Hancock, by her tutor, Proctor v JAS Ventures Pty. Limited

[2007] NSWSC 1

CITATION:	HANCOCK, by her tutor, PROCTOR v. JAS VENTURES PTY. LIMITED & ORS [2007] NSWSC 1
HEARING DATE(S):	Monday 8 January 2007
JUDGMENT DATE :	10 January 2007
JURISDICTION:	Equity
JUDGMENT OF:	Hall J at 1
DECISION:	Upon the plaintiff, by her counsel and tutor, giving to the Court the usual undertaking as to damages: (a) The operation of caveat number AC548786 be extended until further order of the court. (b) Subpoenas be made returnable on 25 January 2007. (c) The return date for subpoenas returnable before the court on 8 January 2007 be extended to 25 January 2007. (d) The summons and the plaintiff's motion filed on 3 January 2007 be stood over the Equity Registrar's list for directions on 1 February 2007. (e) The plaintiff's solicitors serve a copy of these orders and directions upon R.L. Kremnizer & Co., solicitors on or before 12 January 2007. (f) Leave to either party to apply with respect to order (a) on three days' notice. (g) Costs of the motion are costs in the cause.
LEGISLATION CITED:	Contracts Review Act 1980 (NSW) Real Property Act 1900 (NSW) Conveyancing Act 1919 (NSW) Protected Estates Act 1983 (NSW)
CASES CITED:	Malouf v. O'Donohoe (unreported, Young, CJ. in Eq., 22 April 2001) Dowdle v. Inverell Shire Council (1998) 9 BPR 17,349 Custom Credit Corporation Limited v. Ravi Nominees Pty. Limited (1992) 8 WAR 42 Woodward v. Page (1898) 7 BPR 14,612 Gonsalves v. Debreczini [1999] NSWSC 488 Heller Financial Services Limited v. Amour (Santow, J., unreported 8 August 1997)
PARTIES:	HANCOCK, Elizabeth, by her tutor, James Gerald PROCTOR v. JAS VENTURES PTY. LIMITED & ORS
FILE NUMBER(S):	SC No. 1008 of 2007
COUNSEL:	Plaintiff: M. Gorrick First Defendant: J.A. Darvall
SOLICITORS:	Plaintiff: L. Rundle & Co. First Defendant: Zelden Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HALL, J.

WEDNESDAY 10 JANUARY 2007

No. 1008 of 2007

ELIZABETH HANCOCK, BY HER TUTOR, JAMES GERALD PROCTOR v. JAS VENTURES PTY. LIMITED & 7 ORS

JUDGMENT

1 HIS HONOUR: The plaintiff commenced proceedings by way of summons filed on 3 January 2007 seeking relief, inter alia, by way of declaration that the transfer from her to the first defendant of the title to a property situated at and known as 456 Maroubra Road, Maroubra, in the State of New South Wales, was void or voidable.

2 The plaintiff also seeks relief pursuant to the general law and pursuant to the provisions of the Contracts Review Act 1980 (NSW) that the first defendant do all acts and things necessary to transfer the property to her free of all encumbrances.

3 On the same date, 3 January 2007, the plaintiff filed a notice of motion which was heard by me as duty judge in which relief, inter alia, was sought pursuant to s.74K of the Real Property Act 1900 (NSW) for the extension of the operation of a caveat lodged by her in respect of the property.

4 Mr. M. Gorrick of counsel appeared on behalf of the plaintiff and Mr. J.A. Darvall of counsel appeared on behalf of the first defendant.

5 On 3 January 2007, the acting Deputy Registrar made orders, inter alia, that the notice of motion be heard in the vacation period and made the summons returnable at 10.00 am, Monday 8 January 2007.

6 The plaintiff relied upon the affidavit of Helen Proctor sworn 3 January 2007, the affidavit of James Gerald Proctor sworn 3 January 2007, affidavits of service sworn by Elias Abikhalil, licensed commercial sub-agent, sworn 5 January 2007 and tendered documents contained within a folder constituting Exhibit JGP1 in the substantive proceedings and marked as Exhibit A in the proceedings on the notice of motion. Exhibit A contains copies of documents relevant to the sale transaction, a valuation of the property, two mortgages, a copy of the conveyancing file of M. Sokol & Co. and a report of Associate Professor Brian Draper amongst other documents.

7 A copy of the caveat dated 23 August 2006 was marked as Exhibit B.

8 The defendant relied upon correspondence comprised within Exhibits 1, 2 and 3 and a copy of a notice pursuant to s.57(2)(b) of the Real Property Act and s.111(2)(b) of the Conveyancing Act 1919 (NSW) addressed to the first defendant.

9 Mr. Gorrick of counsel submitted a form of draft orders sought comprising nine paragraphs. At the conclusion of the hearing, he advised that, on the present notice of motion, he sought only relief in terms of paragraph 1 pursuant to s.74K of the Real Property Act.

Factual background

10 The plaintiff is presently aged 90 (date of birth 10 October 1916). The property in question comprises four apartments, apartments 1, 2 and 3 being subject to leases as at the date of sale. Apartment 4 was occupied by the plaintiff as her home.

11 A contract of sale for the property was entered into on 13 December 2005 for a sale price of $1,560,000.

12 Settlement of the sale occurred shortly thereafter, namely, on 22 December 2005.

13 M. Sokol & Co., solicitors, in particular, Ms. Maria Sokol, acted on behalf of the plaintiff in relation to the sale transaction.

14 A transfer of sale was witnessed by Marina Sokol.

15 A valuation undertaken by R.V. Dimond, valuer, stated the current market value of the property as at 30 November 2006 to be $2,600,000.

16 On 19 December 2006, notice was served upon the caveator of the proposed lapsing of the caveat.

17 On 8 November 2006, the Guardianship Tribunal made an order that the estate of the plaintiff be subject to management under the provisions of the Protected Estates Act 1983 (NSW) and that the manager of her estate be Mr. James Proctor.

18 The Tribunal recorded a formal finding that Ms. Hancock was a person who had a disability and, as a consequence, was at least partly incapable of managing her person. It also found, in relation to financial management, that she was not capable of managing her affairs.

19 In his report of 19 September 2006, Associate Professor Draper stated that:-

“Miss Hancock clearly had no notion that she had made some kind of agreement to sell her home and it is hard to know whether she has signed some documents and forgot about it or whether the transaction is entirely fraudulent. Currently the problems are with her capacity to manage her own affairs and that is witnessed by her forgetfulness and problems in looking after her finances.
…”

20 Associate Professor Draper stated that the result of a CT scan revealed atrophy with some mild small vessel vascular disease. The most likely diagnosis was Alzheimer’s Disease with possibly a vascular component.

21 Caveat No. AC548786W was lodged on the plaintiff’s behalf as caveator by her solicitors L. Rundle & Co. Schedule 1 to the caveat claimed “… an equitable interest as the rightful owner of the land”.

22 The facts stated in Schedule 1 were as follows:-

“The caveator was the registered proprietor of the land. By transfer AC12379B registered 23 December 2005, the property was transferred to JAS Ventures Pty. Limited, ACN 116 634 096. The transfer was procured and registered without the knowledge or approval of the registered proprietor/caveator. No consideration was paid to her.”

Serious questions to be tried

23 Mr. Gorrick of counsel on behalf of the plaintiff submitted that the following were the serious questions to be tried on the summons:-

(a) That the plaintiff lacked the capacity to enter into the agreement for sale and transfer of her property. Particular reliance was placed upon the affidavit of Helen Proctor. Attention was drawn to Ms. Proctor’s observations of the plaintiff made on 23 December 2005, the day following the completion of the sale and upon the report of Associate Professor Draper. Mr. Gorrick emphasised that, in his submission, there was an arguable case that the plaintiff lacked the relevant functional capacity.

(b) That the plaintiff may have been subject to equitable or common law fraud or unconscionable dealing.

(c) That the transaction comprised of the contract of sale and the transfer of title to the first defendant attracted the beneficial provisions of the Contracts Review Act 1980 (NSW) , s.9.

Factual matters

24 The following factual matters were emphasised by Mr. Gorrick as significant:-

(a) The short period of time between the exchange of contracts (13 December 2005) and the completion of the contract (22 December 2005).

(b) The fact that no agent was involved in the transaction.

(c) The fact that the vendor did not have possession of the Certificate of Title to the property (the affidavit evidence indicates that the Certificate of Title was held by Rundle & Co.).

(c) There is no reference in the file of M. Sokol & Co. (Tab 6 of Exhibit A) to any attendance by Marina Sokol (or any other solicitor) on the plaintiff concerning the transaction.

(d) The fact that the transaction price represented a significant undervalue.

(e) No part of the settlement monies were paid to the plaintiff as vendor.

(f) There is no information as to what happened to the deposit monies.

(g) The fact that, although the contract provided for vacant possession of the unit occupied by the plaintiff, she was left in possession, notwithstanding Special Condition 48.

Evidence as to the plaintiff’s capacity

25 I have referred in paragraphs [19] and [20] to the report of Associate Professor Draper of 19 September 2006. It is apparent that that report was obtained for the purposes of assessing her then capacity to manage her own affairs in the context of the application for a guardianship order for the plaintiff and for the appointment of a financial manager. The report, accordingly, was not specifically addressing the question of the plaintiff’s capacity as at December 2005. The report does, however, provide some evidence for the purposes of the present application of the fact that the plaintiff did suffer from a condition that was relevant to her mental capacity and that had developed and had been in existence for some considerable period prior to Associate Professor Draper’s examination in September 2006.

26 Helen Proctor, the great-niece of the plaintiff, in her affidavit sworn 3 January 2007, provided evidence that in years gone by the plaintiff had been independent, of not “a little eccentric”. She stated that the plaintiff had always lived with her parents and continued living alone at Flat 4, 456 Maroubra Road, Maroubra after her mother’s death in 1964. The flat had been the plaintiff’s family home since about 1941 and the plaintiff became the owner of the flat upon the death of her mother and brother in the 1960s.

27 Ms. Proctor stated that it had been her custom to invite the plaintiff for Christmas every year to her home. Over the past four or five years, she had observed a decline in the plaintiff’s functioning. The plaintiff, however, had appeared to be managing to travel by public transport to shop and attend senior classes until early 2006. She had spoken over the years about the property and had often referred to its value but at no time had the plaintiff ever indicated an intention to sell the flats.

28 Ms. Proctor’s evidence was that the first real sign of a serious deterioration in the plaintiff’s condition was at Christmas 2005. A couple of days before Christmas Day she had contacted the plaintiff and reminded her of the Christmas luncheon to be held but she seemed to her to be “unusually vague and disorientated”. In a phone call on 23 December 2005, she stated that she spoke to the plaintiff about the Christmas lunch to make sure that she was coming. In her affidavit (paragraph 10) she stated:-

“… I do not recall her exact words in response, except that she did not respond to my invitation or question. I repeated the invitation clearly and made the assumption that she would arrive as usual or phone to let us know. This was the first occasion where I formed the opinion that she may not have been aware who was speaking to her.”

29 Ms. Proctor went on to state that the plaintiff failed to attend the Christmas lunch and did not phone to say that she was not coming. When she spoke to her later that day:-

“She was very disorientated and did not know what day it was. She said words to me to the effect, ‘is this a special day?’. She did not explain or apologise for not coming to lunch. When I said words to the effect, ‘yes, it’s Christmas, you know you always come to us’, she replied in words to the effect ‘well, Merry Christmas then’. She then spoke of other topics and said words to the effect ‘Australia is the best place to live’ …”

30 Ms. Proctor stated that at that time she was concerned as to the plaintiff’s mental state and whether she should become actively involved in her ongoing care.

31 In her affidavit (paragraph 14), Ms. Proctor stated that an ambulance driver phoned her and stated that he had found the plaintiff in the Emergency Department of Prince of Wales Hospital looking thin, pale and disorientated. On a later attendance at the plaintiff’s home, Ms. Proctor found that the flat was not secured and the back door was open. The plaintiff’s clothes were said to be filthy. The flat was in a squalid condition. Ms. Proctor stated that the plaintiff was unable to prepare her own food and the ACAT Team at Prince of Wales Hospital then became involved.

32 On 16 August 2006, Ms. Proctor made contact with Ray White Real Estate, Maroubra and spoke to a Mr. Michael Guirguis the next day. It was then that he advised that the plaintiff was no longer the owner of the premises. When she subsequently spoke to the plaintiff, the plaintiff was said to have been extremely distressed and agitated and stated “I’ve never sold the units. I’m going to march right up to Ray White this minute”. She also said to Ms. Proctor words to the effect, “phone my solicitors Rundle & Company immediately”.

33 It was following contact between James Proctor and Ms. Suttor of L. Rundle & Co. that the facts concerning the sale transaction became known to Ms. Proctor and her brother.

34 The evidence on this application does, in my opinion, raise a serious question as to the plaintiff’s mental capacity as at the dates of the contract of sale and transfer.

Dealings between the plaintiff and Mr. Aronov

35 Ms. Proctor stated (paragraph 22) that the plaintiff had told her of “Simon” who was the property manager at Ray White Real Estate, Maroubra. Ms. Proctor stated that she now knows that person to be Simon Aronov. Based on her conversations with the plaintiff, the latter appeared to “like and trust Simon”.

36 On 21 August 2006, Ms. Proctor met Mr. Aronov. At that meeting, Mr. Aronov referred to the plaintiff’s tax bill. In reference to it, Mr. Aronov said “I’m going to pay it. I owe Elizabeth money”. He then showed Ms. Proctor a “contract” dated 7 November 2005 which he permitted Ms. Proctor to copy. The copy of the document was marked as Annexure A to Ms. Proctor’s affidavit.

37 The “agreement” dated 7 November 2005 signed by Mr. Aronov as the purchaser and apparently the signature of the plaintiff. The agreement, in part, reads:-

“I, Simon Aronov, declare that I will purchase the property at 456 Maroubra Road, Maroubra from Elizabeth Hancock for $2,200,000 on 23 December 2005. The property will be purchased in JAS Ventures Pty. Limited. The director of the company is Alexandra Tischenko (she will not be aware of the agreement between myself, Simon Aronov, and Elizabeth Hancock).”

38 The “agreement” refers to the fact that the money is to be paid to the plaintiff on 23 December 2005, the total amount being $2,200,000 together with interest in the amount of $400,000. The document concludes:-

“The solicitors for both parties (Bob Zelden and Marina Sokol) are not aware of this agreement between myself Simon Aronov and Elizabeth Hancock.”

39 Ms. Proctor stated (paragraph 25) that at the meeting, Simon Aronov was “very emotional and cried”. He said that he had taken the plaintiff to Bondi Junction to complete the sale of the units and that she knew and understood exactly what she was doing. He stated that “her mental state has only gone downhill recently. She can’t remember our agreement any more. She is refusing to move out. She even spat at me. Unless she moves out, I can’t pay the money”.

40 Mr. Aronov is said to have stated that he had had the units valued and that “they are only worth $1.8 million”. Mr. Aronov also discussed his conduct and stated “I only thought of Elizabeth because my first wife and my business partner ran of to Cyprus with all my money and I was left in a desperate financial state. They left my little son behind”.

41 The evidence on this application establishes a serious question as to the relationship and dealings between Mr. Aronov and the plaintiff and the contract of sale of the property. His association with other relevant persons is discussed below.

The solicitor who acted for the plaintiff

42 Mr. Darvall of counsel on behalf of the first defendant, relied, inter alia, upon the fact that the plaintiff had been legally represented by Ms. Sokol in relation to the sale and transfer. However, the circumstances revealed by the evidence in this application raise a significant question as to the circumstances in which Ms. Sokol came to act for the plaintiff and whether the plaintiff in fact received from her appropriate independent legal advice. This is particularly so against the background that L. Rundle & Co. had acted for the plaintiff and her family for very many years since the 1960s in relation to the property, in relation to the filing of the plaintiff’s tax returns each year from 1969, in relation to a question of land tax in 1993, in relation to a Local Government objection in 2001 and other matters. L. Rundle & Co. has throughout been the custodian of the Certificate of Title for the Maroubra property, having held it in the firm’s strong room since 1968. The Certificate of Title, I note, has never been encumbered by the plaintiff.

43 A letter from the Law Society of New South Wales dated 19 September 2006 (Tab 8 to Exhibit A) states that the Society’s records indicate that Ms. Sokol held a practising certificate for the year ending 30 June 2005 but she did not renew her practising certificate as from 1 July 2005. She subsequently applied for and was issued a practising certificate effective for January 2006 to 30 June 2006. She held a current practising certificate as at 19 September 2006. Accordingly, at the time of the transactions involving the Maroubra property, she did not hold a practising certificate.

44 The cover sheet of Ms. Sokol’s file records the plaintiff’s name and address and phone number. It also contains amongst the handwritten entries, the name “Simon Aronov”. Mr. Darvall suggested that that name appears to have been written in different handwriting to that containing the particulars relating to the plaintiff and may have been added at a later time. Whilst that may be the case, it is difficult to determine without appropriate examination of the original record. At least on its face, the entry to which I have referred raises an issue of a possible association between Mr. Aronov and Ms. Sokol. Mr. Aronov’s association with other relevant persons will be referred to shortly.

Financing of the purchase

45 According to the affidavit evidence of Mr. James Proctor (paragraph 16), the consideration of the transfer of the property ($1,560,000) was financed through borrowings by the first defendant in the amount of $1,480,000 from the second to eighth defendants. JAS Ventures Pty. Limited, as mortgagor, entered into a mortgage (AC12380S) with mortgagees Miriam Joy Sampson) for $30,000), Simon Services Pty. Limited (for $150,000), Beresford Properties Pty. Limited (for $300,000) and Madison Park Pty. Limited (for $320,000). The principal sum ($1,200,000) was for a term of 12 months at an interest rate of 8.75% and at the agreed higher rate of 11.25%. The expiry date of the mortgage was 22 December 2006.

46 JAS Ventures Pty. Limited entered into a further mortgage with Sid Helprin Pty. Limited ($180,000) and Sidney Helprin and Lynette Sandra Helprin ($100,000). The principal sum ($280,000) was for a term of 12 months at a lower interest rate of 16.5% and a higher rate or 20.50%, the expiry date being 22 December 2006. Both mortgages were executed on behalf of the mortgagor/borrower by Alexandra Tischenko (director and guarantor).

Receipt of the settlement monies

47 According to the evidence of Mr. Proctor (affidavit, paragraph 27), NAS Corporation Pty. Limited received the amount of $1,185,365.58 at the time of the transfer of the property to the first defendant in accordance with a direction to pay NAS Corporation allegedly signed by the plaintiff. The principal place of business of the first defendant, JAS Ventures, is the same as the registered address of Lynette Rodriguez, who was director and secretary of NAS Corporation as at the date of its deregistration.

48 The affidavit of Mr. Proctor also establishes (paragraph 19) that Simon Aronov assisted the plaintiff in the management of the rental of the Maroubra flats and that Alexandra Tischenko and Lynette Rodriguez had the same address with ASIC, namely, 323 Malabar Road, Maroubra. Papa Pan Pizza Pty. Limited is a company owned by Simon Aronov and the principal place of that business is also registered as 323 Malabar Road, Maroubra.

49 The evidence on this application, accordingly, establishes the following facts and associations:-

(a) Mr. Simon Aronov, a former employee of the managing agent, Ray White, dealt with the plaintiff in relation to the property.

(b) Alexendra Tischenko, a director/secretary of JAS Ventures Pty. Limited of 323 Malabar Road, Maroubra, was appointed as such on 12 October 2005.

(c) Lynette Rodriguez, a director of NAS Corporation Pty. Limited of 323 Malabar Road, Maroubra, was appointed as such on 12 October 2005.

(d) Papa Pan Pizza Pty. Limited – Lynette Rodriguez was a previous director between 29 April 2004 and 2 December 2005 and Simon Aronov was appointed director of the company on 2 December 2005.

50 The association between the abovementioned persons and corporate entitles are potentially material to a determination of the nature and scope of arrangements associated with the sale and transfer of the property. The evidence on this application, however, is at least sufficient to establish, on a prima facie basis, an association, if not some form of alliance, between Simon Aronov, Alexandra Tischenko (JAS Ventures Pty. Limited) and Lynette Rodriguez (NAS Corporation Pty. Limited) being formed and/or operative for and in relation to the sale and transfer of the property.

Time following service of the lapsing notice

51 As earlier noted, the first defendant served a lapsing notice by facsimile on L. Rundle & Co. on 19 December 2006. Mr. Proctor has explained the difficulty he has since encountered in obtaining relevant information concerning the transactions and is presently engaged in inquiries concerning the sale and transfer. I do not consider that there was any unacceptable delay on the plaintiff’s part in making the present application.

Possible remedies against other persons

52 Mr. Darvall drew attention to a number of documents in evidence, in particular, documents behind guide card 6 in Exhibit A, guide cards 9, 10 and 12. He submitted that they indicate that the plaintiff has a cause of action against the solicitor acting on the sale and transfer and yet there is no explanation of the failure to join that person. He also submitted that there is no explanation for failing to join Mr. Aronov. In relation to the issue of the balance of convenience, he relied upon Exhibits 1, 2, 3 and 4 which included correspondence concerning a possible re-financing of the mortgage.

53 I do not consider that the failure to commence proceedings against those persons, in any way, undermines the present application nor provides an impediment to the plaintiff’s claim for an extension of the operation of the caveat under the Real Property Act 1900.

Default under the mortgages

54 Exhibit 1 is a letter written on behalf of HLP Mortgage Company (Aust.) Pty. Limited in which it is stated that that company requires all mortgages to be discharged and caveats to be withdrawn prior to or at settlement. That company would only settle “with a clear title”.

55 Exhibit 2 comprises a letter from Australian Mortgage Brokers advising that “the re-finance will not be able to take place while a caveat is lodged”. The letter states that “the financier has advised that once the re-finance has been completed the caveat may be lodged”.

56 Mr. Gorrick on behalf of the plaintiff relied upon the fact that the notice issued pursuant to s.57(2)(b) of the Real Property Act 1900 was issued upon the basis of default by the first defendant in paying interest due in November 2006 and the fact that the default was unassociated with the caveat. The default was clearly one for which the first defendant was alone responsible. The evidence supports the submission made in this respect.

Other matters

57 Mr. Darvall further submitted that there had been no pleading of fraud in relation to what he termed was a “shaky claim”. He further submitted that any order made extending the operation of the caveat should be for a specified period and not until further order of the court. On the question of balance of convenience, he relied upon the defendant’s potential exposure under the mortgage to the higher interest rates applicable.

58 In reply, Mr. Gorrick stated that no application had been made by the defendant to file any further evidence, that the default was not due to the caveat and that the plaintiff had moved with speed in seeking an extension under s.74K of the Real Property Act.

Service of the application to extend the operation of the caveat on the mortgages

59 In general terms, this Court will not hear an application to extend the operation of a caveat unless all interested parties disclosed by the notice which gave rise to the application have been served with copies of the application before the hearing. The Act provides that no ex parte application to extend a caveat is to be entertained unless the Court had dispensed with service.

60 In Malouf v. O’Donohoe (unreported, Young, CJ. in Eq., 22 April 2001), it was stated by the Chief Judge in Equity that the Court almost never makes an order extending the operation of a caveat ex parte. He stated there:-

“It is extremely difficult to see any justification for dispensing with service in cases where lawyers have left their application for dispending with service to the last day and no other factor is present. Indeed, it is difficult to see when the Court would ever be justified in dispensing with service in a case where there was an identifiable caveator in the jurisdiction.”

61 However, in this case, JAS Ventures has appeared and some of the mortgagees have been given notice of the proceedings.

62 The notice pursuant to s.74J of the Real Property Act was made on behalf of JAS Ventures Pty. Limited. No other interested party is therein disclosed.

63 The affidavits of service of Elias Abikhalil establish that the summons and notice of motion were served on the following mortgagees: Beresford Properties Pty. Limited, Simon Services Pty. Limited, Lynette Helprin, Sidney Helprin, Sid Helprin Pty. Limited.

64 The mortgagees, Miriam Joy Sampson and Madison Park Pty. Limited under mortgage AC12380S have not been served. R.L. Kremnizer & Co. act on behalf of the mortgagees. There has been no appearance on their behalf on this application.

65 I have had regard to the date of service of the notice and that during the operation of it the Christmas vacation period has intervened and the relative speed with which proceedings were commenced on 3 January 2007 and the notice of motion filed in determining whether it is appropriate for an order to be made extending the operation of the caveat and, if so, the conditions upon such an order ought be made.

Relevant principles

66 In considering whether the caveator’s claim “has or may have substance” under s.74K(2), courts apply the same principles as they would apply if the caveators were seeking an interlocutory injunction to restrain interference with the interest they assert pending a final hearing of their claim. In this respect, the Court is required to consider whether there is a serious issue to be tried and whether the balance of convenience favours extension of the operation of a caveat. The onus in these respects is upon the caveator.

67 It has been held that the test in s.74K(2) as to whether the caveator’s claim “has or may have substance” has been described as one which is “a not very demanding test”: Dowdle v. Inverell Shire Council (1998) 9 BPR 17, 349 at 17, 350.

68 The balance of convenience issues in the ordinary course normally favour the retention of a caveat and in such circumstances the court may extend the caveat until further order.

69 It has been held that it would be an “unusual case for the balance of convenience to favour removal of the caveat”: Custom Credit Corporation Limited v. Ravi Nominees Pty. Limited (1992) 8 WAR 42 at 52.

70 There are a number of principles to be applied in determining the subject application. In general terms, the approach to be taken qua caveats was expressed by McLelland, J. in Woodward v. Page (1989) 7 BPR 14,612 at 14,613 in the following terms:-

“… the caveat should be removed except to the extent that the court is satisfied that the [caveator] would be entitled to an interlocutory injunction restraining the plaintiff from dealing with the property until the final determination of the [caveator’s] claim. That, in turn, invokes the principle that where a claimant’s entitlement to ultimate relief is uncertain, the court in deciding to grant or refuse an interlocutory injunction must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the respondent of the grant of an injunction in support of relief to which the claimant may ultimately be held not to be entitled, and the consequences to the claimant of the refusal of an injunction in support of relief to which he may ultimately be held to be entitled.”

Application of relevant principles

71 In the present case, the Court is required to consider whether there is a serious question to be tried (or an “arguable case”) and whether the balance of convenience favours the extension. The statutory wording in s.74K(2) lend support to this approach, for the words “has or may have substance” point to the “serious question” criterion: Gonsalves v. Debreczini [1999] NSWSC 488 per Austin, J. at [18].

72 It is generally the case, as I have earlier noted, that balance of convenience considerations favour retention rather than removal of a caveat, though this is not inevitably so: Heller Financial Services Limited v. Amour (Santow, J. (as his Honour then was) unreported, 8 August 1997 at 4). This, his Honour stated, was for the reason that by its very nature a caveatable interest must be a proprietary interest in land. Hence the purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which would defeat or derogate from the incidents attaching to that proprietary interest. Because in many cases the removal of the caveat would destroy for all practical purposes the benefit of the proprietary interest, this would effectively resolve the matter against the caveator on a final basis, that always being a significant factor in favour of interlocutory relief (at p.5).

73 In applying these principles to the present case, I have had regard to the evidence presently before the Court and as to appropriate inferences to be drawn from that evidence. On an application such as this, of course, the Court cannot decide any disputed questions of fact on an interlocutory hearing. The proper occasion for the determination of the reliability of evidence is, of course, at a final hearing.

74 Insofar as issues of alleged fraud or unconscionable dealing are relied upon, the evidence does not, of course, permit any final conclusions to be reached. However, in my opinion, the facts disclosed in the evidence raise and support an arguable case that the plaintiff did not have the capacity to enter into the contract of sale and that in accordance with general law principles and the provisions of the Contracts Review Act 1980 (NSW) she has a basis for claiming equitable and other relief. I am mindful of the fact that it has been stated that:-

“Legal wrongdoing is sometimes and quite often difficult to prove at an interlocutory level when the Court is proceeding quickly and at a structural level to work through the approach to the status quo and generally applying the principles laid down by McLelland, J. (in Woodward v. Page ) to which I have referred …” ( 21 Million Pty. Limited v. Clarence Street Pty. Limited [2003] NSWSC 1160 per Einstein, J. at [34]).”

75 The evidence, however, on this application does raise serious issues to be tried as to whether the plaintiff understood the transaction and had the capacity to enter into the contract of sale and transfer, and whether she received independent legal advice. The facts established on this application supporting the conclusion that the plaintiff has an arguable case include the fact that the property had a value of in excess of $2 million, the fact that the plaintiff received none of the proceeds of sale, the fact that the evidence raises a very real question as to whether the plaintiff held the necessary mental capacity to enter into the transactions and the fact as to whether she received independent and appropriate legal advice.

Balance of convenience

76 I have concluded that, having regard to the matters to which I have earlier referred, including the matters referred to in Exhibits 1, 2, 3 and 4, the balance of convenience favours an order being made for the extension of the operation of the caveat. I propose to grant liberty to either party to apply on notice.

77 I record that on 9 January 2007, I made the orders in paragraph [78] indicating at that time that I would publish my reasons today. These are those reasons.

Orders

78 Upon the plaintiff, by her counsel and tutor, giving to the Court the usual undertaking as to damages:-

(a) The operation of caveat number AC548786 be extended until further order of the court.

(b) Subpoenas be made returnable on 25 January 2007.

(c) The return date for subpoenas returnable before the court on 8 January 2007 be extended to 25 January 2007.

(d) The summons and the plaintiff's motion filed on 3 January 2007 be stood over the Equity Registrar's list for directions on 1 February 2007.

(e) The plaintiff's solicitors serve a copy of these orders and directions upon R.L. Kremnizer & Co., solicitors on or before 12 January 2007.

(f) Leave to either party to apply with respect to order (a) on three days' notice.

(g) Costs of the motion are costs in the cause.

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