WOODFORD -v- PATTINSON [No 2] [2017] WASC 334 (20 November 2017)

3 The Caveat is currently in the form of an 'absolute caveat', in that it absolutely forbids the registration of any instrument affecting the estate or interest claimed by Mr and Mrs Woodford in the Land. In addition to the extension of the caveat, Mr and Mrs Woodford also seek an order to amend the Caveat to a 'subject to claim' caveat, which forbids the registration of any instrument affecting their interest in the Land unless that instrument is expressed to be subject to their claim.

4 For the reasons which follow, the Caveat will be extended, but in an amended form, so that it prohibits the registration of any instrument unless such instrument be expressed to be subject to the claim of Mr and Mrs Woodford.

5 In these reasons, I will deal with the following matters:

(3) the requirements of s 138C of the Transfer of Land Act 1893 (WA);

(4) whether the Woodfords have established that their claim to an interest in the land has, or may have, substance;

(6) whether the Caveat may be amended in the manner sought by the Woodfords.

6 The materials before the Court are as follows. Mr and Mrs Woodford relied upon affidavits of Joanne Louise Woodford dated 8 March 2017 and 2 November 2017; an affidavit of Jose Neves, sworn 30 October 2017; and an affidavit of Deanne Neves, sworn 30 October 2017. In addition, some other documents have been provided to the Court in the form of submissions or notes which set out the basis of the Woodfords' contentions.

7 Mr Pattinson relied upon affidavits he swore on 24 March 2017, 28 March 2017 and 30 October 2017; and bundles of documents that he provided to the Court (not annexed to any affidavit) on 20 October 2017, on 26 October 2017, and at the hearing this morning.

8 Despite the fact that documents have been provided by both Mr and Mrs Woodford and Mr Pattinson without being annexed to an affidavit, I have received those documents for the purpose of understanding the parties' submissions, and in view of the fact that there has been no objection to the provision of those documents to the Court. Little turns on the informality in the manner in which the documents were provided, in those circumstances.

9 The Application has a somewhat unfortunate history.

10 The underlying dispute between the parties arises by virtue of loans provided in the form of payments of money said to have been made by Mr and Mrs Woodford to Mr Pattinson, at various times starting in or about March 2013. Mr and Mrs Woodford say that, in about June 2013, they asked Mr Pattinson to sign a document to formalise the terms of that loan arrangement. That document has been provided to the Court. It is described as an 'Acknowledgment and Charge' to Mr and Mrs Woodford, and is signed by Mr Pattinson. It also bears the signature of a witness, Mr Jose Neves.

11 In the Acknowledgment and Charge, Mr Pattinson indicated that he agreed to pay Mr and Mrs Woodford an outstanding sum of money on or before the expiration of three months after the date of the document, or such longer period as they agreed, interest on the balance outstanding at that time, and costs and disbursements, and, critically for present purposes, indicated that he charged:

[a]ll of our estate and interest in the [Land] and/or in the proceeds of sale of such property to you as security for payment of the Outstanding Sum and all future monies (if any) due from us to you for any reason whatsoever together with interest thereon as hereinbefore provided.

12 Mr and Mrs Woodford say that, in reliance on the Acknowledgment and Charge, they lodged the Caveat in respect of the Land, and they rely upon that document as evidence of an equitable charge, which is an interest in the Land that they say that can be protected by a caveat.

13 Mr and Mrs Woodford also say that, following the execution of the Acknowledgement and Charge, they provided further funds to Mr Pattinson. They say that none of the amounts advanced to Mr Pattinson have been repaid.

14 Mr Pattinson does not dispute that he has received funds from Mr and Mrs Woodford, but does dispute the amount that is actually owed by way of principal. There is also a dispute, to which I will refer further in a moment, in respect of the interest which is also said to be owed.

15 Earlier this year, Mr Pattinson requested that the Registrar of Titles issue a notice to the Woodfords, advising them that the Caveat would lapse 21 days after the date of the notice, unless they obtained an order of this Court extending its operation. That prompted the Woodfords to commence the present proceedings.

16 Shortly after the Application was commenced by Mr and Mrs Woodford in March 2017, the parties, who were then represented by lawyers, agreed by consent to the extension of the Caveat. They did so on an interim basis, pending a hearing at a special appointment for the determination of the question whether the Caveat should be extended.

17 Following the extension of the Caveat by consent, the parties' dispute was the subject of a mediation in this Court, as a result of which it appeared that the parties had reached either an agreement, or at least an agreement to agree, in relation to their resolution of their underlying dispute and the removal of the Caveat. Regrettably, it appears that that agreement has broken down, at least in practical terms, so that the underlying dispute, which led to the Caveat being placed over the Land, continues to exist.

18 After the breakdown of the agreement or agreement to agree, some months passed. In late September, Mr Pattinson formally requested that the Court deal with the question of the extension of the Caveat. The matter came back before the Court and a special appointment was listed for the hearing of the Application. More recently, that hearing was brought forward, on an urgent basis, because Mr Pattinson advised that the existence of the Caveat has a bearing on whether he will be able to secure a refinancing of loans secured by a first registered mortgage over the Land.

19 That loan has fallen into arrears. One of the documents provided to the Court by Mr Pattinson is a copy of a letter from the solicitors for his financiers, who advised Mr Pattinson that he was in default of that loan, and that if the full amount was not repaid, the mortgagee would exercise its rights under the loan agreement and/or the mortgage, including by entering into possession of the Land and/or exercising a power of sale.

20 Mr Pattinson has informed the Court that he has secured an agreement from a further finance provider to lend him funds to repay that loan. Mr Pattison says that the further loan will itself be secured by a mortgage over the land, but the new finance provider requires the discharge of the Caveat before proceeding with that loan. I will refer to that matter in further detail in a moment, in relation to the question of balance of convenience.

(3) The requirements of s 138C of the Transfer of Land Act 1893 (WA)

21 I turn to the requirements of s 138C of the Transfer of Land Act (the Act). The legal principles in relation to an order under s 138C of the Act are wellestablished, and they were set out by Beech J in Bashford v Bashford.[2] It is not necessary to repeat his Honour's observations here, but they must be read in conjunction with some more recent authorities.

22 In summary, the Court's power to make an order under s 138C(2) of the Act arises only if the Court is satisfied that the claim by the caveator, that is, the interest in land that is claimed in the caveat, has or may have substance. On that question, the caveator bears the onus of demonstrating that there is a serious question to be tried as to whether the interest claimed in the caveat exists. In determining whether to exercise its discretion under s 138C of the Act, the Court will also consider where the balance of convenience lies.

23 The existence of a serious question to be tried involves showing a sufficient likelihood of success to justify the preservation of the status quo in all of the circumstances. How strong the likelihood of success needs to be depends upon the nature of the rights asserted and the practical consequences likely to flow from the orders sought.[3] Consequently, whether there is a serious question to be tried, and the consideration of those factors going to the balance of the convenience, are wholly independent inquiries.

(4) Whether the Woodfords have established that their claim to an interest in the Land has, or may have, substance

24 The Woodfords claim that they have an equitable interest in land pursuant to the Acknowledgement and Charge. It is clear that an equitable charge is an interest in land which is able to be protected by a caveat. That issue was addressed by Jenkins J in Thorpe v Sizer Developments Pty Ltd, where her Honour said that:[4]

[60] ... An equitable charge is created where property stands charged with the payment of a debt. It is distinguishable from an equitable mortgage because no estate or interest is conveyed or agreed to be conveyed, at law or in equity: Baker, P and Langan, P Snell's Equity 29th ed Sweet & Maxwell, London, 1990 at 443.

[61] There is no doubt that an equitable charge creates a proprietary interest which is able to be protected by a caveat. However, a contractual right does not confer an equitable interest.

[62] In Sykes, E and Walker, S The Law of Securities The Law Book Company Ltd, 1993 at 196 the authors say:

The only actual requirements of the equitable charge seem to be, first, intention; secondly, if over land, the presence of writing; thirdly, the existence of definite ascertainable property, even though future, over which it is contemplated that the charge shall exist; and lastly, in a few exceptional cases the presence of consideration; consideration would not save a purely oral agreement.

25 The Acknowledgement and Charge document to which I have referred expressly charges the land as security for payment of the outstanding sum of money and all future moneys, if any, due from Mr Pattinson to Mr and Mrs Woodford, together with interest, as provided in the document.

26 Mr Pattinson has identified a number of issues which he says establish that the Acknowledgement and Charge is invalid and unenforceable.

27 The first is that Mr Pattinson says he did not sign the document on the date when the Woodfords claim that he did. Ordinarily, a court cannot resolve factual disputes on a hearing to resolve a caveat extension application, which is done on affidavit. It suffices to say that Mr and Mrs Woodford have produced two affidavits, one from the person who witnessed Mr Pattinson's signature, Mr Neves, and another from the witness's wife who deposed that she observed Mr Pattinson signing the document. Even if there is a dispute about the date on which the Acknowledgment and Charge was signed, Mr Pattinson does not dispute that he signed the document.

28 Secondly, Mr Pattinson says that there is an error in the Acknowledgment and Charge, in that it refers in item 4 of the schedule to an 'item 6', which does not appear in the document. That appears to be a typographical error and does not cast any doubt on the validity of the document.

29 Thirdly, Mr Pattinson says that the rate of interest claimed in the Acknowledgement and Charge is too high. The rate of interest is said to be an amount calculated as a lump sum payment of an amount equal to 20% of the market value of the Land as at the date of repayment, less the outstanding sum of principal. Presumably, the submission advanced by Mr Pattinson amounts to a claim that that amount of interest would be so high as to amount to a penalty, and could not be valid.[5] It is not possible to resolve that question now. The argument appears to proceed on the assumption that the Land would be subdivided (it has not yet been); that it would have a particular value at the time of subdivision (that seems to me to be a hypothetical question); and then proceeds on the basis that whatever the outcome as to value, 20% of that value would be an amount which would constitute a penalty and that that would invalidate the entirety of the Acknowledgment and Charge itself, as opposed to just the interest component.

30 I am not satisfied that that issue, which will need to be grappled with in due course, casts a sufficient doubt on the validity of the Acknowledgment and Charge as a whole as to preclude reliance on it. Questions about the interest clause and its effect must await the trial of the substantive dispute about the monies said to be owed to Mr and Mrs Woodford.

31 A fourth argument advanced by Mr Pattinson was that before he signed the Acknowledgment and Charge, he was told he did not need to read it, and he was not told to get legal advice about it. He also submitted that he was under considerable stress on the day that he signed the document. It is not clear precisely what was intended by that submission. It may be that what Mr Pattinson has in mind is some sort of unconscionability claim. But, even if that is the case, again, that would need to await the trial of the underlying dispute as to whether an amount of money is owed. It is not possible to resolve that matter now.

32 Mr Pattinson also appeared to advance a further argument, namely that the Acknowledgement and Charge was signed long after any loan was made by the Woodfords to Mr Pattinson. Again, it was not entirely clear what that argument entailed. It may have been intended as an argument that the charge over the Land was not supported by any consideration. Even if that is the case, and irrespective of when the Acknowledgment and Charge was signed, there was evidence before the Court that, after the Acknowledgment and Charge was signed (on whichever date), further funds were provided by Mr and Mrs Woodford to Mr Pattinson. In those circumstances, even if consideration was required to be given in respect of Mr Pattinson's provision of the charge, I am not persuaded that there is sufficient doubt about its validity as to undermine the serious question to be tried as to the existence of the equitable interest claimed by the Woodfords.

33 I digress to observe that the evidence before the Court was that, in the past, Mr Pattinson has not objected to the Caveat being lodged over the Land. Indeed, he accepted that in 2016 his lawyers, acting on his behalf, had previously requested that a caveat be registered on the title to the Land by Mr and Mrs Woodford, and then withdrawn, after which the subject Caveat was lodged. At that earlier stage, it appears that Mr Pattinson did not raise any objection to there being a basis for the Caveat.

34 For the avoidance of any doubt, while I accept that Mr and Mrs Woodford have demonstrated that there is a serious question to be tried, in relation to the existence of an equitable interest in the Land by virtue of the Acknowledgement and Charge, nothing in what I have said should be construed in any way as resolving the question of whether Mr Pattinson owes money to Mr and Mrs Woodford and, if so, in what amount. That question needs to be resolved in other proceedings.

35 I digress again to observe that it will be regrettable for all of the parties concerned if it is necessary to engage in further litigation to resolve that dispute, given the relatively modest sum involved. I urge the parties to again endeavour to resolve this dispute by a compromise on terms acceptable to all of them, so that they may put this dispute behind them.

36 I turn to the question of the balance of convenience. This proved a most difficult question in the present case because of the fact that the parties are unrepresented, and, in part, because of the lack of evidence about precisely what consequences may, or will, arise if the caveat is extended.

37 As I have already observed, Mr Pattinson's case is that he seeks to refinance the loan that currently is secured by a first registered mortgage over the Land. The precise terms of that refinancing arrangement are unclear. The evidence before the Court in unsworn documentary form was not entirely consistent with what Mr Pattinson told the Court from the bar table. Mr Pattinson submitted that he seeks to refinance his present loan, and that a new finance provider is willing to do so in circumstances where Mr Pattinson's son will join with him in the loan. The new financier wishes to register a mortgage over the title of the Land.

38 Mr Pattinson submitted that he is a pensioner. It is not at all clear how he would have any ability to service a loan or to repay his son any amount of money that he might contribute or for which he may be liable in respect of this proposed arrangement. However, Mr Pattinson submitted that the Land has a significant value, and a value which considerably exceeds the amount which he owes to his present financier. The amount of the land presently appears to be anywhere between $600,000 and over $1,000,000. The amount of the proposed loan appears to be in the vicinity of under $390,000. Mr Pattinson submitted that he would not be able to loan any more than that from his finance provider. There was no evidence at all in relation to these proposed financial arrangements which would support that conclusion.

39 I am left in the situation of weighing up the prospect that, on the one hand, if the Caveat is not extended, Mr and Mrs Woodford will lose the interest they claim in the Land, which, at present, is the only security they have in respect of the amounts that they say they have loaned to Mr Pattinson. On the other hand, Mr Pattinson says that if he is unable to refinance the loan on terms satisfactory to any new finance provider, his present finance provider is likely to exercise its rights of possession or sale under its mortgage. What I do not have evidence of is anything to suggest that it would not be possible for an arrangement to be reached whereby Mr Pattinson borrows an amount which is sufficient to repay his debt to Mr and Mrs Woodford, or to reach some agreement with the finance provider so that the claim that Mr and Mrs Woodford say they have in respect of the Land continues to be secured.

40 In the absence of any evidence about those matters, I have reached the conclusion that the balance of convenience presently supports the maintenance of the status quo. I do that in circumstances where I am conscious of the difficulties that the parties have had in respect of the evidence before the Court. The Court has endeavoured to provide the parties with as much time as is possible, in circumstances where it has been necessary to deal with the Application on an urgent basis.

41 In conclusion, I accept that Mr and Mrs Woodford have established that there exists a serious question to be tried that the Acknowledgement and Charge gives rise to an equitable interest in the Land which can be protected by a caveat and that the balance of convenience presently supports the maintenance of the status quo.

(6) Whether the Caveat may be amended in the manner sought by the Woodfords

42 As I have said, Mr and Mrs Woodford seek to extend the Caveat in an amended form. They seek to amend the Caveat so that it prohibits the registration of instruments, unless those instruments are registered subject to their claim. They also wish to make clear that the interest that they claim as equitable chargees is attributable to the Acknowledgement and Charge, to which I have referred.

43 The power to amend a caveat was considered by Le Miere J in Palazzo Homes Propriety Limited v Goh.[6] In that case, his Honour observed that 'a caveator may not lodge a caveat which goes beyond the legitimate claim necessary to protect the caveator's rights'.[7]

44 However, his Honour went on to say that 'the caveator's claim has or may have substance if there is a serious question to be tried that the caveator has a caveatable interest in the land notwithstanding that the caveat is an absolute caveat where the estate or interest claimed by the caveator only justifies a "subject to claim" caveat'.[8]

45 In the present case, Mr and Mrs Woodford conceded that the Caveat presently goes beyond what is necessary to protect their rights as equitable chargees. That concession was correctly made.

46 On the question of amendment of a caveat, Le Miere J, went on to say that:[9]

It is now generally accepted in Australia that the power to make such order as the court considers appropriate, or as to the court seems fit, in dealing with an application to remove a caveat, includes the power to order amendment of the caveat as a condition of its retention.

47 His Honour went on to observe that that power was reflected in the provisions of the Act:[10]

Section 138(2) of the Act provides that on a registered proprietor summoning a caveator to show cause why a caveat should not be removed the court may make such order as the court or judge may seem fit. The power to make such order as the court may seem fit includes the power to order that the caveat be amended.

The preponderance of authority in Australia is that the power to make such order as the court considers appropriate, or as to the court seems fit, in dealing with an application to remove a caveat does not empower the court to order an amendment of a caveat which would result in the substitution of a different estate or interest than the estate or interest claimed in the caveat.

...

Section 138C(2)(a)(iii), amongst other things, empowers the court to make such orders as it thinks fit concerning the caveat. But that power is conditioned by the requirement that the court be satisfied that the caveator's claim has or may have substance. On an application to extend the operation of a caveat s 138C(2)(a)(iii) confers on the court a limited power to allow the terms of the caveat to be amended. Amendment may be permitted so as to enable the caveat to express better or more fully the interest which is claimed in the caveat. However, amendment is not permitted so as to alter the interest which is claimed and therefore a different interest.

Section 138C(2) of the Act empowers the court to order that a caveat be amended if the court is satisfied that the caveator's claim has or may have substance. What is encompassed within 'the caveator's claim'? It may refer to the estate or interest being claimed, in this case an equitable charge ... , or it may extend to the dealings which the caveat forbids, in this case it absolutely forbids the registration of any instrument affecting the estate or interest of the caveator.

48 His Honour then concluded, having regard to the power in s 138C(2)(a)(iii), that:[11]

... the court has power to amend the caveat so that it forbids the registration of any instrument affecting the estate or interest claimed by the plaintiff unless it is subject to the claim of the plaintiff rather than absolutely forbidding the registration of any such instrument.

49 I respectfully agree with his Honour's conclusion. I also agree with his Honour's observation that the Court should not encourage imprecise caveats to be lodged on the basis that they can be fixed later. Having said that, the Court should not lose sight of the overall merits in exercising its discretion whether to permit an extension of a caveat in amended form.

50 In the circumstances of this case, I am satisfied that the Court should make an order to permit the extension of the Caveat on an amended basis. In concluding that the caveat should be extended, I note that Mr and Mrs Woodford have provided an undertaking as to damages in the usual form, dated 8 March 2017.

[1] There was some confusion in relation to the status of the Caveat. As I explained in Woodford v Pattinson [2017] WASC 328, shortly before this hearing, Mr and Mrs Woodford attempted to withdraw the Caveat. After having considered further the implications of that course, Mr and Mrs Woodford subsequently indicated that they wished to seek leave to lodge a fresh caveat over the Land. As it turned out, the Registrar of Titles had not taken any action to remove the Caveat, pending the order of the Court. In those circumstances, at the hearing on 3 November 2017, Mr and Mrs Woodford again sought to have the Caveat extended. I have proceeded on the basis that, in the circumstances, the Caveat remains registered on the title to the land and may therefore be extended by an order of the Court.

[2] Bashford v Bashford [2008] WASC 138.

[3] Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [42] [44] (Newnes JA), referring to Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82.

[4] Thorpe v Sizer Developments Pty Ltd [2006] WASC 151 [60] [62] (Jenkins J) (cases cited omitted).

[5] Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; 247 CLR 205; Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525.

[6] Palazzo Homes Pty Ltd v Goh [2010] WASC 407.

[7] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [5] (Le Miere J) (cases cited omitted).

[8] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [16] (Le Miere J).

[9] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [7] (Le Miere J) (cases cited omitted).

[10] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [8] [9], [14] - [15] (Le Miere J) (cases cited omitted).

[11] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [23] (Le Miere J).