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Texts Cited: N.A.

Category: Principal judgment

Parties: Gurbachan Singh Khaihra (plaintiff)
Rajeev Agarwal (first defendant)
Xiao Lan Ju (second defendant)

Representation: Counsel:
P Reynolds (plaintiff)
P Lin (defendants)
Solicitors:
Remington & Co (plaintiff)
Project Lawyers (defendants)

File Number(s): 2025/398559

Publication restriction: N.A.

Judgment – Ex Tempore (Revised From the Transcript)

1. The plaintiff makes an urgent application for the extension of a caveat lodged in relation to land located at 167 Annangrove Road, Annangrove. In the alternative she seeks an injunction restraining the defendants from dealing with the land or the opportunity to lodge a new caveat. Failing an extension, the caveat that is currently lodged will lapse at 5pm today.

2. For the reasons I am about to give, I propose to make orders extending the caveat but subject to conditions.

3. The defendants are the registered proprietors of the property. They have entered into a contract to sell the property. The sale is scheduled to complete on 3 November 2025. The defendants’ ability to complete the sale is affected by the caveat.

Principles to be Applied

4. There is no dispute as to the relevant principles to be applied on this application. They are identified by Brereton J in Sutherland v Vale [2008] NSWSC 759 at [11]. In short, the test to be applied on an application to extend the operation of a caveat under s 74K of the Real Property Act 1900 (NSW) is the test for the granting of an interlocutory injunction. Two issues must be addressed. First, whether the caveat has or may have substance, which encompasses the concept of a seriously arguable case. The second is the balance of convenience.

5. In this case there is no dispute that the caveat has or may have substance. That is, there is no dispute that there is a seriously arguable case. The question is whether the balance of convenience favours an extension of the caveat.

Background facts

6. The background to the dispute between the plaintiff and the defendants has some complexity and is strongly disputed. It is not necessary or appropriate for me to seek to come to any conclusions about the underlying merits of the plaintiff’s allegations or to address the factual contentions at any length.

7. The defendants contracted to purchase the property in about July 2022 for $3.5 million. The purchase was settled in about August 2023. The acquisition was financed by a loan from Bankwest, who took a mortgage over the property. It is apparent that there was some kind of commercial arrangement between the plaintiff and the defendants relating to the property that was struck in late 2023.

8. The first defendant had been the plaintiff’s accountant from about 2020. Although there is a contest about the specifics, in broad terms, the commercial venture contemplated that the plaintiff would make contributions in respect of an interest in the property (either 40% or 50%), that he would contribute to “expenses”, which appears to include holding costs, and that the parties would seek to make a development application and secure development approval. It was anticipated that this would result in a significant increase in the value of the property. There is some evidence suggesting that it was agreed that there would be no formal transfer of any part of the title to the plaintiff, apparently because of issues associated with stamp duty. There is dispute about the precise amount that was paid by the plaintiff, but for present purposes it is sufficient to note that payments in the vicinity of $500,000 were made, including $420,000 for a 40% share. That figure was calculated by reference to the cost of the property less the amount outstanding to Bankwest.

9. It appears on the basis of the evidence before me that the documented arrangements did not articulate on any clear basis the precise character of the arrangements between the parties, including the obligations of the respective parties. For example, it is unclear how income from the property in the form of rent was to be taken into account.

10. During 2024, the parties fell into dispute. There is evidence that suggests that the defendants took the view in the second half of 2024 and into 2025 that the plaintiff was failing to pay his share of the expenses. There is evidence suggesting that the plaintiff was resisting what he considered to be demands to make excessive payments in advance.

11. The defendants took steps to place the property on the market in late 2024. The plaintiff, who had some awareness that this was taking place, says he was not informed of all relevant details.

12. The evidence before me of the communications between the plaintiff and the first defendant is principally in the form of text exchanges. It is reasonable to expect that if this matter went to trial, there would be further evidence adduced of communications between the parties, including conversations that would be relevant.

13. The text messages indicate that there were exchanges between the plaintiff and the first defendant about steps taken by the defendants to sell the property. The messages are often put in a truncated and informal way.

14. In a text exchanged on 23 April 2024, the first defendant informed the plaintiff that “$3.3m at 6 months is the best offer so far”. The plaintiff sent a text message later the same day stating “We go ahead with Da bro that’s too low & big loss”. On the next day, he wrote “I am ready to go ahead for the da”. There are multiple text exchanges over a couple of days, including allegations from the plaintiff that he was being pressured. There was some antagonism. Allegations were made by both of them. At one point the plaintiff stated “I won’t reply any more”. On the evening of 24 April 2025, the plaintiff wrote “up to u bro, I don’t want anything just want to get out of this mess”.

15. On the morning of 25 April 2025, the first defendant suggested that they should each get legal representatives and that it was getting impossible to deal with the plaintiff directly. He stated: “I have sent an email to the agent accepting the $3.3m with 6 months after your text last night... So either pay all $160k & sign legal agreement by Monday or the property will be sold on Monday.”

16. A contract for sale was made on 2 May 2025, with a sale price of $3.3 million and a 6-month settlement period. As I have noted the contract is due to complete on 3 November 2025. The plaintiff lodged a caveat on 6 May 2025. Following correspondence, that caveat was withdrawn on 20 June 2025 and a fresh caveat was lodged on the same day, which set out in much greater detail the facts said to underlie the caveatable interest. There was correspondence between the parties from July 2025 about the caveat, including without prejudice communications, before a lapsing notice was served on 2 October 2025.

17. The question about whether the plaintiff consented to the sale is likely to be a matter of dispute. Uncertainty arises because of the character of the text messages and the possibility that there were other relevant communications not presently before the Court. There were some text messages from the plaintiff where he expressed an objection to the sale and urged the first defendant to proceed with the endeavour and make a development application. But there was at least one text, which I have referred to earlier, which is consistent with the plaintiff consenting to the sale. For present purposes, I proceed on the basis that the issue of whether or not the plaintiff consented to the sale is uncertain. It does not appear that there was a formal, fully informed and unambiguous consent.

The Interest Claimed

18. The caveat lodged by the plaintiff claims that he has an interest in the land by way of “express trust, common intention, constructive trust, joint endeavour, constructive trust, proprietary estoppel, and/or equitable charge”. The caveat provides detailed particulars of the facts said to give rise to the interest.

19. On this application, the plaintiff advanced its interest in the land on 3 cumulative or alternative bases which can be summarised as follows:

20. the defendants hold a 40% interest in the property on express trust for the plaintiff;

21. the plaintiff has an equitable charge over the property in respect of all moneys paid by the plaintiff to the first defendant; and/or

22. by reason of proprietary estoppel, constructive trust or some other equitable doctrine, the plaintiff and defendants hold the property pursuant to a joint endeavour which involves pooling financial resources and sharing expenses for the purposes of applying for development approval in respect of the property as a childcare centre, with a view to selling the property and sharing the profit.

23. The defendants accept that for the purposes of this application, there is a serious question to be tried about each of the asserted interests. They submitted however the plaintiff’s claim is a weak one, especially as to the second and third contentions, and that this may be taken into account by the Court in the exercise of discretion.

The Balance of Convenience

21. The question of balance of convenience is of central importance on this application.

22. The anticipated net proceeds to be received at settlement is $192,000. That amount reflects the purchase price of $3.3 million less an anticipated amount to pay out a mortgage of $2.86 million and amounts on account of rates and levies as well as costs of sale. There is also evidence that a deposit of $165,000 has been released to the defendants. The defendants have offered to pay 40% of the net proceeds of sale and the deposit into a solicitor’s trust account, or with the Court, pending the final determination of these proceedings. That amount on my calculations would be approximately $142,800.

23. The defendants have also offered, as a fallback, to pay the whole of the net proceeds of sale (approximately $192,000) together with an undertaking in the nature of a freezing order designed to protect a further $165,000. I was told that the defendants were unable to pay the amount of the deposit released because at least part of those funds have already been disbursed.

24. The plaintiff has indicated that he is willing to proffer the usual undertaking as to damages. In addition, he has proffered an undertaking that, by way of summary, requires him to pay 40% of the net holding costs associated with the property (including mortgage repayments). The undertaking is subject to conditions concerning the appropriate provision of documents substantiating the net expenses.

25. As to the contention that the plaintiff has an equitable interest as to 40% of the property, it seems to me that this interest, assuming it to exist, would entitle the plaintiff to 40% of the net proceeds of sale. This interest is likely to be adequately protected by having 40% of the net proceeds paid either into a solicitor’s trust account or into Court.

26. As to the contention that the plaintiff has an equitable charge over the property in respect of all amounts that he has paid to the first defendant, this would, if good, give the plaintiff an entitlement to the whole of the net proceeds expected to be received at settlement. That is because he has paid approximately $500,000 to the first defendant which is more than the anticipated net proceeds of sale.

27. This interest would be prejudiced by the sale if the property is being sold at an undervalue. The plaintiff does not specifically contend that the price achieved by the sale of 2 May 2025 is at an undervalue. However, he contends that he is not in a proper position, having regard to the information provided to him, to make any proper assessment as to whether the property has been sold at an undervalue. It does appear, although the evidence is limited, that the property was sold through an independent agent and that the sale did not occur with undue haste. Furthermore, the first defendant had no apparent incentive other than to achieve the highest price possible.

28. It is not apparent to me that this equitable interest would justify, on a balance of convenience basis, depriving the defendants from proceeding to sell the land. If the plaintiff is correct about this interest, he can pursue the defendants for monetary relief in respect of any shortfall in the distribution of the sale proceeds.

29. The third asserted interest in the property gives rise to additional complexity. On this basis, there is some equity in the property that corresponds to an asserted right to specifically enforce the joint venture agreement, which requires the parties to submit a development application. If there is an equitable interest in the property of this variety, then the sale of the land would defeat the plaintiff’s legitimate expectations in respect of that interest. That is not to say that if the property is sold, the plaintiff would be entirely without remedy if his cause of action is otherwise made out. He would however be required to establish and recover damages on a loss of opportunity basis.

30. I note that the details of the interest in the land identified in the caveat state that: “the joint endeavour has come to an end by virtue of the registered proprietors seeking to sell the property prior to the obtaining of the development approval contemplated by the joint endeavour”. Notwithstanding this apparently unambiguous statement, the plaintiff contends that the joint venture has not come to an end. He submits that the wording of the caveat should be read as referring to the defendants’ allegation that the joint venture has come to an end. The plaintiff has proposed an amended summons that seeks specific performance of the alleged joint venture agreement. The defendants did not take issue with the form of the caveat on this application and, as I have indicated, accepted that there is a serious question to be tried as to each form of equitable interest asserted by the plaintiff.

31. Various other considerations arise in respect of the balance of convenience.

32. The plaintiff contends that an order for specific performance of the defendants’ obligations under the joint venture would do “more perfect and complete justice between the parties” (see Wesco Ventures Pty Ltd v Cecil Developments Pty Limited [2020] NSWSC 98 at [46]), and that the opportunity to obtain specific performance will be lost if the property is sold. He contends that the defendants are protected against any failure on the part of the plaintiff to pay his share of the joint venture by the undertakings that he has proffered. The defendants contend that if the caveat does not lapse then they are at risk of being sued by the purchaser for breach of contract. The evidence from the first defendant refers to potential liability to the purchaser that “could be in the millions”, however it is far from clear how that liability could come about. Any liability to the purchaser would presumably reflect the difference in the agreed price and the value of the property. Absent a sale at undervalue, which the defendants contend did not occur, it is not obvious how the purchaser could suffer any substantial loss. I recognise that prejudice to a third party is a matter that can be taken into account in considering the balance of convenience, although such hardship is rarely decisive: see Patrick Stevedore**s Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1; [1998] HCA 30 at [65]-[66] and Lawton Pty Ltd v FHMC Pty Ltd [2021] FCA 1165; 163 IPR 266 at [50]. There is no specific evidence in this case of prejudice to the third-party purchaser.

33. The financial position of all parties is somewhat obscure on the evidence. As to the plaintiff, there is evidence that he suffered a serious motor vehicle injury in 2019 and that while he received CTP payments for 5 years, since those payments stopped he has not received any income. He gave evidence that at the time of entry into the joint endeavour he told the first defendant that he did not have any funds available and that he was struggling to get a loan to make the investment of $420,000 for his 40% interest and to pay the $50,000 that was his share of the expenses for 1 year. There is some suggestion, however, that he owns an investment property in Melbourne. The defendants contend that the Court cannot be satisfied that the plaintiff would have the financial ability to meet any significant liability that might arise pursuant to the undertaking as to damages.

34. As to the defendants, there was some evidence of financial hardship. There was apparently at least 1 period during which they obtained a moratorium on repayment of the loan to Bankwest, being the loan that was secured by the mortgage over the property. There is some evidence in text exchanges between the first defendant and the plaintiff that the defendants were motivated to sell the property because of financial stress. The defendants’ position is that at least one significant reason for the financial stress is because the plaintiff was either unwilling or unable to pay his share of the holding costs.

35. It appears from the evidence, although it is far from comprehensive, that the monthly interest payments required to be made to Bankwest considerably exceed the rental return that is being achieved on the property. If the caveat is not removed pending the continuation of the joint venture, the defendants will continue to be liable to make payments to Bankwest. The undertaking proffered by the plaintiff means that this would be ameliorated to some extent, namely, to the extent of 40%. Nevertheless, the defendants would continue to incur a net monthly liability. While there is some evidence of financial hardship, the defendants did not adduce evidence that they could not meet those obligations. There must be a risk that if the caveat is not removed, the defendants will be unable to meet their obligations to Bankwest and that the property will be sold by Bankwest in order to enforce the mortgage. However, as I have indicated, this is not a matter addressed in the evidence to any great extent.

36. I have some reluctance to extend the caveat with the consequence that:

37. there is a high risk that the contract for sale will be terminated with possible prejudice to the purchaser and a risk of a claim for damages against the defendants;

38. the defendants will remain exposed to the financial burden to Bankwest; and

39. a joint endeavour will be forced to continue in circumstances where trust appears to have broken down.

On the other hand, the plaintiff has invested nearly $500,000 into the joint venture. There is a serious question to be tried as to the equitable interest reflecting the right to compel performance of the joint endeavour. The property appears to have been sold without fully informed consent. If the sale proceeds, the plaintiff will be left with a personal claim against the defendants. On his case, he was induced by his accountant to make an investment that, at present, appears to have been a very poor one.

37. Weighing these matters, I have concluded that, subject to conditions, the balance of convenience lies in favour of extending the caveat.

38. The first condition is that the caveat should only be extended for a finite time. If there is to be a development application, it should be made and prosecuted promptly. Moreover, these proceedings should be prosecuted by the plaintiff with all reasonable expedition. I propose to extend the caveat for a period of 6 months. If the plaintiff wishes to extend the caveat beyond that period, he will need to make a fresh application and, at that time, relevant circumstances will no doubt be taken into account.

39. The second condition is that the plaintiff gives the undertakings that he has proffered.

40. The third condition is that the plaintiff will be required to provide security to support the undertaking he has proffered in respect of his share of the holding costs. That security should be paid promptly as a condition of the extension. I propose the sum of $25,000 to be paid by way of security by 3 November 2025. The payment of this security will give an appropriate assurance to the defendants, before the sale contract can be terminated, that the plaintiff will pay his share of the ongoing holding costs. I have identified the amount of $25,000 because it is half of the amount for expenses for a year that was, on the plaintiff’s case, paid by him at the commencement of the joint endeavour.

41. The plaintiff resisted the suggestion from the defendants that he should give security for the undertaking as to damages. It seems to me that there is a difference between the undertaking to contribute his share of the holding costs and the undertaking as to damages. The undertaking as to damages will only be enlivened if the plaintiff fails in the proceedings and the defendants or some third party suffers loss. The undertaking to pay holding costs is an inevitable payment that will be required in order for this joint endeavour to proceed, which is what the plaintiff seeks. If the plaintiff is unable to provide that security, the defendants should have the opportunity to complete the contract.

42. Given that the joint endeavour may persist, and given that circumstances may change, it is conceivable that new circumstances will arise that would justify an order that the caveat be withdrawn and, accordingly, the parties will have liberty to apply.

43. I make the following orders:

44. The Court NOTES the following undertakings proffered by the Plaintiff through his Counsel:

(a) The usual undertaking as to damages; and (b) An undertaking to pay on the last day of each month 40% of the total of:

(i) AND utilities and rates in respect of the Property incurred in any given month not paid for by the tenant; (ii) AND real estate agent expenses; (iii) AND any other expense of the Property agreed to between the parties in writing.

PROVIDED that the Defendants provide to the Plaintiff no later than 7 days before the last day of each month:

(i) A business record issued by all third parties in respect of whom expenses are to be paid for that month pursuant to this undertaking identifying the quantum of the amount of the expense such as an invoice.

(ii) A business record issued by the real estate agent identifying the rent expected to be received in the given month from the tenants.

OTHERWISE, the Plaintiff is to make the payment pursuant to the undertaking 7 days after receipt of all of the said documents.

(c) An undertaking to pay, by 5pm on the business day following the defendants providing a banking record produced by or generated by Bankwest showing the monthly mortgage repayment debited against the Defendants in respect of the Property for that month, 40% of that debited amount.

2. The defendants undertake to instruct the real estate agent managing the tenancies on the Property to pay 40% of the net rental income received each month to a person and account nominated by the Plaintiff in writing and to not revoke the said instruction until such time as the caveat lapses or expires.
3. An order pursuant to section 74K of the Real Property Act 1900 (NSW) (RPA) that the caveat with the Land Titles Office registration number AV165395 lodged in relation to the whole of the land situated on 2/1281233 being the property known as 167 Annangrove Road, Annangrove, NSW 2156 (Property) be hereby extended to 24 April 2026 or such other time as ordered by the Court;
4. The order in Order 3 will be automatically revoked if the plaintiff fails to provide security in the sum of $25,000 in a form agreed by the parties or ordered by the Court to support the undertaking in Order 1(b) and (c) above, such security to be provided on or before 3 November 2025.
5. Costs reserved.
6. Liberty to apply on 1 day’s notice.
7. The matter be listed before the Real Property List Judge for directions on Friday 31 October 2025.
8. These orders be entered forthwith.

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Amendments

29 October 2025

Amendment to indenting at [43]

29 October 2025

Amendment to indenting at [43]