Tendiris Pty Ltd v Ogle [2004] QSC 355

[1] The applicant, Tendiris Pty Ltd ("Tendiris") applied for the removal of Caveat No. 707811293 (the "caveat") from the title of lot 3 on RP 208443, County of Stanley, Parish of Parker (Title Reference 15959246) ("the land"). Tendiris purchased the land from the mortgagee in possession, Elliott & Harvey Mortgage Securities Limited ("EHMS"), in exercise of their power of sale over the land owned by the respondent, Donald Gordon Ogle. Mr Ogle is the caveator.

[2] Mr Ogle as mortgagor executed a mortgage over the land in favour of EHMS in December 2001. Mortgage no. 705310541 (the "EHMS mortgage") was registered on 8 January 2002. Mr Ogle wished to develop the land, which was zoned rural. On 21 June 2002 he applied to the Pine Rivers Shire Council (the "Council") for a material change of use to allow the land to be developed as a low density residential sub-division. On 18 November 2002 on instructions from EHMS, the land was valued by John Watt & Associates. Their valuation of the land was $8,580,000. The following month the EHMS mortgage was increased to secure $4 million in debt.

[3] On 25 March 2003, the Council refused the application for material change of use. The grounds for the decision were that it contained insufficient information; there were concerns about irreversible threats to the environment; and it was in conflict with the Strategic Plan and Development and Control Plan. There were said to be 822 properly made submissions opposing the proposal. On 28 April 2003, a Notice of Appeal was filed in the Planning and Environment Court against the Council decision. No further steps have been taken to prosecute the appeal; however, that does not appear to be because of any lack of interest in doing so or views about the prospects of success but rather because of the events that unfolded with regard to the EHMS mortgage.

[4] On 28 April 2003 EHMS served a Notice of Exercise of Power of Sale on Mr Ogle. On 20 June 2003 the loan on the EHMS mortgage to Mr Ogle matured and on 11 July 2003 another Notice of Exercise of Power of Sale in Form 7 was served on Mr Ogle which required remedy of the default by 10 August 2003. The default was not, and has never been, remedied.

[5] Mr Ogle commissioned a valuation of the land and on 25 September 2003 he received a valuation by PRP Valuers & Consultants saying that the land was worth $11,990,000.

[6] In February 2004, EHMS gave instructions to Samut & Co ("Samut"), a licensed real estate agent, to sell the land. Samut issued an information memorandum including a call for tenders. Later that month Samut approved an advertising campaign for the sale of the land and received a pro forma contract of sale. Information memoranda were posted to about 83 enquirers. The closing date for tenders was 26 March 2004.

[7] In March 2004, Leonardus Smits (the sole director of Tendiris) saw an advertisement for the sale of the land in The Courier-Mail. He spoke to Bruce Hedditch at Samut who posted him an information memorandum. In an affidavit filed on this application, Mr Smits deposed that there had been no previous communication between himself and Mr Hedditch.

[8] Mark Jackson-Knaggs, chief executive officer of Ipro Developments Pty Ltd ("Ipro"), has sworn an affidavit on behalf of the respondent in this matter. Objections were properly taken to various parts of Mr Jackson-Knagg's affidavit to which I have therefore not made reference. Mr Jackson-Knaggs deposed that he met with Mr Smits some time between 12 and 23 March where they discussed the purchase of the land. Mr Jackson-Knaggs said that he informed Mr Smits that Ipro proposed to purchase the land for $9.8 million. He said that Mr Smits told him that he would be able to purchase the land at a "vastly reduced price" by tender process. He said that they discussed and agreed that the tender documents' terms and conditions would not achieve true market value for the land. Mr Jackson-Knaggs said that they discussed meetings each had had that day with the Council about the Material Change of Use Application. Mr Jackson-Knaggs also deposed that he "accidentally" received a copy of a letter dated 18 March 2004 apparently from Baseline Consulting Pty Ltd ("Baseline Consulting') to Mr Smits providing detailed assessments of the current status of the Material Change of Use Application.

[9] At that time Mr Ogle had solicitors, Clarke & Kann, acting for him. On 22 March, they corresponded with the Council with regard to the planning application. On 24 March, Clarke & Kann also wrote to Elliott & Harvey, solicitors for EHMS, asserting Mr Ogle's right to redeem the mortgage until close of business on 11 June 2004. 24 March was the day on which Ipro was incorporated. There is no evidence that it has any assets. Its chief executive officer, Mr Jackson-Knaggs, was discharged from bankruptcy only on 14 February 2004.

[10] On 25 March 2004, the day before the closing date for the tenders for the sale of the land, Tendiris submitted a tender for the purchase of the land for $5,000,000. Mr Hedditch has sworn that four conforming tenders were received by the closing date including that of Tendiris. The highest tender was submitted by Tendiris and its tender was accepted.

[11] Mr Ogle has sworn that a contract for the sale of land between himself and Ipro for $9,800,000 was entered into on 26 March 2004. This contract ("the first Ipro contract") was signed by the purchaser but not by the vendor. The deposit was said to be $50,000. Mr Ogle's solicitors sent a copy by facsimile transmission to Elliott & Harvey on 26 March 2004.

[12] On 1 April 2004 Astills Lawyers ("Astills"), for Ipro, sent a letter to Elliott & Harvey noting that a formal offer for purchase of the land had been made to Mr Ogle outside the tender process and seeking Elliott & Harvey's consideration of its offer with other offers in the tender process. They said that Ipro had been holding discussions "on and off for some three and a half years" with the registered owner of the land as to its possible sale, yet it appears that Ipro had only been in existence since 24 March 2004. They also sought a meeting with Elliott & Harvey. On the following day Astills sent a letter to Elliott & Harvey confirming that there would be a meeting on 5 April 2004 between Ipro and EHMS. On the same date Elliott & Harvey wrote to Mr Ogle's solicitors noting the terms of the first Ipro contract faxed on 26 March and noting the terms of the EHMS mortgage and the proposed use of funds to be received on the sale of the property.

[13] On 2 April 2004, Tendiris submitted an offer in the form of a standard REIQ contract ("the 2 April offer"). Certain clauses of the contract were crossed out. This offer, which was not accepted, apparently formed the basis for a caveat later lodged by Tendiris. It is difficult to see on what basis it could have done so.

[14] On 6 April 2004, Elliott & Harvey wrote to Mr Ogle's solicitors about the first Ipro contract noting that Mr Ogle had not signed it. Elliott & Harvey also wrote to Astills seeking urgent confirmation of whether or not a sale of contract existed between Mr Ogle and Ipro and noting that should that contract settle, the mortgage over the land would be redeemed by Mr Ogle. Ipro's request for a meeting was rejected. On 7 April 2004, Clarke & Kann sent a facsimile to Elliott & Harvey enclosing a copy of the first Ipro contract signed that day by Mr Ogle.

[15] On 7 April 2004 Mr Ogle entered into a contract, which was subject to finance within 14 days, to sell the land to a buyer whose name was at first not noted in the contract. It was signed by Kevin Thomas Browne and Mr Ogle has deposed that the contract the ("Samford Nominees contract") was with Samford Nominees Pty Ltd ("Samford Nominees"). That name appears on a later copy. The selling price of the land in the Samford Nominees contract was $15 million.

[16] Global Capital Corporation ("GCC") sent a proposal for finance to Samford Nominees with various requirements including a requirement for Samford Nominees to deposit $11,000 into GCC's bank account by 23 April 2004. The proposal was careful to state that it should not be considered an offer of finance.

[17] On the same day as Mr Ogle signed the Samford Nominees contract, Astills, on behalf of Ipro, wrote to Elliott & Harvey enclosing an offer to purchase the land as part of the tender process for $7 million with a deposit of $50,000. They enclosed a copy of a contract signed by Ipro (the "second Ipro contract"). On 8 April 2004 Elliott & Harvey wrote to Astills rejecting a deposit of only $50,000 and requiring a 10 per cent deposit to be paid at the time of signing the contract. On 13 April, Astills wrote to Elliott & Harvey offering to increase the deposit to $500,000 within seven days of EHMS signing the second Ipro contract. That offer was rejected on 14 April 2004.

[18] On 14 April 2004, Elliott & Harvey wrote to Mr Ogle's solicitors informing them that the payout figure for the mortgage as at 30 April 2004 was $4,889,161.38. They confirmed that the tender contract and any other sale contract that EHMS entered into would contain terms entitling Mr Ogle to redeem the mortgage prior to completion of any other contract. They pointed out that they were not bound by special condition 8.6 in the first Ipro contract which entitled either party to extend the settlement date for up to a further three months from 30 April 2004. If settlement did not occur on that date, EHMS would complete its own contract and extinguish Mr Ogle's equity of redemption.

[19] A contract for sale of the land was entered into by Elliott & Harvey as mortgagor and Tendiris dated 15 April 2004 (the "Tendiris contract"). This was in accordance with the draft contract in the tender documents. The purchase price was $5 million and the settlement date 11 June 2004. The deposit was to be satisfied by a bank guarantee to be issued by a bank to the vendor on terms as may be approved by the vendor. The deposit was to be 10 per cent. Unlike the 2 April offer, Tendiris specifically agreed to clauses 11.8 (2) and (3) by which the buyer acknowledged that the mortgagor had the right to tender to the seller and the seller was obliged to accept the full amount owing to the seller under the mortgage at any time up to and including settlement date and that in the event that those rights were exercised by the mortgagor, the contract would be immediately terminated by notice in writing by the seller to Tendiris and all monies paid to the seller by Tendiris would be fully refunded to Tendiris. On the following day, Tendiris lodged the caveat referred to earlier in these reasons, caveat No 707644838, which was purportedly based on the 2 April offer ("the Tendiris caveat").

[20] On 16 April 2004, Elliott & Harvey also wrote to Mr James Loel, a solicitor at John O'Connor & Company, solicitors for Tendiris, stating clearly first, that the contract referred to in the caveat was not on foot; but secondly, the offer made at 15 April 2004 was accepted subject to certain matters required to be met by 20 April 2004. On the same date, Elliott & Harvey advised Astills that EHMS withdrew any consideration of the offer made by Ipro and informed them that it would not be accepted.

[21] On 19 April, Elliott & Harvey informed Clarke & Kann that the 2 April offer used to support the Tendiris caveat had not been accepted and that the settlement date in the Tendiris contract was 11 June 2004. On 21 April 2004, Clarke & Kann wrote to Tendiris' solicitors with regard to the invalidity of the Tendiris caveat and putting Tendiris on notice that Mr Ogle had entered into a contract for a considerably higher price and retained the right to redeem the mortgage. The caveat was subsequently withdrawn by Tendiris. Elliott & Harvey informed Clarke & Kann that it would be removed from the title at settlement.

[22] On 21 April 2004, Elliott & Harvey informed Clarke & Kann that EHMS had accepted the Tendiris offer. After referring to the special conditions which included the entitlement of the mortgager, Mr Ogle, to redeem the mortgage prior to the completion date, they stated, "We confirm our instructions, however, that our client will not keep open that opportunity beyond the presumptive completion date in the contract your client purports to have entered into, namely 30 April 2004."

[23] In the meantime, Mr Ogle continued to pursue his application to the Council for Material Change of Use. On 23 April 2004, Baseline Consulting advised Mr Ogle that the Fire Management Plan had been completed and "it is anticipated that the Material Change of Use should issue within approximately 90 days."

[24] In answer to a query by Elliott & Harvey on 27 April as to the status of the Samford Nominees contract, in particular whether the subject to finance clause due to expire on 21 April had been satisfied, Clarke & Kann said on 28 April 2004, "In relation to our client's Contract with Samford Nominees Pty Ltd we advise that our client's Buyer has obtained an in principle approval letter from its financier." Unsurprisingly, this led Elliott & Harvey to ask whether the finance condition had been set aside or waived. In fact, it appears that finance was still being sought.

[25] On 30 April 2004, Samford Nominees received a letter from Timeline Finance Pty Ltd ("Timeline") confirming that GCC had told Timeline that Samford Nominees' loan application was being assessed, with 2 of the 5 authorising signatures having approved and recommended it, and that final approval could be expected by 6 May 2004 with settlement 7 to 10 days later. On 4 May 2004 Clarke & Kann informed Elliott & Harvey that formal finance approval was expected to be received by 6 May 2004 with settlement anticipated 7 to 10 days after that and said that they would notify Elliott & Harvey when they received confirmation of finance approval. This was well within the time limit set by the mortgagee, EHMS. However, no such confirmation was received at any time during May 2004.

[26] Mr Jackson-Knaggs has sworn that on 14 May 2004, he received an e-mail from Mr Smits from Tendiris raising a proposal for discussion purposes for the joint development of the land with "the difference between the current market value (as determined by Suncorp's panel valuer - amount unknown to me but will be available next week) and the purchase price plus stamp duty" being paid to his nominee. He said that the current purchaser should be allowed to complete and that if the deal he proposed was to be done "now", he would require a pre-payment of $1.5 million before settlement (non-refundable). Mr Ogle says that this demonstrates that Mr Smits well knew that Tendiris was purchasing the property below market value.

[27] This is supported to some extent by a report of a conversation by a student, who was on placement at Clarke & Kann, with a real estate agent who one might infer was marketing the land on behalf of Tendiris. The student apparently said that he "represented a property broker" and "had a client interested in possibly purchasing land for future residential development." There are a number of difficulties in placing any reliance on this evidence. The first is the form in which it was put into evidence. Exhibited to Mr Ogle's affidavit filed on 9 July 2004 is what appears to be a print copy of an e-mail sent to Mr Ogle by a partner from Clarke & Kann forwarding an e-mail sent to that partner by a student at Clarke & Kann - relating a version of a conversation that student had with a real estate agent who may have been retained by Tendiris. The difficulties in using the contents of that conversation against Tendiris, at least in this form, can immediately be seen. The evidence contains layers of hearsay so as to make it inadmissible. In addition, the information was obtained through a subterfuge not in keeping with a solicitor's duty not to attempt to further the client's case by unfair or dishonest means.[1] It is, in my view, inadmissible and will be disregarded.

[28] Mr Ogle had not yet been able to obtain an alternative buyer with either a sufficient deposit or the finance to complete. On 2 June 2004, Mr Collins of MFS Group ("MFS") wrote to GCS saying that MFS had made an indicative offer to Samford Nominees for funding the purchase of the land. MFS required a new valuation of the land which it was anticipated would be available on 16 June. If it was satisfactory and all other credit and legal documentation was approved, MFS said it would be in a position to settle within a few days of 16 June. This was after the proposed settlement date of the Tendiris contract on 11 June 2004. After settlement, as Elliott & Harvey pointed out in a letter to Clarke & Kann on 3 June 2004, the mortgager's right to tender the amount secured and to have the securities discharged would be extinguished.

[29] On 8 June 2004, Clarke & Kann wrote to Elliott & Harvey protesting that the proposed sale to Tendiris was at an undervalue as:

(1) The property had been re-listed by Tendiris with a real estate agent who had advised he was entertaining offers over $10 million;

(2) Samford Nominees had entered into a contract dated 26 March 2004 to purchase the land for $15 million subject to finance;

(3) The first Ipro contact was an unconditional offer and they had that day received an amended offer from Ipro agreeing to increase the deposit from $50,000 to $350,000 (the "third Ipro offer").

They requested an extension of the settlement date to 12 July 2004.

[30] Elliott & Harvey refused that request by letter dated 9 June 2004 and set out the steps its client had taken to obtain the best price for the land. The matters raised by Clarke & Kann in its letter of 8 June 2004 do not suggest that EHMS was not endeavouring to obtain the best price for the land. The first point is only an expression of opinion. The factual basis for it, if there was one, was not put before the court in admissible form, and, in any event, it was specifically denied. The subject to finance clause in the Samford Nominees contract had not been satisfied. None of the Ipro contracts had a sufficient deposit.

[31] A meeting then took place between Mr Smits and Mr Ogle on 9 or 10 June 2004. A dispute exists as to what was said at that meeting and even as to on what date it occurred. It is not possible to resolve that question of fact on an application such as the present. Notes of a without prejudice conference on 10 June between Tendiris' solicitor Mr Loel and a solicitor from Clarke & Kann exhibited to an affidavit by Mr Ogle will not be considered as the privilege in these communications has not been waived by both parties.

[32] The Tendiris contract settled at 3.30pm on 11 June 2004 with mortgage finance being provided by Suncorp Metway Ltd. After business hours on 11 June 2004, at 5.20pm, Elliott & Harvey received a facsimile transmission from Clarke & Kann saying:

"We understand that Tendiris Pty Ltd was not able today to complete the contract it signed with your client. Please urgently confirm."

[33] This understanding was incorrect as the contract had settled. The letter attached a copy of a further unsigned, undated form of contract to sell the land between Mr Ogle and Ipro ("the third Ipro contract"). The fact is that Mr Ogle had not been able to sell the land by 11 June 2004. He had been in default for about a year and on settlement of the Tendiris contract, he lost his equity of redemption.

[34] On 17 June 2004, the respondent lodged the caveat which is the subject of this application (the "Ogle caveat"). This caveat has prevented registration of the transfer to the applicant. The grounds of the claim of the Ogle caveat were said to be:

"The equitable estate remains in the caveator notwithstanding that the first registered mortgage (namely, Elliott & Harvey Mortgage Securities Limited ACN 089 156 605 of the said land) has purported to execute a transfer of the said land in purported pursuance of its power of sale under mortgage No 705310541 which said memorandum of transfer is voidable by reason such sale having been effected in breach of sec 85 of the Property Law Act 1974." (errors in original).

[35] Section 85 of the Property Law Act 1974 provides that:

(1) It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.

(2) Within 28 days from completion of the sale, the mortgagee shall give to the mortgagor notice in the approved form.

(3) The title of the purchaser is not impeachable on the ground that the mortgagee has committed a breach of any duty imposed by this section, but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

(4) A mortgagee who, without reasonable excuse, fails to comply with subsection (2) shall be guilty of an offence.

(5) An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by this section.

(6) Nothing in this section affects the operation of any rule of law relating to the duty of the mortgagee to account to the mortgagor.

(7) This section applies to mortgages whether made before or after the commencement of this Act but only to a sale in the exercise of a power arising upon or in consequence of a default occurring after the commencement of this Act."

[36] The application by Tendiris, the purchaser, to remove the Ogle caveat is made pursuant to s 127 of the Land Title Act 1994 which provides that a caveatee may at any time apply to the court for an order that a caveat be removed.

[37] A caveat will be removed by the Court where the caveator fails to show[2] on the evidence "that there is a serious question to be tried which would justify ... leaving the caveat undisturbed."[3] The caveator must show that it is fairly arguable that he or she has a caveatable interest in the land.[4] If there is no caveatable interest then the caveat should be removed.[5]

[38] It is apparent in this case that the caveator has no caveatable interest in the land as against the purchaser. Subsection 85(3) provides that the purchaser's title is unimpeachable at the suit of the vendor[6] or the mortgagor on the ground that the mortgagee has been in breach of its duty to take reasonable care to ensure that the land is sold at market value. As McPherson J observed in McKean v Maloney,[7] the title of the purchaser referred to in subs 85(3) is not confined to legal title or registered title.

[39] The purchaser is further protected by s 87(1) of the Property Law Act which provides that a sale of land made in exercise of the power of sale is not impeachable on various grounds and, with regard to those grounds:

"a purchaser is not, either before or on conveyance, concerned to see or inquire whether a case has arisen to authorise the sale, or due notice has been given or the power is otherwise properly and regularly exercised, but any person damnified by an unauthorised, or improper, or irregular exercise of power shall have a remedy in damages against the person exercising the power."

[40] The purchase can not be set aside unless the purchaser had notice of the mortgagee's impropriety[8] or unless there is fraud. [9] No arguable case of fraud on the part of the purchaser has been raised through any admissible evidence so as to unravel the dealing between the mortgagee and purchaser. Nor is there any evidence of impropriety on the part of the mortgagee, let alone any of which the applicant purchaser had any notice. The method of sale was regular and unexceptional. Tendiris appeared to believe it was buying the land cheaply but if a purchaser buys in an open tender process where its offer is the highest conforming offer then the price paid is not sufficient to set aside the sale. The mortgagor, Mr Ogle, had ample opportunity to redeem his mortgage but was unable to do so.

[41] The applicant has failed to satisfy the onus of showing that there is a serious question to be tried. Even more significantly, the question of balance of convenience strongly favours the applicant for the reasons set out in its submissions. The Ogle caveat was not lodged until 6 days after settlement, after the applicant had paid the purchase price in full and incurred liabilities under the mortgage to Suncorp Metway. The inability of the applicant to obtain registration exposes it to risks of default under that mortgage. No action has been commenced by the caveator against Tendiris. There is no evidence that the respondent has any capacity to compensate the applicant for any loss or damage occasioned by the caveat. Further there is nothing to suggest that the ownership of the land was other than a commercial opportunity for the respondent so that any loss he suffers could be compensated in damages.

[42] The caveat should be removed forthwith. The application is allowed. I will hear argument as to costs.

[1] Queensland Law Society Solicitors' Handbook, para 4.08.

[2] The burden of proof is on the caveator: Re McKean's Caveat [1988] 1 Qd R 524 at 525.

[3] Re Jorss' Caveat [1982] Qd R 458 at 464 - 465 where reference was made to the Privy Council decision in Eng Mee Yong v Letchumanan [1980] AC 331 in which Lord Diplock compared a caveat to a statutory interlocutory injunction (in that case granted ex parte). See also Genrich v Maitland Holdings Pty Ltd [1982] Qd R 58 at 62; Lewenberg & Pryles v Direct Acceptance Corp Ltd [1981] VicRp 36; [1981] VR 344 at 347; Re Burman's Caveat [1993] QCA 252; [1994] 1 Qd R 123.

[4] In Re Caveat No 773, Ex parte Hodgson (1873) 3 QSCR 158 at 159.

[5] Genrich v Maitland Holdings Pty Ltd (supra) at 63 per Williams J; 69 per Andrews J.

[6] McPhee v Zarb [2002] QCA 530 at [31].

[7] [1988] 1 Qd R 628 at 635.

[8] Brigers v Orr [1932] NSWStRp 71; (1932) 32 SR (NSW) 634; Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 502.

[9] Cameron v Brisbane Fleet Sales Pty Ltd [2002] 1 Qd R 463 at 470.