Maindream Projects Pty Ltd v Melbourne Construction and Management Co Pty Ltd

[2001] QSC 136

SUPREME COURT OF QUEENSLAND

CITATION:

Maindream Projects Pty Ltd v Melbourne Construction & Management Co Pty Ltd [2001] QSC 136

PARTIES:

MAINDREAM PROJECTS PTY LTD
ACN 088 178 778
(applicant)
v
MELBOURNE CONSTRUCTION
AND MANAGEMENT CO PTY LTD
ACN 007 296 479
(respondent)

FILE NO:

S 3753 of 2001

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

10 May 2001

DELIVERED AT:

Brisbane

HEARING DATE:

3 May 2001

JUDGE:

Wilson J

ORDER:

Draft order to be agreed by the parties

CATCHWORDS:

CONVEYANCING – LAND TITLES UNDER THE TORRENS SYSTEM – CAVEATS AGAINST DEALINGS – application by registered proprietor developer to remove caveat lodged by builder over unsold lots in residential development project – whether balance of convenience favours maintenance of caveat

Land Title Act 1994 (Qld), s 127(1)

COUNSEL:

DD Bates for the applicant
DA Skennar for the respondent

SOLICITORS:

McCullough Robertson for the applicant
Murdochs Solicitors for the respondent

1. WILSON J: This is an application to remove a caveat pursuant to s 127(1) of the Land Title Act 1994.

1. The applicant is the registered proprietor of lot 200 on SP 133203 and 29 lots (namely, nos 2, 3, 6, 8 – 13, 31 – 34, 36 – 38, 40 – 42, 58 – 62, 64, 65, 67, 68 and 101) on SP 127941 in the county of Stanley and parish of Redcliffe. On 6 April 2001 the respondent lodged a caveat over the land, claiming “an equitable share or interest as equitable mortgagee of an estate in fee simple”. The grounds of the claim are described as follows –

“Pursuant to a contract for simple building works dated 11 June 1999 between the Registered Owner and the Caveator pursuant to which security over any interest which the registered owner has in the Lots ……… was provided to the Caveator. The current amount owing to the Caveator by the Registered Owner is the sum of $569,000.00 plus interest and other fees and charges.”

1. The lots over which the caveat has been lodged were originally part of one parcel of land (lot 1 on RP 893306), which was subdivided after the execution of the contract – initially into lots 200 and 201 on SP 133203.  Lot 201 was then further subdivided into 68 lots.  (The 29 lots over which the caveat has been lodged comprise the unsold balance of those 68 lots.)

1. By an agreement dated 11 June 1999, between the applicant as proprietor and the respondent as builder, the respondent undertook to perform certain building works.  On any view, the agreement was made before lot 1 on RP 893306 was subdivided.  According to Mr Mudge (the respondent’s sole director) the respondent was given possession of the whole of the area comprised in the original parcel of land (affidavit sworn 2 May 2001 para 22).

1. Clause 1.2.5 defines “The Works” as “the whole of the work described in Item B5 of the Appendix”, and item B5 is –

“The whole of the work to be executed in accordance with this Agreement, namely construction of new residences 268 no. over stages 1, 2, 3 and 4 Stage No. 1 consisting of 68 no. new residences.”

1. Clause 1.2.6 defines “The Site” as –

“The lands and other places to be made available by the Proprietor to the Builder for the purposes of this Agreement and as more specifically defined in Item B6 of the Appendix.”

Item B6 of the appendix does not include the description of the site, but has the notation “stage no. 1 only refer to clause 15.02.”  Clause 15.02 is a special condition in these terms –

“15.02Refers to Schedule of costs for stage no. 1 construction of 68 no. new residences as attached.”

1. Clause 10.17.2 provides –

“10.17.2The Proprietor hereby charges any interest which the Proprietor has in the parcel of land upon which or upon part of which the Works are to be executed with the payment to the Builder of all moneys certified by the Architect or otherwise payable under this Agreement.”

1. The applicant asked the Court to infer that the 68 residences the subject of the agreement were all to be constructed on lot 201; it concedes that there is a serious question to be tried in relation to lot 201, but submits that there is no serious question to be tried with respect to lot 200.

1. The 68 residences were to comprise the “Bay View Palms” project, as Mr Mudge impliedly concedes (affidavit para 24, exhibit RAM 5).  It is apparent from the copies of the plans of subdivision of what was lot 201 (exhibit DG 1 to the affidavit of Daniel Stephen Gorman sworn 27 April 2001) that “Bay View Palms” CMS No 28819, consisting of 68 lots and common property, was created out of that lot.  In the circumstances I am prepared to infer that stage 1 under the building agreement related to only that part of the original parcel which became lot 201 on SP 133203.

1. Clause 10.17.2 entitled the respondent to a charge over “the parcel of land upon which or upon part of which the Works [were] to be executed”.  In my view that is to be interpreted as a charge over lot 1 on RP 893306, being the parcel of land upon part of which (ie the part which became lot 201 on SP 133203) the works were to be executed.

1. Thus, there is a serious question to be tried as to the respondent’s caveatable interest in lot 200 as well as the 29 lots which were part of lot 201.  The question, then, is whether the balance of convenience favours the maintenance of the caveat.

1. The respondent has proffered the usual undertaking as to damages.

1. The applicant’s principal submission was that the caveat is of no utility; that the security provided by clause 10.17.2 is illusory, because there are other secured creditors, whose interests in the land have priority over that of the respondent, and that the sums owing to them are so great as to mean that this security is worthless.  He submitted that the caveat is preventing the sale of the balance of the 68 residences, which, in turn, is preventing the applicant from repaying its financiers.  The applicant and its directors Daniel Stephen Gorman and Eddie Hong Sing Yuen offered undertakings that –

“(i)any excess funds that may be received from the sale of the Stage 1 Land subject to the Caveat be paid into McCullough Robertson’s Trust Account and not be dispersed until the resolution of the respondent’s claim as notified in the caveat;

(ii)the applicant will forward to the respondent prior to the settlement of any of the Stage 1 Land subject to the caveat a copy of any settlement statement indicating where the funds to be received on settlement will be allocated.” (emphasis added)

These undertakings seem to be premised on there being a serious question to be tried as to the respondent’s having a caveatable interest in lot 201 only, contrary to the view I have taken.  Further, as counsel for the respondent submitted –

“20. The difficulties with this undertaking are:

a.The respondent has absolutely no control over the amount of disbursements at settlement.  Even though there is the offer of the provision of a settlement statement, no mechanism is in place which permits the respondent any control in relation to expenses incurred by the applicant.  Further, given that the applicant appears to be marketing the units itself (Ex RAM 5), there is potential for “expenses” to be inflated.

b.Acceptance of the undertaking in lieu of the caveat would effectively deprive the respondent of the only security provided in the contract for the payment of moneys owed to it.  The director of the applicant deposes in paragraph 10 of his affidavit that the applicant has assets to meet its debts as and when they fall due but:

i.    No evidence in [sic] provided in support of this assertion.  Indeed Mr Mudge deposes in paragraph 25 of his affidavit that Mr Gorman has advised him that the applicant is a $2 company and that the respondent will eventually receive nothing;

ii.   No offer has been made to offer any other security for payment in lieu of the caveat even though the applicant is apparently in a position in which it could do so.”

1. Counsel for the respondent said (transcript p 24) –

“In my submission…this caveat ought to be maintained on the title. ..…If your Honour is concerned about the caveat and is against me in terms that it should be maintained on the title, I have instructions to offer this to the Court, that there will be a consent to the release of the caveat in relation to each lot as and when that lot’s due to settle but the caveat is maintained in relation to lots that remain unsold for as long as they do remain unsold. ..…and that… also includes the maintaining of the caveat on lot 200.”

1. The argument that the caveat is of no utility because of the amounts owing to other secured creditors having priority over the respondent is not an attractive one, as it is for the respondent, and not the Court, to evaluate its security in commercial terms.  I am, however, concerned at the caveat’s potentially paralysing effect on the settlement of contracts for the sale of the residences.  The balance of convenience favours the maintenance of the caveat over lot 200 and the remaining 29 lots that comprised part of lot 201, on the condition put forward by counsel for the respondent.

1. I will ask counsel to try to agree on the terms of the draft order.