Nguyen v Kaha

3914/08 THI HIEN NGUYEN V VEENA KAHA JUDGMENT (Ex tempore; revised on 1 August 2008) 1 HIS HONOUR: This case has come before me in the Equity Duty List for final hearing of a summons filed on 25 July 2008. The plaintiff seeks a declaration that she has a caveatable interest in land at Pyrmont Street Pyrmont, as chargee pursuant to written loan agreements between the parties dated 26 October 2007 and 24 April 2008. The plaintiff also seeks an order under section 74O of the Real Property Act 1900 (NSW) granting her leave to lodge a further caveat in respect of this property, claiming that interest as chargee. 2 The plaintiff and the defendant entered into a document described as a loan agreement dated 26 October 2007. There is no evidence as to the circumstances in which that agreement was negotiated or anything other than the terms of the agreement itself and the terms of a contemporaneous caveat. The recitals to the agreement stated that the defendant as borrower requested the plaintiff as lender to lend $60,000 "for her own purpose". Clause 2 of the agreement provided that the borrower agreed to repay principal sum of $60,000 within three calendar months of the date of the loan agreement "provided that the loan agreement be executed properly, and be witnessed by a third party natural person who attained the age of at least 18 years." There is no evidence as to whether that condition was fully satisfied but I do note the signatures of both parties have been witnessed. 3 Clause 2 also provided that the borrower agreed to execute another loan agreement at the expiration of the current loan agreement, and it said that the current loan agreement would expire on 26 January 2008. There are provisions for interest and early repayment, various warranties and provisions for default, and other routine provisions. 4 Clause 19 provided that nothing in the document (described in that clause as a deed) merged, extinguished, postponed, lessened or otherwise prejudicially affected any right, power or remedy that a party might have against another party. 5 Clause 20 is headed "Consents and Approvals", and is in the following terms: "Where this Deed gives any party a right or power to consent or approve in relation to a matter under this deed, that party may withhold any consent or approval or give consent or approval conditionally or unconditionally. The party seeking consent or approval must comply with any conditions the other party imposes on its consent or approval. The Borrower acknowledge that he would consent to the lender lodging a Caveat against the title of the following property [folio identifier 219/SP 54840 and the address of the Pyrmont property are given] AND ACKNOWLEDGES THAT the borrower understood English in a functional manner." 6 It will be seen that this agreement has been drawn by someone whose facility in English is to some extent limited. One infers that some of the clauses have been taken from precedents, not always appropriately. Significantly however, the agreement relates to a loan of $60,000 and contains a provision by which the borrower acknowledges that he (in fact she) would consent to the lender lodging a caveat against the title. 7 The contemporaneous document, also dated 26 October 2007, is a caveat in respect of the Pyrmont property. The registered proprietor was identified as the defendant and the caveator was identified as the plaintiff. The nature of the estate of interest in the land was said to be "a legal and equitable interest". The instrument by virtue of which the interest arose was said to be the loan agreement of 26 October 2007. Under the words "by virtue of the facts stated below" the following appears: "The registered proprietor had borrowed a lump sum of money from the lender, Thi Hien Nguyen, in the amount of $60,000 by way of unsecured loan. The registered proprietor had agreed to execute a caveat by written agreement against her property under the said loan agreement dated 26 October 2007 ." 8 The caveat was signed by the plaintiff and the defendant. 9 On 24 April 2008, a further loan agreement was entered into between the plaintiff and the defendant. This occurred in circumstances where, according to the evidence of the plaintiff, in the meantime $20,000 had been paid in February or March 2008. 10 The new loan agreement was in terms virtually identical with the previous agreement except that the loan amount was $40,000 rather than $60,000, in clause 2 the expiration date for the loan agreement was given as 24 July 2008 and there were some other different dates with respect to calculation of interest. Clause 20 of the new agreement was identical with clause 20 of the old agreement and once again, the document was signed by the plaintiff and the defendant. This time there was no contemporaneous caveat. 11 It is an agreed fact that on 5 July 2008 the defendant entered into a contract for the sale of the property as registered proprietor. 12 On 14 July 2008, a solicitor acting on behalf of the defendant forwarded to the plaintiff a Notice to Caveator of Proposed Lapsing of Caveat. I was informed from the Bar table that the caveat will lapse next Tuesday 5 August. 13 The first question to address is whether it is reasonably arguable that the plaintiff has a caveatable interest. In Iaconis v Lazar [2007] NSWSC 1103, Young CJ in Eq considered the effect of a provision in a loan agreement by which a party to the agreement undertook to consent to the lodgment of a caveat against his or her land. He said [at 23]: "The current commercial enthusiasm for this sort of clause in a contract and for lodging a caveat has been given a great boost by the decision of the Court of Appeal in Troncone v Aliperti (1994) 6 BPR 13,291. This decision has often been interpreted by persons seeking charges as meaning that every time there is an agreement that X can lodge a caveat over any property Y may own, that an equitable charge is created. It should be remembered, as McLelland CJ in Equity said in Coleman v Bone (1996) 9 BPR 16,235 at 16,239, that the true principle is that, 'where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure the payment to B of that money.'" 14 I was taken to a number of other authorities expounding the law emerging from Troncone v Aliperti, but in my opinion they do not add to the principles I have set out, except to the extent of emphasising that the answer in the instant case is always dependent upon the proper construction of the instruments before the court, having regard to all admissible facts and circumstances. Thus, in Express Loans and Finance Pty Ltd v Hunter [2004] NSWSC 142 Bryson J, as his Honour then was, referred to Troncone v Aliperti and pointed out that the decision turned on the Court of Appeal's view that with the aid of implication, the documents there under consideration showed an intention to create an interest in land, that is an equitable interest and a charge over the land (at [7]). On the facts before Bryson J there was found to be no such intention. See also, Neoform Developments and Interiors Pty Ltd v Town and Country Marketing Pty Ltd [2000] NSWSC 344 (Young CJ in Eq); Thu Ha Nguyen v Larry Quoc Huy On [2003] NSWSC 50 (Bergin J); Surfers Paradise Coaches (Qld) Pty Ltd v Tsu Chan Lin [2007] NSWSC 475. 15 Were it not for the express wording used in the caveat in the present case, it would be open to argument that the combination of a loan agreement containing a covenant by the borrower to consent to lodgment of a caveat and the contemporaneous caveat signed by the borrower would support an implication that the parties intended to create an equitable interest by way of charge over the land against which the caveat was lodged. The fact that the loan agreement was accompanied by the contemporaneous execution and lodgment of a caveat would arguably serve to distinguish the case from the Express Loans and Finance decision. 16 The facts would also be arguably distinguishable from the Surfers Paradise Coaches case, where a deed was entered into to provide for the consent of the registered proprietor to the lodgment of caveats, in circumstances where a debt had been incurred by another entity at an earlier time and the proprietor had at an earlier time personally guaranteed that debt. The facts that the debt had arisen at an earlier time, and that the instrument authorising the caveats and the caveats themselves made no reference to any proprietary interest, led White J to the conclusion that no such interest had been created. But where a loan agreement and caveat are entered into contemporaneously and in connection with a loan then made, the position is arguably different. 17 However, I am drawn to the conclusion that in this case no proprietary interest was intended to be created, and therefore no proprietary interest was in fact created, by the wording of the caveat. As I have said, the description of the facts said to give rise to an interest in land referred to the registered proprietor borrowing money "by way of unsecured loan". 18 The acknowledgment by both parties that the loan was unsecured seems to me to imply that the authority to execute and lodge a caveat was based upon an intention of the kind described by Bryson J in the Express Loans and Finance case. There his Honour said at [13]: "An impediment is placed in the way of a registered proprietor if a caveat is lodged, whether or not the caveat is effective, as the lodgment confronts the registered proprietor with problems and difficulties, whether or not it can be removed. To my mind the correct understanding of clause 10 is that its purpose was to enable the plaintiff to impede and obstruct the defendant's path as registered proprietor, without going further." 19 It was submitted on behalf of the plaintiff that the reference in the caveat to an "unsecured loan" should be construed as a reference to a loan not supported by a registered mortgage. But that would be to read into the wording of clause 6 a limitation that is not there. A loan supported by an implied charge is in the relevant sense a secured loan. The chargee has security over the charged property, according to normal usage of that legal language. 20 My conclusion, therefore, is that the application for a declaration that the plaintiff has a caveatable interest in the Pyrmont property must fail. 21 It follows that the application for an order under section 74O granting leave to permit a further caveat to be lodged on the basis of the loan agreements must also fail. 22 It is unnecessary for me to consider a submission, made on behalf of the defendant, that any interest arising out of the 2007 loan agreement and contemporaneous caveat was extinguished when that agreement was replaced by the 2008 agreement. I should note, however, that the submission seems to be adequately answered by the wording of clause 2 of the 2007 agreement, by which the borrower agreed to execute another loan agreement at the expiration of the current agreement, and clause 19 of the 2008 agreement, which provided that nothing in it extinguished any existing right. 23 I dismiss the summons and I order that the plaintiff pay the defendant's costs of the proceedings as agreed or assessed. **********

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