Morkaya v Parkinson; Parkinson v Morkaya

CATCHWORDS : REAL PROPERTY - Torrens title - Caveats against dealings - Removal - onus of proof - caveatable interests - right to have registered proprietor give security on property to third party

LEGISLATION CITED : (NSW) Real Property Act 1900, s 74MA

CASES CITED : Martyn v Glennan [1979] 2 NSWLR 234

08/278779 Aydan Morkaya (plaintiff/applicant) David Anthony Parkinson (defendant/first respondent) PARTIES : Fairfax Media Publications (second respondent) 08/278871 David Anthony Parkinson (plaintiff) Aydan Morkaya (first defendant) Ativa Pty Ltd (second defendant)

Ms A Morkaya (in person) COUNSEL : Mr D Parkinson (in person) (defendant/respondent) Mr C Swanson (Sol) (second respondent)

SOLICITORS : Martin Legal Pty Ltd (defendant/first respondent) Ledlin Partners (second respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2008/278779 Aydan Morkaya v David Anthony Parkinson

2008/278871 David Anthony Parkinson v Aydan Morkaya

1 HIS HONOUR: By notice of motion filed on 22 February 2010, the plaintiff Aydan Morkaya claims orders that caveats lodged by the first defendant David Anthony Parkinson and the second respondent Fairfax Media Publications Pty Limited, in respect of the land comprised in Folio Identifier 12/SP72249, which is a townhouse at Homebush owned by Ms Morkaya and occupied by her daughters, be removed pursuant to (NSW) Real Property Act 1900, s 74MA.

2 On an application by a registered proprietor for removal of a caveat, although the proceeding is instituted by the registered proprietor, nonetheless the Court approaches the matter in exactly the same way as it approaches an application by a caveator for an order extending the operation of the caveat [see Martyn v Glennan [1979] 2 NSWLR 234]. Accordingly, each caveator bears the onus of showing that it has a seriously arguable case for final relief in the nature of the caveatable interest claimed, and that the balance of convenience favours retention over removal of the caveat.

3 So far as Fairfax Media's caveat is concerned, it claims an interest described as "interest pursuant to Deed of Guarantee and Indemnity dated 2 November 2004", said to arise by virtue of that Deed of Guarantee. It does not state the nature of the estate or interest claimed. It fails to state whether it is an interest as beneficial owner or as beneficiary under some sort of trust or as chargee or mortgagee. As I have had repeatedly pointed out, such caveats are defective because they do not describe in a way which enables the reader, the caveatee or the registered proprietor to ascertain what is the interest in the land claimed, and whether any other dealing would be inconsistent with that interest.

4 In any event, the Deed of Guarantee and Indemnity dated 2 November 2004 is in evidence. It describes the customer as Ativa Pty Limited trading as One Stop Pine, Castle Hill, and the guarantors as Mr Parkinson and Ms Morkaya. Clause 7B provides: For the purposes of securing payment to Fairfax the guarantor charges all of its, his or her real personal property including all the property acquired after the date of Deed and wherever it is situated, including land and all of his or her or estate in interest therein in favour of Fairfax in the payment of all sums of money which the guarantor may become liable to pay Fairfax.

5 Such a clause is no doubt capable of creating a caveatable interest in land, and indeed ordinarily would do so.

6 Ms Morkaya disputes that the signature appearing as hers on the guarantee is her signature. I have compared her signature, not just with her signatures that appear on affidavits sworn in these proceedings in 2008, but with much more contemporaneous signatures - for example, on a Deed on 10 February 2004 between Mr Parkinson and her concerning the DCA Computers business, and on a handwritten agreement signed by her with Mr Parkinson which, according to Mr Parkinson's own evidence, was created on or about 7 November 2005. The signature that appears as Ms Morkaya's on the Fairfax guarantee bears no resemblance at all to any other signature of hers on any of these documents, and, the others appear reasonably consistent each with the other. The disputed signature certainly bears no resemblance with the signatures of hers to which I have referred of 2004 and 2005, at which time there was no relevant dispute between the parties, nor between them and Fairfax, and no reason to suppose that she would have any motive for adopting the stratagem of placing on the document a signature that was not her ordinary signature. 7 The signature was purportedly witnessed by one Warren Hill, who also witnessed Mr Parkinson's signature on the Guarantee. No party has called Mr Hill. One would have expected those seeking to uphold the signature to call a purported witness to it. Although it seems that Ms Morkaya may have had some contact with Mr Hill, his absence as a witness does not assist the case of the caveator seeking to uphold the caveat.

8 Mr Parkinson has given evidence that he saw Ms Morkaya sign the document. I cannot, on an application such as the present one when emotions are running high, on both sides, at least as between Mr Parkinson and Ms Morkaya, and in the light of the history of these proceedings, say at this stage that I am going to believe one of them and not the other of them. There is reason to approach the evidence of each of them with reservation, particularly when it is directed to possibly assisting or hurting the other.

9 The evidence adduced by Fairfax, in the affidavit of Terrence Edmund Ledlin sworn 20 March 2010, demonstrates that Fairfax sued Ativa, and subsequently sued Ms Morkaya and Mr Parkinson as guarantors, relying on the Guarantee document. Mr Ledlin's affidavit asserts that the present notice of motion is the first occasion on which Ms Morkaya has disputed her signature on the Guarantee document, even though that document was provided to her, apparently at her request, in September 2008, and even though following that she had a conversation with Fairfax indicating that she would fax a proposal for payment. Ms Morkaya maintains that she has from time to time disputed to Fairfax or agents of Fairfax her signature, but has provided no evidence to support that assertion.

10 Fairfax's proceedings have now reached the point that they have obtained judgment against both Ms Morkaya and Mr Parkinson, and have served a bankruptcy notice on at least Ms Morkaya, and filed a Creditors Petition, which is returnable on 1 April 2010. Throughout all of this, it does not appear as if she has raised any formal dispute as to the authenticity of the signature. Those matters have caused me considerable concern; but they are less direct and less compelling than the exercise of comparing the signatures, is especially in the absence of evidence from Mr Hill Taking all those matters together, I am not satisfied that Fairfax has made out a sufficiently arguable case to justify sustaining the caveat at this time.

11 Turning to Mr Parkinson's caveat, he primarily relies on the document to which I have already referred, said to have been signed by Ms Morkaya in about 2005, which is in the following terms: I Aydan Morkaya acknowledge that David Parkinson is contributing $64,850 with cheque number 7 from his Citibank account in order to have my property XX Glen Logan Road lifted from current CBA guarantee. This bank Guarantee uses XX Glen Logan Road and two of David Parkinson's properties as security. However, it must be fully paid out in order to lift my property as security so I can buy XX/XX Underwood Road. I confirm that I will sell XX Glen Logan Road ASAP and allow David Parkinson to use $63,850 equity in my Underwood property to reinstate the bank Guarantee across David's two properties, and as well Underwood Road. I also acknowledge that David Parkinson intends to loan me approximately $40,000 from the Citibank account in order to complete the purchase of XX/XX Underwood Road. I hereby declare that I would put Glen Logan Road on the market as soon as David loans me this money, and will repay the money from the proceeds, from the sale of Glen Logan Road, within one month of its contract exchange.

12 It seems that Mr Parkinson indeed provided $63,850 to the bank, which was used to discharge the bank Guarantee and thus free Ms Morkaya's former property at Glen Logan Road from that security. She was then able to purchase the Underwood Road property which is the Homebush property, the subject of the present caveat. Mr Parkinson apparently advanced in excess of $40,000 - partly by payment of the deposit on the purchase, and partly by payment of stamp duty in respect of Underwood Road - and in addition made some other payments on behalf of Ms Morkaya. Ms Morkaya has admittedly repaid $41,000.

13 The document does not support any view that Mr Parkinson was intended to acquire an equitable interest by way of contribution of the purchase price; in any event, more than the amount of the deposit has already been repaid to him. The question is whether the undertaking to permit Mr Parkinson to "use $63,850 equity in my Underwood property to reinstate the bank Guarantee", arguably creates a caveatable interest.

14 As I understand the position, the bank Guarantee was security to the lessor of the premises from which One Stop Pine traded, for the obligations of the lessees under the lease. Mr Parkinson and Ms Morkaya either were the lessees or guarantors of the lessee. They were equally responsible and liable or in respect of the lease. Although an argument has been advanced that there was more equity in Ms Morkaya's property than in Mr Parkinson's, and that the bank looked more to Ms Morkaya in that sense in respect of the Guarantee, that is quite irrelevant to the present question; they were jointly and severally liable to the lessor, and they were jointly and severally liable to the bank in respect of the bank guarantee.

15 The essence of the handwritten agreement is that Ms Morkaya assumed an obligation to Mr Parkinson to allow her Homebush property to be used as security, together with Mr Parkinson's two properties, to the Commonwealth Bank (CBA) for a bank guarantee. That bound Ms Morkaya to permit the Homebush property to be used in a particular and specific way as a security. Mr Parkinson had a right to compel her in equity to permit the property to be used in that way. The result would have been a decree of specific performance requiring Ms Morkaya to execute security over her property in favour of CBA, although it would not entitle Mr Parkinson to a decree requiring the creation of any proprietary interest in his favour, as distinct from in favour of CBA.

16 The position is somewhat analogous to a contract for purchase for the benefit of a third party - for example, where A contracts with B to purchase land on the basis that the transferee will be C beneficially. In those circumstances, I think it is at least arguable that A does have a caveatable interest in the land, and similarly therefore that Mr Parkinson has a caveatable interest in the land.

17 The next question is the balance of convenience. Mr Parkinson's caveatable interest, if any, is a limited one. It is certainly not in the nature of $63,000 of equity in the land. It is a right to have Ms Morkaya give security over her property, together with two properties of Mr Parkinson's, to secure a bank guarantee to the extent of $63,850. In order to enforce that equity, Mr Parkinson would have to offer property of his own as security as well as Ms Morkaya's property.

18 However the decisive factor on the balance of convenience, that emerged in the course of submissions, and belatedly in circumstances where the Court had been told more than once by Ms Morkaya that she could not sell the properties, or could not exchange contracts for sale of the properties as a matter of practicality while the caveats were on title, is that in fact she proposed to sell the property off the market to her daughters, for a sum significantly less than its indicative value as so far established by evidence served in the proceedings. Apparently, Ms Morkaya's daughters have been able to raise something in the order of $490,000, which would merely discharge the mortgage to Citibank, the second creditor, and leave no surplus; whereas the evidence tends to suggests that the property may be worth $590,000 or so. That course would diminish the pool of divisible assets, such as it is, for the purposes of the present proceedings by $100,000, solely for the benefit of Ms Morkaya's daughters, and would have given her, had it not been discovered, a secret advantage in the proceedings. There is great convenience in permitting the property to be sold, so that creditors can be paid out, but none in permitting it to be transferred to Ms Morkaya's daughters at an under value to detriment of creditors and to the detriment of the pool of divisible property. If there were a sale for full value, then the Court would almost certainly order that the caveat be removed upon completion, (if it were not removed consensually, but normally any reasonably commercial caveator would remove the caveat upon completion in the face of a on-market sale for full value).

19 Were it not for one matter of form, to which I will come, I would have concluded that Mr Parkinson had sustained an arguable claim to a caveatable interest sufficient to maintain the caveat, and that the balance of convenience favoured its maintenance until the completion of a sale rather than its withdrawal, particularly in light of the facts now disclosed about the proposed sale.

20 However, Mr Parkinson's caveat is wholly defective in form. It claims merely an interest described as "equitable" pursuant to a "loan" instrument undated but executed on 7 November 2005. As has now been indicated on too many occasions to count, describing an estate or interest as legal or equitable does not comply with the requirements of the regulations as to description of the estate or interest claimed in the caveat. The regulation states that it is unnecessary to describe an interest as legal or equitable. What must be shown is whether it is an interest as beneficial owner, beneficiary, chargee, mortgagee, or so on. This caveat totally fails to do that, and it has therefore not been sustained for that reason.

21 That leaves the position as one in which I could give Mr Parkinson leave to lodge a further caveat, or - recognising that there are before the Court proceedings for adjustment of property interests in which ultimately all of these potential interests may have to be adjusted and in any event - simply to substitute an injunction restraining Ms Morkaya from dealing with the property except upon appropriate notice. That seems to me to be the preferable course, provided that the usual undertaking as to damages is given.

22 Accordingly I propose to make orders for the removal of the Fairfax caveat, for the removal of Mr Parkinson's caveat, and (upon Mr Parkinson's undertaking as to damages), to grant an injunction restraining Ms Morkaya from dealing with the property in question.

23 I order pursuant to Real Property Act, s 74MA that by 30 March 2010 Fairfax Media Publications Pty Limited (ACN 003 357 720) withdraw caveat AE516XXXX. 24 I order that by 30 March 2010 David Anthony Parkinson withdraw caveat AE189XXXX.

25 Upon David Anthony Parkinson giving to the court the usual undertaking as to damages, I order that until further order Aydan Morkaya be restrained from by herself, her servants or agents, selling, transferring, mortgaging or otherwise alienating or encumbering, or further encumbering her property comprised in Folio Identifier 12/SP72249.

26 I reserve liberty to Ms Morkaya to apply on seven days notice to discharge or vary the above injunction, including for the purpose of permitting a bona fide transaction for full value (in which case she should give prior written notice to Mr Parkinson of the proposed parties to and value of the proposed transaction).

27 As Ms Morkaya and Mr Parkinson appear today in person, and as Mr Swanson for Fairfax has been unsuccessful, there will be no orders as to costs of the proceedings before the court today.

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.