Circuit Finance Australia Ltd v Bessounian

[2006] NSWSC 1190

CITATION:	Circuit Finance Australia Ltd v Bessounian [2006] NSWSC 1190
HEARING DATE(S):	09/11/06
JUDGMENT DATE :	9 November 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	11/09/2006
DECISION:	Order dispensing with service. Order extending operation of caveat.
CATCHWORDS:	REAL PROPERTY - Torrens system - caveat against dealing - lapsing notice served - application by caveator for order extending operation of caveat - no service on registered proprietor - attempted service at address given by registered proprietor in application for issue of lapsing notice - whether order under s.74K(3) dispensing with service on registered proprietor should be made
LEGISLATION CITED:	Real Property Act 1900, ss.74K, 74N
CASES CITED:	Circuit Finance Pty Ltd v Crown and Gleeson Securities Pty Ltd [2005] NSWSC 997 Ex parte Little (1958) 58 SR (NSW) 173 Re Drinkwater (1929) 46 WN (NSW) 202
PARTIES:	Circuit Finance Australia Pty Limited - Plaintiff Raphael Bessounian - Defendant
FILE NUMBER(S):	SC 5331/06
COUNSEL:	Mr A.C. Casselden - Plaintiff ex parte
SOLICITORS:	Leonard Legal - Plaintiff

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY 9 NOVEMBER 2006

5331/06 - CIRCUIT FINANCE AUSTRALIA LTD v BESSOUNIAN

JUDGMENT

1 The plaintiff claims, as principal relief, a declaration that it has an estate or interest in the defendant’s property at Blacktown "pursuant to the charging clause contained in clause 17 of the terms and conditions of the lease agreement dated 27 April 2006 entered into between the plaintiff and the defendant". As an interlocutory measure, the plaintiff claims an order under s.74K(2) of the Real Property Act 1900 extending the operation of a caveat lodged by it and affecting the defendant's property to which the principal claim for relief relates.

2 In the section headed "Estate or Interest Claimed", the caveat contains these words.

“Equitable charge arising out of the charging clause in clause 17 of lease agreement executed by the registered proprietor/lessee in favour of the caveator.”

3 The instrument by virtue of which the estate or interest is thus said to arise is described as a lease agreement of 20 April 2006. The lease agreement is one that relates to goods, specifically certain electronic or computer equipment. The so-called lessor is the plaintiff. The lessee is described as "Out of Exile Pty Ltd & Raphael Bessounian".

4 The lease agreement provides for what is, strictly speaking, bailment of the goods by the plaintiff to Out of Exile Pty Ltd and the defendant and requires certain payments of money by them. It contains a clause 17 as follows:

“As security for the due and punctual payment of the rent and/or the moneys owing and the due and punctual performance of the observance of the terms of this lease, the Lessee, as beneficial owner, hereby charges in favour of the Lessor, all of his right, title and interest in and to the charged property and all property here after to be held or acquired by the Lessee in addition to the charged property and consents to a Caveat or other registrable instrument being lodged to register such charge.”

5 The lease agreement contains a definition of “charged property” which refers to the property described in a particular part of its schedule. However, that part of the schedule is blank, with the result that there is no property expressly identified as "charged property" and the plaintiff's claim accordingly rests on the words referring to "all property here after [sic] to be held or acquired by the Lessee".

6 In this respect, the circumstances are the same as those considered by Brereton J in Circuit Finance Pty Ltd v Crown and Gleeson Securities Pty Ltd [2005] NSWSC 997, which involved an identical clause in a lease agreement under which the present plaintiff was lessor. I quote from his Honour's judgment:

“[11] The lease agreement, which is between Circuit Finance as lessor and Jason Campbell as lessee, of a Mitsubishi Pajero wagon and accessories, contains, amongst its terms, cl 17 which provides that:
As security for the due and punctual payment of the rent and/or the moneys owing and the due and punctual performance and observance of the terms of the lease the Lessee as beneficial owner hereby charges in favour of the Lessor all of his rights, title and interest in and to the charged property and all property here after to be held or acquired by the Lessee in addition to the charged property and consents to a Caveat or other registrable instrument being lodged to register such charge.

[12] That part of the lease agreement schedule which provides for identification of the charged property is left blank, so the operation of clause 17 is limited, therefore, to the words:
All property hereafter to be held or acquired by the lessee in addition to the charged property.

[13] Accompanying the lease is a guarantee of lessee’s obligations signed by Jody-Lee Campbell, which contains a provision that, as security for the performance of the terms of the guarantee by the guarantor, she charges in favour of Circuit Finance all of her interest in any freehold land in Australia and agrees that:
…the Lessor shall have in respect of such land those powers given to a mortgagee by the Property Law Act 1958 (Victoria) where the mortgage is by deed.

[14] As the land was, as at 15 August 2005 and presumably also on 22 June 2005 when the caveat was lodged, held by Jason Campbell and Jody-Lee Campbell as tenants in common, it falls within the definition of charged property (so far as Jason Campbell is concerned), within the terms of clause 17 to which I have referred, and (so far as Jody-Lee Campbell is concerned) it is freehold land in Australia the subject of the charge in the guarantee given by her. In those circumstances, it is plain enough that the effect of the documentation is to give Circuit Finance an interest by way of charge or encumbrance securing the obligations of Mr Campbell as lessee and Ms Campbell as guarantor under the lease and guarantee. Such an interest is manifestly capable of supporting a caveat.”

7 For the reasons given by Brereton J and having regard to the evidence that the defendant is the registered proprietor of the property at Blacktown (he being also one of the persons constituting the "Lessee" under the lease agreement), I am satisfied that the plaintiff has shown, to the standard required by s.74K(2) of the Real Property Act, that the claim in the caveat "may have substance". In other words, I am satisfied that the plaintiff has shown that there is a serious question to be tried regarding the existence of the estate or interest as chargee, which is both asserted in the caveat and the subject of the claim for substantive relief in the present proceeding.

8 There is, however, a question to be addressed under s.74K(3). That section is as follows:

“Unless the Supreme Court has made an order dispensing with service, it may not hear an application made under subsection (1) unless it is satisfied that all interested parties disclosed by the notice which gave rise to the application have been served with copies of the application before the hearing.”

9 There has been no service upon the defendant in the sense of personal service or delivery to him in a way which would be seen to satisfy general concepts of service. (I note, in this connection, that the rules as to service in s.74N of the Real Property Act do not apply since they are concerned with service on a caveator.) That being so, the court may not make an order under s.74K(2) – and, indeed, may not entertain the application – unless there is an order dispensing with service. This is the effect of s.74K(3). An application for an order dispensing with service was made in this case and I indicated at the start of the hearing, having reviewed the evidence about attempted service and steps that had been taken in that direction, that I was disposed to make such an order.

10 The circumstance that the application for an order under s.74K(2) is now before the court is traceable directly to an application for preparation of a lapsing notice lodged by the defendant, as registered proprietor, with the Registrar-General. That application for preparation of a lapsing notice is dated 8 September 2006. It is signed by the applicant. In the space marked "Lodged By" in which are to be inserted "Name, address or DX and Telephone", there is a reference to the defendant's name and an address at North Bondi. I have also been taken to a defence filed by the defendant in certain District Court proceedings, also dated 8 September 2006, in which the same address at North Bondi is given as the defendant’s address.

11 From these two documents it may be inferred that at least as at 8 September 2006, the defendant regarded the North Bondi address as his address.

12 The evidence concerning attempted service shows that a process server went to the North Bondi address on 17 October 2006 and that the door was answered by a man who, in response to a request to speak to the defendant, said that the defendant had moved out six weeks ago and that other people had been there looking for him. The man also said that he had no forwarding address and no telephone number for the defendant. The process server left the summons and supporting affidavit in the letter box at the North Bondi premises.

13 Action directed towards lapsing of the caveat was initialled by the defendant, as registered proprietor, in such a way as to identify the North Bondi address as his address for the purposes of the application for the issue of a lapsing notice. In the absence of other knowledge, a caveator served with a lapsing notice has no means of knowing where the registered proprietor seeking lapsing may be found in order to effect service of an application under s.74K.

14 It has been held that service upon a caveator may be effected by leaving the relevant document at the address of the caveator stated in the caveat: Re Drinkwater (1929) 46 WN (NSW) 202; Ex parte Little (1958) 58 SR (NSW) 173. A similar approach is warranted in relation to service on a registered proprietor who has, by application under s.74J stating the registered proprietor’s address, sought the issue of a lapsing notice. Service of such a notice sets a statutory process in motion in such a way that the caveator is put to the task of sustaining his or her caveat by approaching the Supreme Court but is deprived of the opportunity of doing so unless, within 21 days after such service, the caveator can move the court consistently with s.74K(3). That section assumes that a means of giving notice to the registered proprietor will be readily available to the caveator. Where the caveator’s only recent knowledge comes from the s.74J application, it is reasonable to proceed on the basis that it is sufficient that the caveator seek out the registered proprietor at the address specified in that application.

15 It follows, in my view, that if, as in the present case, genuine attempts have been made to serve the registered proprietor at the address nominated in the s.74J application and, despite those genuine attempts, it has not been possible to effect service, the case is one in which the court can properly make an order of the kind contemplated by s.74K(3) dispensing with service of the application for an order extending the operation of the caveat. As I have said, the person initiating such an application before the court really has no way of discovering the registered proprietor for the purposes of service, except by reference to the application for the issue of the lapsing notice.

16 For those reasons, and in view of the evidence about attempted service and the response received by the process server at the North Bondi address, an order under s.74K(3) is warranted in this case.

17 Pursuant to s.74K(3) of the Real Property Act, I order that service of the summons, insofar as it seeks an order pursuant to s.74 extending the operation of caveat number AC 359373, be dispensed with.

18 Pursuant to s.74K(2) of the Real Property Act I order that the operation of caveat number AC 359373 be extended until further order.

19 I note the usual undertaking as to damages and that the order extending operation of the caveat is made upon that undertaking.

20 The summons is stood over to the registrar's list on 5 February 2007.

21 Each party has liberty to apply on three days notice

22 The defendant will pay the plaintiff's costs of today.

23 The order extending the caveat may be taken out forthwith.

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