M2 Assets Pty Ltd as trustee for the M2 Assets Trust v Turco
[2022] WASC 65
•25 FEBRUARY 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: M2 ASSETS PTY LTD as trustee for THE M2 ASSETS TRUST -v- TURCO [2022] WASC 65
CORAM: HILL J
HEARD: 22 FEBRUARY 2022
DELIVERED : 22 FEBRUARY 2022
PUBLISHED : 25 FEBRUARY 2022
FILE NO/S: CIV 1137 of 2022
BETWEEN: M2 ASSETS PTY LTD as trustee for THE M2 ASSETS TRUST
Plaintiff
AND
ANTONIO FELICE TURCO
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property – Caveats – Removal of caveat – Whether first defendant has caveatable interest - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA), s 138(2)
Result:
Order for caveat to be removed
Category: B
Representation:
Counsel:
| Plaintiff | : | P Edgar |
| First Defendant | : | In person |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Edwards Mac Scovell Legal |
| First Defendant | : | In person |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Gangemi v Gangemi [2009] WASC 195
Great West Permanent Loan Co v Friesen [1925] AC 208
J and H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
KWS Capital Pty Ltd v Love [2013] WASC 294
Martin v Official Trustee in Bankruptcy [1990] Tas R 65
McCourt v National Australia Bank Ltd [2010] WASC 121
Midland Brick Company Pty Ltd v Welsh [2006] WASC 122
Porter v McDonald [1984] WAR 271
Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870
Westpac Banking Corporation v Murray Riverside Pty Ltd [2013] WASC 433
Wichniewicz v Registrar of Titles [2014] WASC 18
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript.)
On 18 February 2022, the plaintiff, M2 Assets Pty Ltd, filed an originating summons seeking an order pursuant to s 138(2) of the Transfer of Land Act 1893 (WA) for the removal of caveat P030285 lodged by the first defendant on 2 February 2022 over a property located at Unit 1, 69 Quarry Street, Fremantle (Property).
On the same date, the plaintiff filed a chamber summons for an urgent interlocutory injunction to seek removal of the caveat and an order that the first defendant be restrained from lodging any further caveat over the property.
In support of its application, the plaintiff relied on three affidavits: an affidavit of Ms Gabrielle Lindsay filed 18 February 2022, an affidavit of Mr Mace Turco, the sole director, company secretary and shareholder of the plaintiff filed 18 February 2022, and an affidavit of Ms Panizza filed 22 February 2022, the current sole director and company secretary of Howtree Holdings Pty Ltd, the registered proprietor of the Property.
The plaintiff also filed three affidavits of service showing service of these proceedings and the relevant papers on the second defendant and that these proceedings have been brought to the attention of the first defendant.
In that regard, I note that Mr Turco has appeared in person at the hearing today and made submissions on his own behalf as to why the caveat should be maintained.
Factual background
Howtree Holdings Pty Ltd (Howtree) is the registered proprietor of the land in certificate of title volume 2613, folio 685, which is otherwise described as Unit 1, 69 Quarry Street, Fremantle.
A company search of Howtree obtained from the Australian Securities and Investments Commission was in evidence before me which discloses that the sole director and company secretary and sole shareholder of this company is Ms Anna Panizza. She was appointed director and secretary on 18 June 2019. The first defendant, Mr Turco, is a former director and shareholder of Howtree. The first defendant was appointed as a director and company secretary on 4 March 2010 and ceased to be a director on 16 June 2017. I note that the ASIC records disclose that for a considerable time over this period, a receiver and manager was appointed to Howtree. Receivers and managers were appointed to Howtree on 19 October 2012 and retired on 19 January 2016.
In about March 2006, Suncorp‑Metway Ltd (Suncorp) entered into a loan agreement with Howtree for $1,712,000. The purpose of the loan, which is disclosed in the documents, was for settlement of units 1, 2 and 4 of 69 Quarry Street, Fremantle. The loan was secured by a mortgage which was registered against the title of each of these units. In respect of the Property, this occurred on 12 May 2006.
In about January 2008, Suncorp entered into a second loan agreement with Howtree for $443,500 which was also secured by the mortgage.
On 19 January 2016, Suncorp assigned its interests in the loan agreements to the plaintiff for $650,000. At this date, the outstanding balance of the loans was $1,205,044.09. I note that on the same date, the receivers and managers of Howtree retired.
The assignment of the mortgage was registered on 21 March 2017.
On 18 January 2021, the plaintiff, by its solicitors, issued a notice of default to Howtree in relation to the loan and the mortgage. The default was not remedied by Howtree and on 30 September 2021, the plaintiff by its solicitors asserted its rights to possession of the Property. On about 5 October 2021, the plaintiff entered into an agreement for a periodic tenancy over the Property with Mr Mario Turco.
On 29 November 2021, the plaintiff advised Howtree that it had commenced marketing the Property for sale. On 4 January 2022, the plaintiff entered into a contract of sale for the Property for $900,000. The settlement date for the sale of the Property was 7 February 2022.
On 22 November 2021, the first defendant lodged a caveat for registration against the title of the Property. On 23 December 2021, a requisition notice was issued in respect of this caveat and on 27 January 2022, the first defendant requested it be withdrawn from registration.
On 2 February 2022, the first defendant lodged a further caveat for registration. The second defendant issued a requisition notice on 10 February 2022 and on 15 February 2022, the first defendant lodged a further statutory declaration to address the requisition.
Due to the lodgement of the caveat, the plaintiff has been unable to complete the sale of the Property. On 9 February 2022, the purchaser of the Property issued a default notice. Under the notice, the purchaser is entitled to terminate the contract as and from 23 February 2022.
The evidence before me is that the sale price of the Property is less than the outstanding principal under the loan agreement of $1.2 million, excluding interest and costs.
The plaintiff has filed an affidavit of Ms Panizza, the director of Howtree, who confirms that:
(a)since she has been director and company secretary of Howtree, it has not made any payment of principal or interest on the loan which is secured by the mortgage;
(b)Howtree acknowledges it is in default of these agreements and does not have the capacity to remedy the default;
(c)Howtree does not challenge service of the notice, the validity of the entry into possession of the Property or the plaintiff's right to sell the Property.
Legal principles governing the application
The principles that apply to an application under s 138(2) of the Transfer of Land Act are the same as those that apply to an application to extend the operation of a caveat under s 138C(2) of that Act. On the application, the question for determination is whether or not the caveator can demonstrate they may have an interest in land which is capable of supporting a caveat.
By its nature, a caveatable interest must be a proprietary interest in land.[1] This requires the interest to be a proprietary interest that is recognised at law or in equity.
[1] Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50 (Custom Credit).
A caveat is a form of statutory injunction which prevents registration of a dealing against land until the caveator has been given a reasonable opportunity to justify the caveat by pursuing such remedies as they may have.[2]
[2] J and H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, 552, 558; Custom Credit (44 ‑ 45); Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27 [68].
The caveator must satisfy the court that, on the evidence presented to the court, their claim for an interest in the property raises a serious question to be tried or whether it may have substance.[3] Even if a claim may have substance, the caveat might not be extended having regard to factors including the apparent strength or weakness of the caveator's claim.[4]
[3] Custom Credit [20] ‑ [21].
[4] KWS Capital Pty Ltd v Love [2013] WASC 294 [32] ‑ [36] (Edelman J).
A caveat will not be removed unless the claim to an estate or interest in the land appears to be without foundation.[5]
[5] Porter v McDonald [1984] WAR 271, 276; Custom Credit (48).
On an application to extend the operation of a caveat, the balance of convenience is a factor to be considered. Interlocutory removal of a caveat, however, will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat.[6]
[6] Custom Credit (50).
A caveatable interest must exist at the time a caveat is lodged. A caveat cannot be lodged to protect a future interest.[7] The caveat must not go beyond the legitimate claim necessary to protect the rights of the caveator.[8]
[7] Martin v Official Trustee in Bankruptcy [1990] Tas R 65, 69; Gangemi v Gangemi [2009] WASC 195 [38] ‑ [45].
[8] Midland Brick Company Pty Ltd v Welsh [2006] WASC 122 [342].
There is limited power for the court to allow the terms of the caveat to be amended. It may be amended to enable the caveat to better and more fully express the interest that is claimed. However, amendment is not permitted to alter the interest claimed to claim a different interest.
Although there are conflicting authorities, it has been held that a registered proprietor may, in limited circumstances, lodge a caveat to enjoin the registration of a particular dealing or particular kind of dealing.[9] Sinclair Investments Pty Ltd concerned a caveat to forbid registration of a transfer executed by a mortgagee pursuant to a voidable transaction. In that case, the equity was said to arise from the charge created by the registered proprietor by entering into the mortgage and the action of the mortgagee in entering into the voidable contract. Needham J held that the registered proprietor had an equitable interest sufficient to restrain completion of a voidable contract for sale of the land by the mortgagee.
[9] Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870, 872; Great West Permanent Loan Co v Friesen [1925] AC 208, 216.
In this court, in Wichniewicz v Registrar of Titles,[10] Edelman J noted that it has been observed on several occasions that there is a conflict on the authorities as to whether a registered proprietor's equity of recission can support a caveat.[11]
[10] Wichniewicz v Registrar of Titles [2014] WASC 18.
[11] McCourt v National Australia Bank Ltd [2010] WASC 121 [8] ‑ [12] (Murphy J); Westpac Banking Corporation v Murray Riverside Pty Ltd [2013] WASC 433 [21] (Beech J).
Mr Turco's caveat
Mr Turco's caveat expresses the estate or interest claimed in the Property in the following terms:
I am the sole director and shareholder of Howtree Holdings Pty Ltd. It has come to my attention that I have been replaced as director + shareholder illegaly (sic) and without my consent. Also I am a beneficiary of the proprietor (trust). Refer to my statutory declaration. With reference to affidavit dated 29 – 1 – 2015 whereby my interest in this property is stated in paragraph 8.
This interest is said to arise by virtue of these same matters together with the statutory declaration lodged with the Registrar of Titles.
The caveat forbids the registration of any instrument affecting the estate or interest absolutely.
Mr Turco's statutory declaration lodged with his caveat essentially repeats the statements as to his estate or interest in the Property and refers to an affidavit filed in the Supreme Court of Western Australia. Importantly, at [3] of the statutory declaration, Mr Turco claims his interest in part of the sale proceeds of this Property.
In his further statutory declaration of 15 February 2022, Mr Turco stated that his title to the estate and interest claimed in the Property arises by virtue of the use by the proprietor of the Property of Mr Turco's equity in other properties for this investment.
Neither of the statutory declarations provides any specific details as to the Supreme Court proceedings that are referred to or what the nature or status of those proceedings is. In addition, no documents are annexed to the statutory declarations.
Parties' submissions
The plaintiff submitted that on the evidence before the court, it was a proper applicant. Counsel submitted that, irrespective of any complaints Mr Turco may have against Howtree, on which counsel made no submission, these complaints do not affect or infect the mortgagee or loan agreements or the rights of the plaintiff.
Mr Turco submitted that there were three reasons he had lodged the caveat:
(a)he had equity in other properties which was leveraged to do the development at Queen Street, including the Property;
(b)he was sole director and shareholder of Howtree at the time the deed of assignment was executed and had no knowledge of it; and
(c)he had no knowledge that he had been removed as director and company secretary of Howtree.
Mr Turco requested that the application be adjourned so he could seek legal advice. While I accept that Mr Turco has only had limited time to prepare for this application, he first lodged a caveat against the Property in November 2021. On this basis, it is my view that Mr Turco has had some time to obtain legal advice prior to today. I accept that, given the notice issued by the proposed purchaser of the Property, there is urgency in determining the application. I offered Mr Turco an adjournment until the afternoon so that he had further time to consider the matter, but he declined that opportunity.
It is clear from the submissions made by Mr Turco that his primary complaint concerns the corporate governance of Howtree and the circumstances in which he has been removed as director and shareholder. However, this complaint, of itself, does not give rise to a caveatable interest in the land.
In this application, the questions for my determination are:
(a)whether Mr Turco has a caveatable interest in the Property in his own name; and
(b)whether there is any evidence which challenges the validity of the transactions relied upon by the plaintiff which gives it the right to sell the Property.
In this regard, the deed of assignment of the debt was entered into at a time when receivers and managers had been appointed to Howtree. There is no evidence which challenges the validity of this document. In addition, no challenge is made to the notices issued by the plaintiff under the loan agreement or mortgage. This did not require any conduct on behalf of Howtree to be valid.
Disposition
In my view, for the following reasons, Mr Turco has not demonstrated he has any estate or interest in the Property against which the caveat is registered.
First, Mr Turco's description of the estate claimed is not capable of amounting to a legal or equitable estate or interest in the land. It is not clear from the description in the caveat, or the statutory declarations in support of the caveat, as to the nature of the interest in the Property that is claimed by Mr Turco.
Second, Mr Turco does not in his statutory declaration or caveat challenge the proposed sale of the Property as being a voidable transaction nor the agreements which give rise to the plaintiff's right as mortgagee on default to enter into possession and exercise rights of sale.
Third, Mr Turco has not provided any detail as to the 'equity in other properties that were leveraged' to fund the development, which entity owned these other properties or the basis upon which it is contended that the equity in these unnamed properties was used to purchase the Quarry Street Property. Even if Mr Turco held some form of proprietary interest in the Property arising out of a contribution to the purchase price, this interest would not entitle him to maintain an absolute caveat against the Property which would deny the plaintiff the rights of sale that it has as mortgagee. At best, it would entitle him to enjoin the disbursement of any remaining funds to the registered proprietor of the Property.
Finally, the evidence before the court is that the outstanding loan balance far exceeds the sale price of the Property. In these circumstances, Howtree has no remaining equity in the Property, and there is no interest against which the first defendant has any claim.
Even if I am wrong in my analysis, I consider Mr Turco's claim in support of the caveat to be weak. In my view, the balance of convenience favours the removal of the caveat given the purchaser's right to terminate the contract, the ongoing liability of the plaintiff to pay penalty interest and the fact that the removal of the caveat will not impair any interest claimed by the first defendant against Howtree Holdings Pty Ltd or others involved in the transactions of which he complains.
For these reasons, it is my view that Mr Turco has failed to demonstrate he may have a claim to an estate or interest in the Property and the caveat should be removed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
25 FEBRUARY 2022
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