Chen v Sunshine Light Property Pty Ltd
[2017] WASC 14
•13 FEBRUARY 2017
CHEN -v- SUNSHINE LIGHT PROPERTY PTY LTD [2017] WASC 14
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WASC 14 | |
| Case No: | CIV:2903/2016 | 23 DECEMBER 2016 | |
| Coram: | TOTTLE J | 13/02/17 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Extension of caveat granted Injunction granted | ||
| B | |||
| PDF Version |
| Parties: | HUI MIN CHEN SUNSHINE LIGHT PROPERTY PTY LTD WEI MIN SUN SHAN SU XING |
Catchwords: | Conveyancing Caveat Section 138C of Transfer of Land Act 1893 (WA) Extension of caveat First plaintiff claims an equitable interest by reason of specifically enforceable obligation contained in Acknowledgement of Debt to provide second mortgage Injunction application Where the plaintiff seeks a mandatory injunction requiring the defendants' solicitors to inform him of the anticipated settlement proceeds within a reasonable time prior to settlement of the units as required by the Acknowledgement of Debt Injunction granted |
Legislation: | Oaths, Affidavits and Statutory Declarations Act 2005 (WA), s 14(1) Transfer of Land Act 1893 (WA), s 188C |
Case References: | Avco Financial Services Ltd v White [1977] VR 561 Bashford v Bashford [2008] WASC 138 Bride v The Registrar of Titles [2015] WASC 11 GE Commercial Corporation (Australia) Pty Ltd v Future Network (Albury) Pty Ltd [2013] NSWSC 1228 Lampion v Lampion [2015] NSWSC 589 Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 Penny Nominees Pty Ltd v Fountain (No 2) (Unreported, NSWSC, 12 February 1990) Schulz v Turner [2008] NSWSC 24 Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162 Swiss Bank Corporation v Lloyds Bank Ltd [1981] 2 All ER 449; [1982] AC 594 Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SUNSHINE LIGHT PROPERTY PTY LTD
First Defendant
WEI MIN SUN
Second Defendant
SHAN SU XING
Third Defendant
Catchwords:
Conveyancing - Caveat - Section 138C of Transfer of Land Act 1893 (WA) - Extension of caveat - First plaintiff claims an equitable interest by reason of specifically enforceable obligation contained in Acknowledgement of Debt to provide second mortgage
Injunction application - Where the plaintiff seeks a mandatory injunction requiring the defendants' solicitors to inform him of the anticipated settlement proceeds within a reasonable time prior to settlement of the units as required by the Acknowledgement of Debt - Injunction granted
Legislation:
Oaths, Affidavits and Statutory Declarations Act 2005 (WA), s 14(1)
Transfer of Land Act 1893 (WA), s 188C
Result:
Extension of caveat granted
Injunction granted
Category: B
Representation:
Counsel:
Plaintiff : Mr J Taylor
First Defendant : Mr S G Leslie
Second Defendant : Mr S G Leslie
Third Defendant : Mr S G Leslie
Solicitors:
Plaintiff : Chan Galic
First Defendant : Zafra Legal
Second Defendant : Zafra Legal
Third Defendant : Zafra Legal
Case(s) referred to in judgment(s):
Avco Financial Services Ltd v White [1977] VR 561
Bashford v Bashford [2008] WASC 138
Bride v The Registrar of Titles [2015] WASC 11
GE Commercial Corporation (Australia) Pty Ltd v Future Network (Albury) Pty Ltd [2013] NSWSC 1228
Lampion v Lampion [2015] NSWSC 589
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95
Penny Nominees Pty Ltd v Fountain (No 2) (Unreported, NSWSC, 12 February 1990)
Schulz v Turner [2008] NSWSC 24
Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162
Swiss Bank Corporation v Lloyds Bank Ltd [1981] 2 All ER 449; [1982] AC 594
Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612
1 TOTTLE J: This is an application by the plaintiff for an order under s 138C of the Transfer of Land Act 1893 (WA) (TLA) extending the operation of a caveat over land held by the first defendant and for other interlocutory relief. The plaintiff and the second and third defendants are the shareholders in first defendant. The second and third defendants are the directors of the first defendant.
Overview
2 The first defendant was incorporated in 2013 to acquire land at 21 - 23 Lake Street, Cannington (the Land) and to undertake a development of commercial and residential units on it. The Land was acquired and the development has now been completed. It comprises 111 residential apartments and eight commercial units. Fifty-six residential units and three commercial units have been sold and 51 units remain to be sold.
3 The development was funded by loans advanced by the National Australia Bank (the Bank) and by contributions made by the plaintiff and the second and third defendants. The first defendant granted a first registered mortgage to the Bank as security for its funding. The plaintiff guaranteed the first defendant's indebtedness to the Bank.
4 Disputes arose between the plaintiff and the second and third defendants. To resolve the disputes the plaintiff, the first defendant and the second defendant entered into a deed entitled Acknowledgement of Debt on 18 March 2015. The Acknowledgement of Debt recorded that the plaintiff had contributed $3,400,000 (defined as the Contribution Amount) to the first defendant, and that the first defendant agreed to pay the plaintiff the Contribution Amount and a further sum of $3,650,000 (defined as the Interest and Bonus Amount) before 1 April 2017. In the Acknowledgement of Debt the first defendant is defined as the Company and the plaintiff is defined as the Shareholder. Clause 6 of the Acknowledgement of Debt provided:
The Company shall provide to the Shareholder an unregistered second mortgage to secure his contribution amount, interest and bonus which may be lodged with Landgate in the event the Company or directors shall be in default of this deed.
5 The plaintiff contends that the effect of cl 6 is the Land and each of the strata title units forming part of the Land was, and is, the subject of an equitable mortgage and is charged in his favour and his charge ranks in priority behind the Bank's mortgage.
6 The defendants have a number of contentions about cl 6. They contend that the clause is void for uncertainty and thus unenforceable. In the alternative, they contend that on its true construction, cl 6 does not operate to create an interest in the Land until a breach of the terms of the Acknowledgement of Debt occurs.
7 On 17 October 2016 the plaintiff lodged a caveat, numbered 461582 (the caveat), over the remaining subdivided properties on the Land.
8 On 31 October 2016 the plaintiff's solicitors received notification that the first defendant had applied to the Registrar of Titles requesting the service of a notice that the caveat would lapse unless he obtained an order extending its operation.
9 On 3 November 2016 this action was commenced by writ. Pleadings have been exchanged and are now closed.
10 On 29 November 2016 I made an interim order extending the operation of the caveat until the determination of the present application. The plaintiff seeks an order further extending the operation of the caveat and a mandatory injunction compelling the defendants to inform his solicitors of the anticipated settlement proceeds of sales of the strata units in advance of the settlement of those units. Applications for the appointment of a receiver to the proceeds of sale of the Land and other interlocutory relief are not pressed by the plaintiff.
The caveat
11 The estate or interest claimed by the plaintiff is described in the caveat as 'an equitable second mortgage' that arises by virtue of:
[a] specifically enforceable contract (entitled 'Acknowledgement of Debt'), made on 18 March 2015 between Hui Min Chen, Sunshine Light Property Pty Ltd ('the Company') and Wei Min Sun by which the company agreed to grant Hui Min Chen an unregistered a second mortgage to secure certain payments to be made by the company to Hui Min Chen under the contract and by which the company agreed that the unregistered second mortgage would be registrable in the event of default by the company under the contract.
The evidence
12 In support of the application, the plaintiff seeks to rely upon an affidavit sworn by him on 21 November 2016. The defendants objected to the plaintiff's affidavit on the basis that though he was not sufficiently conversant with the English language to make his affidavit in English without the aid of an interpreter, his affidavit was written in English, having been translated for him by an interpreter, but there had been no compliance with the requirements of s 14(1) of the Oaths, Affidavits and Statutory Declarations Act 2005 (WA). Counsel for the defendants said that he would not press the objection if the plaintiff swore a further affidavit in the same terms in a language with which he was conversant, Mandarin, and there was compliance with s 14(1). I made a direction that the plaintiff should swear and file and serve such an affidavit on or before 27 January 2017 (this date was subsequently extended at the plaintiff's request to 10 February 2017) and, on that basis, the objection to the plaintiff's affidavit of 21 November 2016 was not pressed. The plaintiff complied with the direction.
13 The defendants rely upon an affidavit sworn by the second defendant on 8 December 2016. This affidavit was written in Mandarin and translated into English by an interpreter Jiping Zou, who swore an affidavit on 16 December 2016 deposing to the accuracy of her translation. The defendants also rely upon an affidavit sworn by Ms Wenqi Xie on 7 December 2016.
14 The affidavit evidence traverses the history of the relationship between the plaintiff and the second defendant and their involvement in the project to buy and develop the Land. For the purposes of dealing with the present applications, it is unnecessary to go into that history. It is sufficient to record that there is deep mistrust between the plaintiff and the second and third defendants. The plaintiff has concerns that the second and third defendants have managed the development of the Land, the sale of units and the affairs of the first defendant to their advantage and to his disadvantage. These allegations are denied by the defendants, who contend that the plaintiff is using the caveat to exert pressure upon them to accelerate the payment of the funds due to him.
Undertakings
15 The first defendant has provided an undertaking to the court that it will not apply the proceeds of sale of the Land for any purposes other than the repayment of the NAB mortgage or payment to the plaintiff of the Contribution Amount, and Interest and Bonus, in accordance with its obligations under the Acknowledgement of Debt.
16 The plaintiff's solicitors have provided the court with the terms of an undertaking that the plaintiff would provide if the caveat is extended. The plaintiff's proposed undertaking is in the following terms:
The plaintiff undertakes to the Court that, until final resolution of the proceedings or further order of the Court, on the provision of the following information at least 72 hours prior to settlement (or such other time as may be agreed or the court may determine) in relation to any Unit for sale in the Property:
a. The date of settlement;
b. The amount to be received from the purchaser in relation to that Unit, by deposit and at settlement; and
c. The identity of any person or entity who is proposed to receive funds on settlement, and the amount each person is anticipated to receive,
the plaintiff will provide to the defendants at or prior to the nominated time for settlement a withdrawal of the caveat over that Unit.
17 The principles applicable to an application made pursuant to s 138C of the TLA to extend the operation of a caveat were summarised by Beech J in Bashford v Bashford [2008] WASC 138 and, more recently, by Edelman J in Bride v The Registrar of Titles [2015] WASC 11. There is no need to restate those principles.
18 There are two essential questions: first, has the plaintiff demonstrated that his claim has or may have substance or, as it is sometimes put, has he established that there is a serious issue to be tried in respect of the estate or interest in the land claimed by him; second, does the balance of convenience favour the extension of the operation of the caveat. The two questions are interrelated in the same way the questions that must be answered in the context of an application for an interlocutory injunction are related: that is, the court must balance the injustice that might be suffered by the first defendant if the application to extend the caveat is granted and the plaintiff later fails at trial, against the injustice that might be suffered by the plaintiff if the application is not granted and he later succeeds at trial.
19 Although it is unusual for a court to refuse to extend a caveat where an arguable case as to the existence of a caveatable interest has been established, there are some cases in which the balance of convenience may tell decisively against the extension of the operation of the caveat: Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 [22] (Pullin JA) (with whom Miller and Newnes JA agreed).
Relevant provisions of the Acknowledgment of Debt
20 The relevant provisions of the Acknowledgement of Debt are cl 3 to cl 7. They read as follows:
3) The Company ACKNOWLEDGES that it is indebted to the Shareholder for the Contribution Amount and interest and Bonus repayable on or before the 1st April 2017 in the following manner:
i) Repayment of the contribution Amount from the sales income is second in priority and subject to the repayment of the First Registered Mortgage in the first instance. The Company and its directors shall inform the shareholder's representatives Chan Galic of the anticipated settlement proceeds within a reasonable time prior to settlement of the Strata Titled Units sold until the Shareholder is paid all his entitlements;
ii) Subject to paragraph 3(i) the Company agrees that the net proceeds of the sale of each individual unit after the payment of sales commission, conveyancing fees and retention of funds for adjustment of rates and taxes, will be held by National Australia Bank. Once the Contribution Amount has been collected by National Australia Bank the Contribution Amount must be transferred to the trust account of Chan Galic to be disbursed to the Shareholder. On payment of the Contribution Amount to the trust account of Chan Galic the Shareholder must provide Chan Galic with a signed transfer of share form transferring his shares to Sun and Xing to be held in escrow by Chan Galic until the shareholder has received all the contribution amount, interest and bonus whereupon Chan Galic must then provide the signed share transfer to Sun and Xing.
iii) Subject to the Interest and Bonus payment being determined pursuant to paragraph 2 the Interest and Bonus will be collected by National Australia Bank pursuant to the terms provided in clause 3(ii). Upon collection by National Australia Bank of $2 Million Dollars of the Total Interest and Bonus Payment from the net proceeds of sale, it will transfer to the trust account of Chan Galic to be disbursed to the Shareholder.
iv) The balance of the Interest and Bonus payment will be held on trust by Westmont Legal and Chan Galic until confirmation by Mr Han Khew and Mr Seng Fai Chan that the Net GST payable has been calculated and that sum shall be deducted from the funds held on trust by Westmont Legal and Chan Galic and the balance will be transferred to the trust account of Chan Galic to be disbursed to the Shareholder. The Net GST payable will be disbursed to the Company.
v) The parties will ensure that full payment of the Contribution Amount and the Interest and Bonus will be paid on or before 1 April 2017 subject to Net GST payable calculation being finalised.
vi) The Shareholder will sign a letter, upon execution of this deed, authorising the National Australia Bank to release funds to the Company under the construction loan.
vii) Subject to the Company and directors of the Company complying with this Deed, the Shareholder agrees not to act in a manner that causes any detriment, delay or to interfere with the development of the Property including the delay of processing of any construction loan drawdowns from the National Australia Bank or appointment of auditors.
viii) In the event that Chen is in breach of clause 3(vii), this agreement shall be terminated. For the avoidance of any doubt, Chen is entitled to enquire from time to time the progress of the development.
ix) The Company shall in any event, upon the completion of the development of the Properties and after the full discharge of the First Registered Mortgage to the National Australia Bank, must apply all subsequent proceeds of the sale of the Properties to satisfy the payment of the Shareholder's Contribution, Interest and Bonus in priority to all other payments.
x) In the event that the parties change legal representatives or settlement agents while the Deed is in effect, the Directors of the Company shall ensure that the legal representative or settlement agents who will be acting for the Company execute a Deed of Covenant to ensure compliance with all the provisions of this Deed.
xi) This Deed shall endure and bind all successors in title to the property.
4) Subject to clause 3(v) the Company acknowledges that it will be in default of its obligations under this Deed if the Company fails to perform any of its obligations under this Deed within FOURTEEN (14) days of the date which an obligation is required to be performed whether or not a formal notice has been made by the Shareholder ('Default').
5) The Company agrees that in the event the Contribution Amount and all of the Interest and Bonus is not fully paid on or before the Date of Repayment, interest shall accrue at the rate of 9% per annum calculated on a daily basis on the Contribution Amount and any Interest and Bonus unpaid as at 1 April 2017.
6) The Company shall provide to the Shareholder an unregistered second mortgage to secure his contribution amount, interest and bonus which may be lodged with Landgate in the event the Company or directors shall be in default of this deed.
7) In addition, the Shareholder is entitled to register a security interest over the Company under the Personal Property and Securities Act 2009.
The plaintiff's submissions
21 The plaintiff's submissions in support of the existence of an interest in the Land rely upon the following legal propositions. First, an equitable charge or equitable mortgage gives rise to a caveatable interest: Avco Financial Services Ltd v White [1977] VR 561, 567 (Gillard J). Second, an equitable charge is a security over property which has been created by an inter vivos act, consensual or otherwise, by the owner of the property: Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162 [28] (McLure JA). Third, the term 'equitable mortgage' is not used in textbooks and authorities with any single denotation; rather, the nature of the security created must turn upon the intention of the party dealing with the assets of the business that are to be subjected to the security and the nature of those assets: Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612 [25] - [26]. Fourth, an equitable charge may take the form of either an equitable mortgage or an equitable charge not by way of mortgage. Fifth, the essence of any transaction by way of mortgage is that the debtor confers upon his creditor a proprietary interest in the property of the debtor, or undertakes in a binding manner to do so, by the realisation or appropriation of which the creditor can procure the discharge of the debtor's liability to him, and that the proprietary interest is redeemable, discharging his liability. Sixth, if there has been no legal transfer of a proprietary interest but merely a binding undertaking to confer such an interest, that obligation, if specifically enforceable, will confer a proprietary interest in the subject matter in equity. Seventh, a contract to mortgage property will generally be specifically enforceable and, if it is specifically enforceable, the obligation to confer the proprietary interest will give rise to an equitable charge upon the subject matter by way of mortgage. The fourth, fifth, sixth and seventh propositions are derived by what was said by Buckley LJ in Swiss Bank Corporation v Lloyds Bank Ltd [1981] 2 All ER 449; [1982] AC 594, 594H - 595F. These propositions were not challenged by counsel for the defendants.
Defendants' submissions
22 As noted earlier, the defendants' principal submissions are: first, cl 6 of the Acknowledgement of Debt is uncertain and thus unenforceable; second, if cl 6 is not void for uncertainty, then it should be interpreted as conferring no proprietary interest upon the plaintiff until a default had occurred and no such default has occurred; and, third, the balance of convenience is overwhelmingly in favour of not allowing the caveat to remain.
Has Plaintiff established that his claim has or may have substance?
Construction of cl 6 of the Acknowledgment of Debt
23 In my view, the preferred interpretation of cl 6 of the Acknowledgment of Debt - that is the interpretation that a reasonable business person would have - is that the clause conferred on the plaintiff an entitlement to a second mortgage registrable over the Land immediately upon the execution of the Acknowledgement of Debt, but the plaintiff's right to lodge the second mortgage with the Landgate for registration was conditional upon the defendants being in default. This interpretation reflects the commercial purpose of the provision of security - that the plaintiff should have the unregistered second mortgage in his possession to protect his position in the event of a default. The interpretation recognises the distinction drawn in the text of cl 6 between the provision of the mortgage and its registration. The benefit of cl 6 would be illusory or at least heavily circumscribed if, as the defendants contend, the plaintiff was not entitled to be provided with the mortgage until there was a default. Assessed objectively, it is unlikely that the parties intended that the security should be provided only after the occurrence of a default, at which point there would be no incentive on the first defendant to provide the security and every incentive not to do so.
24 On the basis of the preferred interpretation of cl 6 of the Acknowledgement of Debt, the plaintiff had a contractual right to a second mortgage over the Land that was specifically enforceable and, consequently, he had a proprietary interest in the Land as soon as the Acknowledgement of Debt was executed.
Unnecessary to determine whether there has been a default
25 As I have formed the view that the plaintiff has established that he has a claim that he acquired a proprietary interest in the Land upon the execution of the Acknowledgment of Debt, and that the creation of the interest was not contingent on the existence of a default, it is not necessary for me to address the competing contentions as to whether there have been defaults.
The uncertainty submission
26 The plaintiff is only required to establish that he has a claim that has or may have substance. Accordingly, I am not required to make a final determination as to whether cl 6 is void for uncertainty. My preliminary assessment is that it is not. The matters that inform this preliminary assessment are as follows. The Acknowledgement of Debt identifies the essential terms of the second mortgage - the parties, the property, the amount to be secured and the repayment date. All that is required to create a valid mortgage is a covenant by which the mortgagor mortgages the property to the mortgagee to secure repayment of the debt on the date for repayment, recorded in an approved form. Each of the necessary elements is found in the Acknowledgement of Debt. The absence of a term specifying the form of the mortgage is not critical, as to be registered a mortgage must be in an approved form (s 105(2) TLA); that is, in a form approved by the Registrar of Titles: s 4 TLA. The absence of 'standard terms' of the nature often seen in commercial mortgages or a mechanism for determining 'standard terms' does not render cl 6 uncertain. The purpose of the second mortgage was to provide short term security for the plaintiff. 'Standard terms' were not essential for achieving that purpose. In any event, various covenants are implied into mortgages by s 113 of the TLA. The failure to specify who was to prepare the second mortgage does not render it uncertain. A reasonable business person would interpret cl 6 as imposing the responsibility for preparation of the mortgage on the plaintiff.
27 The defendants' counsel drew my attention to a number of decisions of the Supreme Court of New South Wales dealing with the issue of whether contracts providing for mortgages to be granted are uncertain if they do not adequately identify the terms of the mortgage. The decisions provide examples of the application of accepted principles to different facts. I do not consider they assist the defendants, but I will refer to them briefly.
28 In Penny Nominees Pty Ltd v Fountain (No 2) (Unreported, NSWSC, 12 February 1990), Young J was dealing with competing claims to equitable interests in a property. The contractual term giving rise to the claim under consideration read as follows:
I shall furnish upon demand such security in such form and value as be required by you from time to time in amount and value sufficient at all times in your opinion to secure any of my obligations to you whether contingent future or otherwise.
29 Young J stated the applicable principle as follows:
one only gets an equitable interest in property at the time when a specifically enforceable obligation to give a mortgage over the particular property occurs. If one has a case of promising to mortgage property when required and that property is in existence and specifically defined, then it may very well be that there is an equitable interest in the property as from the date of the promise to grant a mortgage.
30 On the facts, Young J held that no interest in the property had arisen because the contractual term under consideration did not specify the property, the form of the mortgage, the amount secured by the mortgage, or the amount of the indebtedness.
31 In Schulz v Turner [2008] NSWSC 24 (Nicholas J), the plaintiff claimed an entitlement to a mortgage on the basis of a contractual provision in the following terms:
The joint venture partnership agrees to grant to Ms Karin Schulz a first mortgage entitlement over the said property [11].
32 Nicholas J, referring to Young J's statement of principle in Penny Nominees, held that the contractual provision was sufficient to constitute an agreement to grant the plaintiff a mortgage over the property. Neither the form nor the terms of the mortgage were specified. Neither was the repayment date specified, but Nicholas J dealt with this omission by implying a term that the mortgage was to be for a period of two years, this period being supported by the terms of the agreement as a whole.
33 In GE Commercial Corporation (Australia) Pty Ltd v Future Network (Albury) Pty Ltd [2013] NSWSC 1228 (Darke J), the issue was whether a contractual term by which the defendant had agreed to 'grant to GE a legal mortgage in registrable form (containing such terms and conditions as GE may require)' was void for uncertainty. Darke J at [24] held that it was not void because the terms of the mortgage were not left for the further agreement of the parties, but instead would include such terms as required by GE.
34 In Lampion v Lampion [2015] NSWSC 589 (Robb J), the plaintiffs sought a declaration that there was a binding and enforceable agreement between them and the defendant for the granting of a mortgage over the defendant's interests in two properties. The plaintiffs sought an order that the defendant specifically perform the agreement by executing mortgages in a form attached to the summons seeking relief. The form of mortgage was one appropriate for registration under the Real Property Act 1900 (NSW). The term of the agreement upon which the plaintiffs relied read as follows:
To secure the judgement, our client would be provided with an unregistered mortgage secured by caveat over both properties [14].
35 Robb J dismissed the plaintiffs' application on the grounds that the agreement did not oblige the defendant to execute a mortgage in registrable form, and did not oblige him to execute a mortgage containing the terms set out in the form attached to the summons or in any other particular terms. Rather, the defendant had agreed to provide an unregistered mortgage. His Honour observed the agreement did not contain any mechanism for the determination of the mortgage terms and contrasted the case before him with the case in GE Commercial Corporation.
Conclusion on whether Plaintiff has a claim that has or may have substance
36 It follows from the above that I consider the plaintiff has a claim that has substance. Indeed, in my assessment, it is a strong claim.
Balance of convenience
37 It is common ground that it is in the interests of all of the parties for the units to be sold as quickly as possible. The defendants contend that the presence of the caveat on the title makes it difficult to market the units and has delayed settlement of sales. They submit that the caveat is prejudicing them and third party purchasers of the units. The defendants also say the plaintiff is prejudiced because the delays in effecting sales delay payment of the amounts due to him. The defendants submit that the undertaking it has proffered means that the plaintiff will not suffer any prejudice if the operation of the caveat is not extended.
38 This is a case in which the balance of convenience is important (cfNavarac Pty Ltd v Moondancer Holdings Pty Ltd) but, after careful consideration of the defendants' submissions, I have determined that the caveat should be extended. Amongst the factors relevant to the balance of convenience two matters are decisive in the plaintiff's favour. The first is that to refuse to extend the operation of the caveat would deprive the plaintiff of the benefit of the bargain - the security - which he had negotiated with the defendants and, as stated earlier, I consider the plaintiff has strong claim. The second is that the undertaking that the plaintiff is prepared to give will allow settlement of sales of the units to take place, and this will ameliorate any prejudice that might otherwise be caused by the continued operation of the caveat.
39 For the reasons set out above, the operation of the caveat will be extended.
The injunction application
Background
40 The plaintiff complains the defendants have failed to inform his solicitors, Chan Galic, of the anticipated settlement proceeds within a reasonable time prior to settlement of the units as required by cl 3(i) of the Acknowledgment of Debt and seeks a mandatory injunction compelling them to comply with this obligation.
41 The defendants contend that cl 3(i) is void for uncertainty because the clause does not specify, and the parties cannot know, exactly what information is to be provided, when it is to be provided, and how often it is to be provided. They say that the plaintiff's solicitors have sought more information than that to which the plaintiff is entitled and, in any event, they say they have provided the plaintiff with continuous disclosure of the anticipated settlement proceeds informally in the course of telephone conversations.
42 By a letter dated 8 June 2016, the plaintiff's solicitors, Chan Galic, sought information from the defendants about a number of matters, including the number of units that had then been sold, the settlement date of each sale, the sale price of each unit, and asked for copies of the sale contracts for each unit sold. By letter dated 22 June 2016, the defendants' solicitors, Zafra Legal, responded and stated that their clients were not required to provide the information requested. It appears that the defendants did not provide Chan Galic with any information about the anticipated settlement proceeds of any of the units sold before 19 October 2016.
Applicable principles
43 There are two enquiries: first, has the plaintiff established a prima facie case that the defendants are obliged to inform him of the anticipated settlement proceeds within a reasonable period of time prior to settlement of the units sold, and if so, have the defendants breached this obligation; second, does the balance of convenience favour the granting of the injunction sought: Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 [87] (Newnes JA).
Has Plaintiff established a prima facie case?
44 I do not accept the submission that cl 3(i) of the Acknowledgement of Debt is void for uncertainty. A reasonable business person would construe cl 3(i) as imposing an obligation on the defendants to inform Chan Galic of: the date of settlement of each sale of a unit, the sale price, the identity of persons to whom the proceeds of sale are to be disbursed, and the amount to be paid to each person. Whilst the notice period might vary according to the circumstances of each transaction, I think that a reasonable business person would consider that 48 hours is a reasonable period.
45 The evidence supports the conclusion that the defendants have not provided Chan Galic with the required information in relation to a number of sales.
46 I am satisfied that plaintiff has established a prima facie case.
Does the balance of convenience favour the grant of an injunction?
47 I consider that the balance of convenience favours the grant of an injunction. No significant prejudice will be suffered by the defendants in providing Chan Galic with the information that is required by cl 3(i) of the Acknowledgment of Debt. In their written submissions the defendants expressed the concern that granting an injunction in the terms sought would expose them to the risk of interference from the plaintiff or his solicitors. Assessed objectively, it seems unlikely that plaintiff or his solicitors would interfere with sales as it is in his interests for the sales to proceed to settlement expeditiously. Should it become evident that injunctive relief granted by the court is being used for ulterior purposes, then no doubt an application will be made to discharge the injunction.
48 For these reasons given above, I consider that the plaintiff is entitled to an injunction compelling the first defendant to provide the plaintiff's solicitors, Chan Galic, with notice of the anticipated settlement proceeds, not less than 48 hours prior to the settlement of any unit, such notice to include:
(a) the amount to be received from the purchaser; and
(b) the identity of any person or entity who is proposed to receive funds on settlement and the amount to be paid to that person.
49 I will hear the parties as to the form of the orders and as to costs.
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