherds Touchstone 89. A caveat cannot be entered against land unless the caveator has the relevant proprietary interest in the land: see Real Property Act 1900, s74F(1) ("a legal or equitable estate or interest in land"). Therefore, unless there be evident an intention to the contrary, the grant to the creditors of an authority to lodge a caveat on the relevant property carried with it by implication such an estate or interest in land as was necessary to enable that authority to be exercised…
Mahoney JA therefore held that the grant of the authority to lodge the caveat carried with it by implication "such an estate or interest in land as was necessary to enable that authority to be exercised". His Honour has thus far not considered what the nature of the estate or interest was, or when it was created.
His Honour then addressed the question of the nature of the interest in the land that was created, at 13,292, 13,293: In order to determine the present appeal, it is not necessary to determine what is the precise nature of the interest in the land which, by this implied grant, was passed to the creditors. It is, in my opinion, sufficient to conclude that it was an interest which, within the Real Property Act, would support the lodgment of the caveat. However, three things may be said about it. First, the interest would, of necessity, be an equitable and not a legal interest. A "legal" or statutory interest in land under the Real Property Act may be effectively created or granted only by the registration of an instrument. A promise to grant or the purported grant of an interest in registered land will, to the extent that it is effective, create only an interest in equity. Second, there is in my opinion no rule of law which prevents the creation of a limited equitable interest of this kind. Thus, if the registered proprietor of land covenants by deed that, until a loan be repaid, he will not sell or deal with the land, that covenant would, in my opinion, create in favour of the covenantee an interest in the land to the extent at least that an injunction would go to restrain the covenantor from dealing with the land in a manner inconsistent with the covenant. It is not necessary for this purpose to pursue the nature of the estates or interests in land which, under the conventional law of real property, it was or is possible to create. Nor is it necessary to distinguish between an estate and an interest in land. The right, by the enforcement of an express or an implied negative covenant, to restrain a dealing with land is in my opinion an interest in land within this branch of the law. Accordingly, such an interest would, in my opinion, be within the words "a legal or equitable estate or interest in land" within s74F(1). There is accordingly nothing to prevent the implication from the terms of CL5 of the grant of an interest sufficient to support such a caveat as was contemplated by CL5. Third, I do not mean by this that the rights of a creditor under CL5 are necessarily limited to the creation, by lodgment of a caveat, of (as it is sometimes described) a statutory injunction. It is arguable that that which was granted by CL5 was not merely the power to induce repayment of the loan by preventing dealing with the land; it may be that the implication would extend further, to include the appointment of a judicial receiver or the like. However, on this matter I express no opinion.
It is not necessary for me in this matter to consider the correctness of his Honour's observations concerning the nature of the interest in land that was implied by the grant. The observations are plainly obiter, as his Honour expressly acknowledged that it was not necessary for him to determine that question.
As I have noted, Mahoney JA did not advert to the issue of when the implied grant of an estate or interest necessary to support the lodging of the caveat was made. The clause in question did not make the right to lodge the caveat contingent on a default having occurred, as was the case for the provision considered in Murphy v Wright. The clause was, however, equivalent to that considered in Murphy v Wright in so far as it authorised the creditors to lodge a caveat "on any property owned by" the debtor. There was no suggestion, and there could hardly be any suggestion, that the intention was that the creditors would have an estate or interest by way of security in all of the property of the debtor. Implicitly, an act of attachment was necessary.
In my view, Mahoney JA's reasoning must be interpreted as involving a conclusion that, even if the implied grant was made as an incident of the original agreement, which is consistent with the creditors not having to wait until a breach occurred before a caveat was lodged, the grant must have been contingent on the lodgement of the caveat.
Priestley JA agreed with Mahoney JA, and stated that "the case seems to me to raise much the same issues as this court decided in Murphy v Wright" and that "I do not see any material distinction in the present case from that one".
Meagher JA also agreed with Mahoney JA. His Honour added that the interest in land intended to be granted by the owner could only be an equitable charge.
The position therefore is that in Murphy v Wright, the lender was authorised to lodge a caveat against any of the property of the borrower, but only after breach. The charge was only created at the time of lodgement of the caveat, as that was the means by which the option granted to the lender was required to be exercised. The creditors in Troncone v Aliperti were also authorised to lodge a caveat against any of the property of the debtor, but did not have to wait until a breach had occurred. Implicitly, lodgement of the caveat was required before the estate in any particular property was created, even though the grant of the right was made in the original agreement.
It will now be appropriate to consider the effect of the terms of the Investor Agreement on the issue of when Dr Wai's equitable charge was created.
In the present case, the right granted to Dr Wai to lodge a caveat related to specific property, being the Property, and cl 22 of the Investor Agreement appears to create a contingency as to the timing for the lodgement of the caveat.
It will be convenient to repeat the statement of the condition contained in cl 22.1: Granting of lodgement of such caveats will only be allowed in the event that any or all of the following occur (a) Should the maturity date being 4 months from the date of this agreement lapse and the Investor has not received their full investment in addition to all the interest earned. (b) The Investor has not received their initial investment or the interest earned within 1 month of the Completion date of the Project
I have referred above to the unusual structure of the Investor Agreement, which appears to be intended to give Dr Wai a right to share in a percentage of the profit of the development project, if a profit was made (cl 5), and the right to be repaid his original investment as a debt plus interest, if the project did not make a profit (cl 7). I put aside the deficiencies in the drafting of the agreement.
Schedule 2 to the Investor Agreement contained estimates as to the expected time for completion of the project, but the agreement itself does not specify a completion date for the project.
Clause 7 also does not specify a date by which the Debtor was contractually obliged to repay Dr Wai. Clause 22.1(a) refers, however, to "the maturity date being 4 months from the date of this agreement". It does not necessarily follow, however, that the effect of that provision was to make the debt repayable on 31 December 2010. The dual rights of Dr Wai in cl 5 and 7 must be borne in mind. The debt may have been repayable on 31 December 2010 but it does not follow that that result would necessarily arise, without some act of election by Dr Wai or the Debtor, because that might close off Dr Wai's right to participate in a share of the profits under cl 5.
Paragraph (a) of cl 22.1 appears to relate to the situation where Dr Wai's investment is to be treated as a debt, and par (b) relates to the situation where the investment is to be treated as a right to share in profits.
The use of the words "in the event that any or all of the following occur" in the chapeau appear to be intended to give Dr Wai a choice as to whether, once one of the events has occurred, he will lodge a caveat, or not. The wording of the Investor Agreement lacks clarity in many respects, but it appears to be intended to give Dr Wai two-dimensional investment rights that depend partly on the outcome of the development project, and partly on Dr Wai's election.
It is at least true that Dr Wai was not required to lodge a caveat when the event in par (a) occurred, and if he was confident about the likelihood that he would become entitled to a share of 25% of the profit, he might have elected not to lodge a caveat until the event in par (b) occurred.
The parties did not address the issue of whether Dr Wai would have made an election under the Investor Agreement, if he had proceeded on the basis of par (a) rather than par (b), so I should not base my reasoning on an examination of that issue. It is only necessary for me to observe that it is a real issue. It is at least arguable, that once Dr Wai had lodged a caveat against the title to the Property after the time in par (a) had passed, he could not complain if the Debtor simply repaid his $100,000 (perhaps without interest in this case because of the absence of Schedule 1), and Dr Wai would then lose his right to share in 25% of any profit that was subsequently made. However, I mention this issue only to underscore the proposition that Dr Wai's right to lodge a caveat based alternatively under par (a) or par (b) probably has commercial consequences. That provides some support for the conclusion that, on the proper construction of the Investor Agreement, the estate or interest in the Property that Dr Wai was authorised by cl 22.1 to create would only come into existence when Dr Wai lodged a caveat.
It must also be noted that cl 22.1 contains the words: "Granting of lodgement of such caveats will only be allowed in the event that any or all of the following occur… (Emphasis added)". The authority to lodge the caveat is found earlier in cl 22.1 in the words: "The Developer grants permission to the Investor to lodge a caveat…" While it is questionable to attribute technical legal subtlety to the draughtsman of the Investor Agreement, the use of the word "granting" should not be ignored in a context where Dr Wai is first given the authority to lodge a caveat over the Property, and then there is a restriction as to when the grant may be allowed. Allowing for all of the imprecision of language, the wording of cl 22.1 on balance conveys the meaning that the estate or interest in the Property that Dr Wai is authorised to create will not come into existence until he exercises his authority when either the event in par (a), or the event in par (b) occurs, or alternatively after both events.
That conclusion, in a practical way, is reinforced by the consideration that the Property was owned by two guarantors, and as Handley JA observed in Murphy v Wright at 11,736, extracting the decision of the plurality in Ankar Pty Ltd & Arnick Holdings Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549 at 561: At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety… Doubt as to the status of the provision in a guarantee should therefore be resolved in favour of the surety.
The relevant doubt in the present case is as to whether, on the basis that I have found that the Guarantors were parties to the Investor Agreement, that the agreement had the effect that the Guarantors granted an equitable charge over the Property when the event in par (a) of cl 22.1 occurred, even if Dr Wai did not exercise his right to lodge a caveat against the property (when in fact he may have wished to pursue his right under cl 5 to receive a share of the profits from the development project), or whether he had to exercise that right which may have crystallised his rights against the Debtor, before the equitable charge arose. That doubt should be resolved in favour of the Guarantors, as otherwise they would have no practical way of knowing whether or not their title to the Property was subject to an equitable charge in favour of Dr Wai.
Construing the Investor Agreement in a manner that accords to it the greatest commercial common sense leads to the conclusion that, if the Guarantors' property was to be bound by an equitable charge in favour of Dr Wai, he had to exercise his right to lodge a caveat on the title to the Property. That way the Guarantors would become aware that the Property had become subject to an equitable charge, when the Registrar-General gave the Guarantors the notice of the lodgement of the caveat required by s 74F(6) of the Real Property Act 1990 (NSW).
For the foregoing reasons the appropriate orders for the court to make are: 1. Order in terms of order 1 of the notice of motion filed by Somy Ros and Brian Kelly on 14 May 2015. 2. Order that David Wai pay to Somy Ros and Brian Kelly the costs of the notice of motion filed on 14 May 2015. 3. Order that the notice of motion filed by David Wai on 19 May 2015 be dismissed. 4. Order that David Wai pay to Somy Ros and Brian Kelly the costs of the notice of motion filed on 19 May 2015. 5. Order that exhibits and any documents produced on subpoena may be returnable forthwith in accordance with the Rules.

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