Broadway Homes Pty Ltd v Commercial N Pty Ltd
[2025] WASC 212
•30 MAY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BROADWAY HOMES PTY LTD -v- COMMERCIAL N PTY LTD [2025] WASC 212
CORAM: WHITBY J
HEARD: 30 APRIL 2025
DELIVERED : 30 MAY 2025
FILE NO/S: CIV 1339 of 2025
BETWEEN: BROADWAY HOMES PTY LTD
Plaintiff
AND
COMMERCIAL N PTY LTD
First Defendant
NECULAI CALIN
Second Defendant
REGISTRAR OF TITLES
Third Defendant
Catchwords:
Real property - Application to extend operation of caveat - Application dismissed upon agreement of the parties - Appropriate costs orders - Indemnity costs ordered where plaintiff's application doomed to fail
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Transfer of Land Act 1893 (WA)
Result:
Plaintiff's application dismissed
Plaintiff pay the first defendant's costs on an indemnity basis
Category: B
Representation:
Counsel:
| Plaintiff | : | L C A Palmos & H D Playford |
| First Defendant | : | B Keane SC & G Kugananthan |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Palmos Legal |
| First Defendant | : | Summer Lawyers |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Case(s) referred to in decision(s):
Bateson v Jones [2013] WASC 8
Bride v The Registrar of Titles [2015] WASC 11
Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Frigger v Lean [2012] WASCA 66
Frigger v Professional Services of Australia Pty Ltd [No 2] [2011] WASCA 103 (S)
Melbourne Property Group Pty Ltd v SC Australia Pty Ltd [2013] VSC 701
Re S&D International Pty Ltd (in liq)(receiver and manager appointed) [2009] VSC 225
Rowe v National Australia Bank Ltd [2019] WASCA 140
Wichniewicz v Registrar of Titles [2014] WASC 18
Yara Australia Pty Ltd v Oswal [2012] WASCA 264
WHITBY J:
Introduction and summary
On 1 April 2025, Broadway Homes Pty Ltd, the plaintiff, filed an application by originating summons for an order, pursuant to s 138C or alternatively s 138B(2)(a) of the Transfer of Land Act 1893 (WA) (TLA) extending the operation of caveat P918613 (Caveat) registered by the plaintiff against the second defendant's property at 51 Belladonna Drive, Yangebup (Property).
The plaintiff's application was supported by the affidavit of Mark Basso‑Brusa sworn on 1 April 2025 (Basso-Brusa Affidavit), the affidavit of Henry David Playford sworn on 22 April 2025 (Playford Affidavit), a certificate of urgency filed on 1 April 2025 and an undertaking as to damages filed on 1 April 2025.
The first defendant, Commercial N Pty Ltd, opposed the extension of the Caveat and relied upon the affidavit of Sanam Mirchandani affirmed on 14 April 2025 (save for [3], [27] and [29] which were not relied upon) (Mirchandani Affidavit) and the affidavit of Morgan Ng affirmed 30 April 2025.
Neculai Calin, the second defendant and registered proprietor of the Property, did not enter an appearance.
The Registrar of Titles, the third defendant, indicated by letter to the solicitors for the plaintiff dated 2 April 2025, that it did not intend to enter an appearance in the action provided no claims are made against it, no orders as to costs is made against it and it is able to give effect to the terms of the orders made by the court.
The application was listed for final hearing before me on 30 April 2025. After hearing counsel for the plaintiff and senior counsel for the first defendant, I stood the matter down to allow the parties to confer on a potential resolution of the matter.
The hearing reconvened on the afternoon of 30 April 2025. The parties were ultimately able to reach agreement as to the form of an undertaking provided by the first defendant. That undertaking was:
I, Morgan Ng, of Suite 299, 1 Barratt Street, Hurstville in the State of New South Wales, director of the First Defendant Commercial N Pty Ltd (ACN 627 478 997), do hereby undertake on behalf of First Defendant to the Court as follows:
1.The following terms apply to this undertaking.
a.Caveators: The entities in whose favour the Caveats were registered against the Land.
b.Caveats: The caveats that were registered against the Land and were assigned the following dealing numbers: P504091, P710073, P712042, P770737, P780347, P794458, P913624, P918613.
c.Contract means the contract of sale between the Mortgagee and Michelle Leanne Beale and Mario Carcione dated 18 February 2025 for the sale of the Land.
d.Land: Lot 217 on deposited plan 44206 and comprised in Certificate of Title Volume 2590 Folio 886, commonly known as 51 Belladonna Drive, Yangebup, Western Australia.
e.Mortgagee: Commercial N Pty Ltd, the First Defendant to the Proceeding.
f.Mortgagor: Neculai Calin, the Second Defendant to the Proceeding.
g.Proceeding: Supreme Court of Western Australia proceeding CIV 1339 of 2025 Broadway Homes Pty Ltd v Commercial N Pty Ltd & Ors.
h.Settlement: The completion of the sale of the Land pursuant to the Contract.
i.Surplus: Any proceeds of the sale of the Land that are available after the Mortgagee has disbursed the proceeds of the sale in accordance with sections 109(1)(a) and (b) of the Transfer of Land Act 1893 (WA).
2.The Mortgagee undertakes to do the following:
a.The Mortgagee shall take all reasonably necessary steps that it is able to take to promptly achieve Settlement on or before 1 May 2025 or as soon as practicable thereafter.
b.As soon as reasonably practicable following Settlement, the Mortgagee shall deposit the Surplus in an interest‑bearing trust account.
c.As soon as reasonably practicable after Settlement, the Mortgagee shall write to each of the Caveators and the Mortgagor and:
i.confirm the value of any Surplus;
ii.invite each Caveator and the Mortgagor to confirm in writing whether they intend to make a claim to some or all of the Surplus;
iii.invite the Caveators to reach an agreement between themselves as to the order of priority in which the Surplus can be distributed; and
iv.advise that a response is requested within 14 days after the date of the Mortgagee's written correspondence described above.
d.If an agreement is reached within that 14 day period, the Mortgagee shall pay out the Surplus in accordance with the agreement's terms.
e.If, after 14 days of the communication referred to in paragraph 2(c) above, or after other period time as agreed between the Caveators, no agreement is reached in the nature contemplated by paragraph 2(c), the Mortgagee shall take the necessary steps to pay the surplus into the Supreme Court of Western Australia.
3.If for any reason the sale of the Land is not effected in the Settlement, then the Mortgagee undertakes to perform the substance obligations of this undertaking in relation to any subsequent sale of the Land.
I made orders that, upon that undertaking, the Caveat lapse and the plaintiff's originating summons be dismissed. After hearing both parties' submissions as to costs, I reserved my decision as to costs.
The parties are diametrically opposed as to whom ought pay the costs of the application. The plaintiff submits that the first defendant should pay its costs of the application on an indemnity basis. The first defendant submits that the plaintiff should pay its costs of the application on an indemnity basis.
For the reasons that follow, I order that the plaintiff pay the first defendant's costs of the application on an indemnity basis.
Background
It is first necessary to set out the background relevant to the plaintiff's application.
The plaintiff is a Perth-based residential construction company. On 22 February 2022, the plaintiff, as builder, and the second defendant, as owner, entered into a written building contract for the construction of a residential dwelling on the Property (Agreement).[1]
[1] Basso-Brusa Affidavit [5]; Annexure MMB‑02.
As at 1 April 2025, the second defendant owed an amount of $569,271.80 to the plaintiff in accordance with the Agreement, exclusive of interest and charges.[2]
[2] Basso-Brusa Affidavit [8].
Clause 6 of the Agreement provides:[3]
Security
The Owner hereby charges the land constituting the Site with the due payment to the Builder of all the monies that will and/or may become payable hereunder and irrevocably authorises and consents to the Builder lodging an absolute caveat in respect of the Site to protect the Builder's interests herein.
[3] Basso-Brusa Affidavit [7]; Annexure MMB-02.
On 14 March 2024, the plaintiff lodged the Caveat over the Property pursuant to the Agreement.[4]
[4] Basso-Brusa Affidavit [9]; Annexure MBB-04.
The first defendant holds a registered mortgage over the Property.[5]
[5] Basso-Brusa Affidavit [11]; Annexure MMB-06.
On 24 March 2024, Landgate issued a notice to the plaintiff, on the application of the first defendant, pursuant to s 138B of the TLA stating that the Caveat will lapse at midnight on 15 April 2024 unless an order is obtained from the court extending the Caveat.[6]
[6] Basso-Brusa Affidavit [18]; Annexure MBB-12.
On 1 April 2025, the plaintiff filed this application for orders extending the operation of the Caveat pursuant to s 138C(1) of the TLA.
On 2 April 2025, I made orders to extend the operation of the Caveat until further order of the court and listed the hearing of the plaintiff's substantive application to 30 April 2025.
As at 8 April 2025, there were eight caveats, including the Caveat, registered against the certificate of title of the Property.[7]
[7] Mirchandani Affidavit [9]; Annexure SM‑1.
As at 30 April 2025, the first defendant was in possession of the Property and had entered into a contract of sale for the Property.[8]
[8] Mirchandani Affidavit [21]; Annexure SM‑6.
At the hearing of this matter on 30 April 2025, I made orders by agreement of the parties that upon the undertaking of the first defendant, the Caveat would lapse and the proceeding be dismissed.
The first issue to consider is which party should pay the costs, before I consider on what basis I should order the costs to be paid.
Who should pay the costs of the application?
Pursuant to s 37 of the Supreme Court Act 1935 (WA), the court has a wide discretion to award costs. This is subject to the requirement that the discretion must be exercised judicially.[9]
[9] Frigger v Lean [2012] WASCA 66 [53].
Order 66 r 1(1) of the Rules of the Supreme Court 1971 (WA) provides that the costs of, and incidental to all proceedings shall be in the discretion of the court, but the court will generally order that the successful party to an action or matter, recover its costs. This is often referred to as the usual order as to costs and/or the rule that costs follow the event.
In determining who is the successful party, the question to be answered is who was successful in the 'underlying, real contest' between the parties.[10]
[10] Frigger v Professional Services of Australia Pty Ltd [No 2] [2011] WASCA 103 (S) [12].
Where a matter, such as in this case, resolves without a determination on the merits, the court is deprived of the mechanism that usually determines the appropriate costs order. While the court will not try a hypothetical action between the parties, in order to determine who should bear the costs of the application, it is appropriate, and I am in a position to do so having reviewed the evidence and submissions of the parties, to have regard to which party would have been ultimately successful in the application.
In order to succeed on its application to have the Caveat extended pursuant to s 138C of the TLA, the plaintiff had the onus of satisfying me that:
(1)the plaintiff's claim has or may have substance, that is, that there is a serious question to be tried as to the existence of a proprietary right in the Property[11]; and
(2)the balance of convenience favours the maintenance of the Caveat.
[11] Bride v The Registrar of Titles [2015] WASC 11 [14].
In relation to the serious question to be tried, the claim made by the plaintiff clearly relates to a proprietary interest in the Property. The plaintiff and the second defendant, as parties to the Agreement, have expressly provided for the Property to be appropriated for the discharge of an outstanding debt under the Agreement. This gives rise to a proprietary interest in the Property capable of protection by caveat. The first defendant does not dispute that, at least on a prima facie basis, the plaintiff has a proprietary interest in the Property.[12]
[12] First defendant's outline of submissions filed 14 April 2025 [5].
However, the first defendant submitted that the balance of convenience favoured the refusal of an extension of the Caveat in circumstances where there were competing claims to the surplus funds from the sale of the Property by the eight caveators. The first defendant proposed to contact each of the caveators to seek a joint agreement as to payment of the surplus funds, failing which it intended to make an application to pay the surplus funds into court.
The plaintiff submitted that the balance of convenience favours the extension of the Caveat. The plaintiff did not seek to delay the settlement of the sale of the Property to the third party. Rather, the plaintiff submitted that the sale of the Property could proceed on the basis that it would withdraw the Caveat in exchange for the payment of the surplus funds.[13]
[13] Playford Affidavit [3]; Annexure HDP-01.
Counsel for the plaintiff submitted that the first defendant's failure to provide it with details of the proposed sale of the Property and the amount of any estimated surplus funds was unreasonable and necessitated the bringing of this application.
In my view, the plaintiff's application was doomed to fail for the following reasons:
(1)pursuant to s 109 of the TLA, the sale proceeds of the Property shall be applied firstly, in payment of expenses, secondly in payment of moneys owed to the first defendant under the mortgage and thirdly, in payment of money owing in respect of any subsequent mortgage or charge in order of their respective priorities;
(2)a caveator should not stand in the way of the registered mortgage holder exercising its rights under the mortgage;[14]
(3)there is no obligation for a mortgagee in possession to account to caveators. The obligation to account to the mortgagor and/or other creditors of the mortgagor only arises upon the settlement of the sale of the Property and upon the satisfaction of the mortgagee's interest and associated costs;[15]
(4)where there are competing creditors in relation to surplus funds, the appropriate course for the first defendant to take is that which it consistently foreshadowed to the plaintiff - to pay the surplus funds into court in the absence of agreement between the competing creditors as to payment of the surplus; [16] and
(5)the plaintiff's unregistered equitable interest will not, merely by removal of the Caveat, be extinguished.[17]
[14] Bateson v Jones [2013] WASC 8 [44] - [50] (Pritchard J).
[15] Melbourne Property Group Pty Ltd v SC Australia Pty Ltd [2013] VSC 701 [47] ‑ [57]; Rowe v National Australia Bank Ltd [2019] WASCA 140 [144] ‑ [151].
[16] Re S&D International Pty Ltd (in liq)(receiver and manager appointed) [2009] VSC 225 [159]; Melbourne Property Group Pty Ltd v SC Australia Pty Ltd [53].
[17] Wichniewicz v Registrar of Titles [2014] WASC 18 [25].
Accordingly, the plaintiff should pay the first defendant's costs of the application.
Indemnity costs?
The second issue for determination is the basis upon which those costs should be paid. The first defendant seeks its costs on an indemnity basis.[18]
[18] ts 23.
An award of indemnity costs is appropriate where the action has been commenced or continued in circumstances where the applicant, properly advised, should have known that it had no chance of success.[19]
[19] Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401 applied in Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33].
For the reasons I have outlined, the plaintiff's application was doomed to fail. On 5 February 2025, the solicitors for the first defendant wrote to the solicitors for the plaintiff by email and said the following:[20]
[20] Basso-Brusa Affidavit [15].
…
6. Our client's proposal to pay any surplus funds into Court is a standard process that takes place when a mortgagee sells a property and there are numerous competing interests on title which sit behind the mortgage. It is not unusual for a mortgagee to seek either an agreement in writing from all interested parties as to how any surplus is be disbursed, nor is it unusual for a mortgagee to pay that surplus into Court in circumstances where no agreement is reached between the subsequent interest holders …
7.It is unreasonable for your client to object to this course of action in circumstances where there are a number of caveators claiming an interest in the Land, and each of those caveats predates the registration of your client's caveat.
8.If your client does not withdraw its caveat as requested, we will seek instructions to issue a lapsing notice to remove your client caveat. If your client chooses to bring an application to maintain its caveat, we will seek instructions to defend those proceedings. As you would be aware, such applications are determined on whether the balance of convenience favours maintaining the caveat.
9.In circumstances where:
a.our client has a registered mortgage over the Land;
b.its mortgage secures monies owing to it by the Mortgagor;
c.there are numerous competing interests on the title of the Land; and
d.our client is ready, willing and able to sell the Land and pay any surplus funds into Court upon completion of the sale,
a Court is likely to order the removal of your client's caveat to enable a mortgagee sale to proceed.
10.If our client is required to defend an application by your client to extend the operation of its caveat, then we put you on notice that we will seek our client's costs of defending the application from your client on an indemnity basis.
It was, in my view, unreasonable for the plaintiff to commence these proceedings in circumstances where it was doomed to fail and it was on notice that the first defendant would seek indemnity costs.
Further, in my view, an order for indemnity costs against the plaintiff is appropriate to reflect the court's disapproval of the plaintiff's conduct in commencing and continuing to prosecute these proceedings to final hearing.
Orders
I order that the plaintiff pay all the costs incurred by the first defendant, except insofar as they are of an unreasonable amount or have been unreasonably incurred so that, subject to those exceptions, the first defendant is completely indemnified for its costs of this proceeding.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CS
Associate to the Hon Justice Whitby
30 MAY 2025
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