BD78 Pty Ltd v Fgk3gen Pty Ltd - [2022] VSC 361

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
PRACTICE COURT

S ECI 2022 02223

BD78 PTY LTD (ACN 619 360 271) AS TRUSTEE FOR THE BD78 UNIT TRUST	First Plaintiff
BSS1 PTY LTD (ACN 619 324 346) AS TRUSTEE FOR THE BSS1 UNIT TRUST	Second Plaintiff
v
FGK3GEN PTY LTD (ACN 643 293 207)	First Defendant
REGISTRAR OF TITLES	Second Defendant

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JUDGE:	Ginnane J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 and 22 June 2022
DATE OF JUDGMENT:	23 June 2022
CASE MAY BE CITED AS:	BD78 Pty Ltd v FGK3GEN Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 361

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REAL PROPERTY – Removal of caveat – Loan agreement giving right to lodge caveat – Equitable mortgage – Borrowers seek removal of caveat to enable refinancing of another loan secured by mortgage – Discretionary considerations – Repayment of Loan amount –Caveator’s other possible claims under Loan agreement – Balance of convenience – Removal of caveats subject to conditions – Costs – Transfer of Land Act 1958 s 90(3).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms G Costello QC with Mr J Masters	Gadens Lawyers
For the First Defendant	Mr V Murano	Kyriacou Lawyers Pty Ltd

HIS HONOUR:

The plaintiffs’ summons seeks an order under s 90(3) of the Transfer of Land Act 1958 for the removal of a caveat on the titles of land at Braeside. The first defendant’s caveat claims as its estate or interest, ‘interest as Mortgagee’. The prohibition in the caveat states ‘unless I/we consent in writing’. The caveat was registered on 11 March 2022. The first defendant loaned the amount of $1,900,000 to the plaintiffs under a Loan Agreement dated 5 October 2020.

On 31 August 2020, the plaintiffs as vendors and the first defendant as purchaser entered into a contract of sale of land at Braeside for $12.7 million (‘the Contract’). On 25 September 2020, the plaintiffs as borrowers granted a mortgage of the land to a number of persons who lent them the amount of $6,900,000, under what was described as the first loan agreement.

The plaintiffs contend that the first defendant’s caveat is preventing them refinancing the first loan agreement secured by a registered mortgage over the property. The plaintiffs envisage refinancing the first loan agreement and repayment of the sum of $1,900,000 to the first defendant, subject to the simultaneous withdrawal of the caveat. They wish to refinance the first loan on 24 June 2022 as they are in default under the mortgage. The solicitor for the existing mortgagees emailed the plaintiffs’ solicitors on 31 May 2022 stating:

Further to your email to our office of the 30^th May 2022 as the repayment date is now 2 months overdue our clients have instructed us to issue a Callup Notice unless we are advised of a definite settlement date.
We await your response.

The plaintiffs contend that the incoming financier requires clear title and to that extent the caveat prevents the refinancing occurring.

The first…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] VSC 361
Decision Date: 23 June 2022

CaseChat Overview and Summary

BD78 Pty Ltd took action against Fgk3gen Pty Ltd in the Supreme Court of Victoria, seeking the removal of a caveat lodged by Fgk3gen over a property. The property served as security for a loan between the parties, and the issue at hand was whether the caveat could be removed to facilitate the refinancing of another loan secured by a mortgage on the property. The court was required to balance various legal considerations, including the discretion to remove the caveat, the likelihood of the loan being repaid, and the potential claims the caveator might have under the loan agreement. Additionally, the court had to consider the balance of convenience and whether the removal of the caveat should be conditional.

The court examined the loan agreement between the parties, which included a provision allowing the lender to lodge a caveat if the borrower defaulted. The court found that while the borrower had defaulted, the lender had not yet exercised its right to enforce the loan. The court also considered the borrower's ability to refinance the loan and the potential prejudice to the lender if the caveat was removed. In light of these factors, the court exercised its discretion to remove the caveat, but subject to certain conditions to protect the lender's interests. The court ordered that the caveat be removed upon the borrower providing satisfactory evidence of the refinancing and paying certain costs.

The court's decision was grounded in the statutory provisions of the Transfer of Land Act 1958, which grants the court the power to remove a caveat if it is satisfied that the caveator no longer has a valid interest in the land. The court applied the discretionary considerations outlined in the Act, weighing the rights and interests of both parties. The final orders included the removal of the caveat subject to the conditions specified by the court, and the payment of costs by the borrower.

Orders