Gel Custodians Pty Ltd v Gibson
[2016] WASC 318
•5 OCTOBER 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GEL CUSTODIANS PTY LTD -v- GIBSON [2016] WASC 318
CORAM: ALLANSON J
HEARD: 29 SEPTEMBER 2016
DELIVERED : 5 OCTOBER 2016
FILE NO/S: CIV 1174 of 2016
BETWEEN: GEL CUSTODIANS PTY LTD
Plaintiff
AND
ANITA LOUISE GIBSON
CHRISTOPHER CHARLES SHANNON
Defendants
FILE NO/S :CIV 2588 of 2016
BETWEEN :GEL CUSTODIANS PTY LTD
Plaintiff
AND
ANITA LOUISE GIBSON
CHRISTOPHER CHARLES SHANNON
DefendantsREGISTRAR OF TITLES
Third Defendant
Catchwords:
Practice and procedure - Interlocutory injunction - Balance of convenience - Undertaking to preserve defendants' position - Turns on own facts
Property law - Real property - Caveat removal - Transfer of Land Act 1893 (WA) s 138 - Caveat lodged by registered proprietor - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA), s 68, s 138, s 214, s 214A
Result:
Defendants' application for injunctive relief dismissed
Plaintiff's application for removal of caveat granted
Category: B
Representation:
CIV 1174 of 2016
Counsel:
Plaintiff: Mr G D Cobby
Defendants: In person
Solicitors:
Plaintiff: Norton Rose Fulbright Australia
Defendants: In person
CIV 2588 of 2016
Counsel:
Plaintiff: Mr G D Cobby
Defendants: In person
Third Defendant : No appearance
Solicitors:
Plaintiff: Norton Rose Fulbright Australia
Defendants: In person
Third Defendant : No appearance
Case(s) referred to in judgment(s):
Assets Co Ltd v Mere Roihi [1905] AC 176
Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604
Bank of South Australia Ltd v Ferguson [1988] HCA 12; (1988) 192 CLR 248
Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407
McCourt v National Australia Bank [2010] WASC 121
Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870
SMS Rental (WA) Pty Ltd v Cahma Life Nominees Pty Ltd [2009] WASC 359
Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] VicRp 47; [1994] 1 VR 672
Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110
Wichniewicz v Registrar of Titles [2014] WASC 18
ALLANSON J: The defendants, Anita Louise Gibson and Christopher Charles Shannon, are the registered proprietors of a property in Bakers Hill; it is their home. The plaintiff (GEL Custodians Ltd) claims as the lender under a loan agreement, dated 13 June 2006, and a registered mortgage, dated on or around 19 June 2006, between the plaintiff and the defendants.
In proceedings commenced by the plaintiff in 2013 (CIV 1174 of 2013) the plaintiff pleads that the defendants breached the terms of the loan agreement and mortgage by failing to make monthly repayments as and when they fell due. It seeks relief including payment of the sum outstanding under the mortgage and possession of the land over which it has security.
The defendants oppose the plaintiff's claim and have counterclaimed against the plaintiff and seven others, although the counterclaim has been served only on the plaintiff (as first defendant to counterclaim), the second defendant to counterclaim (Pepper Australia Pty Ltd), and perhaps the eighth defendant (the Registrar of Titles).
On 24 August 2016, the plaintiff lodged for registration a transfer of the mortgage over the Bakers Hill property to a third party (Permanent Custodians Limited). Registration has not been completed because the defendants have an absolute caveat over the land.
There are two applications before the court.
The first application was brought by the defendants in CIV 1174 of 2013. On 31 August 2016, the defendants lodged an application for orders including an interlocutory injunction, the effect of which is to prohibit the plaintiff and second defendant by counterclaim from transferring and registering the mortgage into the name of a third party until the action is heard and determined.
In a separate action commenced by originating summons, CIV 2588 of 2016), the plaintiff applied under s 138 of the Transfer of Land Act 1893 (WA) for the defendants to show cause why an absolute caveat they have lodged over the land on 15 April 2014 should not be removed.
The two applications were heard together because of the common issues.
At the hearing of the applications, the plaintiff advised the court that the third party had agreed that, in the event that it obtained registration as the transferee of the registered mortgage from the plaintiff, pursuant to the transfer dated 24 August 2016, it would not rely on s 68 of the Transfer of Land Act to defeat any interest in the land claimed by the defendants that was not notified on the certificate of title to the land. On the day following the hearing, the third party provided a written undertaking to that effect.
The undertaking is not determinative, but is a relevant matter to be taken into account in considering where the balance of convenience lies between the plaintiff and the defendants.
The interlocutory injunction
Section 68(1) of the Transfer of Land Act provides:
Notwithstanding the existence in any other person of any estate or interest … which but for this Act might be held to be paramount or to have priority the proprietor of land or of any estate or interest in land under the operation of this Act shall except in case of fraud hold the same subject to such encumbrances as may be notified on the registered certificate of title for the land; but absolutely free from all other encumbrances whatsoever except the estate or interest of a proprietor claiming the same land under a prior registered certificate of title …
Section 68 ties in which s 134 and s 199, under which
134Except in the case of ‑
(a)fraud; or
…
no person contracting or dealing with or taking or proposing to take a transfer or other instrument from a person who is or becomes the proprietor of any registered land lease mortgage or charge shall be required or in any manner concerned to enquire or ascertain the circumstances under or the consideration for which such proprietor or any previous proprietor thereof was or becomes registered or required or in any manner concerned to enquire or ascertain the circumstances under or the consideration for which any mortgage or other encumbrance was or is discharged or removed from the Register at any time prior to or simultaneously with the registration of such transfer or other instrument or to see to the application of any purchase or consideration money or shall be affected by notice actual or constructive of any trust or unregistered interest any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.
199Subject to sections 68 and 81T, no action of ejectment or other action for the recovery of any land shall lie or be sustained against the person registered as proprietor thereof under the provisions of this Act except in any of the following cases (that is to say) ‑
(a)the case of a mortgagee as against a mortgagor in default;
…
(d)the case of a person deprived of any land by fraud as against the person registered as proprietor of such land through fraud or as against a person deriving otherwise than as a transferee bona fide for value from or through a person so registered through fraud;
Although the word 'agent' appears in neither section, the reference to fraud in s 68 and s 199 is to fraud which might be brought home to the registered proprietor, and includes fraud of its agents: Assets Co Ltd v Mere Roihi [1905] AC 176, 210. The fraud exception also finds expression in s 214 and s 214A, by which any certificate of title, instrument, entry, erasure or alteration procured or made by fraud in any of the circumstances set out in s 214 is void as against all persons who are party to that fraud, whether or not anyone is convicted of that fraud.
Statutory indefeasibility also does not deny a claim against a registered proprietor, for rights arising out of the acts of the registered proprietor itself: Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604.
The defendants rely on fraud by the plaintiff in procuring the mortgage, and also claim statutory relief including claims for reopening of the loan and mortgage under s 76 and s 77 of the National Credit Code.
Factual background
The plaintiff is the lender under the loan agreement and the mortgagee in its capacity as trustee of a securitisation program. The relationships between the plaintiff and others in the program are governed by a suite of agreements, not all of which are currently before the court in full. In that program, Yes Home Loans Pty Ltd acted as a mortgage originator and mortgage manager. Yes Home Loans was a party to a Correspondent Deed with Australian Mortgage Securities Pty Limited (AMS), another company in the program. AMS acted as trustee manager and master servicer pursuant to a Master Trust and Security Trust Deed between the plaintiff and AMS.
Much attention has been paid in this matter to whether Yes Home Loans, as mortgage originator and mortgage manager, was the agent of the plaintiff. It is not, however, the only issue. The defendants rely on other arguments: in particular, they argue that the plaintiff has not established that the money advanced for the settlement of the property was in fact advanced by the plaintiff as an advance under the loan agreement. The defendants argue that the plaintiff personally gave no consideration under the loan agreement, and, as a result, they are not bound by it. In effect, they regard the advance at settlement by which they obtained the Bakers Hill property as a windfall which they have no responsibility to repay. Because of my other findings, it is unnecessary for me to deal with that issue now. It is a matter for trial.
The defendants also submit that they would not have entered the loan had they known that the plaintiff was part of the GE Money group. There is no question that the loan agreement and mortgage were executed by the plaintiff as the lender/mortgagee, and the defendants were aware of the name of the lender/mortgagee when they signed the agreements. But the defendants say they believed the lender was Yes Home Loans, and were told by someone at Yes Home Loans that the plaintiff was its trustee and a subsidiary. Again that is a matter for trial.
The issue of the 'agency' of Yes Home Loans is also a matter for trial. It calls for consideration of questions about the scope of the authority given to Yes Home Loans, and may not be limited to authority expressly conferred under the Correspondent Deed. The ultimate questions include whether responsibility for the conduct of Yes Home Loans is to be attributed to the plaintiff, and whether the plaintiff's own conduct (including willful blindness to the actions of Yes Home Loans) renders it liable to the remedies sought by the defendants.
On the evidence of the defendants, someone within Yes Home Loans prepared documents falsely stating the employment, income and asset position of the defendants for the purposes of processing their application for a loan. Yes Home Loans then arranged mortgage insurance, on similarly false information, and approved the loan. If that evidence is accepted at trial, the defendants' loan application and application for mortgage insurance were processed on the basis that Mr Shannon was employed and earning $96,600 a year before tax. The repayments on the amount borrowed were about $46,000 a year, just within the capacity of someone on that income, after allowing for taxation and normal living expenses. On the evidence now available, the defendants were self‑employed with little income. They did not have the capacity to service a loan of this size and, miracles excepted, would inevitably default.
Consideration
The general principles governing the grant of an interlocutory injunction are not in dispute: see Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] ‑ [13]; SMS Rental (WA) Pty Ltd v Cahma Life Nominees Pty Ltd [2009] WASC 359 [43].
In substance, the defendants must show a sufficient likelihood or probability of success to justify preserving the status quo until the trial of the action. How strong the probability of success must be depends upon the nature of the rights the defendants assert, and the consequences likely to flow from the order.
Where there is uncertainty about whether final relief will be granted, and that uncertainty depends in whole or in part on a contested question of fact, it is generally not appropriate for the court to decide that factual question on the interlocutory application. That does not mean, however, that the plaintiffs are entitled to the injunction unless it is shown that their claims have no real prospect of succeeding on the facts they assert. The onus remains on the defendants as the parties seeking interlocutory relief.
The defendants have produced evidence sufficient to establish a prima facie case that there was fraud or other misconduct by Yes Home Loans. That finding is not sufficient. The defendants must also show there is a sufficient case that the plaintiff was a party to the fraud, or that the plaintiff was legally responsible for the conduct, for example as the fraud of its agent. That would require the court to have regard to the whole of the arrangement between the plaintiff and Yes Home Loans under the program. In particular, it would be necessary to consider the extent of the authority conferred on Yes Home Loans to approve a loan, where the plaintiff retained discretion under the agreements to accept or refuse the loan. Further, the defendants must show that the fraud was operative: see Bank of South Australia Ltd v Ferguson [1988] HCA 12; (1988) 192 CLR 248, 258 [15].
The present application can, however, be resolved on another basis. In considering whether to grant interlocutory relief, the court must consider the balance of convenience. That requires consideration of the present position, including the position of other parties.
The plaintiff transferred the loan to Pepper Australia by a Loans Purchase Deed made in 2011, between the plaintiff, AMS, AFIG Wholesale Pty Ltd, and Pepper Australia. By a further instrument made in July 2011, Permanent Custodians Limited became a party to the Loans Purchase Deed, taking the benefit of the rights and assuming the obligations of Pepper Australia as purchaser for specified loans (including the loan to the defendants). The purchaser is required under cl 12.1 of the Loans Deed to perfect its title by 1 July 2016. That date has been extended by agreement, but the obligation to perfect title remains. It is likely that the loan has already been assigned and the mortgage has been transferred to Permanent Custodians Limited, but the plaintiff remains the registered mortgagee.
The decision whether to grant an injunction involves balancing the injustice which might be suffered by the defendants if the injunction is refused, and the mortgage is transferred, and it is later found that mortgage to the plaintiff was defeasible. Permanent Custodians Limited, when registered as mortgagee, might rely on s 68 of the Transfer of Land Act. That potential injustice must be balanced against the injustice which might be suffered by the plaintiff, and other parties to the Loans Purchase Deed, if the injunction is granted, and the defendants fail at trial on the claim.
In this case, I am satisfied the balance of convenience lies with the refusal of the injunction. First, the arrangements to transfer the mortgage to Permanent Custodians Limited derive from an agreement made in 2011. There is nothing to suggest that the Loan Purchase Agreement was other than a normal business transaction or that the transfer of the loan and mortgage is to defeat the defendants' claims. Second, the injunction would restrain and affect the rights of others, including Permanent Custodians Limited. Third, the injunction would restrain only registration of the mortgage; the loan and mortgage have already been transferred. Fourth, the undertaking offered by Permanent Custodians Limited would result in it assuming personal obligations as the new registered proprietor which could be enforced against it, notwithstanding registered title. The defendants, if successful, would not be limited to a remedy in damages. Fifth, although the defendants' claims against the plaintiff and others in their counterclaim go beyond a declaration relating to the validity of the mortgage, those claims do not depend on the plaintiff remaining the registered mortgagee.
The caveat application
Under s 137, a person claiming any estate or interest in land under the operation of the Act may lodge a caveat with the Registrar. The purpose of a caveat against dealings is to operate as an injunction to the Registrar to prevent registration of dealings forbidden by the caveat until notice is given to the caveator so that he or she has an opportunity to oppose such registration: Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407, 419. Section 137 provides that a caveat may be lodged, in an approved form, 'forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest, either absolutely, or until after notice of the intended registration or dealing be given to the caveator, or unless such instrument be expressed to be subject to the claim of the caveator'.
The plaintiff having applied under s 138, the defendants must show cause why the caveat should not be removed: s 138(2). Similar principles to those on an application for an interlocutory injunction generally apply to the application under the Transfer of Land Act, with the added consideration that the application concerns an interest in land and is governed by the Transfer of Land Act.
The caveat should not be removed if the defendants' claim has or may have substance, and the balance of justice is in their favour.
The defendants are registered proprietors in fee simple. The courts have recognised limited circumstances in which a registered proprietor may lodge a caveat to enjoin the registration of a particular, or a particular kind of dealing: see Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870; McCourt v National Australia Bank [2010] WASC 121 [8] ‑ [12]; Wichniewicz v Registrar of Titles [2014] WASC 18. For example, such a caveatable interest may arise where the registered proprietor seeks to restrain the registration of a voidable transfer entered into by the mortgagee. There is a competing view: see Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] VicRp 47; [1994] 1 VR 672. I believe I should follow decisions of judges of this court and recognise that a caveatable interest may be shown and a caveat lodged by the registered proprietor, but only where it is to protect some further interest in the land.
The caveat is in these terms. The estate of interest being claimed is described as:
As registered proprietor(s) of the fee simple and to prevent (further) improper dealings.
In the section requiring the caveators to state by virtue of what they claim that estate or interest, the caveat states:
Registered Proprietor(s) are concerned that their title has been/maybe subject to fraud and or the forgery of instruments and documents purporting to be signed by the registered proprietor(s).
Action has been taken by the registered proprietor(s) against the mortgagee (and others) in the Supreme Court of Western Australia (CIV 1174 of 2013) to protect their interest and equity in the land. A stat dec has been lodged in support of this caveat.
The caveat forbids registration of any instrument or dealing 'absolutely'.
The material in support of the caveat is extensive and argumentative. There are four statutory declarations, two each by each defendant. The supporting statutory declarations and annexures are directed to issues between the parties to the action between the plaintiff and the defendants.
The defendants, however, said at the hearing that the caveat was not 'necessarily' to protect their position against the claim by the plaintiff, but was to 'hold their equity in the property'; Mr Shannon said it was for another reason external to this case. It is difficult to discern what that other reason might be. It does not appear on the face of the caveat or the material filed in support of it.
The defendants apparently fear some serious criminality with regard to their title. For example, each statutory declaration concludes with the following paragraph:
Any action by any Landgate Officer or other employee which:
1.interferes with our in personam right to lodge this caveat, or,
2.constitutes a refusal to accept filings in relation to our proprietorship of the Title, or,
3.directly, or indirectly, notifies any parties mentioned within this caveat and statutory declaration without our prior written consent, or,
4.in any other way affects our right to peaceful enjoyment of the Land,
will result in further submissions to the white-collar crime inquiry with respect to the operations of Landgate in the State of Western Australia.
The following factors lead me to determine that the caveat should be removed.
First, the caveat prevents the third party and plaintiff from registering the transfer of the mortgage when, as I have held above, the balance of convenience is in favour of permitting that to occur. I have considered whether there might be some other way to allow the registration of the transfer of mortgage without removing the caveat, but, for the further reasons given below, I believe the caveat in its present form does not meet the requirements of the Act.
Second, the caveat forbids absolutely any dealing with the property. The protection claimed in the caveat, if intended to prevent the registration of fraudulent or forged instruments, goes beyond what is required to protect the defendants' interest in the land. A 'notice caveat' under which the defendants would be given notice of any proposed dealing by the mortgagor or others, to enable the defendants to oppose that registration, would suffice to protect the interest they claim.
Third, the desire to prevent improper dealings under forged instruments is not an interest in land. Thecaveatfails to state any estate or interest in the land other than the defendants' estate as registered proprietors.
Fourth, the approved form requires the defendants to state the matters by virtue of which they may claim that estate or interest. Neither the defendants' concerns, nor the action in this court, are such matters. If there are specific matters arising out of the action in this court and which might support a caveatable interest, they are not stated.
Fifth, the defendants advised the court that the caveat was lodged to protect their 'equity' in relation to another anticipated threat to their title. The caveat does not disclose those matters, or if they are matters which would give rise to an interest in the land.
Sixth, removal of the caveat under s 138 would not have the consequence that the defendants cannot lodge a further caveat: compare s 138D where leave of the court would be required to lodge a further caveat in respect of the same land. Subject to the orders I will make to prevent the defendants from lodging a further caveat that would prevent the registration of the pending transfer of the mortgage, the defendants would not be restrained by the order removing the caveat from lodging a further caveat.
Finally, I note that the defendants sought to be relieved from the obligation to give an undertaking as to damages. Had I granted the injunction, or ordered that the caveat remain in place, I would have required an undertaking as a condition of that order. The plaintiff has questioned the ability of the defendants to give a meaningful undertaking. It has not been necessary to resolve that question because of the decision I have made.
I will order that the caveat be removed, and make consequential orders to permit the registration of the transfer of the mortgage. The application for an interlocutory injunction is dismissed.
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