Aircon Heating and Airconditioning Pty Ltd (in liq) v Crane Distribution Ltd
[2006] VSC 76
•3 March 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 4728 of 2006
IN THE MATTER of Section 90(3) of the Transfer of land Act 1958
| AIRCON HEATING AND AIRCONDITIONING PTY LTD (in liquidation) (ACN 005 456 888) | Plaintiff |
| V | |
| CRANE DISTRIBUTION LTD (ACN 000 003 832) and THE REGISTRAR OF TITLES | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 February 2006 | |
DATE OF JUDGMENT: | 3 March 2006 | |
CASE MAY BE CITED AS: | Aircon Heating and Airconditioning Pty Ltd (in liq) v Crane Distribution Ltd | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 76 | |
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Real Property – Caveat – Agreement to provide mortgage – Caveat removal – Transfer of Land Act s 90(3).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I S Williams | Cornwall Stodart |
| For the Defendant | Mr P J Riordan SC with Mr J D S Barber | Leo Dimos & Associates |
HIS HONOUR:
This is an application by the registered proprietor of land for an order, pursuant to s 90(3) of the Transfer of Land Act 1958, that a caveat lodged thereon be removed. The plaintiff is Aircon Heating and Airconditioning Pty Ltd (“Aircon”) and the caveator/first defendant is Crane Distribution Ltd (“Crane”). The Registrar of Titles is the second defendant but in accordance with usual practice has not participated in the proceeding.
The subject property is Unit 1 and Accessory Unit 9, 4 Martha Street, Seaford being the land described in Certificates of Title Volume 9668 Folios 702 and 710 (“the property”). The caveat, dated 18 May 2005 and lodged on the following day, claims an “Equitable Interest as Chargee as to the estate or interest of the registered proprietors”, and the ground of claim is “Pursuant to a Charge dated 5 October 2001 between the Caveator and registered proprietors”. The caveat states that the prohibition on registration of dealings affecting the caveator’s estate or interest is absolute “Unless previously consented to in writing by the caveator”.
The evidence was on affidavit, that in support being sworn by the liquidator of the plaintiff, Leonard Anthony Milner, and that in opposition being sworn by Crane’s solicitor, George Leonidas. Neither deponent was cross-examined.
The liquidator has entered into a contract for the sale of the property and seeks removal of the caveator to permit the sale to be completed. The caveator opposes removal.
To appreciate the submissions it is necessary to refer to the following facts and circumstances.
To commence, Mr Milner was appointed administrator of Aircon on 12 May 2005. On that day, immediately on his appointment, he sent notices to the creditors of Aircon notifying them of his appointment and the first meeting of creditors on 19 May 2005. His records show that notice was sent to Crane as a potential creditor. Then, on the following day he lodged notification of his appointment with the Australian Securities and Investments Commission (“ASIC”).
On 8 June 2005, at the second meeting of creditors, the creditors resolved pursuant to s 439C(c) of the Corporations Act 2001 that Aircon be wound up and, as a result, Mr Milner was appointed liquidator. The liquidation thus brought about is taken to be a creditors’ voluntary winding up[1].
[1]Corporations Act 2001, s 446A.
On 8 June 2005, immediately following the creditors’ meeting, the liquidator sent letters to the creditors of Aircon, including Crane, notifying them of the liquidation and his appointment, and enclosing a proof of debt for completion.
On 14 June 2005 the liquidator lodged notification of his appointment with ASIC.
In his affidavit the liquidator then set out what he had ascertained in relation to the property. Land title searches showed that on or about 18 December 1989 the directors of Aircon, Glenn Russell Coombs and Rhonda Joy Coombs, purchased the property for $195,000. Then, the plaintiff’s records and title searches show that on 24 March 2004 Aircon as trustee of the Aircon Directors Superannuation Fund (“the Fund”) (which the plaintiff became trustee of on 31 March 2004) purchased the property from the Coombs for $250,000, and that the purchase was completed on or about 25 May 2004. Aircon became the registered proprietor on 13 August 2004. A letter from the solicitor then acting for Aircon to the Coombs indicated that the Fund was to provide the funds for the transfer. Then, on 29 June 2005 the Coombs informed the liquidator that the Fund’s money was held in an interest bearing account with Sandhurst Trustees Ltd and had been withdrawn.
The liquidator then turned to a different matter. On 26 September 2005 he received a copy of a letter dated 22 September 2005 from Crane’s solicitors to Aircon which enclosed by way of service an order made by a judge of the County Court on 19 September 2005. The original letter was sent to Aircon; the liquidator was sent a copy. The liquidator had no prior awareness of the orders let alone of the existence of the County Court proceeding. The documents showed that the proceeding had been brought by Crane against Aircon and the Coombs.
Having received that letter the liquidator had his solicitors search the County Court file and thus ascertained that Crane had commenced the proceeding by filing a writ on 26 May 2005. The writ was endorsed with a statement of claim which contained the following allegations. On 5 October 2005 Aircon applied to Crane to open a monthly credit account in relation to plumbing supplies. The application was in writing and made by the Coombs as directors of Aircon. The application included a guarantee by the Coombs of Aircon’s present and future indebtedness. The guarantee was included in a document called Deed of Agreement, Charge and Guarantee, which document included the terms of sale of plumbing supplies. Various terms were alleged including charging, and granting a mortgage over, all real property, permitting Crane to lodge a caveat on the certificates of title to all their real property, paying interest of 16% per annum in default of payment and paying Crane’s legal costs incurred. It was alleged that on or about 5 October 2001 Crane accepted Aircon’s application and opened a monthly credit account in Aircon’s name. It was then alleged that between May and September 2004 Crane provided plumbing supplies to Aircon to the value of $20,916.13, which amount had not been paid. It was alleged that on 20 May 2005 (only six days before the Writ was filed) Crane demanded of Aircon that it sign a mortgage of the property, which Aircon had not done. As against Aircon relief was sought as follows: $20,916.13, interest of 16%, costs, duties, fees and expenses incurred by Crane, a declaration that Aircon’s interest in the property is charged with payment of the amounts claimed, an order that Aircon sign all documents necessary to secure payment of such sums, and costs. Like relief was claimed against the Coombs.
The order made by the County Court on 19 September 2005 states that counsel appeared for Crane and that there was no appearance for the defendant. The court made the following declaration and orders:
(a)A declaration that “the interest” of Aircon in the property “is charged with the payment of the sums referred to in paragraph 1 below”.
(b)In paragraph 1 of the orders, that there be judgment for Crane against Aircon in default of appearance and the Coombs in default of defence for $20,916.13 and interest pursuant to the agreement fixed at $4,983.75 and Crane’s costs of and incidental to the proceeding taxed on a solicitor and client basis on scale C.
(c)In paragraph 2, that Aircon within 14 days of service on it of the order sign all documents and do all things that Crane may reasonably require to be signed and done to further secure to the plaintiff the amounts in paragraph 1 by giving to Crane a mortgage in registrable form over its right, title and interest in the property.
(d)In paragraph 3, that in default of compliance with paragraph 2 the Registrar of the Court be appointed the agent of Aircon for the purpose of signing each and every document necessary to give effect to paragraph 2.
(e)In paragraph 4, within 21 days Crane serve a copy of the order on Aircon by sending it by ordinary post to Aircon at C/- Andrew J Hall, CPA 10/12 Prospect Street, Box Hill.
(f)In paragraph 5, liberty to apply.
The liquidator’s solicitors also obtained an affidavit of service of the writ. According to this affidavit, the writ was served on Aircon by posting on 27 May 2005 to its registered office which was the office of Mr Hall referred to in paragraph 4 of the orders made on 19 September 2005. The liquidator stated in his affidavit that he had advised Mr Hall of his appointment but Mr Hall did not forward the writ to him. It is important to note that in the affidavit of service the deponent stated that she ascertained the registered office of Aircon from a company extract dated 25 May 2005 obtained from ASIC. The extract shows that Aircon was then in administration and that Mr Milner was administrator having been appointed on 12 May 2005.
The liquidator further stated in his affidavit that he was not aware that Crane had made application pursuant to s 440D(1) or s 500(2) of the Corporations Act to begin or continue with the proceeding against Aircon or had sought his consent to do so. It was apparent from all that was said to me at the hearing of the application that no such application had been made. Indeed, before me counsel for Crane said that it would be argued that no such leave was necessary. I note that the orders made on 19 September 2005 do not include an order granting leave.
The liquidator then referred to the agreement alleged by Crane to have been made on or about 5 October 2001, a copy of which he had obtained. It is thus convenient to refer to the provisions on which Crane relies in the present circumstances. The document is divided into sections headed consecutively Application for a Monthly Credit Account, Terms and Conditions of Sale, and Deed of Agreement, Charge and Guarantee.
By cl 1 of the final section, Deed of Agreement, Charge and Guarantee, Aircon granted a fixed and floating charge over its assets. I was informed by counsel for Crane that the charge had not been registered and that in consequence it was void as against the administrator and liquidator; that result follows from s 266(1) of the Corporations Act. Accordingly, Crane placed no reliance on cl 1.
Clause 2 however provided that in consideration of Crane supplying Aircon goods on credit, Aircon “hereby grants to [Crane] a mortgage in the terms contained in the Approved Form ‘M’ published by the Law Institute of Victoria or any subsequent revision or replacement of that form or such other terms as [Crane] shall deem sufficient... over all real property owned by [Aircon]... and hereby agrees and undertakes when called upon to do so by [Crane] to execute such documents as may be necessary to register the said mortgage on the certificate of title... to secure the repayment of all the indebtedness of [Aircon]... And [Aircon] further agrees to permit [Crane] to lodge a caveat on the certificate of title relating to any real property owned by [Aircon]... and [Aircon] agrees and undertakes not to object to the lodging of any such caveat and not take any steps to remove any such caveat”.
In cl 3 Aircon appointed Crane and its authorised officers the attorney of Aircon for the purpose of doing things necessary or expedient for the purpose of carrying into effect the powers and authorities contained including execution of the mortgage and such documents as may be necessary to register the mortgage.
Clause 9 acknowledges that if Aircon was a trustee it shall be liable on its account with Crane and that the assets of the trust shall be available to meet payment of the account. It is to be noted that in the application section of the document Aircon warranted, in cl 14(b) which applied where the customer was a trustee, that it had full power and authority to enter into the agreement on behalf of the trust and that it shall be bound by the terms and conditions both personally and as trustee.
It may well be that the interest claimed in the caveat was based on the charge in cl 1 of the terms relating to Aircon. Nevertheless Crane seeks to support the caveat on the basis of the agreement of Aircon in cl 2 to grant a mortgage and to permit a caveat. However, these observations are concerned with the caveat, and while becoming aware of the caveat, the liquidator was immediately concerned with the orders of the County Court.
On 18 October 2005 the liquidator’s solicitors wrote to Crane’s solicitors requesting that Crane consent to an order setting aside the orders against Aircon on the basis that the proceeding had been commenced against Aircon while in administration and that the orders were obtained against it while in liquidation, without leave of the court obtained under the Corporations Act or the liquidator’s consent, and foreshadowing that they had evidence which indicated that Aircon held the property on trust for the Fund. The solicitors requested a copy of the charge and documents evidencing Crane’s debt.
Crane’s solicitors responded by letter on 4 November 2005. They enclosed a copy of the credit agreement and drew attention to the trust provision in cl 14. They enquired whether Aircon disputed the security and as to its defence to the County Court claim. They also sought information as to the purchase of the property by the Fund.
On 30 November 2005 the liquidator’s solicitors provided a copy of the superannuation trust deed, the contract of sale and a letter from Aircon’s then solicitors referring to the trust’s draw-down of funds.
On 12 December 2005 the liquidator’s solicitors wrote again advising they were obtaining the file for the sale of the property to the Fund, and that the liquidator intended to sell the property. For the latter purpose it was suggested that funds from the proceeds of sale be kept in their trust account until the dispute with Crane was resolved. The funds, which were understood to be about $26,000, were not to be removed from the trust account without Crane’s consent or court order.
The liquidator proceeded to a sale of the property and on 19 December 2005 executed a contract of sale of the property by Aircon as trustee of the Fund for $320,000. The contract provided for settlement on 1 February 2006 which date was changed by agreement to 2 February.
In the meantime, the solicitors negotiated on terms for the withdrawal of the caveat to permit the sale to settle, but no agreement was reached. On 6 February 2006 the liquidator’s solicitors wrote to Crane’s solicitors advising that settlement was scheduled for 2.30 pm on the following day and stated that unless a withdrawal of caveat was provided by 2.00 pm an application would be made to the court. No response was received.
As the caveat remained on title the sale could not be settled. In these circumstances, on 8 February 2006 the liquidator’s solicitors wrote advising that an application would be made to set aside the default orders and remove the caveat.
On 9 February 2006 the solicitors for the purchaser under the contract of sale wrote to the liquidator’s solicitors advising that the purchaser’s mortgagee was pressing them to utilise the funding already drawn down failing which the facility would have to be cancelled with inevitable damage and cost. The solicitors advised that while the purchaser wished to proceed, unless they had confirmation that day of a proposed settlement date they would deliver a notice of rescission.
In these circumstances it was clear that the liquidator had to institute the present application for the removal of the caveat, and the present proceeding was duly commenced on 20 February 2006. And, on the same day, a summons was filed on Aircon’s behalf in the County Court proceeding seeking an order setting aside the declaration and orders made against Aircon on 19 September 2005. The liquidator stated that that order is being sought, inter alia, because:
(a)the orders were obtained in contravention of s 440D(1) and s 500(2) of the Corporations Act, and
(b)Aircon held the property as trustee of the Fund and it is therefore not property to which Crane has any entitlement.
In his affidavit the liquidator explained that he had not made the application to set aside earlier because of Aircon’s financial position and because he anticipated from the negotiations that these matters could be dealt with by consent. It was only when negotiations finally broke down in early February that it was apparent that application had to be made to the court.
In concluding his affidavit, the liquidator said that he was prepared to undertake to pay into court or into a separate bank account from the proceeds of sale of the property such sum as may be determined by the court and to be held until determination of the dispute between Aircon and Crane.
In his affidavit in opposition Crane’s solicitor noted that no payment had been made under the County Court order. Pursuant to those orders costs had been taxed at $9,372.29. He produced the form of Law Institute mortgage referred to in cl 2, and accounts and statements of the liquidator for the period 8 June 2005 to 8 December 2005 lodged with ASIC which, he said, showed that it is expected that there will be no dividend for creditors. He then stated that the current amount (at 23 February 2006) due and payable by Aircon and secured by the charge in cl 1 of the agreement is $39,711.66 made up of the judgment debt plus interest and taxed costs, further interest to date at 16% and estimated further legal costs and disbursements of $3,000. He then said that the further amount that may become due and payable by Aircon and also to be secured by the charge, in the event the orders are set aside, would total $56,693.16, or if the orders were not set aside $26,693.16, calculated as he set out. The calculation allowed $5,000 for the application to set aside, $35,000 for a four day trial, $6,693.16 for interest for two years and $15,000 estimated costs of the present caveat removal proceeding.
I turn then to counsel’s submissions.
Counsel for Crane commenced by acknowledging that to preserve the caveat, Crane “must satisfy the Court that there is a serious question to be tried, and that the balance of convenience favours the maintenance of the caveat”[2]. Of course under s 90(3) the court has a wide discretion.
[2]See Eng Mee Yong v Letchumanan s/o Velayntham [1980] AC 331 at 337 (PC); and, for example, Australian Natives’ Association Friendly Society v Peball Pty Ltd [1993] V Conv R 54 – 482 at 65, 611 per Eames J; Goldstraw v Goldstraw [2002] VSC 491 at [30] per Dodds-Streeton J.
As to a serious question to be tried, counsel submitted that the effect of the agreement to give a mortgage in cl 2 of the Deed of Agreement, Charge and Guarantee was to confer on Crane an equitable interest in the property as mortgagee, which obligation may be enforced by a decree of specific performance[3]. Further, by virtue of cl 14 of the Terms and Conditions of Sale, Crane’s equitable interest extended to property which Aircon held as trustee even though Crane was not told that Aircon so held the property.
[3]Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 595 per Buckley LJ; Elmfield Properties Pty Ltd v Lasoarc Pty Ltd (1990) V Conv R 54-369 at 64, 598 per Tadgell J. In their submission counsel for Crane said that “in similar circumstances” to the present it was held by Hodgson J in Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 that a caveat should not be removed. That statement does not truly reflect the issue in Composite Buyers. In fact in that case the plaintiff accepted it must withdraw a number of caveats on properties in return for the payment into an account, to abide the result of proceedings between the parties, of one half of the net proceeds of sales, after the discharge of registered mortgages, the defendant accepting that there was a serious question to be tried as to whether the plaintiff had a caveatable interest. Hodgson J pointed this out at 287 where he identified the question he had for decision as being whether a particular document was capable of giving rise to a caveatable interest. That is a narrower question than that which arises for decision in the present case.
Moreover, there was a subsisting order of the County Court requiring Aircon to provide a mortgage in registrable form. If and when that was granted it would be a mortgage of the legal estate subject to prior encumbrances.
These circumstances established that Crane did have the equitable interest claimed in the caveat.
Then it was submitted that the balance of convenience favoured retention of the caveat. If it was removed then, unless Crane acted quickly to enforce the County Court judgment by obtaining a registered mortgage (which it had properly refrained from doing in the face of the dispute about the caveat and the default judgment), Crane “will lose its security”. It was submitted that Crane would then be an unsecured creditor of Aircon, which will not be paying a dividend to its creditors.
Crane submitted, in effect, that the liquidator had created his own difficulty, or urgency, by contracting to sell the property. The liquidator had not explained why it was necessary or appropriate to sell a trust asset, as the liquidator was asserting that it was. It was not part of the winding up process to sell such assets. In the circumstances the completion of the contract of sale was secondary to Crane’s primacy as a secured creditor.
Then it was submitted that the liquidator’s offer to pay a sum of money into an account was not a sufficient protection of Crane’s interest. To support this proposition, counsel referred to Thorncrest Pty Ltd v A Genser & Associates (Aust) Pty Ltd[4] and John and Luka Zombolas v LRG Credit and Finance Pty Ltd[5] where O’Bryan J and Nathan J respectively refused to order removal of caveats. Crane, it was said, would withdraw its caveat at settlement of the sale of the property in exchange for payment of the amount secured by its equitable mortgage. That is the amount of the County Court judgment plus interest and costs, which costs are increasing. It is only on that basis that Crane should give up its security.
[4](1996) V Conv R 54-552.
[5](1988) V Conv R 54-302.
Finally, as to whether there were good grounds for setting aside the orders of the County Court against Aircon, the following contentions were outlined:
(a)Section 440D(1) was not contravened because the property “was not Aircon’s property in the sense indicated by that section”.
(b)If that be wrong, leave will be sought nunc pro tunc to commence the proceeding.
(c)Leave was not required under s 500(2) as the section does not apply to a secured creditor.
(d)Aircon had no arguable defence.
In his submissions counsel for Aircon denied that Crane had a secured interest in the property. This contention was based on the copy of the credit application not having been signed by or for Aircon in the space provided in the document, the signatures of the Coombs having been placed, as it appeared, as guarantors. Thus, it was said, Aircon had not signed or bound itself to the document. That seemed to be the argument to be made, but there may come to be other grounds for the contention. I note that Crane’s counsel said as to this contention that Crane would rely in answer on s 127(1) of the Corporations Act. I note too that Aircon’s counsel did not outline any ground of defence to liability for the price of goods supplied by Crane. Sensibly, as it seemed to me, counsel for Aircon proceeded on the basis that Crane did have an equitable interest in the property. On this basis the existence of the caveatable interest was assumed. On that assumption, and on the property being sold, Crane’s secured interest would automatically attach to the proceeds of sale.
Lest however that assumption was not correct, the liquidator was prepared to undertake, as he had outlined in his affidavit, to retain in an account whatever amount the court considered appropriate and not deal with it other than in accordance with the decision of the County Court.
For these reasons Crane would not be prejudiced if the caveat was removed.
It is to be noted that Aircon’s counsel did not seek to make any point based on the property being held on trust, doubtless because the issue involved questions of fact that could not be answered on the present summary procedure, and because the issue was appropriate to raise in the County Court proceeding. Nor did counsel say anything as to why the liquidator was selling the property when (allegedly) Aircon held the legal title as trustee for the Fund. In the absence of facts I could not speculate on that matter.
It is clear from these submissions, and it was made clear by Crane’s counsel in argument, that the central point of Crane’s concern, and ground of opposition to removal of the caveat, was that the consequence of removal and completion of the sale of the property would be that Crane lost its status as a secured creditor and would become an unsecured creditor. That this fundamental premise of Crane’s submission is wrong is made clear by established authority to which Crane’s counsel did not refer and which Aircon’s counsel assumed but without making reference to it. I considered that Aircon’s counsel was correct but Crane’s counsel challenged the proposition.
It is sufficient, by way of authority on this point, to refer to the decision of Young J in AVCO Financial Services Ltd v Commonwealth Bank of Australia[6]. In that case a mortgagee of Torrens System Land had sold the land and paid into Court the balance remaining of the sale proceeds after recouping the amount owed to him. On an equitable chargee applying for payment out of the fund in Court it was held, granting the application, that on the land being sold the equitable charge attached to the fund that was produced as a result of there being a surplus on the sale. In so holding, Young J followed the earlier New Zealand decisions of Beeby v Official Assignee of Pickering and Pickering[7] and Hope v Hope[8]. Indeed, even earlier than AVCO, Smithers J had expressed the same view as Young J, and referred with approval to Beeby and Hope, in Re Murrell[9]. And in Nichols v Go-Tell Nominees Ltd[10], JD Phillips JA made observations which reflect this position.
[6](1989) 17 NSWLR 679.
[7][1953] NZLR 832.
[8][1977] 1 NZLR 582.
[9](1984) 57 ALR 85 at 90-91.
[10](1997) V Conv R 54-573 at 66,888.
In seeking to deal with this point Crane’s counsel, in a written submission provided subsequent to the hearing, submitted that the observations of JD Phillips JA in Nichols were made in the context of considering the rights of an equitable chargee under a mortgagee sale and that his conclusion was correct because of the application of s 77(3) of the Transfer of Land Act which provides for the application of purchase monies and in particular for the payment of subsequent mortgages and charges in the order of their respective priorities. It was submitted that as the present case was not a mortgagee sale s 77(3) would not protect an equitable chargee. Accordingly, it was submitted, at the highest Crane would be left with an argument that it has a claim as a secured creditor to the proceeds and priority to other unknown claimants such as the liquidator’s own claim, secured creditors, other priority creditors and unsecured creditors.
I do not accept this submission. In the first place, the submission sought to confine the observations of JD Phillips JA to a context different from the present and, further, to somehow confine the observations to the context of a case in which s 77(3) was applicable. Secondly, the submission ignored the well-established principle of equity referred to above. Thirdly, in my view, the observations of JD Phillips JA are not properly to be understood as confined as Crane’s counsel suggested but is reflective of the more general principle that after sale of the secured property an equitable mortgage is converted to a charge on the proceeds of sale for the interest of the mortgagee.
It is thus seen that Crane’s submission that removal of the caveat and completion of the sale meant that it would lose the benefit of its security as equitable mortgagee and, indeed, become an unsecured creditor, is wrong.
Apart from that erroneous reason Crane opposes the removal of its caveat except on payment of that which it is owed. As to that, it seems barely credible that Crane, a publicly listed company, is litigating over such a small debt, even with senior counsel appearing for it on this application. Doubtless Crane is entitled to be represented as it desires and to seek to gather the fruits obtainable under its commercial terms of trading, but it seemed to defy common sense and rational consideration for a liquidator and Crane to be outlaying thousands in legal costs over such a small sum. Crane’s counsel described the situation as “a commercial absurdity” which, it was hoped, would not go any further. The sooner the issue is resolved the better, if only for the sake of those involved manifesting a capacity of a relative degree of mature thought. I mention this as it is part of the context in which the application comes for determination, along with the misconception as to legal principle. Moreover, the sale price of the property well exceeds the amount owing under the orders of the County Court.
I can briefly say something about the decisions in Thorncrest and Zombolas that Crane relied on. Neither decision mentioned the principle of equity central to this case. And neither decision is apposite on the facts. In neither case would the caveator have been protected as in this case.
It remains to refer to a second undertaking that was proffered by Aircon’s counsel in a written submission provided after the hearing. The undertaking is in the form of an undertaking given in Nichols. The undertaking is that Aircon will not hereafter plead or otherwise assert that this proceeding gave rise to an issue estoppel that Crane had no caveatable interest or no equitable interest in the property the subject of the proceeding. That undertaking, as Callaway JA observed in Nichols, will protect Crane from any unfair assertion to the effect that the proceeding gave rise to an issue estoppel.
In all the circumstances of the case, accepting that there is a serious question to be tried as to the existence of the caveatable interest, I am of the view that the balance of convenience favours the contract of sale proceeding to completion and, to enable that to occur, the removal of the caveat. The alleged debt is small, Aircon is in liquidation, the interests of the parties and those of the unsecured creditors of Aircon can only be assisted by as speedy a reduction of the issues between them as possible, the sale of the property will produce a fund and Crane’s secured interest will continue in the net proceeds of sale which are a number of times greater than could reasonably be expected to be required to discharge such indebtedness as may be found or (hopefully) agreed. Added to this is the protection of the undertakings which I will take from counsel for Aircon. As to the amount to be retained by the liquidator I would stipulate $100,000. Although I consider that amount far in excess of anything that ought be required I consider it prudent to allow that sum. Any greater amount would be so far removed from the basic debt as to have lost touch with reality, something that the parties might consider embracing. I also propose to order the parties to immediate mediation.
The disposition of the proceeding will be as follows. On the plaintiff by its counsel undertaking:
(a)that the plaintiff will, out of the net proceeds of sale arising from the sale of the property referred to in paragraph 1 of the orders herein pursuant to the contract of sale made 19 December 2005, pay to and retain in a separate interest bearing account the sum of $100,000 and hold the same in that account until the determination of the amount if any payable by the plaintiff to the defendant or written agreement of the parties or order of the Court, and
(b)that it will not hereafter plead or otherwise assert that this proceeding gave rise to an issue estoppel that the defendant had no caveatable interest or no equitable interest in the said property,
I will order that the second defendant forthwith remove caveat no AD628398S from Certificates of Title Volume 9668 Folios 702 and 710. I will hear counsel on the question of costs.
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