Is there a charge?
33Thus, in relation to s 74O the essential question is whether clauses 5 and 6 of the Deed of Variation authorise, or arguably authorise, the creation of a charge, and the protection by caveat of that charge, over real property other than:
(1) that set out in item 5 of the schedule to the Deed; or
(2) perhaps, other real property then owned by the continuing partners.
34It has to be said that the Deed of Variation is not well drafted. The drafter's preference for jargon over plain English has led, in no small way, to the question on which the s 74O application depends. I will return to this point.
35The first submission put by Mr DeBuse was that the charges given by clauses 5 and 6 were given only to protect the indemnities provided under clause 3. That cannot be correct. There are two reasons for this. The first reason is that the clause 3 indemnities are given to Mrs Schibaia only, whereas the charges are given to each of Mrs Schibaia and Mr Schibaia. In the case of Mr Schibaia, the clause 6 charge could not be for the protection of his rights under clause 3, because he has no such rights. And since the two charges are effectively identical in their wording, it would be strange if one were so limited whereas the other were not.
36The second reason is that the charges in clauses 5 and 6 expressly call up the interests of Mrs and Mr Schibaia respectively both under the Deed of Variation and under the Deed of Release. And each charge concludes with the proposition that "in all other respects the obligations imposed on all parties under the Deed [of Release] remain unchanged". Those obligations include the obligation to indemnify given to Mr Schibaia by clause 3.1 of the Deed of Release and to Mrs Schibaia by clause 4.1 of that Deed.
37I do not think that, as a matter of construction, the charges conferred by clauses 5 and 6 of the Deed of Variation can be limited in the first way that Mr DeBuse suggested.
38Thus, the question for decision comes down to: what is "the real property" that, in their discretions, Mrs Schibaia and Mr Schibaia "may charge"?
39It will be observed that each clause falls into two parts. The first part of each is the discretion to charge the real property and chattels of the continuing partners, and the statement of the purpose for which that charge may be imposed. The second part is the authority to "register" (in more conventional parlance, "lodge") a caveat.
40Mr Jaramillo submitted that each of the clauses should be read as though it ended with the reference to "the earlier Deed". He submitted that what followed was an additional, mechanical, right, limited in the way that it appears, but not something which limited the rights given by the first part of each clause.
41In support of this, Mr Jaramillo noted that the indemnities given under the Deed of Release were continuing indemnities, and that they might require to be called upon (as in fact, according to the plaintiffs, they are now required to be called upon) for some years into the future following from the completion of the development. That position obtains because the Home Building Act 1989 (NSW) applied to the work in question, and rights under that Act in respect of defective work are available for exercise for at least seven years following completion of the residential building work in question
42Thus, Mr Jaramillo submitted, it could not be thought that the right to charge property was limited to property specifically identified as having been owned by the continuing partners in item 5 of the schedule to the Deed.
43As I have indicated, the drafting of each clause is obscure. It refers to "the real property or chattels of the continuing partners". And it authorises the lodgement of a caveat in respect of some property that is described. The authority to lodge a caveat commences with the words "and for this purpose". When read in context, the identified purpose is the protection of the interests of the relevant party, Mrs Schibaia (clause 5) or Mr Schibaia (clause 6). To put it another way, the general discretion to charge is for the purpose of protecting the interests of the person to whom the clause applies. And in pursuance of, or in other words to reinforce or aid in the achievement of, that purpose, the person described is authorised to lodge caveats on the item 5 properties.
44However, not content with erecting that scheme, the drafter introduced the words "any such" before the words "real property as set out in item 5". The question is whether the words "any such" are intended to refer back to "the real property" identified earlier in the clause, or whether they are intended to mean something such as "that" or "the". In other words, the question is whether the authority to lodge a caveat is intended to be given in respect of the real property referred to earlier in the clause - in which case one might think that the reference to item 5 was intended to limit the real property in respect of which that right (and the associated charge) were given - or whether it is an additional right (that is to say, additional to the general right to charge) to lodge caveats against the title to particular identified property.
45The question thus posed is one of law. In the ordinary way, the Court may deal with the question of law on an interlocutory application, if satisfied that it is appropriate to do so. But the Court need not do so. See Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535.
46In this case it seems to me, detailed consideration and final resolution of the question of construction would require the Court to be better informed than it is as to the background known to the parties at the time they made their Deed, and as to the nature of the indemnities that, in my view, were intended to be secured (in a loose sense) by clauses 5 and 6. That would require consideration of a very considerable volume of material. It is not appropriate, in the course of a duty application, to undertake such a task.
47Accordingly, and adopting on the language of s 74K(2) of the Real Property Act, I propose to deal with the application simply by reference to the question of whether the claim to be entitled to lodge a caveat against real property owned by the defendants other than that described in item 5 of the schedule, has or may have substance. It is clear that the claim may have substance even if, on detailed examination, it may be found to be incorrect. And it is clear that the requirement that the claim have substance does not dictate that the Court should conclude that, more likely than not, the construction underlying the claim is correct.
48To my mind, having had some opportunity to consider the clauses overnight, it cannot be said that they are so clear in their operation that the interest claimed by the plaintiffs does not arise. It seems to me that there is an available, and possibly correct, reading of the clauses under which, as Mr Jaramillo submitted, there is a general discretion to charge and a specific authorisation to lodge caveats. That requires reading the words "any such real property as set out in item 5" as meaning "the real property set out in item 5". I do not think that this is a far-fetched or fanciful reading. Nor, in my opinion, is it so clear that the words "any such" must relate back to the real property first referred to, rather than to the real property that is described immediately after them, that in effect the authority to lodge caveats defines not only a specific form of protection that is given but also the whole of the real property that is the subject of the general discretion to charge.
49For those reasons, I conclude that it cannot be said that clause 5 does not extend beyond the real property described in the schedule to other real property owned by the continuing partners.
50Some support for that is obtained from the wording of the general discretion to charge. It extends not only to "real property" but also to "chattels". If it were to be thought that the authority to lodge a caveat was intended to define the property that was the subject of the charge, then one is left with the conundrum that the "chattels" have no limitation, nor any description other than that they be owned from time to time by the continuing partners. That is not a strong argument, but it does provide some support for the view that the authority to lodge a caveat is not intended to confine the property that may be the subject of a charge.
51Mr DeBuse submitted, in the alternative, that the authority to charge real property could not extend beyond real property owned by the continuing partners at the time the Deed was made. He submitted that it would have been easy for the drafter to indicate clearly that the right extended beyond real property or chattels then owned to real property or chattels that would become owned by the continuing partners in the future. I agree that this could have been specifically stated. But any argument based on the clarity of the drafting of the clauses in question must confront the proposition that they are, in some respects, poorly drafted. And the fact that the drafter did not think to include words that are commonly included in such charges cannot be definitive. The question is whether, having regard to the evident purpose of the clauses and to the interests that they were intended to secure, the reference to real property should be limited to real property then owned, whether or not described in item 5. Again, a final resolution of that question would depend on examination of the relevant material facts known to all parties at the time they made their Deed. Again, that is not an appropriate question to be resolved on an interlocutory application if it requires (as it would) consideration of a substantial body of evidentiary material.
52It is sufficient to say that I do not think that the construction for which Mr Jaramillo contended is so obviously incorrect, or hopeless, that it may not have substance.
53It follows that, although the application to extend the operation of the existing caveats must fail, the plaintiffs have made out a case for relief under s 74O of the Real Property Act.