Haris v Yigiter - [2011] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
HARIS v YIGITER & ANOR
[2011] SASC 184
Reasons for Decision of The Honourable Justice Blue
20 October 2011
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - EXTENSION
The plaintiff lodged a caveat over two properties - the defendants applied for removal of the caveat - the plaintiff seeks an extension of time for removal of the caveat pending trial - whether serious question to be tried - whether balance of convenience favours extension - whether undertaking as to damages provided.
Held: Caveat extended in respect of the first property but not the second property upon the plaintiff providing the usual undertaking as to damages - the defendants restrained from dealings with the second property upon the plaintiff providing the usual undertaking as to damages.
Real Property Act 1886 (SA) s 69(b) and s 191(j), referred to.
Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; Fejo v Northern Territory (1998) 195 CLR 96; Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176; Nexus Mortgage Securities v Starmaker (No 51) Pty Ltd [1997] SASC 6347; Thompson v White [2006] NSWSC 110; Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198, considered.

HARIS v YIGITER & ANOR
[2011] SASC 184
Civil

BLUE J. The plaintiff, Mr Haris, seeks an order for an extension of time for the removal of a caveat over two Certificates of Title in respect of which the first and second defendants, Mrs and Mr Yigiter, are the registered proprietors.
The Facts
Mr Haris relies upon three affidavits sworn on 27 January, 27 August and 6 October 2011.
Mrs and Mr Yigiter rely upon three affidavits sworn by Mrs Yigiter on 14 April, 18 August and 13 October 2011.
Mr Haris and Mrs Yigiter are brother and sister. Their parents are Mr and Mrs Subasi.
There are two properties which are the subject of the caveat, namely properties situated in McLean Street, Elizabeth Park and Grayling Street, Elizabeth East.
There is a third property situated at Woodford Road, Elizabeth North which potentially may be the subject of a claim by Mr Haris against Mrs and Mr Yigiter and is referred to in the affidavits, but is not relevant to the caveat.
There is a fourth property situated at Prunus Avenue, Elizabeth Vale which is not the subject of the caveat but is referred to in the affidavits and is relevant to the claim the subject of the caveat in respect of the property in Grayling Street, Elizabeth East.
I address the third and fourth properties first.
Woodford Road Property
On 24 October 2003, Mr Haris settled the purchase of a house property (“Woodford Road”) situated in Woodford Road, Elizabeth North for $120,000.
On 7 October 2005, a transfer of Woodford Road for $156,750 from Mr Haris to arm’s length purchasers was lodged for registration with the Registrar-General, and was registered on 24 October 2005.
The plaintiff’s case is that the signature of the vendor on the contract of sale and of the transferor on the transfer purporting to be his signature is a forgery. The signature on the transfer was purportedly witnessed by Mr Yigiter. His case is that he did not receive the net proceeds of sale, and the signature on the authority to disburse the proceeds is also a forgery. The defendants deny that the signature was a forgery.
Woodford Road is not the subject of a caveat. However, the plaintiff has foreshadowed that he wishes to make a claim against the defendants in respect of the disposal of that property. If he wishes to pursue such a claim in this action, it will need to be properly pleaded in a statement of claim.
Prunus Avenue Property
At some stage, Mr and Mrs Yigiter purchased a property (“Prunus Avenue”) situated at 23 Prunus Avenue, Elizabeth Vale.
Prunus Avenue was subsequently subdivided into three parcels, with a house being built on one of the parcels and all three parcels being sold.
It is the plaintiff’s case that Prunus Avenue was owned beneficially equally by Mr and Mrs Yigiter (50% interest) and Mr Haris (50% interest), that the purchase of the land, the subdivision, development and sale comprised a joint venture by those parties, and that the total profit from the venture was over $140,000. The defendants deny this.
It is the plaintiff’s case that Mr and Mrs Yigiter must have used proceeds of that venture belonging to the plaintiff to pay the balance of the purchase price of Grayling Street, as the plaintiff contends that they did not have available to them any other moneys to contribute. I address this below.
Prunus Avenue is not the subject of the caveat. If the plaintiff wishes to make a claim in respect of it in this action, it will need to be properly pleaded in a statement of claim.
McLean Street Property
On 28 January 2004, settlement took place on the purchase, in the names of Mr Haris and Mrs Yigiter, of a house property (“McLean Street”) situated in McLean Street, Elizabeth Park for $175,000.
A loan of $157,000 was obtained from the Rock Building Society Ltd, which took a mortgage over McLean Street.
There is a dispute between the parties as to the beneficial ownership of McLean Street. The plaintiff’s case is that the property is and was beneficially owned equally by Mr Haris and Mrs Yigiter, that they each contributed approximately $15,000 towards the cost of purchasing the property (being the amount not funded by the Rock Building Society), and that they each contributed towards maintenance and improvement of the house since. It is the defendants’ case that the property was beneficially owned by Mrs and Mr Yigiter to the exclusion of Mr Haris. It is common ground that from January 2004 Mrs and Mr Yigiter resided in the property and made the regular fortnightly repayments required under the mortgage to the Rock Building Society.
On 11 March 2010, a series of documents were lodged with the Registrar-General for registration:
1.a discharge of the Rock Building Society mortgage (“the Mortgage Discharge”);
2.a discharge of a charge by Savings and Loans Credit Union (SA) Ltd (“the Charge Discharge”);
3.a transfer of the fee simple effectively from Mr Haris to Mr Yigiter (“the Transfer”);
4.a transfer of a property in Grayling Street, Elizabeth East to Mr and Mrs Yigiter;
5.a mortgage (“the Adelaide Bank Mortgage”) over both McLean Street and Grayling Street properties in favour of Bendigo and Adelaide Bank Ltd (Adelaide Bank”).
The Transfer was of the estate in fee simple from Mr Haris and Mrs Yigiter jointly to Mr and Mrs Yigiter for no consideration. The Transfer was purportedly signed by Mr Haris and witnessed by his father, Mr Subasi. The Transfer was registered by the Registrar-General on 29 March 2010.
There is a dispute between the parties whether the Transfer was in fact signed by Mr Haris. The plaintiff’s case is that the signature is a forgery, and that he only discovered the existence of the Transfer in July 2010. The plaintiff contends that the Transfer is void (pursuant to s 69(b) of the Real Property Act 1886 (SA)). The defendants’ case is that the Transfer was in fact signed by Mr Haris in the presence of his father.
On 11 March 2010, simultaneously with the lodgement of the Transfer, Mr and Mrs Yigiter paid out
1.the amount owing to the Rock Building Society and lodged the Mortgage Discharge; and
2.the amount owing by Mr Haris to Savings and Loans Credit Union (SA) Ltd (“Savings and Loans”), which had registered a charge over McLean Street.
The evidence does not identify the precise amount paid to the Rock Building Society on 11 March 2010 but a settlement statement from the conveyancer acting for Mr and Mrs Yigiter indicates that the amount required to discharge the mortgage as at 26 February 2010 had been $147,589.78. The amount paid on 11 March 2010 was likely to be of the order of $148,000 (depending upon whether any fortnightly repayment had been made between 26 February and 11 March and depending upon the rate of interest on the loan).
The evidence does not identify the precise amount paid to Savings and Loans to discharge the charging order. The evidence shows that the pay out figure as at 26 February 2010 was $12,967.11. The amount paid on 11 March 2010 was likely to be of the order of $13,000.
The funds used to discharge the Rock Building Society mortgage and the Savings and Loans charging order were obtained in part from a new loan taken out by Mr and Mrs Yigiter from Adelaide Bank, and in part from funds provided by Mr and Mrs Yigiter.
Of the total of about $161,000 paid to the Rock Building Society and Savings and Loans:
1.$111,598.45 was borrowed from Adelaide Bank; and
2.the balance of about $50,000 was provided by Mr and Mrs Yigiter.
On 11 March 2010, simultaneously with the lodgement of the Transfer, Mr and Mrs Yigiter took out the new loan from Adelaide Bank, which was used in part to pay out the moneys owing to the Rock Building Society.
On 11 March 2010, the Adelaide Bank Mortgage over McLean Street was lodged by Mr and Mrs Yigiter with the Registrar-General for registration.
McLean Street was valued by Adelaide Bank at $232,000 as at February 2010 when Adelaide Bank agreed to make the loan to Mr and Mrs Yigiter. The plaintiff contends that the property is now worth over $270,000, and the defendants contend that it is still worth only approximately $232,000. Neither party adduced any admissible evidence of its current value.
On 20 April 2010, Mr and Mrs Subasi lodged a caveat over McLean Street. The caveat is not in evidence.
On 27 September 2010, Mr Haris lodged a caveat (“the Caveat”) over McLean Street. The Caveat claimed that Mr Haris is beneficially entitled to an estate or interest in fee simple in the property.
Recently, Mr and Mrs Yigiter have moved out of McLean Street, have rented it to a tenant and have rented alternative premises themselves.
Grayling Street Property
On 11 March 2010, Mr and Mrs Yigiter settled on the purchase of a house property (“Grayling Street”) situated in Grayling Street, Elizabeth East for $185,5000. The total payable by Mr and Mrs Yigiter to purchase the property (including stamp duty and other fees) was $194,029.52 (although this may be for a settlement on 26 February as opposed to the ultimate settlement date of 11 March).
Mr and Mrs Yigiter borrowed the majority of those funds from Adelaide Bank. Adelaide Bank paid $184,178.60 to the vendor. This left approximately $10,000 payable by Mr and Mrs Yigiter out of other funds.
Mr and Mrs Yigiter granted the Adelaide Bank Mortgage over Grayling Street as well as over McLean Street.
The Adelaide Bank Mortgage secured a total sum of $297,000. As mentioned above, the funds lent by Adelaide Bank were used as to $111,598.45 towards discharging the mortgage in favour of the Rock Building Society over McLean Street, and as to $184,178.60 towards the purchase price of Grayling Street. The balance was used to pay various fees.
On 27 September 2010, Mr Haris lodged the Caveat over the Grayling Street property (as well as over McLean Street). The Caveat claimed that Mr Haris was beneficially entitled to an estate or interest in fee simple in some at present indefinable share in the land by virtue of having contributed to the acquisition of the land.
Application to Remove Caveat and for Extension of Time
On 6 January 2011, Mr and Mrs Yigiter made an application to the Registrar-General for the removal of the Caveat over McLean Street and Grayling Street.
On 27 January 2011, Mr Haris instituted this action, seeking an extension of time for removal of the Caveat.
The time for removal of the Caveat has been extended from time to time on an interim basis.
On 19 August and 17 October 2011, I heard argument on the plaintiff’s application to extend the time for removal of the Caveat on an interlocutory basis until the trial of the action.
On 19 August and again on 16 September 2011, I adjourned the completion of argument on the application at the joint request of the parties to enable them to attempt to negotiate a settlement of the disputes between them. Unfortunately, those negotiations proved unsuccessful.
Serious Question to be Tried
The first question to be considered on an application for an extension of time for the removal of a caveat is the same[1] as the test for an interlocutory injunction, namely whether the plaintiff has established that there is a serious question to be tried[2] or the plaintiff has made out a prima facie case.[3]
[1]    Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176 at 182-183 per Walters J; Nexus Mortgage Securities v Starmaker (No 51) Pty Ltd [1997] SASC 6347 per Doyle CJ (Matheson and Bleby JJ agreeing).
[2]    Fejo v Northern Territory (1998) 195 CLR 96; [1998] HCA 58 at [26] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ.
[3]    Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]-]71] per Gummow and Hayne JJ (see also [19] per Gleeson CJ and Crennan J).
In relation to McLean Street, Mr Haris’ sworn evidence that he did not sign the Transfer clearly establishes a prima facie case.
In relation to Grayling Street, Mr Haris claims an interest in that property on two different bases:
1.that his equity in McLean Street was used to support the total loan of $297,000 obtained from Adelaide Bank, which in turn was used to fund the purchase of Grayling Street;
2.that his share of the joint venture for the development and sale of Prunus Avenue was used to pay the balance of the purchase price of Grayling Street not funded by Adelaide Bank.
As to the second basis, Mr Haris’ case involves two steps:
1.he was a 50/50 joint venturer in the Prunus Avenue venture, and that venture produced a net profit of $140,000 of which he was entitled to 50%;
2.his share of that profit was used by Mr and Mrs Yigiter to pay the balance of the purchase price of Grayling Street in the sum of approximately $10,000.
As to the first step, Mr Haris’ evidence is confined to that contained in paragraph 19.8 of his affidavit sworn on 6 October 2011. Effectively, his evidence is confined to the statement “the subdivision venture that the defendants are referring to is one which I contributed money and time and management to”. Mr Haris does not explicitly say that he was a party to a joint venture in respect of that land and in any event does not depose to any details of his contribution. I do not consider that Mr Haris has discharged the onus of establishing that there is a serious question to be tried on this question.
In relation to the second step, I am not satisfied that the inference can be drawn (even on a prima facie case or serious question to be tried basis) that, assuming Mr Haris was entitled to $70,000 out of total profits of $140,000, his moneys were used in the payment of approximately $10,000 towards the purchase of Grayling Street. Leaving to one side the question whether Mr Haris has negated the possibility that Mr and Mrs Yigiter used funds unrelated to the subdivision venture to pay those moneys, on Mr Haris’ own case they had available to them their own profits from the subdivision venture which might have been used.
As to the first basis, as at March 2010, the equity in the McLean Street property was approximately $84,000 (being the difference between Adelaide Bank’s valuation of $232,000 and the amount owing to the Rock Building Society of approximately $148,000). On the plaintiff’s case, his equity was 50% of this, being approximately $42,000, from which should be deducted the amount owing to Savings and Loans of about $13,000, giving a net equity in the vicinity of $29,000.
The mortgage to Adelaide Bank was for $297,000. This amount exceeds the amounts owing to the Rock Building Society and Savings and Loans totalling approximately $160,000 and also exceeds the value of McLean Street at the time ($232,000).
Further, the amount paid by Adelaide Bank towards the purchase of the Grayling Street property of $184,178.60 is approximately 99% of the purchase price of $185,500.
In these circumstances, Mr Haris has demonstrated a serious question to the tried and a prima facie case that his equity has been used, and continues to be used, to support the purchase of Grayling Street.
Balance of Convenience
The next question to be considered on an application for an extension of time to remove a caveat is the balance of convenience, namely the potential prejudice to the plaintiff if the caveat is removed weighed against the potential prejudice to the defendants if it remains.[4]
[4] Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176 at 182-183 per Walters J; Nexus Mortgage Securities v Starmaker (No 51) Pty Ltd [1997] SASC 6347 per Doyle CJ (Matheson and Bleby JJ agreeing).
In relation to McLean Street, if the Caveat is not extended, Mr Haris is exposed to the potential prejudice that Mrs and Mr Yigiter might deal with the property in a manner which dilutes or removes Mr Haris’ equity in the property (if he is ultimately successful). For example, they could sell the property and dispose of the proceeds, borrow additional moneys against the property, or increase the existing mortgage to Adelaide Bank.
On the other hand, Mr and Mrs Yigiter have not at this point made any decision that they wish to sell McLean Street. I was informed that Mr and Mrs Yigiter have made inquiries about refinancing the loan from Adelaide Bank by two separate loans from an alternative financier. I do not have evidence in relation to that, and I was not informed that the interest rate or terms of repayment would be more beneficial to Mr and Mrs Yigiter if the refinancing took place.
In relation to Grayling Street, it is common ground that the property is vacant and has been vacant since it was purchased in March 2010. I was informed (although not provided with evidence) by Mrs and Mr Yigiter that they intended to renovate the kitchen and bathroom, and to that intent removed the old bathroom and kitchen but have not replaced them. I was informed that they need to borrow $25,000 to $30,000 to undertake those renovations. In addition, I was provided with the information referred to at paragraph [57] above in relation to the possibility of refinancing the loan from Adelaide Bank with two separate loans from an alternative financier.
Conclusion
McLean Street
In all of the circumstances, if Mr Haris gives the usual undertaking as to damages, the balance of convenience favours the granting of an extension of time in which to remove the Caveat.
Subject to the provision of an undertaking as to damages, I will grant an extension of time for removal of the Caveat until the trial and determination of the action. However, I will also grant liberty to the parties to apply. In the event that Mr and Mrs Yigiter decide that they wish to sell the property, or have a specific proposal for the refinancing of the Adelaide Bank loan, they are at liberty to apply for such orders as might be appropriate to permit this to occur. I would be disposed to permit this, provided that Mr Haris’ equity in the property (on his case is preserved), but it would be a matter for consideration at that time as to whether such orders should be made, and if so in what circumstances and on what terms.
Grayling Street
Different considerations apply to the application for an extension of time in respect of Grayling Street.
First, Mr Haris’ claim in respect of McLean Street is a direct claim; whereas his claim in respect of Grayling Street is an indirect claim, and in one sense contingent upon his equity in McLean Street actually being reduced.

Secondly, it is desirable, if possible, that the existing single loan from Adelaide Bank secured over both properties be replaced by two separate loans, secured separately over each property, and it is possible that this could be done without prejudice to Mr Haris’ claim to his equity in McLean Street.
Thirdly, I take into account that the value of Mr Haris’ equity (on his case) in McLean Street was of the order of $30,000 as at March 2010.
Fourthly, Mr Haris lodged a single caveat over both properties, notwithstanding that the nature and extent of his claimed interest in the two properties is different.
In all of the circumstances, it is appropriate that the Caveat not be extended in respect of Grayling Street, but rather that it be replaced by an injunction restraining Mrs and Mr Yigiter from selling, mortgaging, charging or dealing with Grayling Street without prior authorisation by the Court.
In particular, if Mrs and Mr Yigiter were able to refinance the loan from Adelaide Bank with two separate loans, secured separately over each of the two properties, I would be disposed to vary the injunction so as to permit the refinancing (depending, of course, upon the amount and terms of each loan).
If Mrs and Mr Yigiter were able to borrow additional funds to renovate the bathroom and kitchen, I would be disposed to vary the injunction so as to permit that to occur, again dependent upon the terms of the loan and ensuring that the funds were appropriately used.
Undertaking as to Damages
I am not prepared to grant the injunction in respect of Grayling Street unless Mr Haris provides the usual undertaking as to damages.
In relation to the extension of time for the removal of the Caveat over McLean Street, in assessing the balance of convenience, I have assumed that Mr Haris is prepared to provide the usual undertaking as to damages.
Section 191(j) of the Real Property Act 1886 (SA) provides that any caveator who shall have lodged or refused to withdraw any caveat wrongfully and without reasonable cause shall be liable to make compensation to any person who may have sustained damage thereby.
However, the criteria for liability of the caveator under that subsection is different to, and potentially more limited than, the criterion for liability pursuant to the usual undertaking as to damages.
In the circumstances, if Mr Haris is not prepared to provide the usual undertaking as to damages, that would alter my assessment of the balance of convenience.[5]
[5] See eg Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198 at 203 per Cox J; Thompson v White [2006] NSWSC 110 at [12] per Barrett J.
Future Conduct of the Action
In all of the circumstances, it is highly desirable that this action proceed to trial as soon as possible.
To that end, I foreshadowed to the parties on 19 August and 16 September 2011 that I would make directions for pre-trial interlocutory steps on an expedited timetable.
Pleadings
On 17 October 2011, I gave directions for an expedited timetable for pleadings, namely:
1.statement of claim to be filed by 24 October 2011;
2.defence to the filed by 31 October 2011;
3.any reply to be filed by 7 November 2011.
I previously indicated to Mr Haris, and I reiterate, that it is a matter for him whether he pleads in the statement of claim only claims relating to McLean Street and Grayling Street, or whether in addition he also pleads claims relating to Woodford Road and/or Prunus Avenue.
I shall grant leave to Mr Haris to amend his summons to seek the relief which he seeks in the statement of claim.
Disclosure
In relation to disclosure of documents, on 17 October 2011, I directed that each party make disclosure of documents by 7 November 2011. The issues have been well identified by the affidavits filed by the parties, and both parties should be in a position to identify relevant documents at this point, subject only to clarification of which claims are being pursued by Mr Haris, which will be known by 24 October when he files his statement of claim. There should not be an inordinate number of documents to be discovered by either party.
Expert Reports
In addition, on 17 October 2011, I directed that, if either party seeks to adduce expert evidence at trial, they are to lodge and serve expert reports by 7 November 2011.
In relation to each of these directions, I have given the parties to apply, in the event that they are unable to comply with the expedited timetable.
I have adjourned the matter to a settlement/status conference before a Master on 29 November 2011 at 2.15 pm. If the matter cannot be settled at the settlement conference, I expect that the action will be ready at that point to be listed for trial.