7energy Incorporated v Indian Ocean Farms Pty Ltd - [2018] WASC 149

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   7ENERGY INCORPORATED -v- INDIAN OCEAN FARMS PTY LTD [2018] WASC 149
CORAM:   ALLANSON J
HEARD:   26 APRIL 2018
DELIVERED          :   26 APRIL 2018
FILE NO/S:   CIV 1713 of 2018
BETWEEN:   7ENERGY INCORPORATED
Plaintiff

AND

INDIAN OCEAN FARMS PTY LTD
First Defendant

REGISTRAR OF TITLES
Second Defendant

Catchwords:

Property - Real property - Caveats - Extension of caveat - Caveat by purchaser of shares in registered proprietor and units in unit trust - Turns on own facts

Legislation:

Transfer of Land Act 1893 (WA), s 138C(2)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr R E Lindsay & Mr M P Browne
First Defendant	:	No appearance
Second Defendant	:	No appearance
Interested Party	:	Mr A J Di Franceso

Solicitors:

Plaintiff	:	Law Direct
First Defendant	:	No appearance
Second Defendant	:	No appearance
Interested Party	:	Gramercy Legal

Case(s) referred to in decision(s):

Nil

ALLANSON J:

These reasons were given orally at the conclusion of the hearing and have been edited from the transcript.
By an originating summons filed on 23 April 2018, 7Energy Incorporated, seeks orders extending the operation of caveats over three parcels of land. It is unnecessary to describe them in detail. I will simply note that it is land in the Shire of Carnamah.
The registered proprietor of the land is Indian Ocean Farms Pty Ltd. Indian Ocean Farms has two shareholders: North East Equity Pty Ltd and Sirmans Pty Ltd.
By an agreement dated 16 October 2017 for the sale of units and shares, made between North East Equity (as seller), 7 Energy Incorporated (as buyer), Nicola Tana (as covenantor), and Indian Ocean Farms (as the company):
(1)North East Equity, as legal and beneficial owner, agreed to sell to 7Energy, with effect from the settlement date, all of its right, title and interest in and to units, described as the 'sale units': cl 2.1.
(2)North East Equity, as legal and beneficial owner, agreed to sell to 7Energy, with effect from the settlement date, all of its right, title and interest in and to the 'sale shares': cl 2.2.
Sale shares is a defined term in the agreement, meaning shares in the capital of Indian Ocean Farms, described in item 1 of schedule 1 to the agreement, together with the benefits and rights attaching or accruing to them.
Sale units is also defined, and means the units in the Indian Ocean Farms Unit Trust, described in item 2 of schedule 1, together with benefits and all rights attached to or accruing to those units.
In schedule 1, the sale shares are described as 102 ordinary shares in Indian Ocean Farms and the sale units as 9,992,542 ordinary units in Indian Ocean Farms Unit Trust. I understand, from what I was told from the bar table, that the shares and units sold were 85% of the shares in Indian Ocean Farms, and 85% of the units in the Indian Ocean Farms Unit Trust, but there may subsequently have been an adjustment of that percentage, so that Sirmans held or holds 25%. It is not necessary to go into the detail of those percentages. The shares and units, the subject of the agreement, are clearly a majority interest.
The agreement appears to have been executed by North East Equity, by 7Energy Incorporated, and by Mr Tana as covenantor, but not by Indian Ocean Farms. The effect of Indian Ocean Farms not executing the agreement is, on what I have seen, not entirely clear. Clause 28 of the agreement provides that, by execution of the agreement, the company irrevocably and unconditionally consents to the provisions of the agreement and the transactions evidenced in it. I would need to look in detail at the terms of the unit trust deed and also the constitution of Indian Ocean Farms (which was not in evidence) to see what legal effect the failure of Indian Ocean Farms to consent would have.
There are fundamental problems with this application.
The first of them, as counsel for North East Equity pointed out, lies in the caveat and the application for the caveat.
The caveat is dated 22 March 2018. The caveator is 7Energy Incorporated. The registered proprietor is properly described as Indian Ocean Farms. The estate or interest being claimed by the caveator is described as 'fee simple as purchaser'. 7Energy claims that interest as purchaser under the agreement for sale dated 16 October 2017.
Under that agreement, 7Energy is not a purchaser of the fee simple in the land. If the transaction in the agreement of 16 October 2017 were to be fully implemented, Indian Ocean Farms would remain the registered proprietor of the land; the interest of 7Energy, would be as the majority shareholder in Indian Ocean Farms. But it would not be the registered proprietor in fee simple of the land.
The application for the caveat, and the description of the interest claimed in the caveat, are, for that reason, defective. That, in itself, would be sufficient reason to not extend the operation of the caveat.
But there are, in my opinion, other reasons why the caveat should not be extended.
The effect of the agreement, were it to be completed, is that Indian Ocean Farms would remain the registered proprietor of the three parcels of land. 7Energy would hold the majority of shares in Indian Ocean Farms; and 7Energy would also hold the majority of the units in the Indian Ocean Farms Unit Trust. But no evidence has been put before me to show that those interests would give rise to an interest or a caveatable interest in the particular parcels of land.
A shareholder has a chose in action which entitles it to an interest in the share capital of the company. But it is not a proprietary interest in any particular asset held by the company. A shareholder does not have a caveatable interest in real property owned by the company.
Similarly, the holder of a unit in a unit trust obtains no caveatable interest in any item of real estate held by the trustee. The unit trust Deed of Establishment, which was handed up this morning, in cl 4.3(b) r 4, provides:
Each unit shall entitle the registered holder thereof, together with the registered holders of all other units, to the beneficial interest in the trust fund as an entirety, but subject thereto shall not entitle a unit holder to any particular security or investment comprised in the trust fund or any part thereof. And no unit holder shall be entitled to the transfer to him of any property comprised in the trust fund other than in accordance with the provisions hereinafter contained.
Put simply, subject to the terms of the trust deed, the holder of units in a unit trust does not thereby obtain any proprietary interest in any particular asset held by the trust.
The court may extend the operation of a caveat under s 138C (2) of the Transfer of Land Act 1893 (WA) if it is satisfied that the claim set out in the caveat has or may have substance. In this case, the court must be satisfied that 7Energy's claim that it is (or is entitled to be) the holder of the fee simple as purchaser under the agreement has substance. If satisfied, the court may extend the operation of the caveat for such period as specified in the order.
For the reasons which I have given, I am not satisfied that the claim of the caveator may have substance. I believe there is no basis on the material before me to extend the operation of the caveats. The application, accordingly, will be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZW
ASSOCIATE TO THE HONOURABLE JUSTICE ALLANSON
11 MAY 2018