Glenis v Ikosedikas
[2018] VSC 278
•30 May 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
S CI 2018 01788
| JERRY GLENIS | First Plaintiff |
| FAYE GLENIS | Second Plaintiff |
| v | |
| PETER IKOSEDIKAS | First Defendant |
| TORUA PTY LTD | Second Defendant |
| THE REGISTRAR OF TITLES | Third Defendant |
---
JUDGE: | T FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 May 2018 |
DATE OF JUDGMENT: | 30 May 2018 |
CASE MAY BE CITED AS: | Glenis & Anor v Ikosedikas & Ors |
MEDIUM NEUTRAL CITATION: | [2018] VSC 278 |
---
PROPERTY LAW – Application for removal of caveat – Plaintiffs joint registered proprietors of property – First plaintiff owed money to first and second defendants – Written agreement that first and second defendants could lodge caveat if loan not repaid – Defects in caveat – Serious question to be tried – Balance of convenience in favour of plaintiffs – Caveat removed – Transfer of Land Act 1958 (Vic) s 90(3).
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Laidlaw | Stenta Legal |
| For the Defendant | Mr D Clough | GPZ Legal |
HIS HONOUR:
By originating motion the plaintiffs, Mr Jerry Glenis and his wife Ms Faye Glenis, seek removal from the register book caveat registered number AQ896290B (‘the caveat’), lodged on behalf of the first and second defendants, Mr Peter Ikosedikas and Torua Pty Ltd (‘the defendants’). The third defendant, the Registrar of Titles, does not appear in the action, does not seek costs, and will have no objection to the relief sought should the court grant it.
Both plaintiffs have sworn and filed affidavits. I have been provided with submissions on their behalf. The defendants have filed an affidavit and submissions.
The plaintiffs are the registered joint proprietors of the property situated at 18 Riverside Avenue, Balwyn North, Victoria (Certificate of Title Volume 4472 Folio 234). On 5 March 2018, the plaintiffs entered into a contract of sale for the sale of the property. The sale price is $1.995 million.
The property is mortgaged to AFSH Nominees under mortgage number AN926435Q. There is currently over $2 million owing under loans linked to this mortgage. The plaintiffs wish to clear the title, achieve settlement and pay out the bulk of the monies owing under the mortgage. Another property, at Rye, apparently solely registered to the second plaintiff, is also linked to this mortgage.
The caveators under the caveat are Mr Ikosidekas and Torua Pty Ltd. It is undisputed that the first plaintiff, Mr Glenis, owes the caveators a substantial sum of money – the extent of the indebtedness ranges from $450 000 to $690 000.
The impugned caveat was not lodged until 6 April 2018; that is one month after the contract of sale was signed. The caveat includes the following:
2. Grounds of Claim
Part-performed oral agreement with the following parties.
3. Parties
The registered proprietor(s)
4. Estate on interest claimed
Interest as charge
5. Prohibition
Unless we consent in writing
On 14 June 2011, the first defendant deposes that Mr Glenis entered into a loan agreement that effectively consolidated various amounts that had been advanced over the preceding two years. The balance outstanding as at that date was $250 600. Compound interest over the ensuing years magnified this debt. On page two of the agreement, under the heading ‘Security’ reads ‘Proposed security’ to include:
The lender shall have the right to prepare and lodge a caveat, should the loan not be paid out in full at the expiry date 31/10/2011 over the property located at:
15 Riverside Avenue, Balwyn North, Vic 3105
Various other conditions were attached to the loan.
Mr Glenis denies signing page 2 of the loan agreement and, through his counsel, says his signature has been forged. He does not dispute that money was owed, but he denies ever offering a caveat over his property as security for that loan. For present purposes, Mr Laidlaw, who appeared for the plaintiffs, was prepared to act upon the basis that the loan agreement was a genuine document. Mr Ikosidekas, the first defendant/caveator, exhibited a copy of the loan agreement to his affidavit and relies upon it to establish a prima facie case in favour of preservation of the caveat. In answer to a question from me about the whereabouts of the original, I was told that it was ‘still being looked for’.
Legal principles
Section 90(3) of the Transfer of Land Act 1958 (Vic) reads as follows:
Any person who is adversely affected by any such caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit.
In Piroshenko v Grojsman & Ors,[1] Warren CJ summarised the relevant principles that apply to s 90(3) applications. Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief.[2] Their registration is administrative, and an application for removal casts an onus on the caveator to satisfy the two stage test used by the court when deciding whether or not to grant discretionary injunctive relief.[3] Although the courts have adopted the two-stage test as an aid to the consistent exercise of the s 90(3) discretion, the section requires the court to make such order as it thinks fit, and the test utilised by the court cannot circumscribe the power conferred by statute.[4] The caveator will need to establish a prima facie case that it has the estate or interest claimed in the land that entitles it to the maintenance of the caveat.[5] Assuming this to be established, the court will then consider with whom the balance of convenience lies.[6]
[1](2010) 27 VR 489.
[2]Ibid 491 [7].
[3]Ibid.
[4]Ibid 491 [11].
[5]Ibid 491 [7].
[6]Ibid.
Recently, in Yamine v Mazloum,[7] John Dixon J explained that the caveator who bears the onus of establishing that there is a serious question to be tried is required by the statute to show that there is at least some probability on the evidence before the court that he or she will be found to have the equitable rights or interests in the land asserted by them in the caveat. The court’s analysis will be directed to the relationship between the caveat lodged and the interest claimed. Having established a serious question to be tried, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial. As a general rule, the court should take whatever course appears to carry the lower risk of injustice if the court should turn out to have been wrong in its determination of whether or not to remove the caveat. The stronger the case is in the evaluation of the serious question issue, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a 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 his property.[8]
[7][2017] VSC 601.
[8]These principles are set out at ibid [15].
Serious question to be tried
The defendants’ case is underpinned by the 14 June 2011 loan agreement, which the defendants contend contemplates the imposition of a caveat as security for the consolidated loan of $250 000. As I have said, Mr Laidlaw for the plaintiffs, whilst advising the court that his client’s position at trial will be that this agreement is a forgery, accepted that for the purpose of this proceeding, it was appropriate to proceed on the basis that the agreement was genuine. He contended that even if that were the case, the caveat was materially defective in a number of ways. First, it asserts a part performed oral agreement as providing grounds for the lodgement of the caveat when no oral agreement is now alleged by the defendants. Second, the caveat is over the whole of the relevant property when the property is jointly owned by Mr and Ms Glenis. There is no evidence to the effect that Ms Glenis is indebted to the defendants at all and the lack of a ‘carve out’ is an identifiable defect. Third, at the time of the alleged creation of the charge (14 June 2011) the plaintiffs did not have legal estate in the land.
In my view, the existence of the loan agreement is sufficient to justify the conclusion that there is a serious question to be tried in respect of the caveat. Assuming the authenticity of the loan agreement, it is clear enough that the first plaintiff intended to grant the defendants a charge over the property as security for loan funds that had already been advanced.[9] Whilst the first plaintiff possessed no proprietary rights as at 14 June 2011, this is not fatal to the agreement provided both parties understood that at the time of entering into the agreement the charge related to future property, and at the time the charge is sought to be enforced the property can be identified.[10] Questions of a ‘carve out’ of the second plaintiff’s interest and whether the caveat ought be struck down as defective or amended to reflect the assertedly misleading ‘oral agreement’ grounds of claim are, in my view, unsuitable for determination in this interlocutory proceeding and ought be reserved for trial.
[9]See for example Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489, 504 [50], 506 [60].
[10]National Provincial and Union Bank v Charnley [1924] 1 KB 431, 449-450; Williams v Burlington Investments Ltd (1977) 121 S.J. 424; Schipp v Cameron [1998] NSWSC 997 [863].
Balance of convenience
Where a caveator establishes a serious question to be tried, the balance of convenience tilts in favour of that caveator.[11] This, of course, is not determinative and circumstances may alter the balance. On any view of the facts, the defendant/caveator is owed a substantial sum by at least the first plaintiff. As I have stated, it is also clear that in 2011 the first plaintiff intended that sum be secured by a charge over the property. The balance tilts further towards the caveator. However, a number of factors militate in favour of removing the caveat. The caveat was not lodged until April 2018 – one month after the execution of the contract of sale, and six years and ten months after the loan agreement, which purportedly authorised the lodgement of the caveat. In the meantime, the plaintiffs appear to have structured their affairs in such a way as to render any caveat over the North Balwyn property worthless. As I understand it, the $2 million plus mortgage is secured by both the North Balwyn and Rye properties. The caveat is over the North Balwyn property only. The mortgage is to an arms’ length third party who has priority over the defendant’s charge. If the sale goes ahead, the mortgage will be virtually extinguished,[12] and the Rye property will be owned, virtually outright, by the second plaintiff, who is the only registered owner. The net effect of these manoeuvrings is that the caveat is effectively worthless as a security. After the mortgagee’s rights are exercised, there will be nothing left for the defendant. The caveat is thus futile as an instrument to protect the defendant’s interests. There will be nothing to protect.
[11]Cini v Pets Paradise Franchising (SA) Pty Ltd [2008] SASC 287 [70]; Pua Hor Ong v Wu You Yang Pty Ltd (2008) 103 SASR 9, 27-28 [66]; Chong v Chanell (No 2) [2009] NSWSC 1066 [4]; Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 29 [22], [28]-[29]; Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1, 13-17 [61]-[79].
[12]A relatively small amount (in the range of $5000) will remain outstanding.
It follows that the balance of convenience rests with the plaintiffs. If I allow the caveat to remain in place, it will frustrate the sale of the North Balwyn property and expose the plaintiffs to legal action, yet it will offer the defendants no security over their charge, as I have explained.
I will make the following orders:
1. Pursuant to Rule 45.05, the Plaintiff be authorised to commence this proceeding by Originating Motion in Form 5C and the requirements of Rules 5.03(1) and 8.02 be dispensed with.
2. Pursuant to section 90(3) of the Transfer of Land Act 1958 (Vic), the third defendant remove Caveat AQ896290B from the land contained in Certificate of Title Volume 4472 Folio 234.
I will hear the parties on the matter of costs.
9
0