Leda Holdings Pty Ltd v Barnes

[2017] NSWSC 30

Supreme Court

New South Wales

Medium Neutral Citation:	Leda Holdings Pty Ltd v Barnes [2017] NSWSC 30
Hearing dates:	30 January 2017
Decision date:	30 January 2017
Jurisdiction:	Common Law
Before:	White J
Decision:	1)    Order that by 1 February 2017, the defendant withdraw caveat number AM96082C registered on the title of the property in folio identifier 1/259095 being a property located at 168 Terrace Road, North Richmond in the State of New South Wales. 2)    Order that, save as to costs, the summons be otherwise dismissed. 3)    Order that the defendant pay the plaintiff's costs. 4)    Orders to be entered forthwith.
Catchwords:	REAL PROPERTY - Torrens title - Caveats against dealings – Removal – Whether defendant has a caveatable interest - Whether defendant’s equitable interest has priority over mortgagee’s right to sell – Whether serious question that fraud established pursuant to s 42 of Real Property Act 1900 (NSW) – Balance of convenience favours withdrawal of caveat - No question of principle
Legislation Cited:	Real Property Act 1900 (NSW)
Category:	Principal judgment
Parties:	Leda Holdings Pty Ltd (Plaintiff) George Frederic Barnes (Defendant)
Representation:	Counsel: A C Casselden SC (Plaintiff) A Harrison – Amicus (Defendant)   Solicitors: Knight Lawyers (Plaintiff) n/a (Defendant)
File Number(s):	2017/22712

Judgment

1. HIS HONOUR: This is an application by a registered mortgagee for an order requiring the defendant to withdraw a caveat the defendant has lodged in respect of a property in Terrace Road, North Richmond. The defendant, by his caveat, claims a beneficial interest in land, the registered proprietor of which is a company now in liquidation called Naturelink Environmental Services Pty Limited (in liq) (“Naturelink”).

2. In his caveat, the defendant claims a beneficial interest in land on the basis that Naturelink held the land on a constructive trust for him in a share proportionate to his contribution to the acquisition of the land and to improvements thereon, and asserts in the caveat that he made financial contributions in the sum of approximately $65,000 to the acquisition of the land and approximately $189,000 to improvements on the land. In support of the claim to a beneficial interest in the land, the defendant has also relied upon a declaration of trust made on 8 April 1993 that appears to have been duly executed under the common seal of Naturelink.

3. By that instrument, Naturelink declared that it held a property at 126-128 Terrace Road, North Richmond on trust for the defendant and a Ms Bernadette Barnes in equal shares and stated that they had paid the moneys payable for the purchase of the house block.

4. The street address of the land in question is different from the street address appearing on the declaration of trust, but the defendant says that that is attributable to changes to the street numbering in the area.

5. There is certainly, at least, a serious question to be tried that the defendant has an equitable interest in the land that would support the lodgment of the caveat. That, however, is not the end of the matter. The plaintiff, Leda Holdings Pty Limited (“Leda”), is the registered proprietor of two mortgages. The first is a mortgage of which it took an assignment that had been given by Naturelink to Westpac Banking Corporation (“Westpac”). The second is a mortgage given to Leda, apparently as security for obligations that Naturelink is said to have incurred to Leda pursuant to a guarantee. It appears that the liquidator of Naturelink has challenged the validity of the second mortgage claiming that it is liable to be set aside as an uncommercial transaction or perhaps as a voidable preference.

6. However, the liquidator has not opposed Leda’s exercising its power of sale as mortgagee. Terms have been agreed upon between Leda, on the one hand, and Naturelink or its liquidator on the other that facilitate the sale of the North Richmond property proceeding to completion.

7. Naturelink or its liquidator had lodged a caveat on the title, but an agreement has been reached between the plaintiff and Naturelink for its withdrawal on terms that Leda is to provide a bank guarantee for an amount of in excess of $1.5 million, being the estimated balance of the proceeds of sale of the property after payment of expenses.

8. Leda entered into a contract for the sale of the property on 26 November 2016 for the sum of $2.43 million. That purchase price has not been impugned on the present application. In order for the defendant to be able to maintain the caveat so as to prevent completion of the contract that Leda, as mortgagee, has entered into for the sale of the property, it would need to establish that there is at least a serious question to be tried that Leda is not entitled to exercise its rights as mortgagee. In other words, it would need to establish that there is, at least, a serious question to be tried that the defendant's interest as a holder of a beneficial interest in the land, has priority over the rights of Leda as mortgagee. Because Leda is registered as mortgagee, the defendant could only establish such priority if it could demonstrate a case of fraud (Real Property Act 1900 (NSW) s 42).

9. The defendant has attempted to do that, but his evidence does not show either with clarity, or indeed at all, how Leda might be itself implicated in any fraud. In the course of attempting to explain his position, Mr Harrison, who appeared at the defendant's request to represent him on this hearing, indicated that the matter was under investigation by the fraud squad. He said that he expected that a Detective Senior Constable Shawn Schussler would be in a position to explain with greater clarity what the alleged fraud was or might have been than Mr Barnes or he could explain.

10. At Mr Harrison's request, and over the opposition of the plaintiff, I adjourned the matter until 2pm this afternoon so that Detective Senior Constable Schussler could inform the Court as to the nature of any evidence he could give in respect of these matters if an adjournment were permitted for that purpose. Detective Senior Constable Schussler made it clear that he did not have any evidence to indicate that Leda itself was implicated in the alleged frauds that were the subject of investigation. I am not satisfied that there is such a serious question to be tried.

11. In any event, the balance of convenience plainly favours the withdrawal of the caveat. As I have said, Naturelink, through its liquidator, does not seek to prevent Leda from exercising its powers of sale as mortgagee. There is nothing to suggest that Leda has entered into a contract to sell the property at an undervalue. Although, I understand the defendant would be prepared to give an undertaking as to damages, which would be necessary if the caveat were to be extended, there is no evidence as to the defendant's capacity to meet any liability under an undertaking as to damages. Clearly, the damages for which he might become liable under such an undertaking could well be substantial if the sale could not proceed to completion by reason of the caveat remaining on the title.

12. The effect of the agreement reached between the liquidator and the plaintiff is that there is a secured sum representing the net balance of the proceeds of sale before allowance for the amounts claimed by Leda is owing under its second mortgage that could be expected to protect whatever claim the defendant might have, but the defendant's claim in any event is dependent upon Naturelink establishing its entitlement to the net proceeds of sale. I should add that there seems to be no dispute that an amount in excess of $700,000 was owing under the first mortgage that Leda obtained by way of assignment from Westpac, and whatever complaints there might be in relation to the second mortgage, that would not prevent Leda from exercising its power as mortgagee holding the first mortgage. For all of these reasons, the caveat should be removed. The prayers for relief in paras 2 and 3 of the amended summons are not pressed.

1)    Order that by 1 February 2017, the defendant withdraw caveat number AM96082C registered on the title of the property in folio identifier 1/259095 being a property located at 168 Terrace Road, North Richmond in the State of New South Wales.

2)    Order that, save as to costs, the summons be otherwise dismissed.

3)    Order that the defendant pay the plaintiff's costs.

4)    Orders to be entered forthwith.

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Decision last updated: 16 April 2018