Harvie v. Stevens [2004] NSWSC 1217

1 By Summons filed 18 November 2004 the Plaintiff seeks an order under s.74MA of the Real Property Act compelling the Defendant to withdraw a caveat placed upon the title to certain property, which I understand is a home unit in Elizabeth Bay. 2 The Defendant and the Plaintiff were formerly married but are now divorced. They had a child of the marriage. The Plaintiff says that the subject unit was bought with the money provided by the Defendant pursuant to an agreement between herself and the Defendant whereby the Defendant would provide the money for the purchase and would provide the mortgage payments on the mortgage to be taken out and the unit would be placed in the name of the Plaintiff for the benefit of their son, Jake. 3 The Plaintiff says that while she admits that all of the purchase price and mortgage payments in respect of the property were provided by the Defendant, there was an express agreement between the parties that she would hold the property as trustee for the son. 4 The Defendant, on the other hand, says that there was no such agreement. He says that although the property was placed in the Plaintiff's name, he paid all the mortgage payments and the balance of purchase money, so that there is a resulting trust in his favour. He claims an interest pursuant to such a trust in the caveat which he has lodged. 5 There is a clear contest between the parties on the facts. It is a contest that can only be resolved on issues of credit. Clearly, an application of this interlocutory character is not the appropriate occasion to resolve that contest. 6 The Plaintiff has entered into a contract for sale of the unit. The contract is due to be completed shortly. In my opinion the Defendant has made out an arguable case that he has an equitable interest in the property sufficient to support a caveat. There is no real dispute that he has done so. The dispute is whether the balance of convenience favours the withdrawal of the caveat, for the same considerations as would arise, for example, if the Defendant were seeking an injunction restraining the disposition of the unit. 7 The circumstances favouring the withdrawal of the caveat are said to be that the Plaintiff offers to the Court an undertaking that she will deposit the proceeds of sale of the unit in a trust account to await the determination of the Court as to their ownership. 8 Mr White, who appears for the Defendant, says that that undertaking should not be accepted. His sole submission is that there is evidence that the property has been sold at an undervalue. He says that the sale should not be permitted to proceed because the Defendant will thereby lose the true market value of property which beneficially belongs to him. 9 The Defendant has tendered the valuation of a valuer, who says that the market price of the unit is currently $535,000. The sale price of the unit in the contract which has been exchanged is $490,000. The Plaintiff has tendered the evidence of a valuer, who says that $490,000 represents a fair market price in current conditions. He deposes as to the advertising campaign for the sale of the unit and to the number of prospective purchasers who made enquiries. He deposes also that property values have fallen over the last twelve months or so in that area, and that, by reference to comparable local sales, he is able to say that $490,000 represents the current market value. 10 Clearly, there is a factual dispute as to the current market value of the property. Again, it is not the sort of dispute that can be resolved on this type of application. 11 It seems to me that the balance of convenience favours the withdrawal of the caveat. There is no suggestion that there is any collusion between the Plaintiff as vendor and the purchaser of the property. All that is said is that the property might fetch more if, perhaps, the sale were deferred. There is no suggestion that the sale would be in breach of the terms of the trust under which the Plaintiff says she holds the property for the benefit of her son. The real dispute between the parties is as to the ownership of the proceeds of sale. 12 It seems to me that if the caveat were maintained, there is a real risk that the present purchaser would rescind the contract for sale and pursue the Plaintiff as vendor for damages for breach of contract. That is not a risk which in the present circumstances I think the Plaintiff should be exposed to. 13 It seems to me that the retention of the proceeds of sale will be a sufficient protection to the Defendant if he is ultimately found to be entitled to the benefit of the property. If it be found that the property has been sold by the Plaintiff for an undervalue, then the Defendant can pursue the Plaintiff in damages. 14 I note that the amount of the difference between the market value propounded by the Defendant's expert and that propounded by the Plaintiff's expert is not vast. In those circumstances it seems to me that the balance of convenience favours an order under section 74MA for the withdrawal of the caveat.

15 I should note a submission by Mr White that where a plaintiff seeks an order under s.74MA Real Property Act that a caveat lodged against his title be withdrawn, the plaintiff bears the onus of proving that the defendant has no caveatable interest. This submission is founded on a note in Butterworth's Annotated Conveyancing and Real Property Legislation , edited by the present Chief Judge in Equity, which observes, without comment, that one of the text books in the field takes the view that because the prime method of removing caveats is under s.74J, the onus of proof in an application under s.74MA may be on the plaintiff. 16 I do not share that view. It is not supported by authority and I do not think that the learned Chief Judge refers to it with approbation: he is merely noting that it is a view held by some. 17 It seems to me as a matter of first principle that a person who seeks to restrain by caveat a dealing with a property registered in the name of another should always bear the onus of showing that he or she has at least an arguable right to do so, that that right amounts to a caveatable interest in law, and that the balance of convenience favours the maintenance of the caveat. If a registered proprietor seeking to remove a caveat under s.74MA bore the onus of negativing each of these elements, the security of the register under the Torrens system would be significantly weakened. 18 The usual circumstances in which recourse is had to an application under s.74MA rather than the remedy provided by s.74J are pointed out by the learned Chief Judge in his commentary to s.74J (op cit). If a registered proprietor serves a lapsing notice in accordance with s.74J, a caveator seeking to maintain the caveat must obtain an extension order under s.74K. In such an application, clearly the caveator bears the onus of satisfying the Court that, in all the circumstances, the caveat should be extended. However, where a caveat has been lodged after exchange of contracts, the registered proprietor must clear the title and may not have the luxury of waiting until the caveator's time to bring an application under s.74K has expired. The registered proprietor's only recourse in such a case is an application for removal of the caveat under s.74MA. 19 It would be contrary to common sense and justice to hold that where the late lodging of a caveat forces a registered proprietor to take positive action under s.74MA rather than wait for the caveator to demonstrate a case for extension of the caveat under s.74K, the onus of proof applicable in a s.74K application is reversed and the registered proprietor must now shoulder the burden of demonstrating why the caveat should be removed under s.74MA. 20 In those circumstances, upon condition that the Plaintiff undertakes to the Court in terms of paragraph 2 of the Summons, I make an order in terms of paragraph 1 of the Summons. The remainder of the Summons will have to wait for final determination.

21 I now turn to the question of costs. When the matter was called on this morning there was no appearance for the Plaintiff. On the last occasion, the matter had been adjourned specifically to ten o'clock this morning and it was listed at ten o'clock. However, by some oversight or misunderstanding, the Plaintiff and her advisers understood that the matter had been stood over to two o'clock this afternoon. Mr White and his instructing solicitor were present in Court at ten o'clock this morning, and subsequently made a number of enquiries endeavouring to locate the Plaintiff's solicitor and counsel, without success. 22 In the absence of the Plaintiff's legal representatives, an order was made, the effect of which has now been undone by the orders which I have just pronounced. However, although I accept that there was a misunderstanding on the part of the Plaintiff's advisers, it is clear that the Defendant has unnecessarily incurred the costs of his counsel and solicitor for this morning. It seems to me that the Defendant should have the costs of today up to 1 pm in any event, and I will so order. Otherwise costs are reserved. 23 This morning I made an order extending the caveat until further order, and appended some additional directions. The order extending the caveat has now, of course, ceased to have effect, by reason of the further order which I have just pronounced. The directions otherwise made in paragraphs 2, 3 and 4, may stand, viz, that the Defendant is to file any cross-claim by 4 pm on 3 December, and the proceedings will then stand in the Registrar's list for further directions on 6 December 2004. I vacate order 4 in the Short Minutes of Order signed earlier this morning.

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