Cini v Pets Paradise Franchising (SA) Pty Ltd
[2009] SASC 7
•16 January 2009
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CINI & ORS v PETS PARADISE FRANCHISING (SA) PTY LTD & ORS
[2009] SASC 7
Judgment of The Honourable Justice Bleby
16 January 2009
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS
Application for leave to lodge fresh caveats under Land Title Act 1994 (Qld) s 129 – caveats previously lodged by applicant removed pursuant to court order – in earlier proceedings, applicants conceded caveats should be removed due to misdescription of caveatable interests – whether serious question to be tried – uncontradicted affidavit evidence of duress in signing documents giving rise to claimed caveatable interest – whether balance of convenience favours lodging fresh caveats – respondents have changed position in such a way that they will suffer detriment if fresh caveats are lodged – substantial delay between removal of original caveats and application to lodge fresh caveats.
Application dismissed – balance of convenience favours respondents - no serious question to be tried with respect to respondent alleging duress.
Landlush Pty Ltd v Rutherford [2002] 1 Qd R 236; Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, applied.
Cini v Pets Paradise Franchising (SA) Pty Ltd [2008] SASC 287; American Cyanamid Co v Ethicon Ltd [1975] AC 396, discussed.
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, considered.
CINI & ORS v PETS PARADISE FRANCHISING (SA) PTY LTD & ORS
[2009] SASC 7CINI & ORS v PETS PARADISE FRANCHISING (SA) PTY LTD & ORS
Civil
BLEBY J.
This is an application for leave to lodge fresh caveats over two properties in Queensland, in circumstances where caveats previously lodged by the applicant have been removed pursuant to a court order. It arises in the context of a broader dispute between eleven plaintiffs and five defendants.
Background
The defendants are all related corporations. The plaintiffs are either parties to franchise agreements with one of the defendants, parties to a guarantee and indemnity agreement relating to the performance of obligations of franchisees who are parties to franchise agreements with one of the defendants, or parties to a guarantee and indemnity agreement relating to the performance of the obligations of such franchisees under a supply agreement with one of the defendants. The parties are currently engaged in proceedings in the Federal Court, concerning the validity and enforceability of these agreements.
The applicant for leave to lodge caveats is the third defendant, Pets Paradise Franchising (Queensland) Pty Ltd (“Pets Paradise”). The respondents to this application are the eighth and ninth plaintiffs, Lynda Campbell and her mother Elizabeth Campbell.
The two properties over which Pets Paradise seeks to lodge fresh caveats are situated at Burleigh Heads and Ipswich. The Burleigh Heads property is owned by Lynda Campbell and her husband Karl Donnelly as joint tenants, while the Ipswich property is held as tenants in common by Elizabeth and Lynda Campbell and Karl Donnelly, each of whom have a one-third interest.
Elizabeth and Lynda Campbell are the directors and shareholders of a company called Pampered Paws Connection Pty Ltd (“Pampered Paws”). Pampered Paws is a party to a franchise agreement with Pets Paradise. By a “Guarantee Indemnity and Acknowledgment” dated 15 November 2005, Elizabeth and Lynda Campbell guaranteed the performance of Pampered Paws’ obligations under the franchise agreement. The applicant relies on clause 3.11 of that document to create a caveatable interest in its favour. Clause 3.11 reads:
The Guarantor hereby agrees to charge his/her property, both real and personal, and including any future property as security in favour of the Franchisor for any debt owing to the Franchisor by the Franchisee and authorises the Franchisor to register a caveat in respect of this charge over any such property.
Previous application for removal of caveats
The history of proceedings before this Court has some relevance to the present application. On 11 August 2008, the plaintiffs commenced proceedings seeking orders for the removal of caveats registered by the defendants in purported exercise of and in reliance upon an authority said to be created by a relevant agreement with each plaintiff. The defendants relied upon the terms of the agreements for the creation of a charge by the respective plaintiffs and, in some cases, for the express authority to the respective defendants to register a caveat. The caveats were registered over land in South Australia, Victoria, New South Wales, Queensland (including the Ipswich and Burleigh Heads properties), Western Australia and the Northern Territory.
I heard the plaintiffs’ application on 22 and 23 September 2008. The plaintiffs submitted that the caveats should be removed because the defendants had taken no steps to enforce the underlying equitable interests said to support the caveats; and because the plaintiffs signed the relevant agreements in circumstances affected by conduct of the defendants that was unconscionable, as well as misleading and deceptive. They also challenged the effectiveness of some of the caveats because of deficiencies in their form. During argument, the defendants conceded that a caveat over land in the Northern Territory had lapsed; and that the two caveats over the Queensland properties contained material misdescriptions of the alleged caveatable interests. Accordingly, I made an order on 23 September 2008 that those three caveats be removed. I will return to the circumstances of the defendant’s concession in due course.
I handed down my decision in relation to the other caveats on 27 October 2008.[1] I found that six of the caveats were defective as the caveatable interests were misdescribed. I granted the defendants liberty to apply to amend those caveats. I made no order on the application to remove the remaining caveats, as I did not consider that there was any feature of the case that required that the caveats be removed.
[1] Cini v Pets Paradise Franchising (SA) Pty Ltd [2008] SASC 287.
The defendants’ concession regarding the Queensland caveats
As noted above, during argument on 22 September 2008 the defendants effectively abandoned their attempts to defend the caveats lodged over the Queensland properties. As those properties are the subject of the current application, it is necessary to recount in some detail the circumstances in which the defendants made that concession.
Mr Rochow, who appeared for the plaintiffs, made quite extensive submissions on the circumstances of the Campbells’ entering into the relevant agreements. He pointed to affidavit evidence of the facts which the plaintiffs assert amounted to duress. He noted the defendants’ failure to file any affidavit material contradicting these assertions.
Mr Keith appeared for the defendants. Before commencing his substantive submissions, he said:
The caveats in relation to the eighth and ninth plaintiffs … are the caveats that misdescribe the caveator’s interest as being an equitable interest as purchaser. We don’t seek to defend those caveats as so described. There may then arise a question as to whether it would be within the defendants’ power to seek leave to lodge a second caveat or whether, in fact, leave would be required if, in fact, through error the interest claimed on the first caveat was the wrong interest. I am still seeking instructions on clarifying that point, but we do not seek to defend those two caveats of that claim and interest as purchaser.
At the continuation of the hearing the following day, Mr Rochow brought into court some draft minutes setting out the terms of an order he proposed that I should make in relation to the caveats which Mr Keith did not seek to defend. I asked Mr Keith if he had any submissions to make about Mr Rochow’s request that I make orders in those terms. Mr Keith said, “No”. I proceeded to make orders in terms of the minutes provided by Mr Rochow. In relation to the Queensland properties, I ordered that the caveats be removed pursuant to s 127 of the Land Title Act 1994 (Qld).
Leave to lodge a further caveat
The present application by Pets Paradise is made under s 129 of the Land Title Act 1994. That section provides:
Further caveat
(1)This section applies if a caveat (the original caveat) is lodged in relation to an interest.
(2)A further caveat with the same caveator can never be lodged in relation to the interest on the same, or substantially the same, grounds as the grounds stated in the original caveat unless the leave of a court of competent jurisdiction to lodge the further caveat has been granted.
Although it is not necessary to resolve the matter in this case, it is not entirely clear whether the reference to “interest” in sub-ss (1) and (2) refers to the interest in land affected by the caveat or the interest claimed by the caveator. Both concepts are given recognition in s 121 of the Act which specifies the requirements of caveats. By making this application Pets Paradise would appear to acknowledge that, without leave of the court, it does not have a right to lodge a further caveat in this case. It was common ground that Pets Paradise relies on the same or substantially the same grounds for lodging these caveats as were stated in the original caveats.
The principles as to whether a further caveat should be permitted under s 129 of the Land Title Act are, in essence, those that relate to the granting of injunctive relief. In Landlush Pty Ltd v Rutherford[2] Wilson J said:
It is well established that a current caveat should be removed unless the caveator shows that there is a serious question to be tried which would justify leaving it undisturbed (Re McKean's Caveat [1988] 1 Qd.R. 524) and the balance of convenience favours the maintenance of the status quo. A fortiori, where leave is sought to lodge a second caveat on the same grounds as one that has lapsed, the applicant should at least satisfy those criteria. The Court should consider also whether there is a satisfactory explanation for the lapse of the first caveat, whether there is a satisfactory explanation for any delay in making the application for leave, and whether the respondent would be unduly prejudiced by the lodging of a second caveat.[3]
[2] [2002] 1 Qd R 236; [2002] QSC 219.
[3] Ibid 240, [18].
That was a case in which the earlier caveat had lapsed under s 126 of the Land Title Act by virtue of the caveator not having taken the necessary steps to maintain the caveat. Where a caveat has been removed by order of the court and there is no evidence of a mere clerical error justifying the removal, there is no reason why an applicant for leave to lodge a further caveat should be in any better position than an applicant whose earlier caveat has lapsed.
In Australian Broadcasting Corporation v O’Neill[4] there was a discussion by the High Court as to the meaning and application of the phrase “serious question to be tried”. In their joint judgment Gummow and Hayne JJ said:
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd.[5] This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:[6]
“The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted”
By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.[7]
[4] (2006) 227 CLR 57.
[5] (1968) 118 CLR 618.
[6] Ibid 622 – 623.
[7] (2006) 227 CLR 57, 81-82; [2006] HCA 46, [65].
Their honours then discussed the apparent difference between that approach and the approach of the House of Lords in American Cyanamid Co v Ethicon Ltd[8] and continued:
When Beecham and American Cyanamid are read with an understanding of the issues for determination and an appreciation of the similarity in outcome, much of the assumed disparity in principle between them loses its force. There is then no objection to the use of the phrase “serious question” if it is understood as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham, depends upon the considerations emphasised in Beecham.[9]
[8] [1975] AC 396.
[9] (2006) 227 CLR 57, 83; [2006] HCA 46, [70].
In their joint judgment Gleeson CJ and Crennan J, when discussing the principles governing the granting of interlocutory injunctions, said:
We agree with the explanation of these organising principles in the reasons of Gummow and Hayne JJ, and their reiteration that the doctrine of the Court established in Beecham Group Ltd v Bristol Laboratories Pty Ltd should be followed.[10] [Footnotes omitted]
[10] Ibid 68, [19]. See also Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 217-218; [2001] HCA 63, [13] where Gleeson CJ cites with approval a similar statement by Mason A-CJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, 153.
In establishing whether there is a serious question to be tried in this case, the question must be addressed on the assumption that the evidence remains as it is. The Court is not in a position to anticipate what other evidence might be led at the ultimate trial by one of the parties. Pets Paradise must show a sufficient likelihood of success to justify, on the present state of the evidence, the preservation of its right to a caveatable interest in order to preserve that status quo pending the trial.
Serious question to be tried
I am now required to consider, which I was not required to do on the application to remove the caveats, the particular situation with regard to the foundation for the claim of Pets Paradise for its alleged interest in the Queensland properties. Those facts were not replicated in any of the other cases in which I earlier refused the plaintiffs’ applications to remove the caveats.
Elizabeth and Lynda Campbell say that the guarantee agreement on which Pets Paradise relies for the creation of a caveatable interest is not binding because Elizabeth Campbell signed it under duress. In an affidavit sworn on 16 September 2008, Elizabeth Campbell sets out the circumstances that are said to amount to duress.
She deposes to attending, with her daughter Lynda, a one-week Pets Paradise training course commencing on 30 January 2006. Prior to this course, Lynda Campbell had paid a $50,000 deposit to Pets Paradise. Elizabeth Campbell did not expect, when she attended the training course, to enter into any franchise or guarantee agreements. However, at the end of the training course on 6 February, the solicitors for Pets Paradise, Mr El-Hissi and Mr Gell, approached the Campbells and invited them into an office. Once in the office, the solicitors presented Elizabeth Campbell with a number of documents including a franchise agreement, guarantee, solicitor’s certificate, business advisor certificate and accountant’s certificate. Elizabeth Campbell noted that on all the documents, except the franchise agreement, the name of Lynda Campbell appeared in print, while the name of Elizabeth Campbell had been written by hand next to her daughter’s name. Furthermore, the documents were dated 15 November 2005 rather than 6 February 2006.
Elizabeth Campbell says she asked Mr El-Hissi why the documents were dated 15 November. He replied that the documents had to bear that date because that is when Lynda Campbell had signed them. Elizabeth Campbell suggested that the documents should be dated 6 February 2006. Mr El-Hissi said he would get advice on that point but nonetheless insisted that Elizabeth Campbell sign the documents bearing the date 15 November 2005. Elizabeth Campbell asked if she could take the documents away to read them and obtain legal advice. Mr El-Hissi said that the cooling-off period had passed and that if Elizabeth Campbell did not sign the documents, her daughter would lose her $50,000 deposit and Pets Paradise might commence litigation against her.
Elizabeth Campbell says in her affidavit that she was not permitted to read and consider the documents before signing, and that her attention was not drawn to clause 3.11, the charging clause. She deposes to feeling “quite uneasy” and even “quite ill” when she saw her name handwritten on the documents, with the incorrect date. Nevertheless, she signed the documents because, she says, she wanted to protect her daughter from litigation and significant loss.
In effect, Elizabeth Campbell says that she had her will overborne by the conduct amounting to duress which included threats of legal proceedings against and loss of property of her daughter by persons she knew were lawyers, and with no opportunity being afforded to her to obtain independent legal advice.
The defendants in this action have not filed any affidavit material that contradicts or denies Elizabeth Campbell’s version of events. Instead, their affidavits have been silent on these events. On the evidence presently before me the inevitable inference is that pressure was put on Elizabeth Campbell to sign the documents bearing the earlier date in order to avoid an otherwise apparent failure of consideration on her part for the agreements.
It follows that, if the evidence remains the same at any future trial, the only uncontradicted evidence impeaches the efficacy of the documents said to justify the caveatable interest of Pets Paradise, at least in respect of any land in which Elizabeth Campbell has an interest. Pets Paradise cannot establish that there is a serious question to be tried in respect of its alleged caveatable interest over Elizabeth Campbell’s interest in the Ipswich property.
As for the interest of Linda Campbell in that property and in the Burleigh Heads property, there is no suggestion of duress causing her to enter into the agreements. As with the other plaintiffs, she has, and is pursuing in the Federal Court of Australia, a case based on misrepresentation and misleading and deceptive conduct against the defendants. However, in that regard she is in no different position from the other plaintiffs as discussed in paragraphs [52] – [66] of my previous decision.[11] Notwithstanding the difficulties with respect to Elizabeth Campbell, I am prepared to assume for present purposes that, on their face, the agreements are nevertheless enforceable against Linda Campbell.
[11] Cini v Pets Paradise Franchising (SA) Pty Ltd [2008] SASC 287.
Balance of convenience
There are two matters which are particularly relevant in determining where the balance of convenience lies in this matter. The first is that, since the removal of the original caveats, the Campbells have changed their position in such a way that they will suffer detriment if fresh caveats are lodged. The order removing the original caveat was made on 23 September 2008. Pets Paradise filed its application for leave to lodge further caveats on 6 November 2008. In the meantime Elizabeth and Lynda Campbell and Karl Donnelly entered into a finance agreement with the Bendigo Bank, secured by registered mortgages over the Ipswich and Burleigh Heads properties. This was in substitution for an existing loan by Bank of Queensland secured by the first mortgage of the Queensland properties. It appears that negotiations with the Bendigo Bank were effectively completed and the loan approved on 24 October 2008. On 29 October, the Bank sent formal letters of offer to the Campbells and Mr Donnelly setting out the terms of the finance agreement. Elizabeth and Lynda Campbell did not have a chance to execute the necessary documents before leaving on a business trip to China on 1 November. In the meantime steps were taken by Mr Donnelly to secure the discharge of the Bank of Queensland mortgage and the release of security documents held by it. He signed an authority to that effect on 3 November. The Campbells signed the agreements on 14 November 2008 upon their return, and the mortgages were registered on 21 November.
Furthermore, the Campbells and Mr Donnelly have formed an intention to sell the Ipswich property in order to reduce their indebtedness and to fund the ongoing litigation involving Pets Paradise. Elizabeth Campbell deposes to entering into an agreement with Pampered Paws’ solicitors to fund the litigation. Entry into that agreement requires that they sell the Ipswich property. That agreement is subject to legal professional privilege and consequently is not before the Court.
It would therefore seem that, on the basis that the previous caveats had been withdrawn, and with no notice of any intention on the part of Pets Paradise to seek leave to lodge further caveats, the Campbells and Mr Donnelly entered into financial commitments with their bank which has a registered mortgage over both the Queensland properties, and that they entered into a binding commitment which requires them, together with Mr Donnelly, to sell the Ipswich land. They would obviously be prevented from doing so without the consent of Pets Paradise if a further caveat were lodged in respect of that land. There is no indication that Pets Paradise would grant such consent.
The second matter which bears upon the balance of convenience and which, by virtue of the observations of Wilson J in Landlush Pty Ltd v Rutherford[12] quoted above, must be considered in any event, is whether there is a satisfactory explanation for the removal of the first caveat and, in particular, whether there is a satisfactory explanation for the delay in making the application for leave to lodge the further caveats.
[12] [2002] 1 Qd R 236; [2002] QSC 219.
There is no explanation for the substantial misdescription in the original caveats which caused them to be removed. Likewise, there is no explanation for the substantial delay between 23 September 2008 and 6 November 2008 when the present application was made. Pets Paradise sought to excuse the delay on the basis that it could not decide whether to make the application until after I had handed down my decision in relation to the other caveats on 27 October. In my opinion, that does not excuse the delay in filing the application. There was nothing to prevent the application being filed immediately and notice of such application being given to the Campbells, even if Pets Paradise then sought a delay in resolution of the application pending my earlier decision. That at least would have put the Campbells on notice that they might enter into any other commitments relating to the land at their peril. Indeed, Pets Paradise was on notice from what the Campbells had said in their earlier affidavits that they desired access to their respective interests in the Queensland properties for the purpose of borrowing money. It cannot now be surprised that they took that opportunity when it became available. Not only was the application not made expeditiously, but no notice of the intention of Pets Paradise to apply for leave to lodge further caveats was given to the Campbells. The Campbells would therefore be unduly prejudiced by the lodging of a second caveat.
Conclusion
It is not necessary in the circumstances to address a further argument put by Mr Rochow based on issue estoppel, estoppel by conduct and estoppel by representation and I do not do so.
It follows that, for reasons relating to the balance of convenience and undue delay on the part of Pets Paradise, its application for leave to lodge further caveats in respect of both plaintiffs must be dismissed. In the case of the plaintiff Elizabeth Campbell, there is a further ground on which relief should be refused, namely that there is no serious question to be tried.
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