Tadrous v Tadrous

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

Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15,255 Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465, (2007) 13 BPR 24,513 Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 CASES CITED : Esther Investments Pty Ltd v Wilson International Pty Ltd [1982] ANZ ConvR 647 Kerabee Park Pty Ltd Pty Ltd [1978] 2 NSWLR 222 Oceanview Group Holdings v Balaz [2006] NSWSC 1469 Wildschut v Borg Warner Acceptance Corp (Aust) Ltd [1987] ANZ ConvR 283

TEXTS CITED : Sheryl Jackson, "Removal of a Valid Caveat - How Convenient" (1996) 4 APLJ 1

PARTIES : Tanya Tadrous (plaintiff) Michael Tadrous (defendant)

COUNSEL : Mr D Jarrett (plaintiff) Mr D K L Raphael (defendant)

SOLICITORS : Moscardo Lawyers (plaintiff) Malouf Solicitors (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

5944/07 Tanya Tadrous v Michael Tadrous JUDGMENT (ex tempore) 1 HIS HONOUR: On 18 June 2004, the plaintiff Tanya Tadrous lodged a caveat AA 722XXX in respect of land, of which the defendant Michael Tadrous is the registered proprietor, comprised in folio identifier A/363XXX and situated at XXX Williams Street, Yagoona, claiming an interest, described as: "Equitable interest in estate in fee simple", said to arise by virtue of the following facts: "Pursuant to three cluster home development properties, agreement commencing on about 16/9/99 between the late Charlie Tadrous, Tanya Tadrous and Michael Tadrous, which agreement provided $561,359 plus interest to the registered proprietor from the late Charlie Tadrous and Tanya Tadrous". As will be apparent from the claim in the caveat, Charlie Tadrous - who was the plaintiff's husband - has since died; she is the administrator and principal beneficiary of his estate. 2 On 26 November 2007, Michael Tadrous served a lapsing notice in respect of the caveat. On 11 December 2007, Tanya Tadrous commenced these proceedings by filing her Summons, claiming final relief and an order extending the operation of the caveat until further order of the Court. On 13 December 2007, an order was made by consent extending the operation of the caveat until further order of the Court. Directions were made for the conduct of the matter. Pleadings have been filed and amended from time to time. In her Second Amended Statement of Claim filed on 19 February 2009, the plaintiff claims: 1. A declaration that the plaintiff is entitled to specific performance of the oral agreement ("the agreement") made between the plaintiff and the late Charles Tadrous and the defendant in connection with the building of three dwellings upon land at XXX William Street Yagoona in about October, 1999. 2. An order that the defendant specifically perform and carry into effect the agreement by a. Subdividing XXX William Street into three separate titles, and

b. Transferring the dwelling closest to the roundabout on the corner of William and Glossop Street to the Plaintiff;

c. Payment of sum of by way of damages to the Plaintiff which is calculated in accordance with the following formula (A+ B + C) less 1/4D; where A = $652,077 (amount contributed as construction costs) plus interest from (date of sale of Jean St) to the date of compliance with these orders, and

B = $29,120 ( rental of 1/34 Jean Street ) together with interest from March 2003 to the date of compliance with these orders;

C = (interest on RAMS loan secured on Jean St to the date of sale of Jean Street) together with interest of the aforesaid interest from (date of sale of Jena Street) to the date of compliance with these orders;

D = Cost of construction of three dwellings on XXX William Street;

E = Current Value of the dwelling closest to the roundabout on the corner of William and Glossop Street. 3. In the alternative to 2 above that the defendant pay to the plaintiff damages for breach of contract calculated by the following formula: (A+ B+ C+ E) less 1/4D. 4. A declaration that all monies paid by the plaintiff and/or the deceased between the period March 2000 and April 2003 were held on trust by the defendant for the plaintiff the deceased and the defendant for the purposes of the joint venture. 5. A declaration that the defendant holds Folio Identifier A/363XXX known as XXX William Street, Yagoona in the State of New South Wales on trust for the Plaintiff in the amount claimed in 3 above as expressed in the formula in 3 above. 6. Judgment and verdict for the Plaintiff in the sum of the amount claimed in 3 above as expressed in the formula in 3 above. 7. A declaration that the plaintiff is entitled to an equitable charge over the land contained in Folio Identifier A/363XXX known as XXX William Street, Yagoona in the State of New South to the extent of the amounts in 2 and 3 above. 8. Such further or other orders as this Honourable Court sees fit. 9. Costs.

3 Various causes of action are pleaded in support of the relief claimed. Relevantly, the plaintiff alleges (paragraphs 12 - 28) that there was an agreement between the plaintiff, the deceased and the defendant to the effect that the plaintiff and the deceased would fund the construction costs for the development of three townhouses on the William Street property in return for which they were to be repaid the moneys advanced, together with any interest paid by them on moneys that they borrowed on the security of their own property for the purpose of funding the construction costs, and that for the purpose of repaying them the defendant would complete the subdivision of the William Street property into three separate titles and transfer a specified one of the three resultant properties to the plaintiff at cost, setting off that cost amount against the advanced funds, and either borrow sufficient money on the security of the remaining dwellings to repay the plaintiff and the deceased the outstanding balance, or do so out of the proceeds of sale of the remaining dwellings.

4 The plaintiff claims to have advanced a total of some $652,000 pursuant to that agreement, and alleges that the defendant has failed to perform his obligations to repay the funds advanced, or complete the subdivision and transfer the specified property to the plaintiff. There is an alternative claim, (see paragraph 43 of the Statement of Claim) to the effect that, consequent upon the failure of the defendant to perform his obligations under the agreement, the plaintiff has an equitable charge on the William Street property securing at least the amount advanced by the plaintiff and interest thereon.

5 Although those claims are contested in the proceedings, Mr Raphael has, if I may say so, responsibly and rightly not suggested that they are other than seriously arguable for the purposes of considering a claim for interlocutory relief. That said, neither of them if sustained would give the plaintiff an equitable interest in fee simple in the whole of the property. The contract claim might support an equitable interest in fee simple in the specified one-third of the property, but no more; and the equitable charge claim might support an equitable interest as equitable chargee of the property securing the advances in question and interest, but not a claim to an equitable estate in fee simple. It follows that the caveat in its present form cannot be sustained, but there is a sufficiently arguable case for a caveat claiming an equitable estate as equitable chargee to justify the grant of leave, pursuant to (NSW) Real Property Act 1900 s 74O, to lodge a further caveat claiming such an interest, subject to considerations of the balance of convenience.

6 In this context, I accept that where there is a seriously arguable or even undisputable caveatable interest, the Court retains a discretion, based on the balance of convenience, as to whether it will maintain the caveat or require its withdrawal [see Sheryl Jackson, Removal of a Valid Caveat How Convenient (1996) 4 APLJ 1; Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465, [8]; Oceanview Group Holdings v Balaz [2006] NSWSC 1469]. Thus the circumstance that a caveator has a caveatable interest is not so conclusive that the caveat will not be removed, and the Court may order the withdrawal of an indisputably valid caveat where the balance of convenience favours that course [Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15,255; Esther Investments Pty Ltd v Wilson International Pty Ltd [1982] ANZ ConvR 647; Buchanan v Crown & Gleeson; Oceanview Group v Balaz [10]].

7 Circumstances in which such a course may be appropriate include where the party applying for removal of the caveat has an interest in the land superior to that of the caveator, particularly where that party is being prevented by the caveat from a legitimate exercise of its rights, a typical instance of this is where a caveat by an unregistered second mortgagee is preventing the registered first mortgagee from exercising its power of sale with clear title [Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222]. A valid caveat may also be removed by the Court if it prevents the registered proprietor from the legitimate exercise of a right in respect of the land, including a proper sale or refinance, as was suggested in Esther Investments v Wilson International. Again, this usually occurs where the registered proprietor can point to other interests in the land superior to that of the caveator, such as a first mortgagee where the caveator is a subsequent encumbrancee [see Wildschut v Borg Warner Acceptance Corp (Aust) Ltd [1987] ANZ ConvR 283; Buchanan v Crown & Gleeson [10]].

8 Thus, where the registered proprietor wishes to refinance an existing first mortgage, there may be a strong case on the balance of convenience to permit it to do so, at least where that course will not prejudice or derogate from the caveator's claim. But it is always a highly relevant consideration whether the removal of the caveat will derogate from the caveator's claim, and it is a rare case indeed, if there is any, where a valid caveat will be removed for reasons of balance of convenience, if to do so would have an adverse effect on the priority of the caveator's claim [Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 (Owen J); Buchanan v Crown & Gleeson [10]; Oceanview v Balaz, [11]. If the priority of the caveator's interest would be adversely affected by the removal of the caveat, it is at least ordinarily inappropriate to remove the caveat having regard to considerations of the balance of convenience [Custom Credit v Ravi, 50; Buchanan v Crown & Gleeson, [11]; Oceanview v Balaz, [11]. At least, ordinarily speaking, if the removal of the caveat would have the practical effect of deferring the priority of the caveator's equitable interest, its removal ought not be countenanced. One reason for this is that to do so is practically to prefer unsecured rights over the proprietary rights of the caveator. 9 In the present case, there is evidence - which is not contested - that in its present condition the subject property is worth about $1.23 million, and is subject to a registered first mortgage securing a sum of about $265,000 and a further secured interest of about $30,000, leaving an equity of some $935,000. The plaintiff's case is that they (she and her late husband) have advanced something in the order of $650,000, and that that advance, on one approach or another, would bear interest of, say, 7 percent per annum, which would exceed $300,000. Although the plaintiff puts her case on several different bases, some of which would attribute to her an interest of a greater amount, it suffices for the purpose of this application to observe that, on the approach I have just set out - which is probably the least generous to the plaintiff of the various analyses that she advanced - her interest would exceed $950,000 and thus exceed the remaining equity in the property.

10 Against that, the defendant wishes to be at liberty to borrow funds on the security of the property to the extent of about $300,000: for the purpose of funding its defence in these proceedings, up to $200,000, to complete some repairs to the subject property up to about $50,000, and to effect improvements to the defendant's mother's home at a cost of something in excess of $50,000. Of these, only the repairs to the subject property, the need for which is disputed, would add to the value of the security. None of the proposed expenditure involves replacing extant secured obligations or proprietary interests, let alone interests which are entitled to priority over the plaintiff's claim.

11 Refusing to permit the plaintiff to lodge a new caveat would have the effect of allowing the defendant to gain priority for his proposed expenditure over the plaintiff's proprietary or secured claim. On the authorities to which I have referred, I do not think that is a course that can be countenanced. 12 For those reasons, I must decline the present application. My orders are: (1) Order that the plaintiff withdraw caveat AA722XXX by 4 May 2009.

(2) Pursuant to Real Property Act , s 74O, grant leave to the plaintiff to lodge a further caveat in respect of the land comprised in folio identifier A/363XXX claiming an interest as equitable chargee.

13 The ultimate position in practical terms will not be substantially different from that which prevailed before the present application, in that the plaintiff has sustained a caveat in respect of the land. However, the defendant has succeeded in obtaining the removal of the existing caveat, and the plaintiff has required the indulgence of leave, pursuant to s 74O, to lodge a further caveat. Balancing those various considerations, the appropriate order is that there be no order as to costs of the application today, to the intent that each party bear its own costs of today. 14 I dispense with the undertaking, previously given on behalf of the defendant, to file a Notice of Motion.

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