Bateson v Jones
[2013] WASC 8
•23 JANUARY 2013
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BATESON -v- JONES [2013] WASC 8
CORAM: PRITCHARD J
HEARD: 19 DECEMBER 2012
DELIVERED : 19 DECEMBER 2012
PUBLISHED : 23 JANUARY 2013
FILE NO/S: CIV 3005 of 2012
BETWEEN: ALAN BATESON
Plaintiff
AND
SHARON LYNETTE JONES
First DefendantCOMMONWEALTH BANK OF AUSTRALIA
Second Defendant
Catchwords:
Extension of caveat - Whether caveat lodged as security for debt sufficient to give rise to equitable charge - Balance of convenience - Potential prejudice to purchasers and to other caveators if caveat extended - Bona fide exercise of mortgagee power of sale
Legislation:
Transfer of Land Act 1893 (WA), s 138C
Result:
Application for extension of caveat refused
Category: B
Representation:
Counsel:
Plaintiff: In person
First Defendant : In person
Second Defendant : Mr B C Smith
Solicitors:
Plaintiff: In person
First Defendant : In person
Second Defendant : Gadens Lawyers
Case(s) referred to in judgment(s):
Allen v Jambo Holdings Ltd [1980] 2 All ER 502.
Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57.
Bashford v Bashford [2008] WASC 138.
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.
Custom Credit Corporation Ltd v Whitehall Holdings Pty Ltd (Unreported, WASC, Library No 920231, 7 April 1992).
Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307.
His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15.
Jandric v Jandric [1999] WASC 22.
Kuyper v Keywest Constructions Pty Ltd (1990) 3 WAR 419.
Murphy v Wright (1992) NSW ConvR 55‑652.
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95.
Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171.
Troncone v Aliperti (1994) NSW ConvR 55‑703.
Wilson v Graham (1997) 10 BPR 19,051.
PRITCHARD J:
(This judgment was delivered extemporaneously on 19 December 2012 and has been edited from the transcript.)
Mr Bateson has applied by an originating summons dated 12 December 2012 for an order of the Court pursuant to s 138C of the Transfer of Land Act 1893 (WA) (the TLA), extending the operation of caveat number L712735 (the caveat) for 12 months. The caveat has been registered in respect of land jointly owned by Mr and Mrs Jones in Canning Vale contained in certificate of title 1767 folio 74 (the property).
According to the certificate of title, the caveat was registered on 19 August 2011. The caveat was registered after a number of other instruments, namely a mortgage to the Commonwealth Bank (the Bank) registered on 12 November 2008 and two other caveats lodged on 9 March 2011 and 30 June 2011.
Mr Bateson received a notice from the Registrar pursuant to s 138B of the TLA, which indicated that the caveat would lapse at midnight on Monday, 17 December 2012, unless extended by an order of the Court. Mr Bateson's application to extend the caveat was listed for an urgent hearing on 13 December 2012 and on that occasion I made an order extending the caveat until this evening to enable Mr Bateson, who is unrepresented in these proceedings, to lodge further documents in support of his application and to enable him to serve the defendants with his application.
Mr Bateson has filed two affidavits, sworn 11 and 17 December 2012, in support of his application to extend the caveat. The Court has now received an affidavit sworn by Mr David Albrecht, a partner of Gadens Lawyers, which acts for the Bank. The Bank was represented at the hearing today and Mrs Jones, one of the registered proprietors of the property, also appeared in person.
Having read the affidavit material and taken into consideration the matters put before the Court by Mr Bateson, by Mrs Jones and by counsel for the Bank, I have reached the conclusion that the caveat should not be extended.
In these reasons for decision I deal with the following matters:
1.Background.
2.The legal principles governing an application for extension of a caveat under s 138C of the TLA.
3.Whether Mr Bateson has demonstrated that there is a serious issue as to whether he has a caveatable interest.
4.Balance of convenience considerations.
5.The orders which should be made.
1. Background
Mr Bateson's case is that he entered into an agreement with Mr and Mrs Jones in which, amongst other things, he loaned to Mr and Mrs Jones the sum of $100,000 (the loan). According to Mr Bateson's affidavit of 17 December 2012, Mr and Mrs Jones entered into a Deed of Acknowledgment of Debt dated 8 October 2010 in which they agreed to repay the loan either on or before 31 October 2010, or thereafter upon the sale of the property.
Mr Bateson says that Mr and Mrs Jones agreed to charge the property so as to reflect their obligation to repay the loan and agreed that Mr Bateson could lodge a caveat on the title to the property to better secure the moneys loaned. Mr Bateson says that Mr and Mrs Jones did not repay the loan and he commenced proceedings against them in the District Court for the repayment of the moneys he claims they owe him. Those proceedings have been inactive for some months, but Mr Bateson has now sought to reactivate them.
According to the affidavit of Mr Albrecht, the Bank loaned Mr and Mrs Jones just over $1.012 million in October 2008 and the Bank secured repayment of that loan by a mortgage, which is a registered first mortgage over the property. The mortgage was registered on 12 November 2008. Mr and Mrs Jones subsequently defaulted on the loan and earlier this year they voluntarily surrendered vacant possession of the property to the Bank and permitted the Bank to exercise its rights under the mortgage to sell the property. The Bank subsequently marketed the property for sale as a mortgagee in possession.
In September 2012 the Bank entered into a contract with some purchasers (the purchasers), for the sale of the property for $1.2 million. A copy of the contract of sale for the property was annexed to Mr Albrecht's affidavit, and I note that the conditions include a term to the effect that the purchasers were aware that there are caveats on the certificate of title and these must be lifted at settlement.
A settlement statement dated 1 November 2012 was annexed to Mr Albrecht's statement. It indicates that after the payment of what is owed to the Bank and the Bank's fees in connection with the settlement of the property, there is likely to remain in the vicinity of $71,000 in surplus funds, although Mr Albrecht deposes to the fact that that sum will now have reduced and will continue to reduce by virtue of the additional interest, and additional costs, pursuant to the terms of the mortgage.
In September 2012 the Bank wrote to the three caveators, including Mr Bateson, advising of the sale of the property and requesting that they state the amount claimed under the caveats. Correspondence annexed to Mr Albrecht's affidavit indicates that the other two caveators have agreed, at least in principle, to withdraw their caveats pending the pay out of moneys they claim are owed to them. It appears that the combined amounts claimed by the caveators is in the vicinity of $360,000.
The settlement of the sale of the property was to take place on 2 November 2012, but did not proceed as not all of the caveators, including Mr Bateson, had agreed to the withdrawal of their caveats by that date. Mr Bateson did not subsequently agree to withdraw his caveat.
The Bank then made an application to the Registrar to issue a notice to Mr Bateson pursuant to s 138B of the TLA. Settlement of the sale of the property was booked for 20 December 2012 in anticipation of the lapse of the caveat on 17 December 2012.
Mr Albrecht deposes to the fact that the Bank has instructed him that the surplus proceeds of the sale of the property, if it proceeds, are to be held in Gadens Lawyers' trust account pending the resolution of Mr Bateson's claim to that surplus by express agreement between the caveators or by payment in accordance with an order of the Court.
2. The principles governing an application for extension of a caveat under s 138C of the TLA
A caveat may be lodged by a person claiming any estate or interest in land: s 137 of the TLA. If a person has an interest in respect of which equity will give specific relief against the land itself, the interest is an equitable proprietary interest and so is caveatable: see Jandric v Jandric [1999] WASC 22 [6] and Kuyper v Keywest Constructions Pty Ltd(1990) 3 WAR 419, 429 ‑ 432.
The legal principles in relation to an order under s 138C of the TLA are well established. They were set out by Beech J in Bashford v Bashford[2008] WASC 138 [42] ‑ [56] and it is not necessary to repeat his Honour's observations here. His Honour's observations must, however, be read in conjunction with some more recent authorities to which I make reference below.
In summary, the Court's power to make an order under s 138C(2) of the TLA 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, and 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, the Court will also consider where the balance of convenience lies.
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 order sought: see Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [42] ‑ [44] (Newnes JA, referring to Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82). Consequently, whether there is a serious question to be tried, and the consideration of those factors going to the balance of convenience, are not wholly independent inquiries.
Nevertheless, in these reasons it will be convenient to commence by considering the evidence in relation to those matters separately before undertaking an overall consideration of whether a serious question to be tried has been demonstrated in this case.
3. Whether Mr Bateson has established a caveatable interest
I turn to consider whether Mr Bateson has demonstrated that there is a serious question to be tried as to whether the interest claimed in the caveat exists. A copy of the caveat was annexed to Mr Bateson's affidavit of 17 December 2012. The interest claimed in the caveat is 'as charge' and is said to arise by virtue of a Deed of Acknowledgment of Debt made between the registered proprietors (Mr and Mrs Jones) as chargers and the caveator (Mr Bateson) as chargee dated 8 October 2010. This appears to be a reference to the Deed to which I have already referred.
There is authority for the proposition that an agreement (typically in the context of a loan or guarantee arrangement), that in the event of a default by a borrower the lender will be entitled to attach the debt due to an asset of the borrower or guarantor, and may register a caveat against any property registered in the name of the borrower or guarantor, is sufficient, together with the lodgement of the caveat itself, to give rise to an interest in the land by way of an equitable charge over the land, so as to ground a caveatable interest: see Murphy v Wright (1992) NSW ConvR 55‑652; Troncone v Aliperti (1994) NSW ConvR 55‑703; Wilson v Graham(1997) 10 BPR 19,051 (Santow J); and Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307 (Habersberger J). Some interesting questions in relation to the creation of the interest in land which a caveat protects are canvassed by Santow J in Wilson, but it is unnecessary to explore those issues here.
In my view, having regard to these authorities and to the concession made by counsel for the Bank at the hearing today that Mr Bateson has a caveatable interest, and having regard to the terms of cl 4 of the Deed of Acknowledgement of Debt dated 8 October 2010 together with the lodgement of the caveat itself, I am persuaded that Mr Bateson has demonstrated that there is a serious question to be tried as to whether the interest in land claimed in the caveat exists.
I note for completeness that Mrs Jones appeared today on her own behalf and disputed any liability to Mr Bateson. Whether Mr and Mrs Jones are, or will ultimately be found by a court to be, indebted to Mr Bateson is not a question I am required to determine. All that I need to determine is whether Mr Bateson has demonstrated that there is a serious question to be tried as to whether the interest in the land which is claimed in the caveat exists.
I turn, then, to considerations relevant to the balance of convenience.
4. Balance of convenience considerations
Mr Bateson points to a number of matters which he says are relevant to the balance of convenience.
First, Mr Bateson says that the lapse of the caveat will remove any chance of him recovering any moneys from the property. An important factor in considering where the balance of convenience lies is that removal of a caveat will in many cases have the effect of destroying the benefit of the proprietary interest claimed in the caveat: see Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50.
However, that is not, inevitably, a conclusive consideration in favour of the extension (or against the removal) of a caveat. The Court retains a discretion as to whether to make the order sought. In Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95, which concerned an application to show cause why a caveat should not be removed under s 138 of the TLA, Pullin JA observed (at [22]):
It is true that experience shows that parties are most commonly in dispute about the existence of a caveatable interest. Balance of convenience issues are usually of little or no significance where the caveator claims an estate in fee simple or a leasehold estate. In those fairly common cases, it is 'unusual', as Owen J states, that once an arguable case is made out by the caveator that there is such a caveatable interest, that balance of convenience issues will result in removal. However, if for example the interest claimed by the caveator is a security interest or an interest in competition with another claimant against the registered proprietor, then balance of convenience issues may become decisive.
This case is a case of the kind to which his Honour was referring. I will return to this issue in a moment.
Secondly, Mr Bateson points to the fact that he suffers from some health issues at present, and is in some financial difficulty as he is not presently employed.
Thirdly, Mr Bateson points to the fact that he has commenced proceedings in the District Court to recover the money he claims is owed to him by Mr and Mrs Jones.
Fourthly, Mr Bateson suggested that the Bank had engaged in impropriety in permitting the sale of the property when caveats are still registered. That is not what is occurring, having regard to the affidavit material before me. The purchasers were, as a condition of the contract of sale of the property, put on notice about the existence of the caveats over the property. As I have noted, the other two caveators have apparently agreed, at least in principle, to remove their caveats. The present application is concerned with whether or not Mr Bateson's caveat should be extended.
The essence of Mr Bateson's complaint of impropriety in the Bank's conduct, however, is that he claims that the Bank wrote to him on 12 September 2012 and advised that the property had been sold. (A copy of that letter is annexed to Mr Bateson's affidavit of 17 December 2012.) Mr Bateson claims that that was a misrepresentation. However, I note that the contract of sale was entered into on 6 September 2012. There does not appear to be any evidence before the Court of any illegality or impropriety on the part of the Bank in selling the property.
Fifthly, Mr Bateson submitted that the Bank was effectively liable for the debts of Mr and Mrs Jones which attach to the property because it is exercising its mortgagee's power of sale. Mr Bateson relied on s 52 of the Property Law Act 1969 (WA) in support of this submission. Section 52 does not support the submission and I am unable to see any basis, upon the material before me, on which it might be said that the Bank is liable for the debts of Mr and Mrs Jones, which might be said to attach to the property and which are the subject of the caveats registered over the property.
Finally, Mr Bateson submits that his interest in the property is more valid than the Bank's because his interest in the property represents his economic and physical wellbeing, and represents a loss of income for him, as compared with the position of the Bank, which Mr Bateson contends would hardly be significantly affected by the outstanding debt owed to it.
Against these considerations, however, there are a number of countervailing factors.
The first is that while the sale of the property is delayed, Mr and Mrs Jones and the other caveators are potentially prejudiced. That is because the delay in the sale means that the interest owed by Mr and Mrs Jones to the Bank continues to increase, with the result that the surplus which will remain, if and when the property is eventually sold, is decreasing. As a result, in turn there will be less available for those claiming an entitlement to the surplus.
I note that Mr Jones was not present in Court today and that the other caveators have not been joined and are not present. However, given my conclusion in relation to the present application no immediate difficulty arises from their absence. However, particularly in view of the fact that Mr Bateson seeks an extension of the caveat for a year, I note that the potential prejudice to these parties by the extension of the caveat may well be significant.
Mrs Jones also points to the fact that she and her husband have experienced stress as a result of the delay in the sale of the property by the mortgagee and that they are presently in financial difficulties themselves.
I note that there may also be a prejudice to the purchasers of the property as a result of any delay in the sale of the property and as they are not joined as parties, they are not here to advance submissions in relation to any such prejudice. However, again, given the conclusion I have reached with respect to other factors, their absence causes no present difficulty.
The Bank points to the fact that Mr Bateson has not provided an undertaking in the usual terms in support of his application for an extension of the caveat. As a result of observations Mr Bateson made when he appeared before the Court on 13 December 2012 I understood that Mr Bateson was willing to provide such an undertaking. Counsel for the Bank in any event submitted that any undertaking offered by Mr Bateson in relation to the extension of the caveat would be inadequate because of Mr Bateson's present financial position, unless he offered some form of security for his undertaking. Absent some security for an undertaking, counsel for the Bank submitted that the application to extend the caveat should be refused. Mr Bateson submitted that his present financial position meant that he was not in a position to offer any security for an undertaking.
In the context of an application for an interim injunction an undertaking as to damages is often described as the price a plaintiff must pay for the injunction, and as such it is a very important, if not essential, means of preventing injustice before the rights of the parties have been determined. The same rationale applies in relation to an application to extend a caveat. However, the value (or lack thereof) of an undertaking is not determinative against the grant of relief. In Iron Resources Pty Ltd v Argyle Iron Ore Pty Ltd [2009] WASC 20, Newnes J, as his Honour was then, observed (at [41]):
Where the financial position of a plaintiff is such that it is unable to give an undertaking as to damages which has real value, the fact that the undertaking as to damages has little or no value is not conclusive as to the result of an application for an interlocutory injunction.
See also the decisions referred to by his Honour: Allen v Jambo Holdings Ltd [1980] 2 All ER 502; and Custom Credit Corporation Ltd v Whitehall Holdings Pty Ltd (Unreported, WASC, Library No 920231, 7 April 1992).
What is clear from these decisions is that the value (or lack thereof) of an undertaking as to damages is a relevant but not determinative consideration in determining where the balance of convenience lies overall.
However, in this case it is not necessary to determine what weight should be attributed to the absence of an undertaking because of the final factor relied on by the Bank, which weighs against the extension of the caveat, namely that Mr Bateson has no basis to stand in the way of the exercise by the Bank, as the first registered mortgagee over the property, of its right as a mortgagee in possession to sell the property.
In His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15, Barker J considered in some detail the resolution of balance of convenience considerations in a situation where a caveator (the Church) sought to maintain its caveat over land as against the interests of a bank which held a registered mortgage over the land. The Church had initially been the registered proprietor of the land but claimed that the subsequent registered proprietor had become registered on a number of impeachable grounds. The Church therefore sought relief, including an order that the registered proprietor convey the land to the Church. It lodged a caveat to protect its interest.
The Court accepted that there was a serious issue to be determined in the action between the Church and the registered proprietor of the land that supported the maintenance of the caveat as against the registered proprietor. The question then was whether the caveat should be extended, having regard to the interest of the bank, which sought to exercise its power of sale under the mortgage. Barker J considered the relevant principles in his decision (at [63] ‑ [64]):
… [C]ounsel for the Church relied on the principle highlighted in the unreported decision of White J in this Court in R and I Bank of Western Australia Ltd v Lavery, unreported; SCt of WA; Library No 930567; 25 October 1993, when, at p 8, his Honour stated:
'In this State the exercise of a power of sale by a mortgagee is improper only if that power is not exercised in good faith, that is to say, the sale thereunder can be impeached only in the circumstances that the mortgagee has not acted bona fide by fraudulently, wilfully or recklessly sacrificing the interests of the mortgagor: Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138; Cachalot Nominees Pty Ltd v Prime Nominees Pty Ltd [1984] WAR 380, 393; General Credits Ltd v Southern Goldfields Ltd (1991) ANZ Convey Rep 40, 42; Southern Goldfields Ltd v General Credits (supra) at 142, 148.'
Similar approaches to the question of whether a caveat can be maintained to prevent the exercise of a power of sale of a mortgagee are to be found in other jurisdictions. For example, in Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 at 228, Holland J, having observed that the right to caveat is given by statute, not for the purpose of giving notice to the world by the caveator to an estate or interest in the land, but for the purpose of protecting the caveator's interests from being defeated by the registration of a dealing without the caveator having had the opportunity to invoke the assistance of the court to give effect to his interest, then stated as follows:
'If the foregoing correctly describe the nature and purpose of a caveat, it would seem to me to follow that a caveator should have no right to prohibit registration of a dealing to which his alleged interest in the land would not entitle him to object, if he were to invoke the assistance of the court. A subsequent encumbrancer, registered or unregistered, has no right whatever to interfere in, or object to, a proper exercise by a mortgagee of the mortgagee's power of sale, and would have no ground on which to seek the intervention of the court, notwithstanding the fact that registration of the transfer to the purchaser would discharge or defeat all mortgage interests in the land whether registered or not ...
The only class of case which the defendants suggest might lead the court, at the instance of a subsequent mortgagee or encumbrancer, to interfere to restrain registration of a transfer to a purchaser upon the exercise of a mortgagee's power of sale is that of fraudulent or improper sales, such as were instanced above. Assuming for the moment that the mere possibility of a fraudulent or improper mortgagee's sale would entitle the holder of an unregistered mortgage to lodge a caveat prohibiting the registration of all dealings with the land except upon notice to him, it would not follow, in my opinion, that a caveator would be justified in continuing to maintain his caveat, when requested by the mortgagee to withdraw it for the purpose of promoting the prospects of a successful sale by the mortgagee, when the caveator could not point to any circumstance suggesting that the mortgagee was, or might be, going to exercise his powers improperly, or might fail to apply surplus proceeds in the manner required by the law.'
The same principles appear to me to be applicable in this case. The Bank's mortgage was registered prior to Mr Bateson's caveat (which asserts his unregistered equitable interest in the property). There is no evidence to suggest that the Bank is acting fraudulently or improperly in relation to the exercise of its power of sale as mortgagee. The Bank proposes to retain the surplus funds from the sale to be distributed amongst the caveators by agreement between them, or pursuant to an order of the Court. Counsel for the Bank has indicated that the Bank is amenable to an order of the Court to confirm that that will occur, although there may be some question about whether an order could properly be made in these proceedings to that effect. I will discuss that with counsel in a moment.
In reaching the conclusion that I have, I am mindful of the fact that Mr Bateson has been unrepresented and so may not have been in a position to put any countervailing consideration before the Court in relation to the considerations or the principles referred to by Barker J in the Macedonian United Society case. However, I am unable to envisage any submission which could have been made on his behalf which might have warranted a different conclusion being reached.
In my view, notwithstanding the factors pointed to by Mr Bateson, and having regard in particular to the fact that Mr Bateson has, so far as it seems to me, no basis to stand in the way of the first registered mortgagee selling the property pursuant to a power of sale, and having regard to the prejudice liable to be suffered by Mr and Mrs Jones as a result of the delay in the sale of the property, and to the potential prejudice liable to be suffered by the other caveators as a result of any further delay in the sale of the property, I have concluded that the balance of convenience does not support the grant of the extension of the caveat.
Notwithstanding that I have accepted that Mr Bateson has demonstrated there exists a serious question in relation to his interest in the land, in my view the balance of convenience in this case weighs so heavily against the grant of an extension of the caveat that Mr Bateson's application should be dismissed.
5. The orders which should be made
I turn then to the orders which should be made. I propose first to make an order that the application should be dismissed and I will hear from counsel for the Bank as to whether in fact any order can properly be made in this proceeding to reflect the fact that the Bank intends to hold the surplus funds from the settlement of the sale of the property in its solicitor's trust account.
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