DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Interlocutory Application)
FEI v VERITAS LIBERTE PTY LTD
[2022] SADC 41
Judgment of his Honour Judge Burnett
1 April 2022
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - FORM AND CONTENT OF CAVEAT - NATURE OF ESTATE OR INTEREST CLAIMED
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - REMOVAL
EQUITY - GENERAL PRINCIPLES - RULES AND MAXIMS OF EQUITY - WHOEVER SEEKS EQUITY MUST DO EQUITY
EQUITY - GENERAL PRINCIPLES - EQUITABLE CHARGES AND LIENS - GENERALLY
The applicant is the owner of the properties at 7 and 9 Haigh Street Netherby (the Properties). Prior to the applicant purchasing the Properties, the respondent was itself interested in acquiring and developing the Properties. It could not, however, obtain finance to do so. The respondent approached the applicant with a proposal that the applicant purchase the Properties but that the respondent would pay all acquisition, holding and development costs associated with the Properties. On 28 May 2018 the applicant and the respondent entered into a Joint Venture Agreement (JVA) to that effect. The JVA required the respondent to make all repayments of the loan to be taken out to acquire the Properties. On the sale of the Properties, the respondent would receive 99% of the net profits and the applicant receive 1%. The proposed development involved subdividing the Properties into three separate allotments.
The applicant acquired the Properties on 26 June 2018. To do so, he obtained a loan from the NAB, secured by a mortgage over the Properties.
The respondent paid costs towards the acquisition, holding and development of the Properties up to March 2020 (including the mortgage payments), but in breach of the JVA has failed to make any payments at all since that date, including any mortgage payments.
Since March 2020 the applicant has paid the mortgage and all holding and development costs in relation to the Properties, which under the Joint Venture Agreement were payable by the respondent. In total the applicant has since that date paid the sum of $147,829.19 in respect of the mortgage, holding and development costs.
The applicant has entered into contracts for sale for each of the three subdivided allotments of the Properties to third parties. The applicant seeks repayment of the sum of $147,829.19 from the net proceeds of sale but otherwise does not seek any part of the profits (if any) on the sale.
The respondent has placed a caveat over the Properties and has claimed an interest as chargee pursuant to the Joint Venture Agreement dated 28 May 2018. The applicant has sought orders pursuant to s 191(1)(d) of the Real Property Act 1886 (the RPA) that the caveat be removed and that on settlement of the Properties the sum of $147,829.19 be paid to it, with the balance of the net proceeds to be paid into Court.
Held:
(1) The approach to an application for removal of a caveat under s 191(1)(d) of the RPA is the same approach…
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- Case
- [2022] SADC 41
- Decision Date
CaseChat Overview and Summary
The court found that the respondent, Veritas Liberte Pty Ltd, had not met the necessary criteria for maintaining the caveat. The caveat did not accurately describe the proprietary interest claimed, failing the test set out in Union Finance Pty Ltd v Rateki Pty Ltd & Anor (No 2). Furthermore, the respondent did not have an equitable charge over the properties, as the Joint Venture Agreement did not demonstrate an intention to create such a charge. Although the respondent's payments in acquiring, holding, and developing the properties could potentially give rise to a constructive trust, the respondent had not accepted the applicant's claims and repaid the legitimate expenses of the applicant in holding the properties, which is a requirement under the maxim that he who seeks equity must do equity. The balance of convenience favoured the applicant, as maintaining the caveat would prevent the land division from proceeding and terminate the three sale contracts, leading to ongoing mortgage and holding costs.
The court ruled that the caveat must be removed from the properties, and upon sale, the net proceeds should be paid into court after deducting settlement costs, the mortgage amount, and $147,829.19 to reimburse the applicant for mortgage and other holding and development costs. The court's decision emphasized the importance of accurately describing the proprietary interest in a caveat and the necessity for the caveator to meet the criteria for maintaining the caveat, including satisfying the test for an interlocutory injunction and adhering to equitable principles.
Orders
Orders of the court
Held:
(1) The approach to an application for removal of a caveat under s 191(1)(d) of the RPA is the same approach as an application by the caveator to extend the time for removal of a caveat after it has been warned under s 191(1)(e)-(g) of the RPA. The onus is on the caveator in each case to show that the caveat should remain on the property. To do so, the caveator must satisfy the test for an interlocutory injunction: Stone v Leonardis & Anor [2011] SASC 153; (2011) 110 SASR 503 applied.
(2) The caveat must accurately describe the proprietary interest over the subject alleged to be held by the caveator: Union Finance Pty Ltd v Rateki Pty Ltd & Anor (No 2) [2007] SASC 11 applied. The respondent did not accurately describe its interest.
(3) The respondent does not have an equitable charge over the Properties. The Joint Venture Agreement does not demonstrate an intention to create an equitable charge: Taleb v National Australia Bank (2011) 82 NSWLR 489 and Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230 applied.
(4) The payment by the respondent of costs in acquiring, holding and developing the Properties would potentially give rise to a claim for a constructive trust over the Properties: Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 585 and Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 applied.
(5) The applicant has made mortgage payments and paid other costs relating to the holding and subdivision of the Properties. The respondent must accept those claims before it is entitled to the equitable remedy of a constructive trust. That is an application of the principle that he who seeks equity must do equity: Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 applied.
(6) The respondent has not done equity in that it has not accepted the claims of the applicant and repaid the legitimate expenses of the applicant in holding the Properties.
(7) The respondent has not established on the evidence any claims against the applicant in relation to the sale of the Properties or otherwise. In any event, the respondent could not take advantage of the remedy of a constructive trust without first defraying the costs of the applicant in paying the mortgage and other holding and development costs. Any claims against the applicant would be personal claims and could not be set off against the applicant’s claims for reimbursement of the mortgage and other costs.
(8) The balance of convenience favours the applicant in that if the caveat is maintained over the Properties, the land division will not be able to proceed and the three sale contracts will be terminated. Mortgage and other holding costs will still accrue.
(9) An order will made be made that the caveat be removed from the Properties and that upon sale of the Properties the net proceeds of sale be paid into Court after deduction of settlement costs, the sum required to discharge the mortgage and the sum $147,829.19 to be paid to the applicant in reimbursement of the costs that he has spent in paying the mortgage and other holding and development costs.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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