Thu Ha Nguyen v Larry Quoc Huy On and Ors

2 Between June 2000 and March 2001 the first defendant borrowed various amounts of money from the plaintiff and by March 2001 those amounts totalled $110,000. The first defendant repaid $30,000 to the plaintiff on 30 September 2001 and a further $20,000 on 10 December 2001. By 21 August 2002 no further amounts had been repaid and the plaintiff met with the first defendant and asked him when the balance would be paid. The first defendant informed the plaintiff that he was having difficulty and requested a regime of monthly payments of $5,000. At this meeting, the first defendant prepared the following document (the August letter): Date: 21-8-02 To Whom It May Concern, I, Larry On, d.o.b. 24-01-1962, hereby acknowledge owing the amount of $60,000- from Mrs. Thu Ha Nguyen and the repayment will be $5,000 per month until finished. Yours faithfully, (Signature of Larry On) 3 By 30 September 2002 the first defendant had not made the $5,000 payment as promised in the August letter. The plaintiff and the first defendant had a further discussion on 30 September 2002 in which the first defendant informed the plaintiff that he could not make any more payments and was going to sell his house. He said, "I can repay you the balance of the monies which I owe from the proceeds of that sale". The plaintiff said: "You'll have to give me something in writing to secure that payment", to which the first defendant responded: "Why don't you ask your solicitor to prepare the necessary document and I will sign it as security and it will give you an interest in my house?". The plaintiff agreed to do that. 4 After this conversation with the first defendant, the plaintiff arranged a meeting to be held at the Cabramatta office of DPN Company, Solicitors, with the principal of that firm, Ms Dan Phuong Nguyen (the solicitor). The plaintiff and the first defendant met with the solicitor on 30 September 2002. 5 At the meeting with the solicitor, the plaintiff, in the first defendant's presence, informed the solicitor that she had advanced $60,000 to the first defendant and that he had agreed to repay her at $5,000 per month. The plaintiff also informed the solicitor that the first defendant had told her that he was unable to pay the amounts at the moment and that he was selling his house and would give her an interest in that house as security for the monies. The solicitor said to the first defendant, "Do you understand that by executing a caveat you will be providing to (the plaintiff) an interest in your land which can prevent the sale of it?" The first defendant said, "Yes, I understand that". 6 The solicitor, who was provided with a copy of the August letter by the plaintiff, then said to the first defendant: "Are you prepared to secure the repayment of these monies by giving to (the plaintiff) a caveat over your property?". The first defendant responded, "Yes, I have agreed to repay it". The solicitor then said to the first defendant, "What I am asking you is whether or not you are prepared to sign a caveat which will secure to (the plaintiff) the repayment of these monies from the property if you should sell it?". The first defendant responded, "Yes, I will do that". 7 The unchallenged evidence before me is that the solicitor then produced the caveat form and completed the details on the first page relating to the land, the registered proprietor, the caveator, the address for service for the caveator and the details of the solicitor's firm as the firm that lodged the caveat. 8 On the second page of the Caveat in Schedule 1, "Estate or interest claimed", under the heading, "Nature of the estate or interest in the land/registered dealing" the solicitor wrote: "Monies advanced to the registered proprietor in the sum of sixty thousand dollars ($60,000.00)". The portion of Schedule 1 entitled, "By virtue of the instrument referred to below" was left blank, as was the portion headed, "By virtue of the facts stated below". The plaintiff completed the Statutory Declaration in section (K) of the Caveat and the solicitor witnessed the signature of the plaintiff on that Statutory Declaration. 9 The solicitor handed the Caveat to the first defendant and said, "Are you prepared to provide to (the plaintiff) a caveat over your property to secure the repayment of these monies?". The first defendant said: "Yes". The solicitor then handed the first defendant the Caveat and said, "Would you then sign this as the registered proprietor?". The solicitor observed the first defendant sign the Caveat in section (L) of the Caveat which reads as follows: (L) CONSENT OF THE REGISTERED PROPRIETOR of the estate or interest affected by the caveat (section 74F Real Property Act 1900). I, the registered proprietor named at letter (D), for the purposes of section 74F(6) Real Property Act 1900 only, consent to this caveat. Signature of Registered Proprietor: (Signature) 10 The solicitor gave evidence that "immediately after" the first defendant signed the second page of the Caveat under section (L), she said to the first defendant, "Would you also sign here?" pointing to the first page and the first defendant responded, "Yes", and placed his signature at the bottom of the first page (tr. 4). The solicitor lodged the Caveat on 3 October 2002. 11 On 19 August 2002 the first defendant exchanged a contract for the sale of the property to the second defendants, The Hung Pham and Mai Khanah Huynh. The second defendants did not lodge a caveat and their former solicitors, Nguyen and Co Solicitors, (who are not related to the solicitor for the plaintiff), prepared for settlement of their purchase. On 25 September 2002 the second defendants' solicitors wrote to the first defendant's solicitors, noted that settlement was due on Monday, 30 September 2002 and requested the first defendant's solicitors to attend to the withdrawal of caveats then on the title. The second defendants' solicitors had received a communication from the incoming mortgagee that at settlement it would require a final search of the property on the day of settlement. 12 Settlement did not occur on 30 September 2002 and the second defendants' solicitors served a Notice to Complete on 8 October 2002 expiring on 24 October 2002. On 15 October 2002 the second defendants' solicitors wrote to the first defendant's solicitors once again requiring that on settlement the Withdrawals of the three Caveats referred to earlier be available. Although the second defendants' solicitor attended the Law Society's premises at the appointed time for settlement on 24 October 2002 no representative of the first defendant's solicitors attended. 13 On 5 November 2002 the second defendants' solicitors provided a further two weeks to the first defendant's solicitors to settle the contract. They advised that settlement had been booked for Friday, 8 November 2002 and once again advised that at settlement they would require the Withdrawals of the three Caveats. Prior to settlement the first defendant's solicitors advised the second defendants' solicitors that they were authorised to pay the settlement monies to various parties, not including the plaintiff. The second defendants agreed to the release of the deposit to the mortgagee in the amount of $31,000. 14 The first named second defendant, The Hung Pham, swore an affidavit on 6 February 2003 which was relied upon in this application. That evidence included the statement in paragraph 12 that The Hung Pham had been informed by the second defendants' then solicitor, Jacqueline Nguyen, that "a final search on 8 November 2002 disclosed the plaintiff's caveat, but its significance was not appreciated by her conveyancing clerk prior to settlement" and that until she saw the final title search "following settlement" she had no knowledge of the Caveat relied upon by the plaintiff. 15 It was not until 11 December 2002 that the second defendants' then solicitors wrote to the plaintiff enclosing a Lapsing Notice. These proceedings were then commenced and an order extending the Caveat until 10 January 2003 was made by Windeyer J on 20 December 2002. On 10 January 2003 O'Keefe J made orders extending the caveat until 11 February 2003. I heard this application on 11 February 2003 when Mr J Drummond, of counsel, appeared for the plaintiff, and Mr S Burchett, of counsel, appeared for the second defendants. There was no appearance of the first defendant although service of the process was proved. 16 It is conceded that the Summons will have to be amended to claim final relief and it is anticipated that the second defendants will join their former solicitors. This is an interlocutory application pending final hearing. The statutory test to be applied at this stage is set out in s 74K of the Act. If the Court is satisfied that the plaintiff's claim "has or may have substance" then the Court has the discretion to extend the operation of the Caveat. 17 The plaintiff submitted that the two documents, the August letter and the Caveat signed by the first defendant, may be read together for deciding whether they gave rise to an interest in the land: Tonitto v Bassal (1992) 28 NSWLR 564; Baloglow v Konstantinides and Ors [2001] NSWCA 451. The plaintiff relied upon my decision in Nudd v Official Trustee in Bankruptcy [2002] NSWSC 399, unreported, 14 May 2002, to support the submission that once read together these two documents, when properly construed, satisfy s 23C of the Conveyancing Act 1919 (NSW) (the Conveyancing Act). This case is different from Nudd in that the first defendant signed the Caveat on the first page as well as in section (L).

19 In Troncone v Aliperti (1994) 6 BPR 13,291 the relevant clause of the loan agreement stated, "the Debtor authorises the Creditors to lodge a Caveat on the property owned by the Debtors (sic) to protect his interest". Mahoney JA, with whom Priestley and Meagher JJA, said at 13,292: It is a fundamental principle of construction that "Whoever grants a thing is deemed to grant that without which the grant itself would be of no effect" … unless there be evident an intention to the contrary, the grant to the creditors of an authority to lodge a caveat on the relevant property carried with it by implication such an estate or interest in land as was necessary to enable the authority to be exercised. 20 There is nothing in the August letter referring to any right in the plaintiff to lodge a caveat. There is nothing within the body of the Caveat referring to the August letter. It seems to me that in those circumstances it is appropriate to consider the Caveat alone. This case is different from Troncone v Aliperti, in that the debtor in this case, the first defendant, signed the Caveat. It is also different from Nudd, in which the signature was only in section (L) of the Caveat. 21 Mr Burchett submitted that the signature in section (L) of the Caveat does not assist the plaintiff and that all that can be construed from the document is that it was consent "only" for the purposes of s 74F(6) of the Act: see Nudd, par [35] - [38]. However the signature on the first page is a different matter. It is a signature that is not restricted to a consent only for the purposes of s 74F(6) of the Act. 22 The majority of cases considered in relation to these applications are cases in which the debtor has not signed the Caveat, or in the case of Nudd, signed it only in section (L). It was submitted that when the first defendant signed the Caveat he granted to the plaintiff an authority to lodge the Caveat, and that a reasonable consequence of such authority is that it carried with it, "by implication such an estate or interest in land as was necessary to enable the authority to be exercised": per Mahoney JA in Troncone v Aliperti at 13,292. It was also submitted that the Caveat with the signature of the first defendant on the first page and on the second page enables the Court to fairly spell out from the Caveat an intention that the parties intended to create an equitable charge: Cradock v The Scottish Provident Institution (supra). 23 I am of the view that the plaintiff's claims that: (1) the first defendant's signature on the Caveat amounted to an authorisation to the plaintiff to lodge the Caveat; and (2) such signature and authorisation in the light of the words in the Caveat: "monies advanced to the registered proprietor in the sum of sixty thousand dollars ($60,000)", when properly construed, in line with what Mahoney JA said at 13,292 in Troncone v Aliperti that "whoever grants a thing is deemed to grant that without which the grant itself would be of no effect" and the fact that there is nothing evident of an intention to the contrary, amounted to an equitable charge at the time the first defendant signed the Caveat or at the time of the lodgement of the Caveat: Murphy v Wright (1992) NSW ConvR 55-652, may have substance. 24 The second defendants made further submissions in relation to priorities. It was submitted that the plaintiff's equitable interest in the land must yield to the second defendants' interest by reason of the exchange of contracts. It was submitted that the grant of the equitable interest to the plaintiff post-dated the exchange of contract and in those circumstances the second defendants' interest has priority over the plaintiff's interest. The plaintiff submitted that the second defendants' entitlement was to sue for specific performance and would not take priority over the plaintiff's interest. 25 On the evidence before me, the first defendant did not inform the plaintiff or the solicitor that he had exchanged contracts for the sale of property. The second defendants did not lodge a protective caveat, although it is clear that the second defendants' solicitors were aware of three other caveats on the title prior to the lodgement of the Caveat. There is no evidence that the plaintiff was induced to act in any particular manner by any search of the title. The plaintiff and the solicitor seem to have been ignorant of the sale of the property until contacted by the second defendants' solicitors. However they could reasonably expect that the plaintiff would have been contacted in relation to any proposed sale or imminent settlement because of the existence of the caveat on the title. It was a notice to all the world of the plaintiff's claim to an interest in the land: J & H Just (Holdings) Ltd v The Bank of New South Wales (1971) 125 CLR 553 per Windeyer J at 558. 26 The second defendants were represented at the settlement of the contract on 8 November 2002. At that time a search of the property revealed the registration of the plaintiff's Caveat. At that time the second defendants are to be taken to have become aware or to have been on notice of the plaintiff's Caveat, and notwithstanding the Caveat, proceeded to settle. 27 The plaintiff relied on Osmanoski v Rose [1974] VR 523 in support of the submission that the plaintiff's interest has priority. In that case the registered proprietor sold his property in May 1973 with a condition subsequent in respect of the purchaser obtaining finance by 11 June 1973. On 22 June 1973 the registered proprietor sold to other purchasers and completed that sale on 4 July 1973. This was without notice to the previous purchaser whose contract had not been rescinded. On 18 July 1973 the previous purchaser lodged a caveat. Gowans J held that the previous purchaser's equitable interest was postponed to that of the subsequent purchasers. His Honour found that the failure of the original purchasers to lodge a caveat was significant because the subsequent purchasers of the property were induced to acquire their interest by the absence of any caveat affecting the certificate of title. It is true that in this case the second defendants did not lodge a protective caveat, however there is no evidence that the plaintiff was induced to act or not act in a particular manner by reason of a title search. 28 The competing arguments in relation to priorities demonstrate that there is a serious issue to be tried and on the evidence before me I am satisfied that the balance of convenience favours making an order extending the Caveat until further order. 29 On the plaintiff, through her counsel, giving the usual undertaking as to damages, I extend the operation of Caveat numbered 9006492 until further order.

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