Lakeside Resort Development v Sunwoo & 3 Ors

[2006] NSWSC 545

CITATION:	Lakeside Resort Development v Sunwoo & 3 Ors [2006] NSWSC 545 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	26/05/06
JUDGMENT DATE :	26 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	05/26/2006
DECISION:	See paras 31-35 of judgment.
CATCHWORDS:	REAL PROPERTY – Caveats – Application to extend caveat – Caveat recorded on title to lot of land – Evidence that second defendant holds land on trust for plaintiff – Second defendant and third parties attempted to develop land without consent of plaintiff – Attempts to develop land breach of trust – Evidence that attempts to develop land will fail if caveat extended – Whether caveat should be extended – Balance of convenience – Effect of statutory scheme envisaged by Real Property Act 1900 (NSW) – Caveat extended until further order – Whether plaintiff entitled to injunction to prevent further borrowings on security of land – Injunction granted.
LEGISLATION CITED:	Real Property Act 1900 (NSW)
CASES CITED:	Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987
PARTIES:	Lakeside Resort Development Pty Ltd v Henry Sunwoo & 3 Ors
FILE NUMBER(S):	SC 1129/06
COUNSEL:	Plaintiff: R J Carruthers Defendants: A Rogers
SOLICITORS:	Plaintiff: Blake Dawson Waldron 2nd Defendant: Y Kim Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

WHITE J

Friday, 26 May 2006

1129/06 Lakeside Resort Development Pty Ltd v Henry Sunwoo & 3 Ors

JUDGMENT

1 HIS HONOUR: This is an application under s 74K of the Real Property Act 1900 (NSW) for an order extending until further order of the Court the operation of caveat number AB971885 recorded on the title to Lot 1 Deposited Plan 849235, being a property known as lot 1 Boyce Avenue, Wyong in New South Wales.

2 The evidence adduced on this application is disturbing. In October 1996, the plaintiff purchased land which has been called the Lakeside Resort Development site. It appears that the former owner of that land was a company called Lakeside Golf Pty Ltd. It is said that the first defendant, Mr Sunwoo, or Henry Sunwoo Pty Ltd, controlled Lakeside Golf Pty Ltd.

3 Lakeside Golf Pty Ltd, or Mr Sunwoo, also held shares in the plaintiff. A development application was lodged with the Wyong Shire Council for the development of the site. At some stage (the plaintiff says it was by about 1999) Lot 1, being the land the subject of the present application, ceased to form part of the development site.

4 On 17 February 1999, Mr Sunwoo was appointed as secretary of the plaintiff. At that stage he is not recorded as having been a director, but there is evidence that he had effective control of the plaintiff's affairs. A Mr Seung Yeul Park was a director.

5 By a transfer dated 5 February 1999, the plaintiff company transferred Lot 1 to a Mr Jong Sun Park. The affixing of the Common Seal of the plaintiff to the transfer was witnessed by Mr Sunwoo and Mr Seung Yeul Park. The consideration for the transfer was expressed to be $150,000, of which the transferee acknowledged the receipt.

6 There is evidence that there was no resolution of the directors of the plaintiff authorising that transfer.

7 The plaintiff says that Mr Jong Sun Park at this time managed a public golf course which was itself managed by Mr Sunwoo's company, Lakeside Golf Pty Ltd. A ledger entry for the plaintiff company for the year ended 30 June 1999 records the land as having been sold for $100,832.59.

8 On 30 September 2003, Mr Sunwoo swore an affidavit in proceedings between a company called Jym Pty Ltd and a Mr Jong Lee. Mr Sunwoo deposed that he was the sole shareholder and director of Jym, as well as being a director and secretary of the present plaintiff, Lakeside Resort Development Pty Ltd. He deposed that Mr Park had asked for Lot 1 to be transferred into his name so that Mr Park could get a housing loan from a bank.

9 Mr Sunwoo deposed that he replied:

"Lakeside will transfer Lot 1 into your name so that you can get the loan for Lakeside. Lakeside will pay all the legals and stamp duty. You will hold Lot 1 on Lakeside's behalf. We just want the loan."

10 Mr Sunwoo deposed that although a contract for the transfer of the land to Mr Park and the transfer itself showed a consideration of $150,000, the transfer was a "paper transaction". He swore that:

"Mr Park did not pay Lakeside anything for the transfer of the property, Lakeside paid all disbursements and expenses associated with the transfer of the property".

11 He also deposed that a loan of $100,000 was raised by Mr Park from the Colonial State Bank and that those loan moneys, after payment of incidental disbursements, were paid to Lakeside "on whose behalf Mr Park held the property".

12 Later he told Mr Jong Lee, who I infer had until then proposed to lend money to Mr Park on security of the property, that:

"you know that Mr Park is only on the title for Lot 1 of the property for Lakeside. Lakeside is the real owner, Mr Park holds the property on Lakeside's behalf. He is not authorised to grant any further mortgages to secure leases. No money is to be lent on Lot 1 without you dealing directly with me".

13 There could be no clearer admission that the present plaintiff was the beneficial owner of the lot. The admission was also made on oath. It is inconsistent with, but explains, the entry for the so-called sale of the land recorded in the ledger of the plaintiff.

14 On 13 January 2004, Mr Sunwoo caused the second defendant, Kooindah Lifestyle Pty Ltd, to be created. He is its sole shareholder and director. On 16 January 2004, a transfer was executed of Lot 1 from Mr Jong Sun Park to Kooindah Lifestyle Pty Ltd. The transfer was signed for Mr Park by Mr Sunwoo acting as his attorney. The expressed consideration for the transfer was $750,000 but there is no evidence that that sum was paid.

15 It is not suggested by the defendant that the plaintiff consented to this transaction. There is thus a strong prima facie case that the second defendant, whose sole director is Mr Sunwoo, holds the lot on trust for the plaintiff. There can be no doubt that it has notice of the trust of which Mr Sunwoo deposed in his affidavit of 30 September 2003.

16 The second defendant, Kooindah Lifestyle Pty Ltd, has attempted to set about developing the land as a housing development for elderly people. On 19 May 2005 it received an offer of finance from Provident Capital in the sum of $3,762,000 to assist with the construction of ten residences and associated facilities on the land. That loan was apparently settled on 10 June 2005 and $600,000 drawn down at that time against the approved facility of $3,762,000. Provident Capital holds a registered mortgage over the land.

17 On 9 August 2005, a mortgage was given to Australian Hydroquip Pty Ltd to secure a loan of $500,000. It does not appear that that mortgage has been registered. However, Australian Hydroquip has lodged a caveat to protect its interest under the unregistered mortgage.

18 Mr Sunwoo deposes that no moneys have yet been advanced pursuant to the facility which Australian Hydroquip has agreed to provide.

19 Mr Sunwoo says that unless the development is substantially commenced in the near future, the development approval will lapse. He says that Kooindah Lifestyle needs to borrow $598,000 to provide money for construction costs. He gives evidence that the principal of Australian Hydroquip is prepared to advance further funds for the completion of the project provided its mortgage is registered. He says that its mortgage cannot be registered because of the plaintiff's caveat. He says that the finance facility with Provident Capital is due to expire on 9 June 2006 and if that facility is not renewed, the project is likely to fail with the likely result being a mortgagee sale by Provident Capital.

20 He complains that whilst the caveat remains in place, it is unlikely that Kooindah Lifestyle will be able to obtain funding to complete the project. It seems, therefore, that the defendants' opposition to the withdrawal of the caveat is based upon the desire to raise further funds on security of the land to enable the development to be completed.

21 When the application came on for hearing today, the plaintiff was given leave to file an amended notice of motion by which it sought in the alternative to the order for the extension of the caveat, an order that Kooindah Lifestyle be restrained from dealing with the land until further order. Curiously, the second defendant indicated that it would not oppose an injunction in those terms. I say curiously, because it seems to me that the opposition to the extension of the caveat is based upon the defendants' wish to deal with the land by granting further mortgages over it, or by borrowing further moneys against it.

22 There is a strong prima facie case that the second defendant holds the land on trust for the plaintiff. There is no doubt that the caveat was properly lodged. The defendants submit that the balance of convenience, however, is such that it ought not to be extended following the service of a lapsing notice.

23 In my view the balance of convenience does not favour the second defendant further embarking on a separate development without the consent of the plaintiff, which appears to be the beneficial owner of the property, and thereby committing further breaches of trust.

24 In any event, the exercise of the discretion to extend the caveat where the caveator has demonstrated a prima facie interest in the land is one which must be exercised having regard to the statutory scheme. That scheme expressly provides that the holder of an equitable interest in land should be able to prevent the registered proprietor from dealing with the property whilst the caveator's claim is to be resolved.

25 That is not to say that considerations similar to those applicable to the balance of convenience on applications for an interim injunction are necessarily inapplicable in a case such as the present. But the discretion is to be exercised with the statutory scheme in mind (Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 at 11,990-11,991).

26 For these reasons I order that the operation of the caveat registered at Land and Property Information New South Wales, dealing AB971885, naming the plaintiff as caveator and the second defendant as registered proprietor, be extended until further order. This order may be entered forthwith.

27 Initially the plaintiff stated that it only sought the injunction claimed in paragraph 5 of the amended notice of motion if it failed in its application for extension of the caveat. Following discussions with counsel, counsel wishes to obtain further instructions as to whether the plaintiff wishes to seek injunctive relief, whose effect would be to prevent further borrowings on security of the property. If any such application is made, I will deal with it at 2 o'clock. I will also consider any questions of costs at that time.

[After Adjournment]

28 Counsel for the plaintiff has now moved the Court for an order in addition to the order for the extension of the caveat that the first and second defendants by themselves, their officers, servants and agents be restrained from disposing of or dealing with the land comprised in Lot 1 in Deposited Plan 849235 including by drawing down on any financial facility secured over the land until further order.

29 For the reasons previously given, there is a strong prima facie case that any such further drawing would be in breach of trust.

30 Notwithstanding the lateness at which that further application is made, it is not suggested that there is any further evidence which the second defendant would wish to point to in opposition to the order sought.

31 Accordingly, I think it appropriate to make the order as sought. I order that the first and second defendants by their officers, servants and agents be restrained from disposing of or dealing with the land comprised in Lot 1 Deposited Plan 849235 including by drawing down on any financial facility secured over the land until further order.

32 The costs of the amended notice of motion of 23 May 2006 will be the plaintiff's costs in the proceedings.

33 Any subpoenas or notices to produce which were returnable before me today are stood over before the Registrar on 30 May 2006.

34 I direct that for the time being the exhibits remain with the file.

35 I order the orders I have made on this application may be entered forthwith.

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