Forster v Credit Restoration Australia Pty Ltd

[2011] VCC 1375

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE COMMERCIAL LIST GENERAL DIVISION	Case No. CI-11-04524
FORSTER	Plaintiff
v.
CREDIT RESTORATION AUSTRALIA PTY LTD and	Defendants
OTHERS

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	28 October 2011
DATE OF JUDGMENT:	28 October 2011 (Revised 31 October 2011)
CASE MAY BE CITED AS:	Forster v Credit Restoration Australia Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2011] VCC 1375

REASONS FOR JUDGMENT

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Catchwords:  Transfer of Land – Application to remove caveat – Settlement of contract of sale of the property imminent – Balance of convenience favoured the removal of the caveat – Section 90(3) Transfer of Land Act 1958.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr B. Curtin	Hutchinson Legal
For the Defendants	Mr J. Wilkinson	Darroll Nelson
HIS HONOUR:

1           The second defendant by summons dated 20 October 2011 in the proceeding seeks an order that the plaintiff withdraw the caveat lodged on her behalf in respect of the property at unit 2, 322 Maroondah Highway, Ringwood.

2           The plaintiff commenced the proceeding by writ, dated 21 September 2011. There are four defendants. The plaintiff makes allegations against them relating to the misuse of funds provided by her for the purchase of the property at Ringwood.

3           The plaintiff had a poor credit record and the second defendant, through his employer, the first defendant, was engaged to assist in the task of restoring her credit rating so that she could obtain finance to purchase a property. She was unable to obtain finance and the property at Ringwood was purchased in the name of the second defendant for $575,000 pursuant to a contract of sale dated 25 November 2010.

4           The plaintiff alleges that she paid the deposit of $57,000 and further sums towards the purchase price and acquisition costs, totalling in all $156,411.06. On 29 July 2011, a caveat was lodged on her behalf by her solicitor, claiming an equitable interest in fee simple in the property “pursuant to an implied or constructive trust” between herself and the second defendant, as the registered proprietor of the property.

5           The property was purchased with first mortgage finance obtained from Adelaide Bank and the purchase settled in April 2011. The plaintiff paid the first two instalments to Adelaide Bank, apparently in May and June 2011, but has not made any further payments since that time. She has continued to remain in occupation of the property.

6           The second defendant entered into a loan agreement with Aureus April Pty Ltd on 23 July 2011. The loan was on very onerous terms. The loan amount was $20,000. From that sum, a $7,000 establishment fee was apparently deducted and a brokerage fee of $3,300 paid to an organisation associated with the third defendant. The interest rate

under the loan was 6 per cent per month as the lower rate and 8 per cent per month as
the higher rate.

7           The second defendant in oral evidence said that this was the only loan he could obtain and these were the only conditions upon which he could obtain finance. He said that it was necessary to obtain funds in order to meet the ongoing payments due to Adelaide Bank. At the time the loan was obtained, the monthly instalment due to Adelaide Bank was two weeks in arrears.

8           The evidence in relation to this loan is most unsatisfactory. The written loan agreement is in evidence. The loan agreement was executed by the second defendant, apparently in the presence of his solicitor, Mr Darroll Nelson. Initially, the material filed in support of the application provided no information about the circumstances in which the loan was

obtained, the purpose of the loan or the manner in which the loan was disbursed. These
are matters which might have been explained by earlier affidavit material evidence
provided by the second defendant or by his solicitor, Mr Nelson.

9           Between July and September 2011, efforts were made by the second defendant to sell the property through an agent. During this period, the second defendant attempted to keep the plaintiff and her solicitor informed of developments. The only affidavit material before me in relation to the communications between the second defendant with the plaintiff and her solicitor is filed by the second defendant, although the plaintiff’s solicitor has appeared before me on the application and offered some information from the bar table.

10         A contract of sale was entered into by the second defendant to sell the property on 21 September 2011. The second defendant said that before that step was taken, he attempted to twice speak with the plaintiff’s solicitor but was unable to do so. Mr Curtain, the plaintiff’s solicitor, informed me from the bar table that he was not able to speak to the second defendant because he was, at the time, “too busy”. On that day, 21 September 2011 at 3:33pm, the writ in the proceeding was issued by his firm.

11 against the second defendant, a declaration that he “holds the property upon trust for the

Apart from seeking monetary relief from each of the defendants, the writ seeks, as Rules 2008 for the sale of the property and the payment to the plaintiff of the value of her interest from the proceeds of sale”.

12         The second defendant’s application was not issued until 20 October 2011. The second defendant was served with the writ in this proceeding on 5 October 2011. Settlement of the property was due to take place today, 28 October 2011. Accordingly, there was

insufficient time for the second defendant to follow the procedure in section 89A of the
Transfer of Land Act to seek to obtain the plaintiff’s caveat.

13         The application is therefore made pursuant to section 90(3) of the Act. Ordinarily, that procedure is only appropriate where there is limited dispute upon the facts. In cross examination, the second defendant admitted that recently, in a proceeding seeking possession of the property against the plaintiff in the Ringwood Magistrates’ Court, he had given evidence that the plaintiff had a 20 per cent interest in the property.

14         In the circumstances, there appears to be little issue that there is some basis for the interest claimed by the plaintiff pursuant to the caveat. The application was not contested on the basis that there was no serious issue concerning the basis of the caveat but, rather, that the balance of convenience favoured the removal of the caveat.

15         The settlement of the property has not proceeded today. I was informed that the Adelaide Bank had not been told that there may be a problem settling the transaction because of the plaintiff’s caveat. It is probably that the settlement of the purchase could not proceed until at least the end of next week.

16         The purchase price obtained was $515,000. The affidavit of the second defendant, which refers to discussions with the selling agent, suggests that this was the best price that could be obtained. Submissions were made to me, without demur, that the property market in Melbourne is presently in decline.

17         In the circumstances, Mr Wilkinson of Counsel representing the second defendant, submitted that the balance of convenience favoured the Court making an order for the removal of the caveat so that the settlement of the contract could proceed.

18         In opposition, Mr Curtain submitted that the doubt which surrounded the loan agreement between the second defendant and Aureus April Pty Ltd meant that the plaintiff’s interest should take priority to the interests of Aureus April Pty Ltd as her interest was first in

time.

19         Mr Curtain declined my invitation that he make application to join Aureus April Pty Ltd as a party to the second defendant’s summons so that they might be heard in relation to that submission. Further, Mr Curtain was not able to suggest any workable basis upon which the Court might order, as a condition of the withdrawal of caveat, that the settlement only proceed if the second defendant’s obligations to Aureus April Pty Ltd did not reduce the entitlement of the plaintiff at settlement.

20         The second defendant gave oral evidence, which was essentially not challenged, that he does not have the financial means at present to contribute any funds himself to settle the transaction, for example, by meeting the obligations required in order that Aureus April

Pty Ltd remove the caveat protecting its interests. This evidence is supported by the fact that first defendant did not appear to have the funds in July 2011 to meet the monthly payment due to Adelaide Bank and was required to obtain finance on most unfavourable terms.

21         I consider that, in the circumstances, the plaintiff has not established that the balance of convenience favours the maintenance of the caveat, which would inevitably mean that the contract of sale would be unable to settle and, probably, that the first mortgagee, Adelaide Bank, would sell the property for a lesser sum. In circumstances where the relief sought by the plaintiff in the writ filed by her in this proceeding includes an order for the sale of the property, I consider that the plaintiff has little basis for the maintenance of her caveat.

22         Accordingly, subject to the submissions of counsel in relation the form of order I have pronounced in draft, I will make order in those terms.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge

Anderson delivered on 28 October 2011 and revised on 31 October 2011.

Dated: 31 October 2011

Hannah Christensen

Associate to His Honour Judge Anderson