Business Acquisitions Aust Pty Ltd v FTFS Holdings Pty Ltd

[2006] NSWSC 977

CITATION:	Business Acquisitions Aust Pty Ltd v FTFS Holdings Pty Ltd [2006] NSWSC 977
HEARING DATE(S):	6 September 2006
JUDGMENT DATE :	6 September 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	09/06/2006
DECISION:	Caveat extended; Defendant to pay costs on indemnity basis.
CATCHWORDS:	CAVEATS – COSTS – Defendant sought order for removal of Plaintiff’s caveat – application failed – Defendant then lodged lapsing notice – whether conduct unreasonable.
LEGISLATION CITED:	Real Property Act 1900 (NSW) – s.74J, s.74K, s.74NA
PARTIES:	Business Acquisitions Australia Pty Ltd – Plaintiff FTFS Holdings Pty Ltd - Defendant
FILE NUMBER(S):	SC 4581/06
COUNSEL:	M.H. Southwick – Plaintiff Ms P.A. Ryan – Defendant
SOLICITORS:	Edwin Davey Lawyers – Plaintiff Accentro Legal – Defendant

Introduction

1 The present Defendant in these proceedings, FTFS Holdings Pty Ltd (“FTFS”), has previously commenced proceedings against the present Plaintiff, Business Acquisitions Australia Pty Ltd (“BAA”), seeking an order under s.74NA of the Real Property Act 1900 (NSW) for the removal of a caveat number AC517246U lodged by BAA against the land of FTFS.

2    The application by FTFS was heard by me on a final basis on 14 August 2006. In an ex tempore judgment delivered on that day I held that none of the grounds for invalidity of the caveat had been made out by FTFS and, accordingly, its Summons was dismissed with costs: see FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSW SC 846. The consequence, of course, was that the caveat lodged by BAA remained on the title.

3 Four days after the delivery of that judgment, that is, on 18 August 2006, FTFS lodged a lapsing notice in respect of that caveat. BAA's solicitors were served with the lapsing notice on 31 August 2006. On the same day, Counsel for BAA sought and obtained leave to serve a Summons seeking an extension of the caveat pursuant to section 74K of the Real Property Act on short notice.

4    When that Summons was called on in the Duty Judge's list the following day, counsel for FTFS, Ms Ryan, informed the Court that the Summons was opposed, that she was not then ready to proceed with the matter and a timetable for further affidavits proposed by Ms Ryan was then adopted. Both parties have filed affidavits and the Summons filed by BAA has now come on before me for a final hearing.

5 The Summons seeks a declaration that BAA has a caveatable interest in the land of FTFS, as claimed in the caveat, an order that FTFS's lapsing notice be set aside, and an order under s.74K of the Real Property Act extending the caveat until further order of the Court. I should observe at the outset that the declaration sought in the Summons is unnecessary and inappropriate. In the previous proceedings I held that BAA had demonstrated that it had a prima facie case that it had the security interest in the land of FTFS which it claimed in the caveat so that the Court would not order removal of the caveat. Whether that interest as claimed is established is not for this Court to decide on a final basis in proceedings such as this. The validity of the claim by BAA will be tested elsewhere, as I shall explain shortly.

6 The affidavits filed by FTFS in opposition to the present Summons appeared to raise the dispute as to whether FTFS had in fact agreed to be bound by the Mandate Agreement under which BAA claims the security interest which was the subject of debate in the previous proceedings. However, Ms Ryan has confined her submissions today to the following points which I summarise thus. FTFS was entitled to lodge a lapsing notice under s.74J(1) of the Real Property Act because:

– it disputed the debt claimed by BAA, which was the subject of the claimed security interest in the land of FTFS;

– BAA had demonstrated only a prima facie case in the previous proceedings that there was such a debt in existence;

– BAA had not issued a tax invoice or demand on FTFS stating the amount claimed;

– BAA had not commenced proceedings in the appropriate court to establish the validity of the claim;

– FTFS was seriously impeded in the use of its land by the existence of the caveat and required its urgent removal.

7    The evidence adduced in the application before me, none of which was challenged in cross examination, showed that on 17 August 2006 BAA issued to FTFS an invoice for the debt claimed under the Mandate Agreement in the sum of $83,000. FTFS lodged the lapsing notice after the issue of BAA's invoice.

8    On 23 August 2006, BAA served on FTFS a notice demanding payment of the claimed debt within fourteen days, which period expires today.

9    On 31 August, BAA's solicitors received the lapsing notice. After receipt of the lapsing notice BAA's solicitor had a conversation with FTFS' solicitor in which the latter said that FTFS was intent on pursuing the lapsing notice and that BAA would have to file a Summons to remove it. BAA filed and served the present Summons on 31 August 2006.

10    On 1 September 2006 FTFS's solicitor sent a letter to BAA's solicitor enquiring when BAA proposed to commence proceedings to establish the validity of its claim under the Mandate Agreement.

11    BAA's solicitor has drafted a Statement of Claim in the District Court to establish its claim, which will be filed upon expiry of the fourteen day period allowed in the notice of demand served on FTFS on 23 August.

12    Neither FTFS nor its solicitors had made any inquiry from BAA or its solicitors before lodging the lapsing notice or before serving the lapsing notice or, indeed, before 1 September 2006 as to whether or when BAA intended to commence proceedings to establish its claim under the Mandate Agreement.

13    Mr Southwick of Counsel, who appears for BAA, informs the Court that BAA is perfectly willing and has always been willing to undertake to the Court to prosecute diligently its claim under the Mandate Agreement as its conduct since 14 August 2006 has demonstrated. He says therefore that the lodgment of the lapsing notice by FTFS without prior inquiry from BAA and its solicitors as to whether proceedings to enforce the claim would be commenced was premature and unreasonable and has occasioned unnecessary expense. He submits that the caveat should be extended upon the usual condition imposed in such cases, namely, that BAA undertake to the Court to prosecute its claim in the District Court with all due expedition. He says that FTFS should be ordered to pay the costs of the Summons on an indemnity basis.

14    I accept Mr Southwick's submissions. In my opinion FTFS ought to have realised when it received the tax invoice and the notice of demand from BAA that BAA was not sleeping on its claim but was seeking to set in motion the machinery to establish and enforce it. To lodge the lapsing notice on 18 August, only some fourteen days after the judgment in the previous proceedings had been delivered and after the tax invoice had been sent was, in my view, unreasonable. To serve the lapsing notice after receipt of the tax invoice was likewise unreasonable.

15    It must have been apparent by at least 31 August that BAA, having served a notice of demand, was at least preparing to undertake the establishment of its claim by the appropriate proceedings. Even before the period for the demand had expired, FTFS not only had lodged the lapsing notice and had served it upon the solicitors for BAA but, in the telephone conversation between solicitors on 31 August 2006, insisted upon adhering to its position under the lapsing notice and insisted upon the filing of a Summons to remove it.

16    There has been no inquiry from FTFS or its solicitors until after this present Summons had been filed and served as to whether BAA was intending to prosecute its claim in the District Court. If such inquiry had been made earlier, I have no reason to suppose that the solicitors for BAA would have said anything other than that the claim was being pursued, a demand had been served and, on expiry of that demand, the Statement of Claim which he had prepared would be filed and served.

17    In those circumstances, it seems to me that FTFS has acted unreasonably and has provoked proceedings which ought to have been unnecessary. The validity of the caveat is no longer in question and, in the face of the present lapsing notice, that caveat ought to be extended. While I have no reason to doubt that BAA will prosecute the claim which it proposes to bring forward in the District Court with all due diligence, nevertheless, for the sake of abundant caution and for the utmost clarity, I propose to accept an undertaking from BAA to prosecute that claim in the usual form. As I have said, Mr Southwick has informed the Court that BAA is quite willing to give that undertaking.

18    There are many categories of conduct which attract an indemnity costs order against a litigant. One of those categories is that the litigant has unnecessarily occasioned the commencement and prosecution of proceedings. I do not mean by this that an unsuccessful litigant would be ordered to pay costs on an indemnity basis simply because the litigant has lost the case, but it is well established that a litigant who commences unnecessary proceedings may be ordered to pay the opponent’s unnecessarily incurred costs on the indemnity basis.

19    For the reasons that I have given it will have emerged that, in my view, the filing of the present Summons would have been unnecessary had FTFS and its solicitors made an inquiry from BAA prior to either lodging or serving the lapsing notice. In those circumstances, I think that an indemnity costs order is appropriate.

20 I order, pursuant to s.74K of the Real Property Act, that caveat registered number AC517246U be extended until further order of the Court. This order is made conditional upon the Plaintiff giving the usual undertaking as to damages and undertaking to prosecute with all due diligence its claim in the District Court to establish the debt which is the subject of the security claimed in the caveat. A declaration in terms of paragraph 2 of the Summons is unnecessary as the lapsing notice will have no effect since the caveat has now been extended.

21    I order that the Defendant pay the Plaintiff's costs of the Summons on the indemnity basis. I direct that these orders be passed and entered forthwith.

– oOo –