These proceedings were commenced on 18 December 2015 when the plaintiff, Hanson Construction Materials Pty Ltd, filed a summons seeking an order under s 74K of the Real Property Act 1900 (NSW) that a caveat lodged by it on the title of a property at Marks Point owned by the defendant, Mrs Roberts, ("the Property") be extended (following service on Hanson by Mrs Roberts of a lapsing notice under s 74J of that Act).
The Property is the Roberts' family home.
Hanson claims it has a caveatable interest in the Property by reason of a guarantee that it alleges Mrs Roberts signed to secure the indebtedness to Hanson of Wayne Roberts Concrete Constructions Pty Ltd ("the Company") under a trading facility dated 2 May 2013 ("the Agreement"). Evidently, the Company was associated with Mrs Roberts' husband's concreting business. On 1 May 2015 the Company was placed into liquidation.
The Agreement, if binding on Mrs Roberts, purports to charge her property, including the Property, in Hanson's favour to secure the amount owing under the Agreement.
Currently, there is a first mortgage on the title of the Property in favour of the Commonwealth Bank of Australia and caveats lodged by (in order) Hanson, by a Mr Morelli (who is the liquidator of the Company) and by Mrs Roberts' solicitors.
On 23 October 2013, Hanson commenced proceedings in the District Court against the Company and against Mr and Mrs Roberts to seek, amongst other things, to recover the amounts said to be due under the Agreement. In those proceedings (which have since been transferred to this Court and which I will call "the Main Proceedings") Mrs Roberts has filed a defence in which she denies that she executed the Agreement. In the Main Proceedings there is currently a direction that Mrs Roberts serve an expert handwriting report dealing with that issue.
For the purpose of these proceedings, Mr Le Plastrier, who appeared with Mr Anderson for Hanson, accepts that there is a serious question to be tried as to whether the signature purporting to be that of Mrs Roberts on the Agreement is in effect her genuine signature.
A comparison of the signature on the Agreement purporting to be that of Mrs Roberts, and what I am told are examples of Mrs Roberts' genuine signatures on her driver's licence and passport, show that there are some obvious differences between them. For example, the signature on the Agreement is "E Roberts" whereas the genuine signatures read "E T Roberts". Further, the "E" in the genuine signatures appears quite different from that on the Agreement. These are doubtless matters to be explored in the Main Proceedings and, as I say, will be the subject of expert evidence. However, at this stage, I am able to say that Mrs Roberts' contention that the signature is not hers is by no means fanciful.
Mrs Roberts is in default under the CBA facility. The amount she owes the CBA is a little under $500,000. The CBA has threatened mortgagee sale if that amount is not paid.
On 5 July 2016, and after some delay, Mrs Roberts obtained an unconditional loan approval from Bluestone Group Pty Ltd trading as Bluestone Mortgages for a loan of $692,000.
Mrs Roberts proposes to use that advance to retire the CBA debt (and secure a discharge of its mortgage), pay the amount said to be due to Mr Morelli of $64,000 (and thus secure removal of his caveat), pay $35,000 on account of the money she owes to her solicitors (in exchange for which they will withdraw their caveat) and pay an amount of $35,400 she owes to the Australian Taxation Office.
The matter before me today as Duty Judge is Mrs Roberts' notice of motion of 13 May 2016 in which she seeks orders the effect of which would be to:
1. compel Hanson to withdraw its caveat to enable Mrs Roberts to settle with Bluestone and drawn down the $692,000, and thus to procure the withdrawal of the caveats lodged by Mr Morelli and her solicitors; but
2. allow Hanson to lodge a further caveat protecting its alleged interests under the Agreement, to rank in priority to all interests other than the Bluestone mortgage.
Mrs Roberts' solicitors will then lodge a further caveat to protect their interests but will agree that this is to rank after the proposed Hanson caveat.
Mrs Roberts will also give an undertaking to the Court not to increase her borrowing from Bluestone pending the outcome of the main proceedings.
The practical effect of this would be that Mrs Roberts' equity in the Property would be reduced by some $200,000, being the difference between the amount she owes the CBA (around $500,000) and her proposed borrowing from Bluestone (a little under $700,000). To some extent this is because of Bluestone's requirements, which include that Mrs Roberts discharge all her obligations (other than her disputed obligation to Hanson) before draw down.
Hanson claims the amount due to it under the Agreement is some $290,000. It also claims that, if successful, it will be entitled to recover all of its actual costs (by reason of an "all expenses" clause in the Agreement) which costs, its solicitor estimates, will be in the order of $340,000.
There is no direct evidence of the value of the Property. On behalf of Mrs Roberts there is a valuation from a valuer, Mr Craine (unsupported by any evidence from Mr Craine) which records Mr Craine's opinion that the property is worth $1.5 million. On the other hand, the terms on which Bluestone approved its loan suggests it has received a valuation of the property at $1.35 million.
Mr Le Plastrier also pointed to evidence showing that his instructor has attempted to liaise with Bluestone to endeavour to achieve a "priorities agreement" between Hanson and Bluestone but has been unable to do so because, it was suggested, Mrs Roberts has not authorised Bluestone to speak to Mr Le Plastrier's instructor. That may be right, but in the absence of any evidence as to what, if any, priority agreement Bluestone would countenance, I am not able to attach much significance to that.
In this complicated circumstance, a balance has to be struck. On the one hand Mrs Roberts contends she has no liability at all to Hanson because she did not sign the Agreement. There appears to be at least some substance to that contention.
On the other hand, Hanson has a caveat on the tile of the Property being, in effect, the only "security" it has for its debt.
Currently, it ranks next after the CBA which is owed nearly some $500,000. If the arrangement proposed by Mrs Roberts is put into effect it will retain its position in the second rank, but now after Bluestone which will be owed some $200,000 more than is due to the CBA.
If Hanson's estimate of the value of the property ($1.35 million) is right and if it is, as it contends, entitled to recover all of its legal costs, and if its solicitor's estimate is correct, it will be a close run thing as to whether there is sufficient equity in the property to secure all of its debts.
On the other hand, if Mr Craine's opinion turns out to be correct, the position is less problematic.
Mr Le Plastrier drew my attention to the observations of Brereton J in Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465 at [11] - [12] and Tadrous v Tadrous [2009] NSWSC 407 at [8] - [9] to the effect that:
1. only in a rare case will a valid caveat be removed for reasons of balance of convenience if to do so would have an adverse effect on the priority of the caveator's claim;
2. it is unusual to remove a caveat on an interlocutory basis where an arguable case for the existence of the caveat has been established;
3. removal of a caveat should not be countenanced where such removal would have the practical effect of preferring unsecured rights over the proprietary rights of a caveator; and
4. a factor relevant to whether an order should be made compelling withdrawal of a caveat to allow refinance is whether there will be equity left in the property following refinance.
However, the circumstances before me are different from those which are considered in those cases in that:
1. the question of whether Hanson has any rights against Mrs Roberts, and any caveatable interest in the property turns on the stark question of whether her signature has been forged;
2. Mrs Roberts does not seek to remove, for all time, Hanson's ability to protect its alleged interests under the Agreement by a caveat and will consent to a further caveat being lodged on the title of the Property after the CBA loan is refinanced by Bluestone;
3. although the effect of Mrs Roberts' proposal will be to cause certain of her unsecured creditors to be preferred to Hanson, that is not as a result of a choice made by Mrs Roberts but rather on the insistence of the incoming lender; and
4. although there will doubtless be less equity available to Hanson in the proposed circumstances, it seems likely there will be sufficient equity to protect its interest.
Overall though the question is finely balanced. I am persuaded I should make the orders that Mrs Roberts seeks.
I invite counsel to bring in short minutes to give effect to those reasons.
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Decision last updated: 18 July 2016