Stone Leaf Capital Pty Ltd & Anor v Daly & Anor

Judgment 1HIS HONOUR: The principal question in these proceedings is the priority between the plaintiffs, on the one hand, and the second defendant, on the other, as holders of unregistered interest in land held under the Real Property Act 1900 (NSW). 2The first defendant, Mr Anthony Daly, is the registered proprietor of a unit in Bayswater Road, Rushcutters Bay. On 9 May 2012 the second plaintiff, Mrs Helen Cacciola, paid $59,465 to a broker, Lending Services Australia, who deposited the monies into a solicitor's trust account on her behalf. Those moneys were either advanced to Mr Daly or were applied towards various expenses associated with the loan. Under a loan agreement made on 14 May 2012 between Mrs Cacciola and Mr Daly she agreed to provide advances up to $74,465. The loan was to be repaid within six months. Interest on the loan was payable calculated at the rate of five per cent per month. The loan agreement provided that security for the loan was a second mortgage over the Rushcutters Bay unit. 3On 8 May 2012 Mr Daly had signed a mortgage in registrable form in favour of Mrs Cacciola. The mortgage was expressed to secure all moneys that then or at any time in the future were owed to her. The mortgage was not registered. A caveat was lodged on 5 June 2012 in which Mrs Cacciola claimed an equitable interest in the land as chargee pursuant to the loan agreement. 4At that time the property was subject to a registered mortgage in favour of Bendigo and Adelaide Bank Limited. 5On 15 June 2012 the first plaintiff Stone Leaf Capital Pty Limited ("Stone Leaf") advanced $20,000 to Mr Daly. This loan was repayable within 12 months and carried interest at the rate of seven per cent per month. The security for the loan was also said to include a second mortgage over the same Rushcutters Bay unit, although the same solicitors acted on the transaction who had acted for Mrs Cacciola. Mr Daly executed a mortgage in registrable form on 15 June 2012 in favour of Stone Leaf over the unit. That mortgage was not registered. No caveat was lodged by Stone Leaf at that time. 6On or about 24 August 2012 Mr Daly refinanced his loan from Bendigo and Adelaide Bank limited with AMP Bank Limited. The existing registered mortgage was discharged and a new mortgage in favour of AMP Bank Limited was registered. Mrs Cacciola provided a withdrawal of caveat on 5 July 2012 in anticipation of that refinancing. The caveat was not relodged on completion of the refinancing. 7The second defendant, Mrs Zhai, is the sole director and shareholder of Jantom Furniture Pty Limited ("Jantom Furniture") and Zucco Interiors Pty Limited ("Zucco Interiors"). Zucco Interiors provides building, interior design and fitting services. Mr Daly was employed by Zucco Interiors as a marketing consultant from June to September 2011 and as its managing director from October 2011 to July 2012. Mrs Cacciola's son, David Cacciola, deposed that in about June 2012 Mr Daly introduced Ms Zhai to him as his girlfriend. 8From 19 August 2011 Jantom Furniture, Zucco Interiors or Ms Zhai lent Mr Daly substantial sums of money. According to Ms Zhai and records she produced, the amount advanced as at 25 January 2013 was approximately $193,000. Ms Zhai deposed that Mr Daly had tried unsuccessfully to sell the Rushcutters Bay property in October 2012. 9David Cacciola is a mortgage broker. He acted for his mother on her loan to Mr Daly. He also acted for Mr Daly in endeavouring to arrange refinance for Mr Daly. In October 2012, Mr Daly advised David Cacciola that he would be using another broker for that purpose. David Cacciola's initial response was to instruct solicitors to "re-lodge the second mortgage and caveat" for Mr Daly (CB 1/122), but he changed his mind. It appears nonetheless that on 10 October 2012, Mr Daly signed consents for the lodgement of fresh caveats. They were not then lodged. 10Mr Daly told David Cacciola that he would sell the Rushcutters Bay property to repay the moneys he owed Mrs Cacciola and Stone Leaf. Instead, so far as David Cacciola and the plaintiffs knew, Mr Daly proceeded with attempts to refinance the existing loans to Mrs Cacciola and Stone Leaf. He said that he was expecting a profit share from a development in Queensland within a few months. 11On 29 November 2012, a company owned by David Cacciola, called Credit Solutions Group Pty Ltd, lent Mr Daly a further $33,410. Mr Daly engaged David Cacciola to obtain a loan to refinance the amounts he owed to Mrs Cacciola, Stone Leaf and Credit Solutions. David Cacciola sought to arrange such refinance through a company called Tripod Funds Management Pty Ltd. 12Unbeknownst to the plaintiffs, in early January Mr Daly proposed to Ms Zhai that he would give the Rushcutters Bay property to her if she would discharge the debt he owed to AMP and discharge the debts that he owed her. Mr Daly told Ms Zhai that he hadn't been able to sell the Rushcutters Bay unit, but had bought it in December 2011 for $730,000. Ms Zhai said she would prefer that Mr Daly repay the loans by cash and there was some discussion about stamp duty. The upshot of the discussion was that Ms Zhai was prepared to entertain the proposal if there was verification as to the price at which the property had been bought by Mr Daly. That verification was provided. Ms Zhai's solicitors, Maxim Legal, conducted a search and inspected a transfer dated 19 January 2012 under which Mr Daly had purchased the property for that price. Ms Zhai told Mr Daly that she would proceed with the proposal. 13On 30 January 2013, Ms Zhai and Mr Daly exchanged contracts for the purchase of the Rushcutters Bay unit. The purchase price shown on the contract was $460,000 which was the amount required to discharge the AMP mortgage. Maxim Legal conducted a title search before exchange. There was no caveat disclosed by the search. 14It is clear that the purchase price stated on the contract was only part of the real consideration. I admitted the contract for sale notwithstanding that it had not been stamped correctly on Ms Zhai giving the usual undertaking as to stamping, and an undertaking to disclose to the Chief Commissioner of State Revenue the true consideration for the purchase as referred to in her evidence. Even so, the consideration being the price of $460,000 and the discharge of the debts, which at the date of contract were only about $193,000, was an amount which was substantially below the price which Mr Daly had paid for the property. 15It was not put to Ms Zhai in cross-examination that at the time she considered the sale was at an undervalue and was entered into to defeat the claims of unregistered mortgagees. No such claim of intent to defraud creditors was pleaded. 16I have said that David Cacciola was attempting to arrange refinance for Mr Daly through a company called Tripod Funds Management Pty Ltd. The consent of AMP Bank Ltd was needed to enable a second mortgage to that company to be registered. 17David Cacciola deposed that because that consent had not been obtained by about 19 February 2013, he instructed the solicitors Rostron Carlyle to lodge caveats on the title. Those instructions must have been given a few days before that date because caveats were lodged on 15 February 2013. This was the second time Mrs Cacciola had lodged a caveat claiming an interest as equitable chargee. However, those caveats were withdrawn on 22 February 2013. 18On 28 February 2013, David Cacciola advised Mr Daly's solicitor, Ms Peta Mahony, that his funders had released the caveats to allow Mr Daly to obtain consent to the second mortgage. He deposed: "I was contacted by Mr Daly on or about 21 February 2013. Mr Daly told me that he had been contacted by Ian Lazar [of Tripod Funds Management] and been informed that the transaction to borrow moneys from Tripod Funds Management Pty Ltd could not proceed while caveats were registered on the title to the property. I know from my experience in the finance industry that distressed debt lenders, such as Tripod Funds Management Pty Ltd, require consent from any prior registered mortgagees and they will not loan moneys if a caveat is lodged on the property that they are taking security over. Accordingly, to progress the loan moneys being provided by Tripod Funds Management Pty Ltd, that same day I contacted Sean Steindl of Rostron Carlyle Solicitors and requested that he remove the caveats that had been lodged on the title to the property by Helen Frances Cacciola and Stone Leaf Capital Pty Ltd." 19The result was that, by 23 February 2013, the only caveat lodged was by Ms Zhai as purchaser. Maxim Legal had lodged a caveat on her behalf when contracts had been exchanged on 30 January 2013. 20Although the evidence is not explicit, I assume that the plaintiffs did not search the title before they withdrew the caveats. Had they done so and had they inspected Ms Zhai's caveat, they would have seen that Mr Daly had already contracted to sell the land that he was offering as security to Tripod Funds Management Pty Ltd for the refinancing of his debts. 21On or about 19 February 2013, Maxim Legal told Ms Zhai that caveats had been lodged on the title to the property. No evidence was given as to how Maxim Legal came to learn of the caveats at that time. Ms Zhai was not asked about that. She said that on or about the same day, she and Mr Daly had a conversation to the following effect: "25 On or about 19 February 2013, the First Defendant and I had a conversation in words to the following effect: Me: My lawyer today told me that somebody had lodged caveats onto your title. What happened? Who are these people and why they lodged the caveats? Anthony: Really? I did not know there are caveats on the title. Please don't worry. I know what happened. The people who lodged the caveats are my friends. We are doing some business together in Queensland but we are having some issues. But you don't need to worry at all, because this is between myself and them, and has nothing to do with you and the Rushcutters Bay Property. I will have them remove the caveats immediately. Me: Well, I didn't know anything about this and I am not interested in knowing what happened between you and these people. This really has nothing to do with me. But I am telling you, if you don't remove the caveats by settlement, my bank account cannot settle and I will not buy this property from you. otherwise I get myself in trouble. And if we can't settle, you have to pay back my loan immediately. Anthony: Don't worry. I will fix it up immediately." 22I accept that evidence. The caveats lodged by Mrs Cacciola were withdrawn on 22 February 2013. 23In cross-examination, Ms Zhai denied knowing that the plaintiffs had an interest in the property. She denied knowing at any time before settlement of the purchase (being the time to which the question was addressed) that Mr Daly had offered other people an interest in the property for money lent to him. There is no evidence to contradict those denials. 24Mr Daly was not called. I think Mr Daly can be regarded as being in Ms Zhai's camp. Although a party to these proceedings and served, he did not appear to defend the proceedings. No Jones v Dunkel (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298) submission was made in respect of the second defendant's not calling Mr Daly. 25At the commencement of the hearing, counsel for Ms Zhai said that he would be seeking to call Mr Daly to give oral evidence confirming his indebtedness to Ms Zhai. No outline of the evidence had been provided to the plaintiffs. Orders have been made for evidence to be given by affidavit. The plaintiffs opposed the application for Mr Daly to be called to give oral evidence and I refused leave to do so. 26In the circumstances, I do not think that a Jones v Dunkel inference arises, as Mr Daly was, in effect, proffered as a witness who could have been cross-examined. In any event, even if a Jones v Dunkel inference could arise, no such inference could fill the gap of establishing that Ms Zhai had knowledge that security had been offered over the land to the plaintiffs when she denied that knowledge and there was no contrary evidence. 27On the same day that the caveats were withdrawn, David Cacciola became aware of the caveat that had been lodged by Ms Zhai. He sent an email, at 3.28pm on that day, to Mr Daly, asking Mr Daly to organise a quick withdrawal of that caveat and advised him of the circumstances in which it had been lodged. 28On 13 March, Mr Daly told David Cacciola that he was selling the unit and would have to decline the refinance. That prompted David Cacciola to instruct Rostron & Carlyle to "list the second and third mortgages". In fact, by that date, the sale to Ms Zhai had already been completed. The sale and purchase was completed on 12 March 2013. Ms Zhai borrowed the purchase price from Westpac Banking Corporation. On settlement, Westpac received a discharge of the existing registered mortgage, a signed transfer from Mr Daly, and she gave Westpac a mortgage. The documents were provided to Westpac to be presented for registration. No issue has been raised in this case as to the form of the documents. That is to say, I can take the documents to be in registrable form and I see no reason to doubt that. 29The dealings were not presented for registration by Westpac until 19 or 20 March 2013. In the meantime, on 18 March 2013, prior to Westpac's presenting those dealings for registration, the plaintiffs again lodged caveats on the title to the property, claiming an interest as equitable chargees of the land. Because the caveats were lodged before the lodgment of the discharge of mortgage, transfer and mortgage to Westpac, the Registrar General cannot register those dealings (Real Property Act, s 74A(4)). Had Westpac not unaccountably delayed for a week or more in presenting the documents for registration it is likely that this litigation would never have arisen. It seems that the caveats that were lodged on 18 March were the caveats that had been prepared on 10 October 2012, to which Mr Daly had given his consent. 30Mr Daly has been duly served and has notice of the proceedings. He has not appeared. The plaintiffs are entitled to judgment for the debt owing under the loan agreement. I will deal with the quantum of that judgment in due course. 31As between the plaintiffs and the second defendant, the question is, who has priority? Ms Zhai claims the benefit of s 43A of the Real Property Act. That section relevantly provides: "43A Protection as to notice of person contracting or dealing in respect of land under this Act before registration (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. ..." 32It is now settled that the section confers on a purchaser, who has received a registrable instrument and paid the purchase price, the same protection against notice as a bona fide purchaser of a legal estate for value without notice would have at common law (Meriton Apartments v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 at 676). 33Alternatively, Ms Zhai contends that even if she is not in the position of a bona fide purchaser of the legal estate for value without notice, and the issue is to be determined as one between the holders of two unregistered and, therefore, equitable interests, she has priority. The general rule is that where the equities are equal, the interests which are first in time prevail. The plaintiffs' interests as unregistered equitable mortgagees are first in time, but Ms Zhai contends in this case the equities are not equal. 34I will deal first with the claim under s 43A. It was submitted for the plaintiffs that the purchase was not for value. I do not agree. Even if the only consideration were the stated purchase price of $460,000, the purchase would still be for value within the meaning of the rule. In fact, the consideration is not limited to the stated purchase price but includes the discharge of the debts or debt owed by Mr Daly to Ms Zhai or to her companies. It does not matter that the consideration was in all probability less than the market price. For the purpose of the doctrine of bona fide purchaser of a legal estate for value against notice, consideration must be valuable but it not need be adequate. Hence, marriage is a valuable consideration for the purposes of the principle (R P Meagher, J D Heydon & M J Leeming, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies, 4th ed LexisNexis Butterworths, at [8-250] citing Jackson v Rowe (1826) 2 Sim & St 472; (1826) 57 ER 427). 35I should add, because the matter was raised in argument, that there is no reason to doubt the effectiveness of the discharge of the debt or debts, even if the creditor or creditors were, or included, Jantom Furniture and Zucco Interiors, they being companies who provided most of the funds. Ms Zhai is the sole director of those companies and could bind them to the discharge of the debts. Ms Zhai's evidence was to the effect that the debts were owed to her. There is no reason to doubt that the debts were owed to her merely because the source of the funds was from the two companies. But, in any event, this is by the way, for the reasons I have given. 36For the purposes of this doctrine of protection against notice, a purchaser of a legal estate for value will be taken to have notice if he or she has actual imputed or constructive notice. A purchaser has constructive notice of all things that would be revealed by usual or reasonable inquiries. The plaintiffs submitted that, for the purposes of this doctrine, notice would be established if any of four categories of knowledge were established, being the first four categories stated in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576. Reference was made in this respect to Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [174]. This is a misconception. The plaintiffs do not need to go so far. The question there being addressed by the High Court is what knowledge will be required to be established in order that a third party have accessorial liability under the second limb of Barnes v Addy (1874) LR 9 Ch App 244. 37Principles engaged by s 43A of the Real Property Act are different. The principles concerning the doctrine of bona fide purchaser for value without notice at common law concern the circumstances in which the beneficial interest in property can be traced so that the legal holder would hold the property on trust for the person with the beneficial interest. The doctrine of notice for those purposes is wider than for the purposes of a person having accessorial personal liability as a constructive trustee. (See Re Montague Settlement Trusts [1987] Ch 264 and Super 1000 v Pacific General Securities [2008] NSWSC 1222 at [214].) 38The fifth category of knowledge in Baden's case, that is, knowledge of circumstances which would put an honest and reasonable man on inquiry, would suffice for the purposes of establishing constructive notice. Ms Zhai was on notice that the caveats had been lodged. Through her solicitor, she has constructive or imputed notice of the terms of the caveats lodged by the plaintiffs. If her solicitors inspected the terms of those caveats, then the notice they had would be imputed to her. I would infer that they did inspect the caveats. If they did not, she would, nonetheless, have constructive notice of the terms of the caveats because that would be an expected inquiry. But the withdrawal of the caveats indicated that the caveators no longer had, or were no longer seeking to protect, the interest that had been claimed. There was no evidence that the usual practice of conveyancers in such circumstances would be to make inquiries of the caveators to investigate why they had withdrawn the caveats, or to investigate whether the claimed debts had been repaid, or to ask whether the caveators still maintained an interest in the land, notwithstanding the withdrawal of the caveats. 39Such inquiries would not be reasonable. It would defeat a central tenet of the Torrens system if a purchaser were required to go to such lengths to obtain the protection of s 43A, that tenet being that parties are entitled to rely on the state of the register. 40In Perpetual Trustee Company Limited; Performance Capital Mortgage Pty Limited v Motive Finance and Leasing Pty Limited [2010] NSWSC 429; (2010) 15 BPR 29,267 Windeyer AJ said (at [37] and [38]): "[37] A later unregistered interest holder cannot prevail over an earlier interest where at the time of acquiring its later interest, it had notice of the earlier, for notice affects the later holder's conscience (Courtenay v Austin [1962] NSWR 296; (1961) 78 WN (NSW) 1082 at p 1097; Taddeo v Catalano (1975) 11 SASR 492 at p 498-501). There is no evidence that at the time MFL acquired its interest on 9 February 2008 (the settlement date) it had actual notice that PCM's interest was still in place. Any actual notice by MFL some time prior to the date it acquired its interest (in this case being 6 February 2008) is irrelevant to the notice issue here because the relevant time of notice is at the time MFL acquired its interest. This is because during the intervening period (in this case from 6 to 9 February 2008), MFL may have acquired notice of changes to the circumstances of PCM's interest. Actual notice by MFL on 6 February 2008 is however relevant to show that MFL had searched and seen the presence of the PCM Caveat and its later withdrawal so that it would be entitled to assume that PCM no longer sought to protect its interest or that it no longer had an interest to protect (Elderly Citizens at p 227). [38] McPherson JA in Commonwealth Bank of Australia v Platzer [1997] 1 Qd R 266 held that notice could also be acquired if one should have known about the previous unregistered interest but did not make reasonable inquiries to find out about it. In this case, there is no reason why MFL should have known that PCM's unregistered interest was still in place at the time MFL acquired its interest and no reason that MFL should have made inquiries to find out because MFL was entitled to assume that the reason PCM withdrew its caveat was because it no longer sought to protect its interest or that it no longer had an interest to protect." 41I agree. In my view Ms Zhai is entitled to the protection of s 43A. She did not have notice of the plaintiff's interest at the relevant time, being the date of settlement of her purchase. That was due to the withdrawal of the caveats, which meant that she was entitled to assume that the caveators no longer sought to protect their interest or no longer had an interest to protect. 42In any event, even if Ms Zhai is not afforded the protection given to a bona fide purchaser of the legal estate for value without notice through s 43A of the Real Property Act, her equitable interest as purchaser has priority to the plaintiffs' prior equitable interest as equitable mortgagees. This is because the plaintiffs were guilty of postponing conduct by only belatedly lodging and then withdrawing their caveats. It was their conduct in withdrawing the caveats that induced her to purchase the property. Ms Zhai deposed that she purchased the property in the belief that there were no parties who might make claims against it. There is no reason not to accept that evidence. It is inherently probable and I do accept it. 43Ms Zhai did not ask her solicitors to make inquiries of the caveators. She accepted Mr Daly's advice that the caveats had been wrongly lodged and would be removed. They were promptly removed. 44In Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 an unregistered second mortgagee had lodged a caveat to protect his interest, namely, his interest as an equitable mortgagee for a loan of $20,000. He allowed the caveat to lapse, that is, to be withdrawn by the Registrar-General, after he had been "warned", a South Australian procedure the equivalent of service of a lapsing notice. Debelle J said (at [48] and [56]): "[48] In this case, those who acquired equitable interests after Mr Burton assert that he has lost his priority by his failure to register the mortgage and his failure to defend the caveat after it had been warned. It is reasonable to infer from the fact that he lodged the caveat that Mr Burton was aware that it was desirable to take some step to seek to protect his interest. He then had solicitors acting for him. There is no explanation why he did not register the mortgage. The caveat gave notice to those searching the title of the existence of a claim for an equitable interest in the land as equitable mortgagee: see Windeyer J in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (supra) at 558. The act of withdrawing the caveat gave notice that Mr Burton no longer sought to protect that interest. All that would be apparent to a person who searched at the Lands Titles Office was that the caveat had been lodged and later removed. That person would not know the reason why the caveat had been removed. The person searching the title would be entitled to assume that one reason why Mr Burton had failed to uphold the caveat was that the debt had been repaid. The lodging of the caveat puts a person searching the title on guard. The removal of the caveat indicates to those who subsequently search that the caveator no longer seeks to sustain the interest which the caveat had sought to protect. For these reasons, Mr Burton's interest as equitable mortgagee was liable to be defeated by the holder of a subsequent interest who had searched and seen the registration of the caveat and its later removal. ... [56] Mr Burton was clearly negligent in protecting his equitable interest. He did not register the mortgage. He did not hold the duplicate certificate of title and was thus unable to prevent later dealings. This last fact distinguishes this case from the decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales and like cases such as Avco Financial Services Ltd v Fishman [1993] 1 VR 90. His deemed failure to lodge a caveat has the consequence that it is open to others to deal in the land in a way which is adverse to his interest. It is reasonable to infer from the fact that he lodged a caveat that Mr Burton was aware of the need to protect his interest as mortgagee against subsequent interests. There was no reason why Mr Burton could not have at least registered a caveat giving notice of his interest as equitable mortgagee. His failure to do so encouraged Moir Management to enter into the contract to purchase Rymill House. Counsel for Mr Burton relied on the fact that there is no evidence that Moir Management would not have entered into this contract had it been alerted by a caveat to the existence of a mortgage in favour of Mr Burton. The affidavit evidence led by Moir Management goes no further than proving that searches were made before it executed the contract for sale and purchase. It was submitted that the purchase price of $1.3 million was sufficient to pay the debts then due to Elderly Citizens Homes as first mortgagee and to Melbourne Projects, JAD and Mr Burton as well as the interest on those debts. There will be cases where it can be shown that there is no causal connection between the failure to lodge a caveat and the creation of a later interest. An obvious example is where the holder of the later interest has not searched the title. But it cannot be assumed that Moir Management would have proceeded with the contract to purchase had it been aware of Mr Burton's mortgage. There is no evidence to show whether the price of $1.3 million was sufficient to pay what was due to all those who had lodged caveats or who had registered an interest as mortgagee. Moir Management would be aware that it would need to obtain the consent of all mortgagees to the proposed purchase. In addition, it would not wish to expend funds in determining whether Melbourne Projects had a legitimate caveatable interest. For these reasons, I infer that the absence of a caveat or registered mortgage would have been a material factor which Moir Management would have considered before deciding to enter into the contract. The plain fact remains that the deemed failure of Mr Burton to lodge a caveat would lead to an assumption on the part of Moir Management that there was no other interest. Mr Burton or those advising him were negligent in failing to seek to uphold his caveat. That negligence was one factor which caused Moir Management to enter into the contract. For these reasons, the interest of Mr Burton must be postponed to that of Moir Management." 45This judgment was followed by Windeyer AJ in Perpetual Trustee Company Limited; Performance Capital Pty Limited v Motive Finance and Leasing Pty Limited at [35], and by Ball J in Barlin Investments Pty Limited v Westpac Banking Corporation [2012] NSWSC 699; (2012) BPR 30,671 at [32]. 46In this case, Maxim Legal conducted the usual title search before settlement of the purchase and that search showed no caveat. The case falls squarely within the principle that a person may be guilty of postponing conduct by withdrawing a caveat where the withdrawal would lead a subsequent interest holder to believe that the person no longer seeks to protect his or her interest or no longer has an interest to protect. 47The plaintiffs argued that this case can be distinguished from those cited. In the cases cited there was either no evidence to explain the reasons for allowing the caveat to lapse or for the withdrawal of the caveat, or the reasons were insufficient, being in the case of Perpetual Trustee Company Limited a mere assertion that the lodgment of the caveat was not something that was part of the offer of loan. 48In this case, the plaintiffs relied on David Cacciola's evidence that distressed debt lenders such as Tripod Funds Management Pty Limited will not lend money if a caveat is lodged over a property over which they are to take security. No reason for this asserted practice is advanced. Provided a withdrawal of caveat is provided by the holder of an unregistered mortgage or charge on settlement of the finance provided by the incoming second mortgagee, the incoming mortgagee would be protected in the same way as if the caveat were withdrawn in advance of settlement of the refinance. However that may be, it is clear that the plaintiffs knew of the protection that can be provided to an unregistered mortgagee through the lodgment of a caveat. 49The importance of an unregistered mortgagee lodging a caveat to protect his or her interests has been established for decades. The plaintiffs of course did not hold the certificate of title. That was with the registered mortgagee. As long ago as 1984, in Person-to-Person Financial Services Pty Limited v Sharari [1984] 1 NSWLR 745, McLelland J (as his Honour then was) said that although the failure by an unregistered mortgagee to lodge a caveat is not necessarily conduct that will postpone his interest to a person acquiring a later interest in the land without notice of the unregistered mortgage, nonetheless, a failure to lodge a caveat can be postponing conduct. 50His Honour said (at 748-749): "In the present case there is evidence before me, which I accept, to the effect that it is the settled practice of competent solicitors in New South Wales acting for second or subsequent mortgagees, to ensure either the prompt registration of the mortgage or lodgment of a caveat. The failure by the defendant through his solicitor to conform to this practice would naturally lead those who searched, such as the plaintiff, to believe that there was no outstanding second mortgage (cf per Dixon J in Lapin v Abigail (1930) 44 CLR 166 at 205) and it is my opinion that the failure of the defendant, in the absence of registration of his mortgage, to lodge a caveat led the plaintiff to acquire its mortgage on the supposition that no unregistered second mortgage already existed, in circumstances which make it inequitable as between the parties that the defendant's mortgage should have priority over that of the plaintiff." 51The plaintiffs, it seems, withdrew their caveats to assist Mr Daly obtain the first mortgagee's consent to a second registered mortgage and to assist his completing refinancing through Tripod Funds Management. In withdrawing their caveats they knowingly took the risk of their interests being defeated by another dealing. 52It may not be relevant, but it may be observed that the plaintiffs are not neophytes. David Cacciola, who was acting for his mother, is a mortgage broker. The director of Stone Leaf is a partner of Rostron Carlyle Solicitors who acted in the transactions. 53The plaintiffs relied on the word of their borrower, doubtless because having the loans paid out was much more attractive than having to seek to enforce the security. They thereby took the risk of another person's acquiring an interest in the property and it would not be just that they expose the second defendant to the risk of the property being security for Mr Daly's debts. In withdrawing the caveats they held out that they no longer sought to sustain the interest that the caveat sought to protect. 54For these reasons the claim of the plaintiffs to enforce their security over the Rushcutters Bay unit must fail. 55Westpac was not joined as a party to the proceedings. As a party who was awaiting registration of its mortgage, it ought to have been joined. Had I otherwise been of the view that the plaintiffs were entitled to a continuing interest in the property, then I could not have proceeded to make any orders without Westpac's being joined. However, it is clear that Westpac has the same interest in having the dealings registered as Ms Zhai. In the circumstances, I do not think that I should refrain from making final orders to dispose of the proceedings by reason of the non-joinder of Westpac. 56In the absence of Westpac as a party, I do not have any evidence to explain the delay between settlement of the purchase and the presentation of the dealings for registration. It may be that there is some reasonable explanation for that delay, but it should be made clear to lenders who are taking registrable dealings that are to be registered under the Real Property Act on settlement that they should promptly lodge the documents for registration or, if using the system of bulk registration, that they should promptly present the documents for registration. Their customers are entitled to the benefit of the indefeasibility provisions of the Real Property Act. As I said earlier in these reasons, it is likely that this litigation, so far as it concerns Ms Zhai, would never have been started but for the delay in the lodging of the dealings for registration. 57The plaintiffs are entitled to judgment for the amounts lent to Mr Daly with interest. The loan agreements of both plaintiffs provided that the if the borrower failed to pay any amount on the due date, or if the lender paid money or incurred costs or expense in relation to the loan agreement or the security (which included the second mortgage over the Rushcutters Bay unit), the borrower should pay interest from the due date for payment or the date the lender paid the money or incurred the cost or expense, until the amounts were paid by the borrower to the lender. 58The loan agreement also provided that the borrower was to pay and also to indemnify the lender against all costs, losses, charges, expenses paid or incurred by the lender of or incidental to, amongst other things, the negotiation, preparation, execution of the agreement, any breach of the agreement and the exercise or attempted exercise of the security. 59The plaintiffs submit that the costs they have incurred in these proceedings, including the costs they have incurred in their claim against Ms Zhai, are expenses incurred in attempting to enforce the security, and such costs can be recovered on the full indemnity basis pursuant to cl 10.4 of the agreement. I agree with that submission. 60Evidence has now been provided to substantiate the quantum of the debt claimed. It is unnecessary to go into the details as to how the debt is made up. Suffice it to say that with the addition of moneys paid by Mrs Cacciola on Mr Daly's behalf, and the invoices that she has paid or for which she is liable to Rostron Carlyle and to counsel in respect of the attempted enforcement of the security, that the principal of the debt owed to her is now $158,989.73. Interest has accrued on that debt at the rate of 5% per month. Compound interest is not sought. The amount of the principal and interest for which judgment should be given is $267,492.78. 61I will hear counsel further in relation to the quantification of the debt claimed by Stone Leaf. I will interrupt my reasons for that purpose. [Discussion] 62The amount advanced by Stone Leaf on 15 June 2012 was $20,000. Stone Leaf is entitled to add $5,730.45 to that principal. This represents expenses incurred or paid by Stone Leaf in connection with the loan or enforcement of the security. Interest is payable at the rate of seven per cent per month. By cl 5.4(a), the lender is entitled to capitalised interest if there has been default of seven days after the due date for payment. There has been such default. 63The date from which such capitalised interest can be added to principal is the date on which the default occurred. 64Interest totalling $20,126.81 was incurred up to 15 June 2013 and is to be added to the principal sum. Thereafter, further interest at the rate of seven per cent per month totalling $32,040.90 is payable. The result is that judgment should be given for the first plaintiff against the first defendant in the sum of $45,857.26 plus $32,040.90, namely $77,898.16. 65Because judgment for these amounts include the costs incurred by the plaintiffs on the indemnity basis in the proceedings, there is no occasion for any further costs order to be made. For these reasons I make the following orders: