Grego v D Club Pty Ltd
[2011] WASC 55
•2 MARCH 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GREGO -v- D CLUB PTY LTD [2011] WASC 55
CORAM: CORBOY J
HEARD: 27 AUGUST 2010
DELIVERED : 2 MARCH 2011
FILE NO/S: CIV 1857 of 2010
BETWEEN: TONY GREGO
Plaintiff
AND
D CLUB PTY LTD
Defendant
Catchwords:
Caveat - Whether plaintiff has established prima facie case that it has an estate or interest in land - Right of subrogation to mortgage - Whether possible claim for indemnity from principal debtor time barred - Turns on own facts
Legislation:
Limitation Act 1935 (WA)
Transfer of Land Act 1893 (WA)
Result:
Application to extend caveat refused
Category: B
Representation:
Counsel:
Plaintiff: Mr C S Williams
Defendant: Mr J D MacLaurin
Solicitors:
Plaintiff: Solomon Brothers
Defendant: Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221
Cochrane v Cochrane (1985) 3 NSWLR 403
D Club Pty Ltd v Grego [2009] WASC 24
National Australia Bank v McCourt [2010] WASC 237
Re Diplock; Diplock v Wintle [1948] Ch 465
Sardon Pty Ltd v The Registrar of Titles [2004] WASC 56
Sisic v Krpo [2008] NSWSC 1086
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
CORBOY J:
Introduction
The first defendant is the registered proprietor of the land comprised in certificate of title vol 1588 folio 708 and being and located in Milligan Street, Northbridge (the Land). On 10 January 2001, Orix Australia Corporation Limited (Orix) registered a mortgage over the Land (the Mortgage) to secure a loan made to the first defendant pursuant to a 'mortgage loan agreement'. The plaintiff, who at the time was the managing director of the first defendant, gave a guarantee to Orix to further secure the loan (the Guarantee).
On 22 February 2010, the plaintiff lodged a caveat with the second defendant claiming an estate or interest in the Land as an equitable mortgagee. The caveat forbade registration of any instrument affecting the plaintiff's estate or interest unless the instrument was expressed to be subject to his 'claim'.
The first defendant caused the second defendant to issue a notice under s 138B of the Transfer of Land Act 1893 (WA) (TLA). The plaintiff has applied to extend the operation of the caveat in response to that notice.
The plaintiff claims that he is entitled to be subrogated to the rights of Orix under the Mortgage as he paid part of the debt due by the first defendant to Orix in partial discharge of his obligations as guarantor (the Payment). The Payment is alleged to have been made on 19 November 2001, following service of a notice of demand on the plaintiff.
The first defendant denies that the plaintiff made the Payment and says further that, if the Payment was made:
(a)it was not made by the plaintiff as guarantor but was arranged by him as a payment by the first defendant in reduction of its liability to Orix;
(b)alternatively, any claim that the plaintiff might possess against the first defendant for recovery of the amount of the Payment is time barred and the caveat should not be extended to protect any interest in the Land that might be held by the plaintiff as security for a time barred claim.
I have concluded that the caveat should not be extended. I consider that the plaintiff has not established a prima facie case (in the sense referred to in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57) that he made the Payment or that if he did, that the Payment was made in partial discharge of a personal obligation as guarantor of the loan by Orix to the first defendant. I also consider that any claim that the plaintiff might bring against the first defendant for an indemnity or for unjust enrichment in respect of the Payment ‑ and no proceedings have been commenced by him ‑ would be time barred.
Finally, the substantial delay between the events that are alleged to give rise to the plaintiff's estate or interest in the Land and the lodging of the caveat and the fact that the plaintiff has taken no steps to vindicate his claim count against preserving the caveat as a matter of convenience.
The evidence
The plaintiff swore an affidavit on 9 June 2010 in support of his application to extend the caveat. The affidavit annexed a statutory declaration that he made in answer to a requisition from the second defendant. The affidavit confirmed the matters stated in the declaration.
In summary, the plaintiff stated that:
(a)He was a director of the first defendant between 16 November 2000 and 23 November 2006. He granted the Guarantee in that capacity.
(b)On about 31 October 2001, the plaintiff was served with a notice of demand made by Orix through its solicitors. The demand was for immediate payment of all money secured by the Mortgage and owing under the mortgage loan agreement. The demand was addressed to the first defendant as borrower and mortgagor and to the plaintiff (and others) as guarantor (see annexure 'TG‑9' to the plaintiff's affidavit of 9 June 2010).
(c)On 19 November 2001, the plaintiff paid to Orix's solicitors the sum of $41,666.67 in partial discharge of his obligations as a guarantor. It is that payment which has been defined earlier in these reasons as 'the Payment'. The Payment was acknowledged by Orix solicitors dated 14 December 2001 and addressed to 'Mr T Grego, Managing Director, D Club Pty Ltd' (annexure 'TG-11' to the plaintiff's affidavit of 9 June 2010). The letter referred to the first defendant's default and to the subsequent notice of demand and stated that '…our client is entitled to recover from D Club Pty Ltd and each of its guarantors the moneys set out in the Demand less the amount of $41,666.67 paid on behalf of the Borrower on 19 November 2001'.
(d)The Payment was made using funds borrowed from Delmere Holdings Pty Ltd as trustee for the DTMT Trust (Delmere). The loan is said to have been evidenced by a letter dated 19 November 2001 and written by the plaintiff to Mr J Dujmovic of Delmere (annexure 'TG-10' to the plaintiff's affidavit of 9 June 2010).
(e)The loan made by Orix to the first defendant was repaid in 2004 and the Mortgage was discharged at that time (a discharge of mortgage dated 23 January 2004 was annexed to the affidavit of Pauline Mary O'Dea sworn on 24 September 2010 and filed on behalf of the first defendant).
(f)The first defendant has not paid to the plaintiff any amount on account of the Payment.
(g)In 2009, the plaintiff served a statutory demand on the first defendant demanding payment of the sum of $348,288. The demand was set aside: see D Club Pty Ltd v Grego [2009] WASC 24 (COR 169/2008).
The plaintiff made two further affidavits in support of his application and also relied on an affidavit sworn by Philip William Sweeney, who is the finance manager for Delmere. It is convenient to summarise the matters stated in those affidavits after referring to the evidence adduced by the first defendant in opposition to the plaintiff's application.
The evidence relied on by the first defendant was contained in an affidavit sworn by Mr Sedick Price on 27 July 2010. Mr Price stated that:
(a)He is, and has been a director of the first defendant since October 2008. He has been the accountant for the first defendant since May 2008.
(b)The first defendant denied that it was indebted to the plaintiff for the amount of the Payment or at all. It also denied that the plaintiff made the Payment.
(c)Interrogation by Mr Price of the first defendant's electronic accounting records disclosed that:
(i)an amount equal to the amount of the Payment was paid on 20 November 2001 by a cheque drawn on a current account then operated by the first defendant and made payable to Orix;
(ii)there was no deposit into the first defendant's current account in an amount equal to the Payment;
(iii)there was no record of any payment made to Orix in an amount equal to the Payment, apart from the payment by the first defendant on 20 November 2001.
(d)The accounting records that were interrogated by Mr Price had been maintained by the first defendant during the time that the plaintiff was its managing director.
(e)In COR 169/2008, the plaintiff had produced as an annexure to an affidavit sworn by him a document that was said to record the 'running balance' of his loan account with the first defendant for the period November 2000 to 30 June 2005. The plaintiff's affidavit further stated that he had advanced $333,206.25 to the first defendant after 26 June 2001 and during 2002. However, the document recording the running balance of the loan account made no reference to an amount equal to the Payment.
(f)In November 2009, the plaintiff had lodged another caveat against the title to the Land in which he claimed an estate or interest in the Land as an equitable chargee. A statutory declaration made by the plaintiff in support of the caveat stated that the first defendant owed him $348,288 (that is, the amount of the statutory demand the subject of COR 169/2008) and that 'moneys from the amount were used for the purchase of [the Land]'. It was said that the loan was recorded in the first defendant's financial statements from 30 June 2002 to 30 June 2008. A notice was issued by the second defendant under s 138B TLA in January 2009 but the plaintiff took no steps to extend the caveat.
(g)An affidavit had been sworn by Mr Price in support of the first defendant's application in COR 169/2008 to set aside the plaintiff's statutory demand. He had undertaken a search of 'such of the books and records of the first defendant which existed' and ascertained that there was no record of any payment having been made into the accounts of first defendant by the plaintiff.
(h)No document had been located in the records of the first defendant containing or evidencing a claim made by the plaintiff in relation to the Payment.
The further affidavits made by the plaintiff followed the filing and service of Mr Price's affidavit and an adjournment granted to enable the plaintiff to make inquiries and obtain additional evidence about the Payment in light of the statements contained in Mr Price's affidavit. The plaintiff's affidavit sworn on 26 August 2010 merely outlined the inquiries that he had made since the adjournment and explained why he was experiencing difficulty in accessing his records. The plaintiff's final affidavit sworn on 8 September 2010 annexed a letter dated 13 November 2001 from a finance broker to Orix that referred to steps that had been taken by the first defendant to address arrears in its loan payments. The letter had obviously been written following consultations between the broker and the plaintiff.
The affidavit of Mr Sweeney annexed a printout generated from an electronic cash management accounting system that has been maintained by Delmere since before 2001. The printout recorded that on 19 November 2001 Delmere drew a cheque in the amount of the Payment made payable to Orix. Mr Sweeney gave no further evidence concerning the circumstances surrounding the drawing of the cheque, apart from annexing another copy of the letter dated 19 November 2001 that was written by the plaintiff to Mr Dujmovic. The copy produced by Mr Sweeney was located in Delmere's records and had been annotated by hand with the word, 'D Club'. Mr Sweeney did not identify the handwriting.
There was no evidence that either the plaintiff or the first defendant had sought to obtain information from Orix concerning the Payment or from the solicitors acting for Orix who were said by the plaintiff to have received the Payment. Financial statements for the first defendant were not produced and neither party sought to further verify the evidence on which they relied by bank statements or other primary accounting records.
The records of the first defendant and Delmere produced to evidence the payment by cheque of the sum of $41,666.67 to Orix where similar in form. Attachment 'SP 1' to Mr Price's affidavit was described as a 'bank register' for a particular cheque account. It recorded details of the cheque number, date, payee, amount, deposits and the balance in the account following each transaction. Mr Price gave no evidence as to how the electronic record was maintained and there was no further evidence showing that the cheque drawn was presented, apart from a spreadsheet that was attachment 'SP‑2' to his affidavit and which recorded details concerning the loan made by Orix to the first defendant such as interest payments, principal repayments, and balance outstanding. Mr Price gave no evidence as to how and when the spreadsheet was prepared. It referred to a payment of $41,667.66 on 20 November 2001 but otherwise contained no information that could be cross‑referenced to the bank register printout.
The printout from the 'cash management' register produced by Mr Sweeney recorded transactions made on 19 November 2001 on a cheque account operated by Delmere and a running balance on that account as a consequence of those transactions. No electronic or other record showing how the cheque apparently drawn in favour of Orix was treated in the accounts of Delmere was produced notwithstanding that, according to the plaintiff, the money was paid by way of a loan by Delmere to him. Also, no banking record was produced to confirm that the cheque had been presented and paid and there was no explanation given as to how entries into the cash management register were made.
The principles relevant to an application to extend or remove a caveat
I referred to the principles that I regard as being relevant to an application to remove or extend a caveat in National Australia Bank v McCourt [2010] WASC 237. Those principles were derived from authorities that have been often cited and I apply them in determining this application.
The plaintiff's claimed estate or interest in the land
As previously noted, the plaintiff claims that he is subrogated to Orix's rights under the Mortgage by reason of his part‑payment as guarantor of the debt owed by the first defendant. The relevant principle is stated by J O'Donovan and J Phillips, Modern Contract of Guarantee (Lawbook Co Loose Leaf) at [12.2400]:
Once the principal debt or obligation has been wholly satisfied, a guarantor has the right to be subrogated to the rights of the creditor: the guarantor has the right to take under, or to stand in the shoes of, the credit and enforcing the principal obligation of the debtor as well as any securities, priorities and remedies which the creditor enjoyed prior to the performance of the principal obligation.
The plaintiff has been unable to locate a copy of the Guarantee. Consequently, it is not possible to say whether the Guarantee conferred an express right on the plaintiff to be indemnified for any payments made to Orix in reduction or discharge of the first defendant's liabilities under the mortgage loan agreement and the Mortgage. However, where a guarantor gives a guarantee at the valid request of the principal debtor there is, in the absence of an express right of indemnity, an implied contract of indemnity or an implied term in the contract of guarantee to a similar effect: O'Donovan and Phillips, Modern Contract of Guarantee at [12.100].
It is suggested that a request cannot be assumed simply because of 'the improbability of a businessman providing a guarantee…without having been requested to do so': Modern Contract of Guarantee at [12.100], citing Sisic v Krpo [2008] NSWSC 1086 (Ward J). However, a guarantor will still have a claim for recoupment in unjust enrichment where there was no valid request provided that certain conditions are satisfied. Those conditions are set out at [12.110] of Modern Contract of Guarantee.
The loan made by Orix to the first defendant has been repaid and the Mortgage and Orix's personal right of action against the first defendant has been discharged. However, in equity the Mortgage is treated as if it was still available to assist the plaintiff to recover any amount he has paid in reduction of the secured debt: see C Mitchell and S Watterson, Subrogation ‑ Law and Practice (2007 Oxford University Press) at 1.06 and Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221.
The plaintiff has not commenced proceedings against the first defendant seeking to be indemnified in respect of the amount of the Payment or to recover that amount by way of a claim in restitution. Consequently, the plaintiff's claimed estate or interest in the Land is by way of subrogation to the rights of Orix under the Mortgage as security for a possible claim for an indemnity or recoupment of the amount of the Payment.
The issues to be decided
As I have indicated, the rights to which the plaintiff would be subrogated are rights to be exercised by way of security for a claim to recover the amount of the Payment. Consequently, the plaintiff is required to establish that his potential claim against the first defendant has sufficient merit to justify preserving the status quo created by the caveat; that is, to justify continuing statutory protection of the security rights created by the Mortgage and to which he claims to be subrogated.
The first defendant contends that the plaintiff has failed to demonstrate a prima facie case that he would be entitled to recover from the first defendant the amount of the Payment for two reasons: first, the evidence does not establish that the plaintiff made the Payment or that if he did, he did so as guarantor and second, any claim by the plaintiff would be time barred. The issues to be determined in this application primarily concern those contentions.
The first defendant also contended that the plaintiff had not demonstrated that it would be 'unconscionable' if effect was not given to his claimed right of subrogation. I deal with that contention in the next section of these reasons under the heading 'Subrogation Issues'. The question of whether the balance of convenience favours retaining or removing the caveat is dealt with at the conclusion of these reasons.
Subrogation issues
In Cochrane v Cochrane (1985) 3 NSWLR 403, Kearney J observed that 'there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result' (405). The first defendant relied on that observation to submit that the plaintiff claimed right against the first defendant was to be indemnified in respect of the Payment and there was 'nothing to suggest that such a remedy …is not adequate, or that the justice or equity of this case would justify recourse to subrogation (particularly taking into account the relatively small amount of the plaintiff's claim)': first defendant's submissions dated 24 September 2010 at par 24.
That submission failed to appreciate the point of his Honour's observation and the principled way in which rights are recognised in equity. Cochrane v Cochrane involved a claim by a co-mortgagor to be subrogated to the rights of the mortgagee so as to secure a claim for contribution against the other mortgagor. Kearney J's observation was preliminary to the ultimate conclusion reached by his Honour that, 'each co‑mortgagor being primarily liable for the whole debt, adequate justice is done between them if one has to pay the whole debt, by his entitlement to contribution' (405).
In circumstances where a third party pays a secured debt, it is presumed that the third party intended to keep the security alive for its benefit. The right to be subrogated to the security gives effect to an equity created by the (non‑gratuitous) conferral of a benefit on the principal debtor ‑ the discharge of the secured obligation. The right is not conditioned on the third party demonstrating that recourse to the security is necessary because, for example, the principal debtor is unable to indemnify the third party from other sources.
The first defendant apparently accepted that the plaintiff would have a right to be indemnified if it was found that the plaintiff made the Payment and that any claim was not time barred (see par 23 of the first defendant's submissions). That concession was rightly made in my view.
In particular, I am satisfied that for the purpose of establishing a prima facie case it can be inferred that the plaintiff gave the guarantee at the request of the first defendant. The request can be inferred from the relationship between the plaintiff and the first defendant and the commercial circumstances in which the loan was made by Orix. I am prepared to draw that inference notwithstanding the reservation expressed by Professor O'Donovan and Professor Phillips having regard to the nature of this application. I also read the comments by Ward J in Sisic at [35] ‑ [38] as reflecting the particular facts of that case rather than as expressing a principle of general application.
I also consider that it can be inferred that if the plaintiff did make the Payment, he did not do so out of a sense of moral obligation: refer Modern Contract of Guarantee at [12.110]. The Payment is alleged to have been made after a notice of demand had been served.
Analysis of the evidence
The fact that the payment that the plaintiff alleges that he made to Orix was not processed through the banking records of the first defendant can be readily explained: according to the plaintiff and the cash management records of Delmere produced by Mr Sweeney, the payment by the plaintiff was by cheque drawn by Delmere and made payable to Orix (and not the first defendant). However, it is more difficult to explain why the payment was not subsequently included in the first defendant's records of the balance of the loan account with Orix. The spreadsheet showing the balance of that loan account (annexure 'SP‑2' to Mr Price's affidavit) disclosed only one payment in the amount of $41,666.67, being the payment that Mr Price stated was made by the first defendant. It would have been expected that the plaintiff, as the first defendant's then managing director, would have ensured that the payment that he allegedly made to Orix would have been included in the first defendant's records of its loan account.
Further, the record of the loan account maintained between the plaintiff and the first defendant that was produced by the plaintiff in COR 169/2008 (annexure 'SP‑3' to Mr Price's affidavit) discloses that the plaintiff made a number of advances to the first defendant during 2001 but there was no reference to an amount equal to the amount of the Payment. The record of the plaintiff's loan account with the first defendant appears to have been comprehensive; for example, it included interest calculations. There was no explanation provided by the plaintiff as to why the record of the loan account did not refer to the Payment notwithstanding that he made two further affidavits after Mr Price's affidavit had been filed and served and he relied on the record for the purpose of his statutory demand.
There are other difficulties with the contemporaneous documents that the plaintiff produced in support of his claim to have made the Payment. The plaintiff relies on a statement made at the conclusion of the finance broker's letter dated 13 November 2001 in support of his allegation that he made the Payment: 'I [the broker] will personally collect his [the plaintiff's] cheque for the balance of interest of $41,666.67 next Monday' (attachment 'TG‑1' to the plaintiff's affidavit sworn on 8 September 2010). However, the statement read in the context of the letter is ambiguous. The letter stated that the broker met with the directors of the first defendant 'several times in an attempt to resolve the situation with [Orix's] mortgage'. It then referred to the plaintiff's views on a number of matters relating to the loan. It is plain from the contents of the letter and its context that the plaintiff was expressing those views in his capacity as the then managing director of the first defendant. Consequently, the concluding statement in the letter on which the plaintiff relies is ambiguous as the reference to 'his cheque' may be a reference to a cheque to be provided by the first defendant pursuant to the plaintiff's representation, made as managing director, that the first defendant would make the payment. That is, the broker was equating the plaintiff with the first defendant; the plaintiff was the alter ego of the first defendant.
The letter dated 14 December 2001 from Orix's solicitors (annexure 'TG‑11' to the plaintiff's affidavit of 9 June 2010) is also ambiguous. The letter confirmed that a payment of $41,666.67 was made but does not clarify by whom it was paid. The words 'on behalf of the Borrower' might suggest that the payment was by a guarantor. On the other hand, the letter distinguished between the liabilities of the first defendant and the guarantors and it might be said that the letter would have stated that the payment was made by a guarantor if that is what had occurred. Similarly, no inference can be drawn from the fact that the letter was addressed to the first plaintiff as it was directed to him in his capacity as managing director of the first defendant.
The letter from Orix's solicitors stated that the payment had been received on 19 November 2001. That statement is consistent with the plaintiff's evidence. Further, the bank register print‑out produced by Mr Price records that the first defendant made its payment to Orix on 20 November 2001. I accept that those matters favour the plaintiff's version. However, the difference in dates might be explained by the procedures then adopted by the first defendant for drawing cheques and recording banking entries in its accounting records.
The remaining evidence relied on by the plaintiff to establish that he made the Payment is the letter dated 19 November 2001 that he wrote to Mr Dujmovic (annexure 'TG‑10' to the plaintiff's affidavit of 9 June 2010) and the cash management record produced by Mr Sweeney. Again, there are difficulties:
(a)There is no evidence that the cheque said to have been drawn by Delmere was ever presented and accordingly, a payment made.
(b)There is no evidence that the plaintiff ever repaid the amount that he says he borrowed from Delmere. The absence of that evidence cannot be satisfactorily explained by whatever difficulties the plaintiff has encountered in recovering his own records as Mr Sweeney had access to accounting records for Delmere that apparently extended back to the relevant period. It might be expected that the plaintiff would recall repaying the loan independently of his records. It is telling that he gave no evidence of having repaid the amount that he said he borrowed or of any demand by Delmere for repayment. Again, there may be explanations for that but none were offered.
Has the plaintiff established a prima facie case?
I consider that the plaintiff has not established a prima facie case that he is entitled to recover the amount of the Payment from the first defendant in the sense of demonstrating a 'sufficient likelihood of success to justify in the circumstances the preservation of the status quo' (Australian Broadcasting Commission v O'Neill [65]). I have reached that conclusion having regard to the matters to which I have referred concerning the evidence about whether the plaintiff made the Payment. The evidence is too uncertain and inconclusive.
It is likely that the difficulties with the evidence are compounded by the fact that the plaintiff has not apparently claimed in the past that he was entitled to recover an amount from the first defendant despite the Payment allegedly being made in 2001. The apparent lack of any prior claim and the fact that the plaintiff has not commenced proceedings against the first defendant are also matters that are also relevant to whether the plaintiff has established a prima facie case that he is entitled to be indemnified by the first defendant in respect of the Payment or otherwise has a claim in restitution.
The claim is time barred
Actions on a contract of indemnity are subject to a six‑year limitation period: see s 38(1) Limitation Act 1935 (WA).
As to any claim for unjust enrichment, the 1935 Act did not refer specifically to claims for unjust enrichment or in restitution but rather, to contracts implied in law (s 38(1)(c)(v)). It has been held that quasi‑contractual claims fall within the provisions in limitations legislation on simple contracts: see P Handford, Limitation of Actions (2nd ed, Thomson Lawbook Co) at [5.10.720] and K Mason, JW Carter and GJ Tolhurst, Mason & Carter's Restitution Law in Australia (2nd ed 2008 Lexis Nexis Butterworths) at [2717].
As the learned authors of Mason & Carter's Restitution Law in Australia observe, decisions such as Re Diplock; Diplock v Wintle [1948] Ch 465 were determined at a time when the jurisprudential basis for claims for unjust enrichment was thought to lie in implied contract ('quasi-contract'). However they also state that, although there are difficulties in applying limitation statutes to the variety of claims gathered together under the rubric of restitution:
[n]evertheless, the courts, relying mainly on a characterisation of claims in restitution as of a quasi-contractual nature, have, at least in relation to common law claims, generally been able to discern a legislative intention that such claims are barred on the expiry of a period stated in the statutes [2719].
Consequently, if 'it is possible to state a general rule, it is the rather unsatisfactory one that claims in restitution are subject to the same limitation period as actions brought on simple contract': Mason & Carter's Restitution Law in Australia [2717]. Any claim that the plaintiff may have for unjust enrichment is also, in my view, subject to a six‑year limitation period.
A cause of action based on an indemnity by way of reimbursement arises only when the extent of the plaintiff's liability is established and the plaintiff is called upon to pay and not when the event giving rise to the liability to pay occurs: Limitation of Actions at [5.10.690]. Where a guarantor pays a creditor only part of the principal debt, the limitation period for the action to be indemnified for that part runs from the date of payment: Modern Contract of Guarantee at [12.750]. Consequently, the plaintiff's cause of action for an indemnity in respect of the Payment accrued in November 2001.
The cause of action in unjust enrichment accrues at the time of payment where a plaintiff has a right of recoupment arising out of the discharge of a valid obligation owed to a third party which, as between the plaintiff and the defendant, was partly or wholly due to the defendant: Mason & Carter's Restitution Law in Australia [2723].
The first defendant relied on Sardon Pty Ltd v The Registrar of Titles [2004] WASC 56 as authority for the proposition that a caveat 'cannot be lodged to protect an interest that is barred by the statute of limitations' (par 25 of the first defendant's submissions). In my view, that proposition is too broadly stated to reflect either the reasoning in Sardon or the statutory regime for lodging, removing and extending a caveat.
The plaintiff referred, on the other hand, to the observation of the High Court in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 that limitation defences are generally not matters that can be determined on a summary application. Those observations were made on an appeal from a decision at first instance to strike out amendments to a statement of claim on the ground that they were time barred.
However, the question to be decided in this application is only whether the plaintiff has established a prima facie case that he possesses the claimed interest in the Land that should continue to be protected by the caveat that he has lodged. In my view, it is appropriate to have regard to the possibility that the claimed estate or interest rests on a cause of action that is time barred in assessing the sufficiency of the claim. The reasons given by the High Court in Wardley as to why a court should be wary about determining a limitation issue summarily nevertheless indicate that caution must be exercised in dealing with such an issue in any interlocutory context.
I have already stated that I consider that any cause of action that the plaintiff may have possessed against the first defendant accrued in November 2001. However, according to the plaintiff the mortgage loan made by Orix was repaid by January 2004 and the Mortgage was discharged at that time. The plaintiff's claim would still be time barred if, for example, it was held that he was entitled to be subrogated to the personal covenant to pay in the Mortgage. A claimant subrogated to another's right of action against a third party can be in no better position than that other; so that if that other's right of action is time barred, the claimant will also be barred: see Lord Goff of Chieveley and G Jones, The Law of Restitution (7th ed 2007 Sweet & Maxwell) at 43-015. Mitchell and Waterson suggest that the position may be more complicated than that simple rule would suggest but the possible outworking of those complications would not see the limitation period being further extended in the circumstances of this matter (see at 7.137 and following). Accordingly, the latest time at which any cause of action that the plaintiff might possess could have accrued was well over six years ago and indeed, more than six years prior to when these proceedings were commenced.
The conclusions I have reached at a prima facie case level on whether the plaintiff's claimed estate or interest in the Land is dependent on causes of action that are time barred provide another reason why I consider that the caveat should not be extended.
Balance of convenience
There is no evidence that the first defendant intends to deal with the Land. Nevertheless, I consider that the balance of convenience favours removal of the caveat. That is because:
(a)the plaintiff has delayed in claiming an estate or interest in the Land for a long period;
(b)the plaintiff has not taken any step to vindicate his claim apart from lodging the caveat; and
(c)the first defendant has a right to have its title to the Land unaffected by the caveat having regard to the plaintiff's delay and inaction.
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