Archer Wealth v Casey
[2024] VSC 300
•6 June 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2024 02456
| ARCHER WEALTH PTY LTD (ACN 648 609 876) & ORS | Plaintiffs |
| v | |
| SCOTT CASEY & ORS | Defendants |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 & 31 May 2024 |
DATE OF JUDGMENT: | 6 June 2024 |
CASE MAY BE CITED AS: | Archer Wealth v Casey |
MEDIUM NEUTRAL CITATION: | [2024] VSC 300 |
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PROPERTY – Caveats – Application made to remove caveats to enable plaintiffs to complete settlement of mortgage property – Where mortgagor alleges improper sale and breach of duties – Whether the defendants established prima facie case of existence of caveatable interest in the mortgage property – Whether balance of convenience favours removal – Application to remove caveats granted – Transfer of Land Act 1958 ss 76 and 90(3) – Bayblu Holdings Pty Ltd & Anor v Capital Finance Australia Ltd [2011] NSWCA 39 – Byrne v St George Bank Ltd [1996] ANZ ConvR 405 – Harvey v McWatters (1948) 49 SR (NSW) 173 - Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161 – Lawrence & Hanson Group Pty Ltd v Young [2017] VSCA 172 – Piroshenko v Grojsman (2010) 27 VR 489 – Swanston Mortgage v Trepan Investments [1994] 1 VR 672 – Vasiliou v Westpac Banking Corporation (2007) 19 VR 229 – Welldog Pty Ltd v Prox Pty Ltd [2017] WASCA 62.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S Rubenstein | ERA Legal |
| For the First, Second and Fourth Defendants | Mr T Dowling | Strongman & Crouch |
| For the Third Defendant | No appearance |
HIS HONOUR:
Background
Kookee Pty Ltd (Kookee), the second defendant in this proceeding, is the registered proprietor of land at 426 Bunstons Road, Tolmie in the State of Victoria (the Tolmie property). The fourth defendant, Irene Lagoutatzis, is the sole director and shareholder of Kookee; the first defendant, Scott Casey, is Ms Lagoutatzis’ husband.[1]
[1]The third defendant, the Registrar of Titles, informed the Court that she did not intend to appear in the proceeding. References in these reasons to ‘the defendants’ are references to all of the defendants save for the third defendant.
The Tolmie property is a 100 acre plot of land on which there is some shedding. Mr Casey and Ms Lagoutatzis hope to retire there and build a dwelling on the property. Their family have a special connection with the Tolmie property; Mr Casey’s father’s ashes are buried there under a tree planted by Mr Casey and his best friend who previously owned the property and whose ashes are also buried there.
On 16 August 2023, Archer Wealth Pty Ltd (Archer), the first plaintiff in this proceeding, loaned Kookee $4,325,000 (the first loan). As security for the first loan, Archer was granted a mortgage over the Tolmie property (the first mortgage) as well as mortgages over three other properties of which Kookee or Ms Lagoutatzis were registered proprietors (collectively with the Tolmie property, ‘the security properties’).[2] Ms Lagoutatzis was guarantor for the first loan.
[2]Located at: 12 Victoria St, Doncaster in Victoria (Victoria St); 2A Daphne St, Doncaster in Victoria (Daphne St) and 156-166 Webb St, Warrandyte in Victoria (Webb St). Kookee is the registered proprietor of each of these properties, save for Webb St of which Ms Lagoutatzis is the registered proprietor. Webb St is also the residence of Ms Lagoutatzis and Mr Casey.
On 23 August 2023, Archer loaned Kookee an additional $700,000 (the second loan). As security for the second loan, Archer was granted a second mortgage over the Tolmie property (the second mortgage) as well as second mortgages over the other security properties. Ms Lagoutatzis was also guarantor for the second loan.
The defendants took out the first and second loans to refinance their existing debts owed on the security properties. The loans were advanced to Kookee on 23 August 2023.
On 24 August 2023, Archer assigned part of its interest in the first and second mortgages to the other plaintiffs.
The first and second loans were due for repayment on 23 January 2024, five months after the first loan was advanced. Repayment did not occur.
On 15 February 2024, the plaintiffs took possession of the Tolmie property.
On 15 March 2024, the plaintiffs issued Kookee with a statutory default notice pursuant to s 76 of the Transfer of Land Act 1958 (the Act) in respect of the first mortgage over the Tolmie property. The notice identified that a total of $4,787,984.19 was due to be paid under the mortgage.
On 17 April 2024, the plaintiffs as mortgagees exercising their power of sale under the first mortgage entered into a contract of sale for the Tolmie property for the sum of $850,000 plus GST. They had obtained an independent valuation of the property which assessed its market value as being $800,000. The contract of sale provided for settlement to occur on 13 May 2024.
On 18 April 2024, Ms Lagoutatzis commenced a proceeding in this Court against Archer and some of the other plaintiffs seeking an order restraining them from selling the Tolmie property for less than $1.4 million, being the amount she considered was the property’s market value (the injunction proceeding).[3] That proceeding came before Waller J. On 18 April 2024 orders were made requiring Archer to provide Ms Lagoutatzis with a copy of the contract of sale of the Tolmie property by 26 April 2024. Archer complied with this order and, as at the hearing of this matter, no further steps had been taken in the injunction proceeding.
[3]Proceeding S ECI 2024 01840.
In May 2024, the following caveats were registered on the Tolmie property:
(a) On 10 May 2024, caveat AX983444E was registered by Mr Casey which identified the estate or interest claimed as being ‘Freehold Estate’ with an absolute prohibition on dealings. The grounds of claim were described as ‘Implied, Resulting or Constructive Trust’.
(b) On 15 May 2024, caveat AX983457U was registered by Kookee which identified the estate or interest claimed as being ‘Freehold Estate’ and with an absolute prohibition on dealings. The grounds of claim were expressed as ‘Registered proprietor(s) being entitled to possession of the certificate of title for the land and to prevent improper dealings’.
(c) On 16 May 2024, caveat AX983466T was registered by Ms Lagoutatzis which identified the estate or interest claimed as being ‘Freehold Estate’ with an absolute prohibition on dealings. The grounds of claim were described as ‘Implied, Resulting or Constructive Trust’.
As I have noted, the contract for the sale of the Tolmie property was to settle on 13 May 2024. The plaintiffs were ready and willing to complete the sale that day and on 14 May 2024, the solicitors for the purchaser advised that their client was ready to effect settlement immediately.
On 17 May 2024, the plaintiffs commenced this proceeding seeking orders pursuant to s 90(3) of the Act for the withdrawal of the caveats placed on the Tolmie property by Kookee and Mr Casey.
When the proceeding first came before me in Practice Court on 23 May 2024, I granted leave for the plaintiffs to amend their claim to also seek the withdrawal of the caveat registered on the Tolmie property by Ms Lagoutatzis. For the ex tempore reasons delivered that day, I also granted the defendants’ application for an adjournment. The matter then returned before me for hearing in Practice Court in the afternoon of 31 May 2024.
At the hearing of the plaintiffs’ application, counsel for the defendants conceded that that there was no proper basis for maintaining the caveats placed on the Tolmie property by Ms Lagoutatzis and Mr Casey; the only controversy for determination was accordingly whether the caveat registered by Kookee should be maintained.
In support of their application, the plaintiffs relied upon affidavits of Gurminder Singh Taggar, the sole director of Archer, sworn 16 May 2024 and 30 May 2024, and three affidavits made by their solicitors.[4] The defendants relied upon an affidavit by Ms Lagoutatzis sworn 22 May 2024 which, amongst other things, annexed an affidavit sworn by her on 18 April 2024 in the injunction proceeding. They also relied on an affidavit by their solicitor, Andrew James Bailey, sworn 30 May 2024.
[4]Affidavits of Judith Milazzo affirmed 21 May 2024 and 22 May 2024 and an affidavit of Daren James Anderson sworn 30 May 2024.
Relevant principles
In an application under s 90(3) of the Act, the Court applies a two-stage test as articulated by Warren CJ in Piroshenko v Grojsman:[5]
Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief. In so far as their registration is an administrative act, it is when application is made for their removal that the onus falls on the caveator to satisfy the two-stage test used by the court when deciding whether to exercise its discretion to grant interlocutory injunctive relief. This approach has been established law in Australia since the decision of Lord Diplock in Eng Mee Yong v Letchumanan was approved by the Full Court of the Queensland Supreme Court of Appeal in Re Jorss’ Caveat. This two-stage approach requires the caveator to establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question, and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial. This is still the approach taken by the courts in Victoria when deciding applications under s 90(3) of the Act.
[5](2010) 27 VR 489, [7], citations omitted (‘Piroshenko’).
Only a legal or equitable interest in land can sustain a caveat.[6] Subsequent to Piroshenko, Warren CJ observed that, while the prima facie test in respect of the existence of such an interest was ‘often used interchangeably with whether a serious question is to be tried, the prima facie case test is to be preferred’.[7] The caveator ‘must show that they have a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat’.[8] An application for removal of a caveat is not, however, ordinarily an occasion for the final determination of disputed factual issues, or of the claims which the caveat seeks to protect;[9] it is not generally appropriate to enter into a resolution of the underlying dispute in such an application.[10]
[6] AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235, [28].
[7]CFHW Pty Ltd v Burness [2014] VSC 451, [17].
[8][2014] VSC 451, [20], citing Piroshenko (n 5), 494 and O’Neill (2006) 227 CLR 57, 82.
[9]Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126, [38].
[10]Lee v Yap [2021] VSCA 29, [80] (‘Lee v Yap’).
Further, as the Court of Appeal stated in Lawrence & Hanson Group Pty Ltd v Young when considering Piroshenko:[11]
Due to the broad wording of s 90(3) of the TLA, Warren CJ noted that any test utilised by the court cannot subsume or restrict the power conferred by the statute. All it can do is ‘inform the ultimate consideration’ of whether to exercise the discretion conferred in any particular case, and if it chooses to do so, what form that exercise should take. She also said that attention must be directed towards the relationship between the caveat which has been lodged, and the interest which is being claimed, by the caveator.
[11][2017] VSCA 172, [37], citations omitted.
In assessing whether the balance of convenience favours the retention of a caveat, it is necessary to consider the nature of the claimed interest and what the caveat was designed to protect.[12] The Court is not confined in the matters it may consider as going to the balance of convenience.[13]
[12]Dolan v Dolan [2023] VSCA 136, [90] (‘Dolan v Dolan’).
[13]Lee v Yap (n 10), [85].
Additional facts
Before outlining the defendants’ submissions, it is necessary to set out some further relevant facts.
Pursuant to clause 11.1(a) of the Loan Deed by which Archer provided the first loan to Kookee (the Loan Deed), Kookee undertook that, within 30 days of the loan being advanced, it would engage or procure a real estate agent acceptable to Archer, to list and market for sale each of the security properties.
Despite this obligation in the relevant Loan Deed, Ms Lagoutatzis’ evidence was that the plan, which she had told Mr Taggar of Archer about, had in fact always been to only sell Daphne St, Victoria St and the Webb St properties, and for her family to move to the Tolmie property where they would build a home to live in retirement. Mr Taggar specifically denied that he was informed of this by Ms Lagoutatzis.
Ms Lagoutatzis also deposed that she and her husband had spent about $100,000 in preparation for building a dwelling on the Tolmie property in respect of architectural plans, permits, farm management plans, irrigation and fencing and new access roads and gates. Her evidence was that there were two containers on the property filled with building materials to be used in the construction of a dwelling and that they stored various items of farming equipment at the property.
On or about 25 September 2023, Archer’s solicitors sent a Lender’s Demand to Kookee and Ms Lagoutatzis (the Lender’s Demand) which, amongst other things, stated that Kookee was in default of its obligations to Archer because:
(a)it has breached the undertaking in clause 11.1(a) of the Loan Deed by failing to procure that the real property securities identified be listed for sale with a real estate agent acceptable to the Lender and on terms acceptable to the Lender;
(b)it did not pay (and has not paid) the land tax payable in respect of the mortgaged properties at 12 Victoria Street, Doncaster and 2A Daphne Street, Doncaster as required by clause 5.1(A) of the Memorandum of Common Provisions AA3609 to the respective Mortgages.
The Lender’s Demand required these breaches to be rectified within seven days.
On or about 17 October 2023, Archer took possession of Victoria St on the basis that no response was received to the Lender’s Demand and Kookee remained in default of its oblations under the first mortgage. Since that time, Archer has been endeavouring, without success, to obtain the cooperation of the tenant of Victoria St to list the property for sale.
On 20 October 2023, the then solicitors for Kookee and Ms Lagoutatzis sent a letter to Archer’s solicitors stating, amongst other things, that the Lender’s Demand was defective and unenforceable.
On or about 8 November 2023, Archer took possession of Daphne St in purported exercise of its rights as mortgagee. It was later sold at auction for $1,057,000.[14]
[14]The sale completed on 10 April 2024.
On 10 November 2023, the solicitors for Archer served on Kookee and Ms Lagoutatzis a statutory default notice pursuant to s 76 of the Act in respect of the mortgages over the Tolmie property, Victoria St and Daphne St (the November Default Notice). The notice gave Kookee one month to remedy its defaults under the mortgages which were described as follows:
(a)it has breached the undertaking in clause 11.1(a) of the Loan Deed by failing to procure that the real property securities identified be listed for sale with a real estate agent acceptable to the Lender on terms acceptable to the Lender;
(b)it did not pay (and has not paid) the land tax payable in respect of the mortgaged properties at 12 Victoria Street, Doncaster and 2A Daphne Street, Doncaster as required by clause 5.1(A) of the Memorandum of Common Provisions AA3609 to the respective Mortgages; and
(c)it has not duly and punctually paid all council rates payable in respect of the Mortgaged Properties as and when those amounts fell due as required by clause 5.1(A) of the Memorandum of Common Provisions AA3609 to each of the Mortgages.
Defendants’ submissions
The defendants provided the Court with a draft counterclaim to demonstrate the existence of a prima facie case. Although the appropriate course is for the defendants to commence a proceeding by writ in the event that the application for the removal of the Kookee caveat is refused,[15] for present purposes the draft counterclaim was a satisfactory way to consider whether there was a prima facie case. The following summary is based primarily on the allegations in the draft counterclaim.
[15]As the Court of Appeal stated in Dolan v Dolan (n 12) at [54].
Kookee alleges that, within weeks of the first loan being entered into, Archer acted on an alleged non-monetary default of the Loan Deed which was wrong in fact and contrary to its previous oral and written representations made to it in or around late August 2023. Specifically, Kookee alleges that, on or about 30 August 2023, it engaged Biggin Scott to list and market Victoria St, Daphne St and Webb St and that, on the same day, Archer represented to it that it approved, authorised or consented to that appointment. On the basis of that representation, Kookee asserts that it did not take any steps to list and market for sale the said properties with an alternative agent within 30 days of the advance being provided by Archer.
Kookee relies on a further alleged representation by Archer. It is uncontroversial that, shortly before the first and second loans were advanced, Archer requested, and Kookee in fact paid to it, the amount of $10,500. In relation to that matter, Kookee alleges that:
(a) the amount was paid on Archer’s request as a contingency for any shortfall on the settlement of the loans (the shortfall funds);
(b) Archer then represented that there was no shortfall on the settlement of the loans, but that it would retain the shortfall funds to pay outstanding liabilities on the Webb St property, Victoria St and Daphne St for land tax and council rates; and
(c) contrary to this representation, Archer did not pay relevant land tax and council rates from the shortfall funds and, in reliance upon the representation, Kookee did not initially take steps to pay land tax or council rates owing in relation to the above mentioned properties (although it alleges that relevant land tax payments were in fact made on 30 August 2024 and council rate payments made on 15 September 2023).
On the basis of the matters outlined in the above two paragraphs, Kookee alleges that the Lender’s Demand was invalid, void and of no effect because it had in fact:
(a) procured the relevant properties to be listed for sale with a real estate agent which was acceptable to Archer;
(b) paid the sum of $10,500 for the purposes of land tax payable in respect of Victoria St and Daphne St and that, in any event, the land tax and council rates payable in respect of those properties were paid.
Claims for misleading and deceptive conduct are also proposed to be advanced.
As a consequence of the invalidity of the Lender’s Demand, Kookee alleges that the enforcement actions taken by Archer in respect of Victoria St and Daphne St, including entering into possession of the properties, were beyond its power as mortgagee and in breach of the Loan Deed.
On substantially the same grounds to those upon which it seeks to invalidate the Lender’s Demand, Kookee also seeks to impugn Archer’s right to serve the November Default Notice, on the basis of which it then purported to enter into possession of the Tolmie property and market it for sale pursuant to its power as mortgagee.
Kookee also alleges that, from around late September 2023 to 23 January 2024, it and its related parties took steps to refinance the first and second loans with alternative lenders, but that Archer engaged in conduct which unreasonably prevented it from succeeding in those efforts. This is a further ground upon which Kookee asserts that Archer’s actions in entering into possession of the Tolmie property and commencing to sell it were beyond its power as mortgagee and in breach of the Loan Deed.
Kookie also alleges that Archer breached its duties as mortgagee and failed to act in good faith. Specifically, it alleges that Archer did not conduct the sale of Daphne St and the Tolmie property in good faith, with due regard to its interests and so as to obtain the best available price.
By reason of the above matters, in addition to claims for damages and compensation, Kookee seeks that the sale of the Tolmie property be restrained and the contract of sale for the property to be set aside as it was against conscience for Archer to rely upon the strict terms of the Loan Deed and the mortgages in procuring the possession and sale of the property. It is also alleged that Archer engaged in unconscionable conduct as a result of which its appointment as mortgagee in possession and that the sale of the Tolmie property is voidable.
Kookee also claims that the very high interest rates payable under the Loan Deed are unenforceable penalties.
In relation to the balance of convenience, Kookee submitted that there was no evidence that Archer, or the purchasers of the Tolmie property, would suffer any specific prejudice if the sale of the property was postponed. Further, whereas the plaintiffs’ position is secured by mortgages over the Tolmie property, Victoria St and Webb St with an asserted combined value of between $5.95 million - $7.8 million (and having already recovered approximately $1 million from the sale of Daphne St), the removal of the caveat registered by Kookee will mean that the purchasers of the Tolmie property will become the registered proprietors of the property, thereby obtaining indefeasible title. This would represent an irreparable prejudice to the defendants because:
(a) the purpose of the Loan Deed was for Mr Casey and Ms Lagoutatzis to build a house on the Tolmie property and retire there;
(b) Mr Casey and Ms Lagoutatzis had already taken substantial steps towards building a home on the Tolmie property, having spent approximately $100,000 on that project to date and storing an extensive range of items of farm equipment and chattels on the property; and
(c) of Mr Casey’s strong emotional and familial connections to the Tolmie property.
Consideration
The caveat registered by Kookee on the Tolmie property asserts a ‘Freehold Estate’, with an absolute prohibition on dealings, on grounds expressed as follows:
Registered proprietor(s) being entitled to possession of the certificate of title for the land and to prevent improper dealings.
The asserted ‘improper dealings’ may be taken to be those articulated in the draft counterclaim outlined above. Authority by which I am bound requires the conclusion that, in the State of Victoria, this is not a caveatable interest in land.
This result follows from the decision of the Court of Appeal in Swanston Mortgage v Trepan Investments.[16] The registered proprietor of land, Trepan, had mortgaged the land to secure a loan made by Swanston. Trepan defaulted on the loan and Swanston exercised its power of sale and entered into a contract of sale with a third party. The circumstances of that sale gave rise to suspicions that Swanston had not obtained the best price for the land and Trepan lodged a caveat to prevent the registration of the transfer of land. The trial judge held that Trepan had a caveatable interest in land in the circumstances and dismissed Swanston’s application for an order under s 90(3) of the Act for the removal of the caveat.
[16][1994] 1 VR 672 (‘Swanston Mortgage‘).
Swanston succeeded on appeal. The Court of Appeal held that a mortgagor’s equity to have an improper sale of mortgage property set aside is a ‘mere equity’ and not the ‘estate or interest in land’ which a person must have in order to lodge a caveat.[17] As the Court of Appeal in Vasiliou v Westpac Banking Corporation later stated in relation to Swanston Mortgage:[18]
Brooking J, who delivered the main judgment, referred to case law which differentiated between the equitable interest of a mortgagor (the equity of redemption) which would be held to exist if a court decided that a mortgagee’s sale of Torrens system land should be set aside, and the “mere equity” which existed prior to the granting of a remedy by the court. Because the mortgagor sought to caveat before the sale was set aside, the right was a “mere equity”. This was not a caveatable interest because it did not amount to an equitable interest in land.
[17]As identified by the later judgment of the Court of Appeal in Vasiliou v Westpac Banking Corporation (2007) 19 VR 229, [113] (‘Vasiliou’).
[18]Ibid [113]-[115], citations omitted.
In Vasiliou, the Court of Appeal noted that a different approach had been taken in New South Wales and that Swanston Mortgage had been the subject of criticism such that its correctness may require reconsideration.[19] However, ‘[u]nless and until that decision is overruled after a full hearing before a bench of five appellate judges, we are bound by it’.[20] No such appellate reconsideration has since occurred.
[19]Ibid [120].
[20]Ibid [121].
An ostensibly distinguishable feature of Swanston Mortgage from the facts of this case is that, in Swanston Mortgage the interest in land claimed by the caveator was an equitable interest as mortgagor; in this matter the interest asserted by Kookee is to a ‘freehold estate’. This is similar to the interest asserted by the caveator in Byrne v St George Bank Ltd[21] which was described as an ‘estate or interest as the registered proprietor and as a mortgagor disputing any claimed entitlement of the proprietor of mortgage registered number …’). In the Court of Appeal, Hayne JA, with whom Ormiston JA agreed, did not consider that this difference with the language of the caveat considered in Swanston Mortgage gave rise to any point of distinction.[22]
[21][1996] ANZ ConvR 405 per Hayne JA.
[22]Ibid.
Like Swanston Mortgage, in this case the defendants allege an improper sale of mortgaged property. The fact that the circumstances said to give rise to this asserted impropriety are different is not a relevant distinguishing feature for the purposes of determining whether Kookee has a caveatable interest in the Tolmie property. On the authority of Swanston Mortgage by which I am bound, it does not.
Given this conclusion, the issue of the balance of convenience does not strictly arise. However, if it had been necessary to do so, despite the significant matters on which the defendants relied as referred to in [41] above, for the following reasons I would have determined that the balance of convenience favoured the removal of the caveat registered by Kookee on the Tolmie property.
Consistent with the observations of Walsh J in Inglis v Commonwealth Trading Bank of Australia,[23] Kookee’s proprietary rights as the registered owner of the Tolmie property are subject to and qualified by the rights over the property given to Archer by the first and second mortgages.[24] If Archer exercises those rights, that is not an act which contravenes or infringes Kookee’s proprietary rights. This informs the long-established ‘general rule’ to which Walsh J referred in relation to applications to restrain the exercise of a mortgagee’s power of sale:[25]
… such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court.
If the mortgage debt has not been paid, the Court will not ‘as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due’.[26]
[23](1971) 126 CLR 161 (‘Inglis’).
[24]Ibid 166.
[25]Ibid 164.
[26]Ibid 164-165.
As at the hearing of this application, Kookee remained indebted to Archer under the loans in the sum of approximately $4,882,551. This debt has not been paid and the defendants have not offered to pay into court any amount claimed by Archer.
The ‘general rule’ is an application of the equitable maxim that ‘he who seeks equity should do equity’,[27] but it is subject to a number of exceptions.[28] Counsel for the defendants referred to the catalogue set out by Buss P and Newnes JA in Welldog Pty Ltd v Prox Pty Ltd[29] who stated that, depending on the facts and circumstances and overall justice of the case, payment into court may not be required if it is alleged that:[30]
[27]El-Saafin & Anor v Franek & Ors [2018] VSC 450, [56] (‘El-Saafin’).
[28]See the discussion in Bayblu Holdings Pty Ltd & Anor v Capital Finance Australia Ltd [2011] NSWCA 39, [58]; El-Saafin (n 27), [58]-[60]; and Goater v Commonwealth Bank of Australia [2014] NSWCA 265, [76].
[29][2017] WASCA 62.
[30]Ibid [37].
(a) the power of sale under the mortgage is not properly exercisable;[31]
[31]Citing Inglis (n 23) (164–165); Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd (2011) 279 ALR 166 [58] (Campbell JA, Tobias & Macfarlan JJA agreeing).
(b) the mortgage is invalid, or a breach of the mortgage has not occurred which engages the power of sale, or a notice required to engage the power of sale is ineffective;[32]
(c) the power of sale is being exercised for an improper motive;[33] or
(d) the mortgage or the power of sale is impugned pursuant to the Australian Consumer Law or the Australian Securities and Investments Act or equitable principle.[34]
[32]Citing Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55–634, 59, 626–59, 627 (Powell J).
[33]Citing Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd (Unreported, NSWSC, 8 March 1991) (Bryson J) 11–15.
[34]Citing Glendore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130, 133–136 (Morling J); Town & Country Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540, 545 (Davies, Gummow & Lee JJ).
Counsel for the defendant sought to rely on each of these exceptions, save for subparagraph (c), on the basis of the allegations in the draft counterclaim. The difficulty with this argument is that, whatever might be the position in relation to the other security properties, the proposition that any of these exceptions are enlivened in respect of the sale of the Tolmie property appears most unlikely.
It is uncontroversial that clause 11.1(a)(i) of the Loan Deed includes an express term requiring Kookee, within 30 days of the loan being advanced, to engage or procure a real estate agent acceptable to Archer, to list and market for sale each of the security properties, including the Tolmie property. There is no suggestion that Kookee discharged this obligation in respect of the Tolmie property, or even attempted to do so. Further, the alleged representation on which Kookee relies in the draft counterclaim in relation to the engagement of a real estate agent is specifically limited to the other security properties and is not advanced in relation to the Tolmie property; that claim is entirely unrelated to the Tolmie property.
Given these matters, there would appear to have been a clear default by Kookee of an obligation imposed upon it by the Loan Deed as a result of which the total owing by Kookee became immediately due and payable.[35] In terms of the exceptions to the general rule referred to in [51], there could be no suggestion that a breach of mortgage has not occurred enlivening the mortgagee’s power of sale. Neither is it apparent to me how that conclusion is to be avoided by the matters alleged in the draft counterclaim, which principally concern the other security properties, so as to provide a proper foundation for a claim that the power of sale in respect of the Tolmie property was not properly exercisable, or so as to engage any of the other exceptions to the general rule.
[35]By operation of clauses 12.1 and 12.2(c) of the Loan Deed.
The defendants sought to resist this analysis by contending that the ‘express purpose’ of the loans was for Mr Casey and Ms Lagoutatzis to build a house on the Tolmie property and for them to retire there. Mindful of the summary nature of this application, I consider this claim to be fundamentally weak. Whatever purpose Mr Casey and Ms Lagoutatzis may have subjectively had in obtaining the loans, the terms of the Loan Deed are clear. And it is apparent that Ms Lagoutatzis appreciated this distinction. In her affidavit filed in the injunction proceeding (which she adopted in this proceeding), Ms Lagoutatzis deposed to ‘the plan’ for her family to sell Webb St, Victoria St and Daphne St and to move to the Tolmie property to build a house and retire. However, in the immediately preceding paragraph, she also set out in some detail the making of the Loan Deed ‘for the purposes of Archer to provide … the finance needed to sell four real properties’ which she proceeded to identify and which included the Tolmie property.
The claim that the express purpose of the loans was to allow Mr Casey and Ms Lagoutatzis to build a house on the Tolmie property is also directly inconsistent with the formal letter of offer for a mortgage loan which Archer provided Kookee and Ms Lagoutatzis and which they both signed on 10 August 2023. Consistent with the terms ultimately reflected in the Loan Deed, the letter identifies the Tolmie property as one of the properties to be provided as security and contains a special condition that ‘All properties will need to be on the market for sale within 30 days of settlement’.
This patent inconsistency between, on the one hand, the purpose of the loans as claimed by Ms Lagoutatzis and, on the other, the express terms on which the loans were offered and entered into by the parties, led counsel for the defendants to suggest in submissions that the inclusion of the Tolmie property in the relevant schedule to the Loan Deed was the result of a common mistake. This late claim was not further developed, is entirely absent from the draft counterclaim and is inconsistent with Ms Lagoutatzis’ affidavit filed in the injunction proceeding referred to in [55].
For the above reasons, it is not apparent to me that any of the exceptions to the general rule in Inglis are arguably engaged so as to relieve Kookee from the obligation to bring in an amount sufficient to meet the mortgaged debt, or such other amount as may be appropriate. However, even if an exception was arguably engaged, the question of an appropriate payment into court to address the loss that the mortgagee may suffer remains a relevant consideration. In Harvey v McWatters,[36] an authority dealing with the exception concerning whether the power of sale under a mortgage has arisen at all on which the defendants seek to rely, Sugarman J stated as:[37]
The present, however, is not a case where it is sought to put the mortgagee out of possession or restrain him from taking possession. Here the mortgagee is in possession and it is only sought to have him restrained from selling. He runs no more risk than that of losing some particularly advantageous sale and that of possible depreciation of the security pending the hearing. It is obvious that the maximum possible loss is not the amount sworn to be due or the amount in fact due under the mortgage, but the value of the security itself, and the evidence here suggests a strong possibility that this is a good deal less than the amount secured by the mortgage. … In the present case I think that there should be a payment into Court by the mortgagor, but that the amount of such payment should be governed by the principles which I have stated…
An analogous approach could appropriately be undertaken in this case had an exception to the general rule been engaged as submitted by the defendants. The fact that the defendants have not offered to pay into court any amount is a matter which weighs the balance of convenience against the maintenance of the caveat registered by Kookee on the Tolmie property.
[36](1948) 49 SR (NSW) 173.
[37]Ibid 177-178.
The Court will accordingly order that the caveats be withdrawn.
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SCHEDULE OF PARTIES
S ECI 2024 02456
BETWEEN:
| ARCHER WEALTH PTY LTD (ACN 648 609 876) | First Plaintiff |
| - and - | |
| MARTIN SIA PTY LIMITED (ACN 007 443 692) ATF THE MARTIN SIA PTY LTD SUPERANNUATION FUND | Second Plaintiff |
| - and - | |
| JASINE PTY LTD (ACN 058 515 941) ATF THE SIA FAMILY TRUST | Third Plaintiff |
| - and - | |
| SIA GROUP FINANCE PTY LTD (ACN 662 603 634) | Fourth Plaintiff |
| - and - | |
| SUPER TAN-EYRE PTY LTD (ACN 157 866 003) ATF THE TAN-EYRE FUND | Fifth Plaintiff |
| - and - | |
| KIMBERLEY PETER YELLAND | Sixth Plaintiff |
| - and - | |
| SCOTT CASEY | First Defendant |
| - and - | |
| KOOKEE PTY LTD (ACN 142 470 139) | Second Defendant |
| - and - | |
| REGISTRAR OF TITLES | Third Defendant |
| - and - | |
| IRENE LAGOUTATZIS | Fourth Defendant |
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