Formquip Nirvana Pty Ltd v Memphis Property Co Pty Ltd
[2025] VSC 348
•16 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S ECI 2025 02705
| FORMQUIP NIRVANA PTY LTD | Plaintiff |
| v | |
| MEMPHIS PROPERTY CO PTY LTD | First Defendant |
| THE REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | COSGRAVE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 May 2025 |
DATE OF JUDGMENT: | 16 June 2025 |
CASE MAY BE CITED AS: | Formquip Nirvana Pty Ltd v Memphis Property Co Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2025] VSC 348 |
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REAL PROPERTY – Application for removal of caveat pursuant to Transfer of Land Act1958 (Vic) s 90(3) – Where relevant clause of loan agreement created both an equitable charge and an equitable mortgage – Transfer of Land Act 1958 (Vic) s 91(4) not contravened – Respondent established a prima facie case justifying its interest in the property as chargee – Balance of convenience favoured maintenance of caveat – Caveat not removed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Stark | Merton Lawyers |
| For the First Defendant | Mr S Dyrenfurth | Nerlich Lawyers |
HIS HONOUR:
By an originating motion and summons filed 14 May 2025, the plaintiff (“Nirvana”) seeks the following orders:
(a) a declaration that caveat AY804359Q lodged by the first defendant (“Memphis”) on the title of the property located at 118–120 Mannington Road, Bulleen, Victoria, being the land pertaining to Certificate of Title Volume 12573 Folio 316 (“the Property”), contravenes s 91(4) of the Transfer of Land Act 1958 (Vic) (“TLA”);
(b) alternatively, a declaration that Memphis does not hold an interest as equitable chargee in the Property pursuant to an agreement with Nirvana dated 29 December 2022 as claimed in the caveat; and
(c) an order under s 90(3) of the TLA directing the second defendant (“the Registrar of Titles”) to remove the caveat from the register.
Background
Nirvana is the sole registered proprietor of the Property. Nirvana was incorporated in July 2021. It has two directors and secretaries, Edward Stone and Sean Bishop. Stone became its sole director and secretary in July 2024. Nirvana is the trustee of the Formquip Nirvana Trust.
Formquip Project Management Pty Ltd (“Project Management”) was incorporated in June 2020. Stone and Bishop are the directors and secretaries of Project Management.
Memphis was incorporated in September 2021. Luke Crozier (“Crozier”) and his wife Kendall are the directors of Memphis. Memphis is the trustee of the Memphis Property Trust.
By an agreement made on 29 December 2022, Memphis lent the sum of $1 million in relation to construction work being performed on the Property. Nirvana is in the process of developing the Property into 31 residential apartments. It has entered into 14 contracts of sale with prospective purchasers. The contracts are conditional upon a plan of subdivision being registered bringing the relevant lots into existence.
There is a dispute about the nature of the agreement. Nirvana says that Memphis and Project Management entered into the deed regarding the loan. Project Management is a company related to Nirvana. According to Memphis, there was an agreement (“the Loan Agreement”) made on about 29 December 2022 between Memphis, Nirvana and Project Management (as varied or novated). Memphis said that it lent Nirvana $1 million and Nirvana charged and mortgaged the Property in favour of Memphis. According to Memphis, the Loan Agreement was partly in writing and partly implied. Insofar as it was written, Memphis said it included a deed dated 29 December 2022 signed by Stone on behalf of Project Management (“the First Deed”), email correspondence dated 17 January 2023 and a second deed provided to Crozier on about 24 January 2024 (“the Second Deed”). The Second Deed was, by the parties’ agreement, backdated to 29 December 2022 and signed by Stone and Bishop on behalf of Nirvana and by Mr and Mrs Crozier on behalf of Memphis.
On 2 October 2024, Memphis lodged a caveat (“the Memphis first caveat”) on the title to the Property claiming an interest as mortgagee pursuant to the Loan Agreement.
Between 18 October 2024 and 15 November 2024, correspondence passed between the former solicitors for Nirvana, Dandanis & Associates Lawyers (“Dandanis”), and the solicitors for Memphis, Nerlich Lawyers, in relation to the Memphis first caveat.
On 21 October 2024, Boutique Residential Constructions Pty Ltd (“Boutique”) lodged a caveat (“the Boutique caveat”) on the title to the Property claiming an interest as chargee pursuant to an agreement with Nirvana dated the same day. Stone is the sole director, secretary and shareholder of Boutique.
On 18 November 2024, Nirvana made an application to the Registrar of Titles to remove the Memphis first caveat pursuant to s 89A of the TLA.
On 20 November 2024, the Registrar of Titles sent a notice to Memphis at its address for service pursuant to s 89A(3) of the TLA. The notice stated that the Memphis first caveat would lapse on 31 December 2024 unless, before that date, Memphis gave the Registrar of Titles written notice which satisfied the requirements of s 89A(3) of the Act.
On about 29 November 2024, Memphis served on Nirvana two demands. The first was a demand that it execute a mortgage in registrable form over the Property in accordance with the Loan Agreement. The second was a demand for payment under the Loan Agreement. Nirvana did not comply with either demand.
On about 4 December 2024, the s 89A notice was returned to sender. Memphis said that it did not receive the notice and did not know about it.
On 12 December 2024, Memphis commenced proceeding S ECI 2024 06717 against seven defendants, including Project Management and Nirvana. As against Nirvana, Memphis sought a declaration that it had an equitable interest in the Property, a declaration that its interest was an equitable mortgage and an order that Nirvana execute all documents and do all things required to give Memphis a mortgage in registrable form over the Property.
On 8 January 2025, the s 89A application was registered and the Registrar of Titles removed the Memphis first caveat from the title to the Property.
On about 21 January 2025, Crozier became aware that the Memphis first caveat had lapsed and he instructed solicitors to lodge a second caveat that day claiming an interest as chargee pursuant to the Loan Agreement (“the Memphis second caveat”).
On 2 April 2025, a liquidator was appointed to Project Management.
Between 2 April and 8 April 2025, correspondence passed between the solicitors for Nirvana and Memphis in relation to the Memphis second caveat.
A current title search for the Property reveals the following encumbrances:
·a mortgage in favour of Payton Capital Ltd registered 27 July 2022;
·a mortgage in favour of Payton Capital Ltd registered 28 June 2024;
·a caveat identified as dealing No AY289598M claiming an interest as chargee by Joe and Leanne Mifsud registered 9 August 2024;
·a caveat identified as dealing No AY289636G claiming an interest as chargee by Joe and Leanne Mifsud registered 9 August 2024;
·the Boutique caveat registered 21 October 2024; and
·the Memphis second caveat registered 21 January 2025.
Legislation
Nirvana’s application is made pursuant to s 90(3) of the TLA which is in the following terms:
Any person who is adversely affected by any such caveat may bring proceedings in the court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit.
The Court’s power to order the removal of a caveat under s 90(3) of the TLA is discretionary.
Legal principles
In Piroshenko v Grojsman,[1] Warren CJ explained that when a party applies to remove a caveat, the caveator must satisfy a two-stage test used by the court when deciding to exercise its discretion to grant interlocutory injunctive relief. Her Honour said that the two-stage process required the caveator to establish that there was a serious question to be tried that they have the estate or interest that they claim in the land and, having done so, to establish that the balance of convenience favours the maintenance of the caveat over the land until trial.[2]
[1](2010) 27 VR 489.
[2]Piroshenko v Grojsman (2010) 27 VR 489 at [7].
Her Honour said that in order for the caveator to satisfy the first limb, the caveator must satisfy the court that:
(a) there is a probability on the evidence before the court that the caveator will be found to have the asserted equitable rights or interest; and
(b) that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.[3]
[3]Ibid [18].
This approach has been endorsed in a number of subsequent Court of Appeal cases.[4]
[4]Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126 at [35]–[36]; Chan v Liu [2020] VSCA 28 at [42]–[43]; AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235 at [25]; Lee v Yap [2021] VSCA 297 at [79]; Dolan v Dolan [2023] VSCA 136 at [51].
In Sylina Pty Ltd v Solanki, Elliott J conveniently summarised the principles which govern the resolution of these applications as follows:
(1) The court’s power under s 90(3) of the Act is discretionary.
(2)A caveator bears the onus of establishing that there is a serious question to be tried that it does have the “estate or interest in land” as claimed.
(3)If the caveator establishes a serious question to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
(4)There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator; the stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.[5]
[5][2014] VSC 2 at [43].
Parties’ submissions — prima facie case
Memphis contended that it had established a prima facie case that it had an interest in the Property as chargee under the Second Deed. This was largely because it said that an agreement which charges a person’s land with performance of an obligation, including the payment of money, creates an equitable charge and will support a caveat. Memphis referred to the decision of Australian Secured & Managed Mortgages Pty Ltd v Horizon Hotels Pty Ltd (“Horizon Hotels”), where a clause of the agreement in question provided:
The applicant/s hereby charges and mortgages to and in favour of Craig Steven Highmore the applicant’s interest in any and all assets and real property owned by the applicant/s individually or jointly (including the security offered) to secure payment by the applicant/s to Craig Steven Highmore of the fees and any and all other monies due to Craig Steven Highmore by the applicant/s including all amounts that Craig Steven Highmore may incur in connection with the enforcement and/or preservation of its rights under this agreement.[6]
There was no dispute in that case that the clause was sufficient to create an equitable charge over the relevant property to secure repayment of any fees which the Court found were owed to Craig Highmore.[7] The trial judge was satisfied that the equitable charge arising from the clause provided a suitable basis for the caveat lodged over the property by Highmore.[8]
[6][2022] NSWSC 1647 at [25].
[7]Ibid at [74].
[8]Ibid at [150].
In the present case, clause 5 of the Second Deed is in the following terms:
IN consideration of the Lender entering into this Deed, and in order to secure the obligations of the Guarantor herein the Guarantor hereby CHARGES AND MORTGAGES in favour of the Lender the property described in Item 9 of the Schedule (“the Mortgaged Premises”).
Memphis argued that it was the lender, being the party named and described in Item 2 of the Schedule to the Second Deed. It said that the reference to “Guarantor” in clause 5 was to Nirvana.[9] It suggested that there was a typographical error in the document in that the word “Guarantor” in clause 5 should instead have read “Borrower”. Memphis referred to an email which Mr Crozier received from Bishop. The email was from Dandanis addressed to Messrs Bishop, Stone and Goran Sugarevski, the former chief operating officer of the Formquip group of companies. The email, which Dandanis sent at 10:37am on 17 January 2023 (and Bishop forwarded to Crozier), stated:
We confirm your instructions that the Borrower will be Formquip Nirvana Pty Ltd ATF Formquip Nirvana Trust and not Formquip Project Management Pty Ltd as per your previous instructions given that Formquip Nirvana will be providing a second mortgage over 118–120 Manningham Road, Bulleen, Vic.
Memphis also contended that the property described in Item 9 of the Schedule to the Second Deed was the Property.
[9]Memphis’s outline of submissions filed 26 May 2025 at [30(b)].
Memphis submitted that, by virtue of the above matters, it had established a prima facie case justifying its interest in the Property as chargee under the Loan Agreement.
Nirvana denied the validity of the Memphis submissions. It said that the Memphis second caveat infringed s 91(4) of the TLA by protecting the same interest as the Memphis first caveat and said, further, that clause 5 of the Second Deed did not give Memphis the interest which it claims. Further, Nirvana said that any agreement giving Memphis security was uncertain and/or incomplete. Also, it argued that there was non-compliance with s 126 of the Instruments Act 1958 (Vic).
Analysis
The First Deed was dated 29 December 2022. The only parties to the First Deed were Project Management as borrower and Memphis as lender. Under the terms of the First Deed, Memphis agreed to lend Project Management $1 million on the terms and conditions set out in the deed. The loan commenced on 29 December 2022 and the loan was to be repaid six months from that date. Item 8 of the schedule to the First Deed referred to “Security” and Nirvana but there was no reference in the body of the First Deed to either security or Nirvana. The copy of the First Deed in the affidavit material bears Stone’s signature on behalf of Project Management but Memphis did not execute the document.
The Second Deed was also dated 29 December 2022. However, the parties are agreed that this deed was actually signed by both of them in January 2023 and backdated by consent.
The two parties to the Second Deed were Nirvana as the borrower and Memphis as the lender. The principal sum lent was $1 million and the purpose of the funds was to provide working capital to assist in Nirvana’s business. The due date for repayment was six months from 29 December 2022. Item 9 of the Schedule referred to the “Mortgaged Premises” and a second ranking mortgage over the property.
Clause 1 of the Second Deed stated that Memphis has advanced or will advance to Nirvana the principal sum of $1 million on or before 29 December 2022.
There was some uncertainty about the question of which company received the $1 million from Memphis. In his submissions,[10] counsel for Memphis said that the loan was from Memphis to Nirvana and that Nirvana charged and mortgaged the Property in favour of Memphis. He also contended that there was a typographical error in the Second Deed whereby the word “Guarantor” in clause 5 should have instead said “Borrower”.[11]
[10]T4.
[11]T28.
Memphis argued that, notwithstanding the ostensible terms of the First Deed and the Second Deed, Nirvana was the borrower. The first defendant contended that this was apparent from the intended effect of clause 5 of the Second Deed. The parties created this document shortly after the email from Dandanis quoted at paragraph 27 above. The terms of that email confirmed that Nirvana (and not Project Management) was to be the borrower. A difficulty with the Second Deed is that clause 5 refers to Nirvana as the guarantor and not the borrower. To that extent, there was, as Memphis alleged, a typographical error.
On the other hand, counsel for Nirvana rejected the argument that there was a typographical error in clause 5 of the Second Deed. Counsel submitted that the loan was a “three-way arrangement”, with Project Management as the borrower and the Second Deed being executed for the purpose of obtaining a guarantee from Nirvana. However, Nirvana argued that the Second Deed was irremediably defective and could not give rise to the security interest asserted by the first defendant, because:
(a) Nirvana was the principal borrower under the Second Deed. It could not have been a guarantor at the same time as being a principal borrower; and
(b) “Guarantor” is not defined in the Second Deed. This meant that there was uncertainty as to the fundamental terms of the proposed charge or mortgage, such that no security interest was created.
Clause 5 of the Second Deed was in materially similar terms to a clause which I have also set out from the case of Horizon Hotels. As noted, in that case, Henry J accepted that the charging provision in the clause gave rise to an equitable interest in the property and that the equitable charge provided a proper basis for a caveatable interest.
Although Memphis has not specifically pleaded its case in the Supreme Court in this way, on the evidence before me, I can imagine that, apart from its current contract case, it could plead alternative claims for novation, estoppel and rectification.
Nirvana is correct to observe that the Second Deed makes no reference to a guarantor in the description of the parties or the schedule to the deed. “Guarantor” is referred to in clause 5 of the Second Deed but nowhere else in the document. I note also that:
·Nirvana’s lawyers prepared the Second Deed and, to that extent, it can be construed against Nirvana by reason of the contra proferentem rule;
·when Nirvana’s lawyers forwarded the Second Deed to Crozier, he had no solicitors acting for him or Memphis; and
·it does not appear that Crozier obtained professional legal or financial advice about the First Deed or the Second Deed at the time he received either document.
There is no dispute between the parties that:
·Nirvana is the registered proprietor of the Property;
·Memphis lent $1 million in connection with the development of the Property;
·neither Nirvana nor Project Management repaid the loan to Memphis;
·Nirvana instructed its solicitors in January 2023 that Nirvana, not Project Management, was the borrower of the monies from Memphis. These instructions were confirmed in an email; and
·a director of Nirvana sent the email to Memphis.
In these circumstances, and notwithstanding the issues with the documentation, I consider that Memphis has raised a serious question that it has the estate or interest which it claims. The email which Bishop sent to Crozier is important in confirming the thrust of Memphis’s case to the effect that there was an agreement that Nirvana would stand as the borrower in place of Project Management. And that Nirvana would grant security in favour of Memphis in relation to the $1 million loan. The instructions, confirmed in the email, constitute a significant piece of evidence whereby the Nirvana/Project Management interests support the Memphis claim. Even if there was some uncertainty and the Second Deed did not accurately represent the agreement made, the party to be charged signed it. This was consistent with the gist of the agreement which Memphis alleged.
Section 91(4) of the TLA
Apart from relying upon the confusing nature of clause 5, Nirvana also argued against the finding of a serious question on the basis that Nirvana contravened s 91(4) of the TLA by claiming in the Memphis second caveat the same interest as it did in the Memphis first caveat.
I am satisfied that, because the clause refers to both charging and mortgaging in favour of Memphis, the Second Deed creates two different types of interest in the land which could attract protection by a caveat. So much appears from the decisions of EA & S Plaster Company Pty Ltd v Registrar of Titles[12] and Re Carter Holt Harvey (Australia) Pty Ltd (No 1) (“Carter Holt”).[13]
[12](2000) Q ConvR ¶54-543.
[13][2017] VSC 499 (“Carter Holt”).
In the former, the applicant sought directions that the Registrar of Titles register a caveat on land of which the second respondent was joint tenant with his wife. The Registrar declined to register the caveat because he considered that the grounds were the same, or substantially the same, as a previous caveat which the applicant had withdrawn.
The applicant was in the business of supplying building products. On 3 August 1999, the second respondent signed an application for credit account with the applicant and agreed to be bound by certain terms and conditions. Relying upon the second respondent’s execution of the credit application, the applicant supplied goods and services to the second respondent. Subsequently, the second respondent breached the terms of the credit application by failing to pay invoices forwarded to him and he was, therefore, in default of his obligations under the agreement. Clause 10 of the credit application provided:
The Customer charges as a fixed charge with the payment of all moneys now or in the future becoming owing hereunder all his property both real and personal … with the payment of all moneys now or in the future becoming owing hereunder … and further, the Customer, if requested by the Supplier [the applicant], will execute a mortgage and/or charge or other like instrument … in the form prepared by the Supplier’s Solicitor over any or all of the Customer’s property …
On 9 November 1999, the applicant lodged a caveat claiming an interest as mortgagee of an estate in fee simple of the share owned by the second respondent. The applicant relied upon clause 10 of the credit account application.
The applicant subsequently withdrew the caveat to allow registration of a mortgage executed by an officer of the applicant pursuant to a power of attorney also contained in clause 10 after the second respondent had declined to do so contrary to his obligations under the agreement with the applicant. For reasons which are not material, the Registrar declined to register the power of attorney.
On 1 December 1999, the applicant lodged a second caveat on grounds that it was an equitable mortgagee of an estate in fee simple pursuant to clause 10 of the credit account application and a request to execute a mortgage dated 30 November 1999.
On 3 December 1999, the Registrar required that the second caveat be withdrawn because it was based on the same grounds as the first caveat. Both were based on clause 10 and were substantially the same.
The applicant contended at trial that the first caveat was based on the initial part of clause 10 which charged the second respondent’s property with the payment of all moneys owing to the applicant. This was described as an equitable general charge. The applicant said that the second caveat relied upon the request to the second defendant to execute the mortgage under clause 10. In doing this, an equitable mortgage came into existence.
The trial judge found that an equitable charge was different from an equitable mortgage.
The trial judge accepted the view propounded in The Law of Securities[14] where the learned authors said that an equitable charge is a pure hypothecation whereas the equitable mortgage is a mixed hypothecation. The equitable mortgagee has the potentiality of full beneficial ownership through the process of foreclosure. The equitable chargee is not entitled to foreclosure upon default. Accordingly, the Court concluded that because the caveats were based on two separate grounds, the second caveat was entitled to be registered.
[14]Edward I Sykes and Sally Walker, The Law of Securities (Law Book, 5th ed, 1993) at 197.
In Carter Holt, Amerind Pty Ltd was trustee of a trust which carried on business manufacturing and distributing decorative and architectural finishes. On 11 March 2014, the sole director of Amerind resolved to appoint administrators to the company and Bendigo and Adelaide Bank appointed receivers and managers because the company was hopelessly insolvent. The receivers continued trading and, after paying out the debt owed to the bank, realised a surplus.
Between May 2000 and February 2014, Carter Holt supplied plywood and other goods to Amerind in the course of its business. At the time Amerind went into liquidation, Carter Holt was owed approximately $4.9 million for goods sold and delivered to Amerind. Carter Holt provided the goods and services pursuant to a supply agreement.
On about 20 June 2003, Mr David, the sole director of Amerind, gave Carter Holt a written guarantee of indemnity in respect of the moneys owed by Amerind to Carter Holt. Carter Holt contended that by executing the written guarantee of indemnity David gave a charge in favour of Carter Holt over all of his interest in land and other assets which he thereafter acquired and also agreed to execute an instrument of transfer for any such assets by way of security upon request.
The charging clause was in the following terms:
The Guarantor will charge in favour of [Carter Holt] all estates and interest in any land and any other assets whether tangible in [sic] intangible in which they now have any legal or beneficial interest or in which they later acquire any such interest, with payment of all monies owed by the customer and agree upon request, to execute a registrable instrument transferring to [Carter Holt] the Guarantor’s estate and interest by way of security.
Justice Robson accepted that an equitable charge is an example of a pure hypothecation. The creation of a charge does not require any specific wording. It is sufficient if the grantor manifests an immediate intention to create a charge by using words that create a present intention to charge land specified as security.[15] His Honour accepted that the words “will charge” in the charging clause created a present and unconditional obligation by way of equitable charge. In addition, his Honour accepted the submission that the later part of the clause created a specifically enforceable right to call for a legal mortgage which was a species of equitable mortgage. His Honour concluded that the promise to execute a registrable instrument of transfer by way of mortgage was a separate and distinct promise made under the clause from the creation of the charge.
[15]Carter Holt (n 13) at [40].
On the basis of these authorities, I reject Nirvana’s argument that the interest claimed in each of the two caveats was the same. Accordingly, this provides no basis upon which to reject registration of the Memphis second caveat.
Balance of convenience
Nirvana argued that the Memphis second caveat is impeding Nirvana’s effort to obtain further finance and its plan to develop the Property. In its affidavit, Nirvana says that:
·the original finance provided by Payton Capital Ltd has been exhausted on the initial construction and development of the Property;[16]
·another financier has agreed to provide finance. This funding “would allow Nirvana to complete the development and perform its obligations under the 14 contracts of sale it has entered into with prospective purchasers”;[17]
·the financier requires the completion of the building to take place on or before 30 September 2025;[18]
·in order to obtain further finance, the financier requires security to be lodged on the title to the Property so that the financier holds security for all money owing to it by Nirvana. That cannot happen while the Memphis second caveat remains on title;[19]
·the planning permit for the Property expires on 7 October 2025;[20] and
·Nirvana is required to enter an agreement pursuant to s 173 of the Planning and Environment Act 1987 (Vic) with Manningham City Council. While the Memphis second caveat remains on title, Nirvana is required to seek the consent of Memphis in order to enter that agreement with the council.[21]
[16]Affidavit of Edward Stone dated 14 May 2025 at [33]. The affidavit erroneously referred to “Payton Capital Pty Ltd”.
[17]Ibid at [34].
[18]Ibid.
[19]Ibid at [36].
[20]Ibid at [37(a)].
[21]Ibid at [37(b)].
Those matters are the factors which, from Nirvana’s perspective, make the hearing to remove the caveat urgent. Nirvana wants to enter the new funding agreement and complete the work within the time prescribed.
I note that in Nirvana’s submissions filed in respect of the application, it said that it urgently needs further finance to complete construction of the apartments currently under construction and that finance cannot be provided while the Memphis second caveat remains on title.
I am not persuaded that the balance of convenience favours removal of the caveat. I say this for several reasons.
First, there are other interests registered on the title apart from the Memphis second caveat. These include the mortgages in favour of Payton Capital Ltd, two caveats in favour of Joe and Leanne Mifsud claiming an interest as chargee and the Boutique caveat also claiming an interest as chargee. If the new financier is to have a registered mortgage in priority to those interests, not only will Nirvana have to remove the Memphis second caveat but it will also have to remove the other interest holders (or possibly obtain their consent). In the circumstances sworn to by Nirvana’s director, there is no utility in removing the Memphis second caveat if the other interests remain. The benefit of removing the Memphis second caveat will be minimal if there are still five prior interests (rather than six) ahead of the new financier.
Moreover, Nirvana has produced no evidence to explain what the position is with those other parties whose interests are protected by a mortgage or caveat over the Property. The Court does not know, for example, the extent of the indebtedness to each of those parties, their willingness to be paid the amount owing to them or the amount of money required to complete the project.
Secondly, I do not accept that the new financier is unable to register or lodge security against the title to the Property if the Memphis second caveat remains on title. Rather, I expect that the financier could still register a security interest against the Property but its priority would likely rank after some or all of the security interests already registered against the Property.
Thirdly, I do not accept the statements from Nirvana’s counsel that Nirvana’s project on the Property “can’t proceed without further finance” and that the only way Nirvana can complete the Property by 30 September 2025 is with the further funding.[22] The submission made goes beyond the evidence. In his affidavit, Stone says that the further funding “would allow Nirvana to complete the development and perform its obligations under the 14 contracts of sale it has entered into with prospective purchasers”, and that “[t]he financier requires such completion to occur on or before 30 September 2025”.[23] He does not expressly say that the only way to complete the project by 30 September 2025 is with the further finance he refers to, or that without that finance, he cannot complete the project.
[22]T51.
[23]Affidavit of Edward Stone dated 14 May 2025 at [34].
Fourthly, there is the question of what effect removing the caveat would have on Memphis. If the Court orders the removal of the Memphis second caveat, then Memphis will lose the priority which it currently enjoys. If the new financier registers a mortgage over the Property and it takes priority over Memphis (and potentially other parties with interests registered against the Property), then it is conceivable that Memphis would not only lose its priority but the security interest itself. The potential loan raised to be raised by the plaintiff from the new financier is $4.8 million. As observed earlier, the plaintiff has not provided the Court with any details about the current indebtedness owed to Payton Capital Ltd, the Mifsuds and Boutique. The Court does not have any specific information which would enable it to compare the total construction and development costs in connection with the project (including the borrowings and related interest and costs) with the likely proceeds of sale from the project. Without such information, the Court cannot assess with reasonable confidence whether Memphis would likely be repaid if its second caveat were withdrawn.
Because the above financial information is peculiarly within the knowledge of Nirvana and it has not provided that information to the Court, the Court is unwilling to assume that Memphis would still be repaid if the Memphis second caveat were withdrawn. Indeed, I suspect there is a possibility that the security currently held by Memphis might prove worthless. Such potential damage to Memphis is serious.
Fifthly, I note further that the documentation which Nirvana relied upon in relation to the new finance was unclear and uncertain. I say this because a substantial part of the documentation was either redacted or entirely missing. For example, there was a reference to new proposed facility and security documents which were said to be attached to an email dated 14 May 2025. The email itself redacted the names of most recipients of the email, the name of the sender of the email and some of the documents referred to in the email. The only part of the proposed facility and security documents attached was Schedule 2 to the facility agreement. Parts of the document were redacted and various terms set out in the schedule were said to be awaiting confirmation. However, it was clear that a condition precedent to the loan was that the lender approved the building contract. This latter document was not available to the Court. It follows from this that the Court does not know the final terms of the building contract or whether the prospective new financier approved the contract. Hence, there is no certainty that the building would proceed even if the Court orders the removal of the Memphis second caveat.
In his affidavit, Stone said that due to commercial sensitivities, he requested that details of the new financier and any party involved in the development not be revealed to Memphis. In my view, Nirvana, through Stone, did not provide a compelling rationale to keep confidential the information referred to. From time to time, courts are asked to keep certain affidavit material confidential by, for example, placing an affidavit or an exhibit to an affidavit in a sealed envelope and not allowing access to, or inspection of, the document without leave of the court. In the present case, Nirvana has acted unilaterally by withholding documentation both from Memphis and from the Court. Stone simply failed to explain to the Court or provide any sufficient underlying factual basis justifying the confidentiality. There was no intimation of what Memphis might do which would justify the withholding of the documentation.
Finally, I also note that Item 10 of Schedule 2 to the proposed facility agreement refers to “Certificates of Title Folio Identifier Volume 8461 Folio 566 and Volume 8461 Folio 567”, which are different from the Certificate of Title of the Property set out in the plaintiff’s summons and originating motion. Nirvana has not explained this discrepancy.
In view of the matters set out in this part of the judgment, I consider that the balance of convenience favours Memphis.
Conclusion
For the reasons set out, I am not satisfied that the caveat should be removed. Accordingly, subject to hearing from the parties, I consider that the plaintiff’s originating motion and summons filed 14 May 2025 should be dismissed and that the plaintiff should pay the first defendant’s costs of and incidental to the application, such costs to be taxed on a standard basis in default of agreement. I note that the position adopted by the Registrar of Titles was that she would not appear at the hearing, would not seek costs and would abide by the orders of the Court.
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