Ron Medich Properties Pty Limited v McGurk [2010] NSWSC 552 | Case summary

1 The Plaintiff, Ron Medich Properties Pty Limited ("RMP") seeks an order under s 74K of the Real Property Act 1900 (NSW) extending the operation of a caveat which it has lodged against land owned by the Defendant, Mrs McGurk. Alternatively, the Summons seeks an order pursuant to s 74O of the Real Property Act for an order granting leave to RMP to lodge a further caveat in relation to the property. 2 Further or in the alternative, the Summons seeks an order restraining Mrs McGurk from discharging a mortgage presently registered against the title to the property. 3 The caveat, in Schedule 1, describes the estate or interest in the land claimed by RMP as follows. Under the heading "Nature of the estate or interest in the land", appears "equitable interest pursuant to a constructive trust". Under the heading "By virtue of the facts stated below" appears "use of the caveator's funds to acquire an interest in the property". 4 The description in Schedule 1 would lead the reader to conclude that RMP was claiming a constructive trust arising from the fact that Mrs McGurk, as registered proprietor, had used RMP's funds to acquire, by way of purchase or otherwise, some undefined interest in the property and that, by some circumstance not identified, she held that interest, whatever it was, upon a constructive trust, not a resulting trust, for RMP. 5 However, the interest which RMP seeks to protect by the caveat is quite different. It says that it is a mortgagee of the property securing the sum of $3.8 million by operation of the equitable doctrine of subrogation in that it provided $3.8 million to Mrs McGurk or to a company controlled by her husband, Mr McGurk, in order to enable Mrs McGurk to discharge a mortgage over the property in that amount to BankWest, and that that money was subsequently applied for that purpose. Accordingly, RMP says it is, in equity, entitled to the benefit of the bank's mortgage. 6 The interest as mortgagee, by virtue of the doctrine of subrogation which RMP now advances is, as I have said, very different from the interest as beneficiary of a constructive trust which is claimed in the caveat. The caveat does not, in this regard, comply with the requirements of s 74F(5)(b) of the Real Property Act, in that it does not specify the "prescribed particulars" of the estate or interest to which the caveator claims to be entitled. 7 Clause 7 and Schedule 3 of the Real Property Act Regulations 2008 set out the "prescribed particulars" relevant to the present case: "1 Particulars of the nature of the estate or interest in land claimed by the caveator. … 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 items 4 and 5), or (c) how the estate or interest claimed ranks in priority with other estates and interests in the land." 8 A person, not the registered proprietor, reading the caveat in this case would have no idea of the nature and extent of the interest actually claimed by RMP: see Leros Pty Ltd v Terara Pty Limited (1992) 174 CLR 407, at 422. 9 A defect in the terms of a caveat describing the interest claimed is fatal. It cannot be cured by amendment: Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314; Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) 12 BPR 23,355; Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) 12 BPR 23,403. 10 For these reasons, the caveat will not be extended. 11 I now turn to the application for an order granting leave under s 74O to RMP to lodge a new caveat in reliance upon the same facts as it has asserted to support the caveat which will now lapse. 12 I refuse that application because, in my opinion, it is not supported by sufficiently persuasive evidence that the caveat is not an abuse of the caveat procedure. My reasons are as follows. 13 RMP says that the sum of $3.8 million was advanced to Mr and Mrs McGurk for the purpose of enabling them to discharge a mortgage in that amount over their home, in circumstances in which BankWest was threatening to exercise its power of sale. Mr Kelly SC, who appears for RMP, says that, in those circumstances, the presumption of the law is that the new lender intends to have the same security as was held by the mortgagee whose debt is being discharged. There is ample authority to support that proposition in law: Ghana Commercial Bank v Chandiram [1960] AC 732, at 745; Butler v Rice [1910] 2 Ch 277. 14 However, Mr Kunc SC, who appears for Mrs McGurk, says that there is no evidence of the facts in this case which make the principle applicable. First and foremost, he says, there must be a loan by the new lender and it must be for the purposes of discharging the previously existing mortgage. 15 Here, Mr Kunc says, there is no evidence by way of an affidavit from Mr Medich that RMP lent $3.8 million to Mr and Mrs McGurk or either of them, or to their companies, let alone that RMP lent it for the purpose of discharging the mortgage to BankWest. To the contrary, Mr Kunc points to a witness statement made by Mr Medich on 12 March 2009 and provided to the New South Wales Police in relation to a charge of arson laid against Mr McGurk. In that witness statement, Mr Medich says in paragraph 6: "6 I very [sic] stressed out at this time and I was recommended a solicitor Rob HUGH who in turn recommended Micael McGURK to try and recover my investment. McGURK helped me recover my investment in late 2007 (I later learnt that Andrew HOWARD actually provided the strategy to recover my funds). Because I was under the belief that McGURK helped me recover my funds my confidence in him increased and I trusted him. I actually gave McGURK 3.8 million dollars to pay off mortgages over his own home at Cranbrook Avenue Cremorne just before I recovered the money from Amazing Loans as his commission ." (emphasis added) 16 Further, in an affidavit sworn on 18 March 2009, in proceedings in the Federal Court brought by RMP against Mr and Mrs McGurk, amongst others, Mr Medich says that an advance of $4.4 million was made to a company called Bentley Smythe Pty Limited, being a company controlled by Mr McGurk, to be secured over a property in Bower Street Manly, a quite different property from that over which BankWest has the security in issue in the present case. 17 In support of an application for a freezing order against the assets of Mr and Mrs McGurk and three other companies controlled by Mr McGurk, Mr Medich said that Mr McGurk had misapplied the sum of $3.8 million in question. In paragraph 51 of that affidavit, Mr Medich said: "51 By reason of the matters deposed to in the affidavit of Deborah Jane Waters I am concerned and believe it is likely that of the $4.4 million transferred by the first applicant to the first respondent on 21 May 2008, $3,628,143.16 was used by [Mr McGurk] to discharge the mortgage granted to the Bank of Western Australia Limited over [the subject property]." 18 Accordingly, there are two separate statements of Mr Medich in evidence which contradict his present case that $3.8 million was lent to, or for the benefit of, Mrs McGurk and that the loan was to be applied to discharge BankWest's mortgage. One statement is that Mr McGurk was entitled to that sum absolutely and without qualification as a commission for his services; the other is that Mr McGurk misapplied that money, which had been intend for a completely different business transaction. 19 In those circumstances, I decline to grant leave under s 74O for the lodgement of a new caveat, bearing in mind that Mr Medich had ample opportunity himself to put on affidavit evidence explaining exactly the circumstances upon which he now relies to support this or any other caveat that he would seek to lodge against Mrs McGurk's property. 20 For the reasons which I have given above, it seems to me that there is no basis upon which I could properly now grant an injunction in the terms sought in the Summons: I am not satisfied by RMP's evidence that there is a serious question to be tried. 21 In view of the criticisms made by Mr Kunc of the evidence tendered in support of this Summons, particularly the absence of affidavit evidence from Mr Medich, Mr Kelly now seeks an adjournment of the Summons in order that further evidence may be adduced. Presumably, that evidence is to be adduced in support of the application for leave under s 74O or in support of an injunction. 22 Mr Kunc opposes any adjournment for that purpose. He points out that this matter came before the court on two occasions before today. There was ample opportunity for RMP to understand the nature of the case to be presented against it. Indeed, it seems that this case has, to some degree, been rehearsed in the Federal Court on an application by RMP to amend a statement of claim by adding a cause of action of the very nature claimed to support the present caveat. 23 The most obvious evidence to be adduced in support of the application for extension of the caveat, but even more in support of an application for an order under s 74O, or for an injunction, would have been the evidence of Mr Medich himself. He is the controlling mind of RMP and is said to have made the relevant agreement (whatever it was) directly with Mr McGurk. It could not have escaped the attention of Mr Medich's legal advisers that his evidence was of critical importance. For whatever reason, no evidence from Mr Medich has been forthcoming. 24 The Plaintiff has had every opportunity of presenting its case properly and fairly and has failed on the case it presented. In those circumstances, I do not think that it is in the interest of justice to prolong these proceedings further by granting the adjournment sought. 25 Accordingly, I refuse the application for an adjournment and dismiss the Summons. 26 The Plaintiff will pay the Defendant's costs of the Summons.

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Ron Medich Properties Pty Limited v McGurk

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