M State Pty Ltd v Sepentulevski

Business Acquisitions Australia Pty Ltd v Renshall [2006] NSWSC 1238; (2006) 12 BPR 23, 873 CASES CITED : Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 9997; (2005) 12 BPR 23,403 Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Limited [2005] NSWSC 880; (2005) 12 BPR 23,355 Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2

M State Pty Ltd - Plaintiff Bill Sepentulevski AKA Blagojce Sepentulevski - First Defendant Nada Sepentulevski AKA Nadia Sepentulevski - Second Defendant Metodia Sepentulevski - Third Defendant PARTIES : Kuselis Levitas - Fourth Defendant Sarah Bella Rottenstein - Fifth Defendant Michelle Rottenstein - Sixth Defendant Ida Schwartz - Seventh Defendant Pepper Finance Corporation Limited - Eighth Defendant

COUNSEL : Mr J L Hancock - Plaintiff First Defendant in person

SOLICITORS : Hancocks Solicitors - Plaintiff First Defendant in person

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4582/09 M STATE PTY LTD v BILL SEPENTULEVSKI & 7 ORS JUDGMENT 1 The plaintiff makes application under s 74K of the Real Property Act 1900 for an order extending the operation of a caveat, being caveat AD868647B, affecting the land in folio identifier 3/SP 69292. 2 The nature of the estate or interest in that land claimed by the plaintiff as caveator is described in schedule 1 to the caveat as "equitable instrument". That supposed estate or interest is said to exist by virtue of an instrument described as "deed of loan" dated 29 February 2008 between the defendants and the plaintiff. 3 The question to be addressed upon an application of this kind is whether the claim made in the caveat "has or may have substance": s 74K(2). 4 The answer is clearly "no". 5 In Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997; (2005) 12 EPR 23,403, Brereton J referred to the requirements imposed, via s 74F(5), by the Real Property Regulation 2003 regarding the content of a caveat. The legislation requires that certain particulars be included in a caveat. I quote from Brereton J's judgment: "Those prescribed particulars are to be found in Real Property Regulation 2003 which provides, by clause 7, that a caveat must specify the particulars set out in Schedule 3 in relation to the estate or interest to which a caveator claims to be entitled. Schedule 3 specifies those particulars as follows (emphasis added):

1. Particulars of th e nature of the estate or interest in land claimed by the caveator. 2. The facts on which the claim is founded, including (if appropriate) a statement as to the manner in which the estate or interest claimed is derived from the registered proprietor of the estate or interest or the primary or possessory applicant against which the caveat is to operate. 3. If the caveator's claim is based (wholly or in part) on the terms of a written agreement or other instrument, particulars of the nature and date of that agreement or instrument and the parties to it. 4. If the caveator claims as mortgagee, chargee or covenant chargee, a statement of the amount (if readily ascertainable) of the debt or other sum of money charged on the land (or, if the amount is not readily ascertainable, the nature of the debt, annuity, rent-charge or other charge secured on the land). …

10. It is not necessary to specify: (a) whether the estate or interest claimed is legal or equitable, or (b) the quantum of the estate or interest claimed (except as provided in paragraphs 4 and 5), or (c) how the estate or interest claimed ranks in priority with other estates and interests in the land." 6 After referring to the effect of s 74H(1)(b) (which states that a caveat does not prohibit the recording of dealings except to the extent that the recording "would affect the estate, interest or right claimed in the caveat") and s 74K(2) (directing attention to whether the caveator's "claim" has or may have substance), Brereton J continued: "These provisions, taken together, make clear that the characterisation and description of the nature of the estate, interest or right claimed by a caveator is more than a mere formal requirement of the provisions of the Act relating to caveats, but goes to the heart and substance of the operation of those provisions. Without the estate interest or right claimed being described, neither the Registrar General nor a person reading the caveat can know, for purposes of s 74H(1)(b), whether a dealing would affect the estate claimed. Nor can the court know, for purposes of s 74K(2), whether the caveator's claim has, or may have, substance." 7 The caveat considered by Brereton J described the estate or interest claimed by the caveator as "an equitable interest". Its source was described as a "lease agreement" of a particular dated between the caveator and one of the registered proprietors and the "charging clause in clause 17 of that agreement". The clause in question was one by which the person concerned (designated the "lessee") "hereby charges" his interest in any land owned by him as security for payment. 8 Brereton J held that "an equitable interest" was an insufficient description of the estate or interest claimed, having regard to the provisions of the Real Property Regulation. The expression is, he said, one of "enormous generality" and not apt to delineate the claim. His Honour added that since the regulation says that it is not necessary to describe the claimed interest as legal or equitable, acceptance of "an equitable interest" as adequate would compel the conclusion that "an interest" is also adequate, a proposition that simply flies in the face of the stated requirement that there be a statement of the "nature" of the interest. 9 Brereton J went on to consider whether the situation was saved by the added reference to the "charging clause" as the source of the interest. He decided that it was not, since "charging clause" has no fixed meaning and might well refer to a provision permitting the charging of costs or fees. 10 Reference may also be made to the decision of Campbell J in Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Limited [2005] NSWSC 880; (2005) 12 BPR 23,355. In that case the estate or interest claimed was described simply as "equitable interest" and there was a reference to the instrument from which the interest was said to arise. Campbell J held the caveat to be defective. The description "equitable interest" could, as he said, "relate to a multiplicity of interests". 11 The same view has been taken in other cases: see, for example, Business Acquisitions Australia Pty Ltd v Renshall [2006] NSWSC 1238; (2006) 12 BPR 23, 873; Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2. 12 In this case, as I have said, the words used are "equitable instrument". There is simply no species of estate or interest in land that could conceivably be described as "equitable instrument". The caveat is therefore meaningless and on that basis cannot be supported. Even if it were held by some means to refer to "equitable interest", the objections to which I just referred would apply and the caveat would still be unsupportable. 13 There is, in any event, a difficulty for the plaintiff in being able to point, in the particular deed of loan of 29 February 2008, to any language creating a charge. The document is replete with references to security but in its operative provisions the closest it comes to creating a security is in clause 2(j), which says that the obligations of the lender under the deed to make the moneys available to the borrower are conditional upon the receipt by the lender of the "securities" and the "collateral security" specified in the schedule prior to any moneys being advanced. There is in the schedule a description of securities in a way that includes "a mortgage and/or caveat over the property known as 3/92 Port Hacking Road, Sylvania which is folio identifier". There is no folio identifier specified but it is shown sufficiently by other evidence that the land described in the caveat is the particular property in Port Hacking Road, Sylvania. 14 Going back to clause 2(j), all it says is that the lender need not lend the money unless and until the particular securities are delivered to it. It is not suggested that any security over the Port Hacking Road property was delivered. Nevertheless, the money was advanced. It is arguable therefore that the lender saw fit to waive its rights to insist on the provision of the security. 15 Reference was also made to part of the schedule to the deed headed "Default" which begins: "The debtor or borrower or mortgagor hereby agree with the Mortgagee that in the event of default under the mortgage & or deed of loan which continues for a period of twenty-eight (28) days, and without any notice, the Mortgagee shall be entitled to lodge a mortgage and caveat over any Real Property in the Commonwealth of Australia in which the debtor or borrower or mortgagor has an interest as a registered proprietor …" 16 I do not know how one would lodge a mortgage unilaterally. One could lodge a caveat unilaterally and that is presumably what the plaintiff has ineffectively attempted to do. But the status within the document of the material in the schedule headed "Default" is by no means clear. There does not seem to be any operative provision preceding the schedule that incorporates the words in question or gives operation or effect to the schedule. This goes to underline my conclusion that the effect of the deed is doubtful, to say the least. 17 I return, however, to the fundamental point that the caveat is bad in form because it does not claim any recognisable estate or interest in land and therefore cannot be sustained. 18 The notice of motion is dismissed. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.