Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd

Bayblu Holdings Pty Ltd (the applicants) sought to appeal a decision of the primary judge concerning the removal of caveats lodged by them over certain properties. Capital Finance Australia Ltd (the respondent) was the first mortgagee of these properties and had exercised its power of sale. The dispute centred on whether the applicants, who held a subsequent interest in the land, were entitled to maintain caveats that would prevent the completion of the sale to a third-party purchaser. The appeal was heard in the Court of Appeal of New South Wales.

The legal issues before the Court of Appeal included whether the primary judge erred in removing the caveats, and in doing so, whether he correctly applied the test for the removal of a caveat, which is whether the caveator would have been granted an interlocutory injunction to protect the interest claimed. This involved considering the "serious question to be tried" and "balance of convenience" limbs of the test for interlocutory injunctions, and the relevance of various factors to the balance of convenience, such as the sufficiency of the sale proceeds to repay the mortgage, the financial position of the mortgagor, the mortgagor's willingness to bring the amount owed into court, and the effect on third parties. The court also considered the principle that a party with an interest in land subject to a mortgage is usually not entitled to maintain a caveat if the sale proceeds are entirely payable to the first mortgagee.

The Court of Appeal affirmed the primary judge's reasoning. It held that the test for removing a caveat is whether an interlocutory injunction would be granted to protect the claimed interest. In this case, the applicants would not receive any surplus proceeds from the sale, meaning the effective value of their legal title was zero, and maintaining the caveats would not protect a proprietary right of value. The court found that the balance of convenience did not favour the applicants, particularly given their precarious financial position, their failure to bring the amount owed into court, and their lack of an undertaking as to damages. These factors indicated a lack of preparedness to do equity and an unwillingness to place their assets at risk to maintain the caveats.

The Court of Appeal dismissed the summons for leave to appeal, ordering that the applicants pay the respondent's costs.