Metecno Pty Ltd v Smith
[2023] WASC 17
•2 FEBRUARY 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: METECNO PTY LTD -v- SMITH [2023] WASC 17
CORAM: STRK J
HEARD: 1 FEBRUARY 2023
DELIVERED : 1 FEBRUARY 2023
PUBLISHED : 2 FEBRUARY 2023
FILE NO/S: CIV 1066 of 2023
MATTER :IN THE MATTER OF THE TRANSFER OF LAND ACT 1893 (WA) s 138
BETWEEN: METECNO PTY LTD
Plaintiff
AND
AMBROSE WAYNE SMITH
First Defendant
THE REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Caveats - Whether the plaintiff has shown cause why the caveat should be removed - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA) s 138
Bankruptcy Act 1966 (Cth) s 58
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr P Lochore |
| First Defendant | : | In Person |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Kanji & Co Solicitors |
| First Defendant | : | In Person |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Avco Financial Services Ltd v White [1977] VR 561
Bashford v Bashford [2008] WASC 138
Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27
Composite Buyers Ltd v Soong (1995) 38 NSWLR 286
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) ANZ Conv Rep 334
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Elliott v Blanshard (1970) 17 FLR 7
Gangemi v Gangemi [2009] WASC 195
J and H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Kerabee Park Pty Ltd v Daley (1978) 2 NSWLR 222
KWS Capital Pty Ltd v Love [2013] WASC 294
Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407
Magnolia Private Capital Pty Ltd v Floate [2022] WASC 131
Mario Casella & Sons Builders Pty Ltd v Duckworth [2005] WASC 245
Martin v Official Trustee in Bankruptcy [1990] Tas R 65
Midland Brick Company Pty Ltd v Welsh [2006] WASC 122
Midwarren Estates Pty Ltd v Retek & Stivic [1975] VR 575
Modular Forms Pty Ltd v Cecich [2015] WASC 177
Morris Finance Ltd v Brown (2017) 350 ALR 86; [2017] FCAFC 97
Palazzo Homes Pty Ltd v Goh [2010] WASC 407
Percy & Michele Pty Ltd v Gangemi [2010] VSC 530
Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171
Porter v McDonald [1984] WAR 271
Queensland Estates Pty Ltd v Co-ownership Land Development Pty Ltd [1969] Qd R 150
Re Charge Card Services Ltd [1987] Ch 150
Re The Victorian Farmers' Loan and Agency Co Ltd (1897) 22 VLR 629
Spunter Pty Ltd v Hall [2006] WASC 6
Sulinmo Properties Pty Ltd v Malloney (1985) ANZ Conv Rep 25
Veloudos v Young (1981) 56 FLR 182
Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171
Table of Contents
Introduction
The evidence
The factual background
Form of caveat
The applicable principles
Power to amend caveat
Metecno's position
Disposition
Should the operation of the caveat be extended?
Form of the caveat
Undertaking as to damages
Conclusion and orders
STRK J:
(This judgment was delivered extemporaneously on 1 February 2023 and has been edited from the transcript.)
Introduction
On 25 January 2023, the plaintiff, Metecno Pty Ltd (ACN 096 402 934) filed an originating summons seeking relief pursuant to the Transfer of Land Act 1893 (WA). By a chamber summons filed on the same day, Metecno applied for an interim order extending the operation of Caveat O385625 registered against the property known as 38 Bursaria Crescent, Ferndale in the State of Western Australia, being Lot 286 on Plan 10446, and being the whole of the land described in Certificate of Title Volume 1347 Folio 145 (the Ferndale property). Caveat O385625 was lodged as an absolute caveat. By the same application, Metecno sought that Caveat O385625 be amended to forbid the registration of any instrument affecting the estate or interest claimed by Metecno unless such instrument be expressed to be subject to the claim of the caveator.
A certificate of urgency was filed with the chamber summons seeking an immediate hearing of the application, which was listed for hearing on 1 February 2023. A memorandum pursuant to O 59 r 9 of the Rules of the Supreme Court 1971 (WA) was also filed with the originating summons, together with an undertaking as to damages.
Mr Ambrose Wayne Smith, the sole director of Altiform Pty Ltd (ACN 114 317 421) (in liq) and the registered proprietor of the Ferndale property, is named as the first defendant in the proceeding. Mr Smith was served with the application and supporting papers less than two clear days before the urgent hearing of the application. He attended court in person and had not had the benefit of legal advice. In light of the short notice afforded to Mr Smith, the hearing proceeded as if ex parte.
The Registrar of Titles is named as the second defendant and elected to take no part in the hearing of the application.
The principles to be applied in determining the application are well settled. On the evidence before me, upon reading the materials filed and after hearing counsel for Metecno, I was satisfied that Metecno had shown cause why Caveat O385625 as against the Ferndale property should be extended and amended. At the conclusion of the hearing I gave ex tempore reasons for decision. My reasons are reproduced below, edited so as to include references in the form of footnotes. I also set out in full the principles to be applied in the disposition of the application and Metecno's position.
The evidence
On 24 January 2023, Ms Caitlyn My Binh Chiem, a solicitor acting for Metecno, affirmed an affidavit in support of the application to which she attached documents marked A to K. The affidavit was read and relied upon at the hearing of the application.
By her affidavit, among other things, Ms Chiem deposed to the agreement between Metecno and Altiform by which Metecno supplied goods to Altiform on credit (Credit Agreement); the provision by Mr Smith of a guarantee and indemnity in favour of Metecno securing the obligations of Altiform (Guarantee and Indemnity); Mr Smith being the sole director and secretary of Altiform and the registered proprietor of the Ferndale property; the non‑payment by Altiform of moneys payable under the Credit Agreement; the appointment of a liquidator to Altiform; proceedings commenced by Metecno in the Magistrates Court of Western Australia on 26 June 2020, known as General Procedure Claim 7783/2020, as against Mr Smith pursuant to the Guarantee and Indemnity; there being a debt that remains outstanding and owed by Altiform to Metecno under the Credit Agreement, and the failure of Mr Smith to pay to Metecno the amount demanded and for which Metecno says Mr Smith is liable under the Guarantee and Indemnity; the lodgement of Caveat O385625 over the Ferndale property; the bankruptcy of Mr Smith; and Metecno's receipt of a notice dated 10 January 2023 from Landgate concerning Caveat O385625 issued pursuant to s 138B of the Transfer of Land Act.
Ms Chiem attached to her first affidavit a copy of the certificate of title for the Ferndale property; a copy of the credit account application executed by Altiform which constituted the agreement as between Metecno and Altiform for the provision of goods on credit (described in these reasons as the Credit Agreement); a copy of the Guarantee and Indemnity executed by Mr Smith in favour of Metecno; a copy of an historical extract of Altiform obtained from the Australian Securities and Investments Commission; copies of the outstanding invoices and a record of Altiform's account balance; copies of the letters of demand; a copy of Caveat 0385625 lodged with Landgate; a copy of the General Procedure Claim issued by Metecno against Mr Smith in the Magistrates Court on 26 June 2020 and associated service documents; a copy of the Certificate of Appointment of Bankruptcy Trustee in relation to Mr Smith dated 25 September 2020; a copy of the notice issued by Landgate on 10 January 2023; and copies of correspondence as between the parties.
At the hearing of the application, counsel also read the second affidavit of Ms Chiem, which was affirmed and filed in support of the application, and to which Ms Chiem attached documents marked A to E. Among other things, in her second affidavit Ms Chiem deposed to the steps taken to serve the application and papers upon Mr Smith and the Registrar of Titles; to having received a communication from a delegate of the Registrar of Titles confirming that the Registrar did not at this time intend to file an appearance or be heard in relation to the application; and to a communication received on 30 January 2023 from a process server engaged by Metecno which recorded that at 2:05 pm on 30 January 2023, Mr Smith was personally served with the application.
At the hearing, counsel for Metecno also relied upon a written outline of submissions filed on 25 January 2023.
The factual background
From the affidavits filed in support of the application, I understand as follows.
Mr Smith is the sole director and company secretary of Altiform, and the registered proprietor of the Ferndale property.[1]
[1] First Chiem affidavit pars 4, 6.
The Ferndale property is subject to a registered easement in favour of Town of Canning,[2] and a registered mortgage in favour of Australia & New Zealand Banking Group Ltd.[3]
[2] First Chiem affidavit, annexure A, page 6.
[3] First Chiem affidavit, annexure A, page 6.
Metecno contends that on 7 January 2013, Metecno and Altiform entered into the Credit Agreement which set out the terms on which Metecno would supply building materials to Altiform on credit.[4] Metecno contends that on 7 January 2013, Mr Smith executed the Guarantee and Indemnity in favour of Metecno securing Altiform's obligations to Metecno under the Credit Agreement.[5]
[4] First Chiem affidavit par 5.
[5] First Chiem affidavit par 7.
The Guarantee and Indemnity provides, among other things, as follows:[6]
The Guarantors hereby charge in favour of the Company as security for his/her/their obligations to the Company, all right title and interest in any land held now by the Guarantors alone or jointly with anyone or acquired by the Guarantors at any time hereafter as beneficial owner and as trustee of every trust. If the Customer defaults in payment or any amount owed to the Company, the Guarantors specifically authorise the Company to lodge a caveat against any dealings with any such property without prior demand for payment from the Guarantors and hereby appoint the Company my/our Attorney for this purpose.
[6] First Chiem affidavit, annexure B, page 8, as reproduced in the plaintiff's submissions par 2.
Metecno contends that goods were supplied by Metecno to Altiform between December 2019 and January 2020 pursuant to the terms of the Credit Agreement. However, Metecno says that it did not receive payment for goods supplied to Altiform in December 2019 and January 2020 in the amount of $35,488.20.[7]
[7] First Chiem affidavit par 8.
A liquidator was appointed to Altiform on 31 March 2020, and on the same day Metecno instructed Kanji & Co Solicitors to recover the amount owing from Mr Smith and to lodge a caveat over the Ferndale property.[8]
[8] First Chiem affidavit pars 9 ‑ 10.
On 2 April 2020, a letter of demand was sent to Mr Smith and on 9 April 2020, Kanji & Co Solicitors lodged Caveat O385625 against the Ferndale property on behalf of Metecno.[9] Caveat O385625 records that the estate or interest claimed by Metecno in the land is as chargee pursuant to the agreement as between Metecno and Mr Smith dated 7 January 2013. The extent of prohibition recorded is 'Absolute'.[10]
[9] First Chiem affidavit pars 11, 13.
[10] First Chiem affidavit, annexure F, page 21.
On 26 June 2020, Metecno commenced proceedings in the Magistrates Court against Mr Smith, seeking to recover against him as guarantor the debt due by Altiform under the Credit Agreement, together with interest and costs.[11] On 25 September 2020, Mr Smith entered into bankruptcy, and no further action was taken to prosecute the Magistrates Court proceeding.[12]
[11] First Chiem affidavit par 14; First Chiem affidavit, annexure G, page 22.
[12] First Chiem affidavit, annexure 1, page 24; First Chiem affidavit par 16.
In her first affidavit, Ms Chiem deposed that the debt owed to Metecno by Altiform has not been paid. Ms Chiem deposed that as at the date of her first affidavit, Mr Smith owes to Metecno as guarantor the sum of $45,499.17, which amount is comprised of $35,488.20 for unpaid goods sold and delivered, $8,338.85 in interest and $1,672.12 being the caveat and court costs incurred in the proceedings commenced in the Magistrates Court.[13]
[13] First Chiem affidavit par 18.
On 12 January 2023, a notice dated 10 January 2023 was received by Metecno via Kanji & Co Solicitors from Landgate with respect to Caveat O385625.[14] If an order is not made extending the operation of the caveat, it will lapse on 3 February 2023.
[14] First Chiem affidavit par 18; First Chiem affidavit, annexure J, page 25.
On 16 January 2023, Kanji & Co Solicitors were instructed by Metecno to commence proceedings to extend the operation of Caveat O385625, and on 24 January 2023 Mr Smith was sent a letter advising him of the same.[15]
[15] First Chiem affidavit pars 20, 21.
Form of caveat
When lodging the caveat, Metecno identified its interest in the Ferndale property as an interest held as chargee, grounded upon a charge contained in the Guarantee and Indemnity granted by Mr Smith in favour of Metecno on 7 January 2013. Caveat O385625 is an absolute caveat, that is, it forbids the registration of any instrument affecting the estate or interest claimed by Metecno.
The applicable principles
Under s 137 of the Transfer of Land Act, a person claiming any estate or interest in land under the operation of the Act may lodge a caveat with the Registrar. The purpose of a caveat against dealings is to operate as an injunction to the Registrar to prevent registration of dealings forbidden by the caveat until notice is given to the caveator so that he or she has an opportunity to oppose such registration.[16] Section 137 provides that a caveat may be lodged, in an approved form, 'forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest, either absolutely, or until after notice of the intended registration or dealing be given to the caveator, or unless such instrument be expressed to be subject to the claim of the caveator'.
[16] Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407, 419.
Metecno must now satisfy the court that the caveat should be extended: s 138(2) of the Transfer of Land 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.[17] This requires the interest to be a proprietary interest that is recognised at law or in equity.
[17] Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50.
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.[18] 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.[19] 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.[20] A caveat will not be removed unless the claim to an estate or interest in the land appears to be without foundation.[21]
[18] J and H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, 552, 558; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (44 ‑ 45); Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27 [68].
[19]Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (48 ‑ 50).
[20] KWS Capital Pty Ltd v Love [2013] WASC 294 [32] ‑ [36].
[21] Porter v McDonald [1984] WAR 271, 276; Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (48); Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129, 141; Mario Casella & Sons Builders Pty Ltd v Duckworth [2005] WASC 245 [26]; Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171 [43].
A caveatable interest must exist at the time a caveat is lodged. A caveat cannot be lodged to protect a future interest.[22] The caveat must not go beyond the legitimate claim necessary to protect the rights of the caveator.[23] Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat.[24]
[22] Martin v Official Trustee in Bankruptcy [1990] Tas R 65, 69; Gangemi v Gangemi [2009] WASC 195 [38] - [45].
[23] Midland Brick Company Pty Ltd v Welsh [2006] WASC 122 [342].
[24] Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (50).
In the exercise of the court's discretion under s 138 of the Transfer of Land Act, the balance of convenience is a relevant factor. There is no rule of law that once an arguable case for a caveatable interest is established, removal of the caveat will only be ordered if it is shown that the 'circumstances are so unusual' that the caveat should be removed. The discretion is to be exercised having regard to the particular circumstances of the case.[25]
[25] Magnolia Private Capital Pty Ltd v Floate [2022] WASC 131 [12]; First defendant's submissions par 65.
I adopt and apply these principles in determining Metecno's application.
Power to amend caveat
As was observed by Le Miere J in Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [7], it is now generally accepted in Australia that the power to make such order as the court considers appropriate, or as to the court seems fit, in dealing with an application to remove a caveat, includes the power to order amendment of the caveat as a condition of its retention.[26]
[26] Le Miere J cited by way of example: Re The Victorian Farmers' Loan and Agency Co Ltd (1897) 22 VLR 629; Queensland Estates Pty Ltd v Co-ownership Land Development Pty Ltd [1969] Qd R 150; Elliott v Blanshard (1970) 17 FLR 7, 11; Midwarren Estates Pty Ltd v Retek & Stivic [1975] VR 575; Kerabee Park Pty Ltd v Daley (1978) 2 NSWLR 222, 229; Veloudos v Young (1981) 56 FLR 182, 186 ‑ 187; Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) ANZ Conv Rep 334.
Further, his Honour noted that s 138(2) of the Transfer of Land Act provides that on a registered proprietor summoning a caveator to show cause why a caveat should not be removed, the court may make such order as the court or judge may seem fit. The power to make such order as the court may seem fit includes the power to order that the caveat be amended.[27] However, the preponderance of authority in Australia is that the power to make such order as the court considers appropriate, or as to the court seems fit, in dealing with an application to remove a caveat does not empower the court to order an amendment of a caveat which would result in the substitution of a different estate or interest than the estate or interest claimed in the caveat.[28]
[27] Palazzo Homes Pty Ltd v Goh [8], citing Porter v McDonald (275); Sulinmo Properties Pty Ltd v Malloney (1985) ANZ Conv Rep 25.
[28] Palazzo Homes Pty Ltd v Goh [9] ‑ [11].
As to the exercise of discretion to amend a caveat, Le Miere J in Palazzo Homes Pty Ltd v Goh at [24] ‑ [25] observed that the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then fixed up later. Caveats act as a form of interlocutory injunction, albeit by an administrative act, and can have powerful and serious consequences. Wrongly formulated caveats should not easily be tolerated.[29] Further, the court should have regard to the overall merits of the case.
[29] Le Miere J citing Percy & Michele Pty Ltd v Gangemi [2010] VSC 530 [104] (Macaulay J).
Metecno's position
Section 138C of the Transfer of Land Act provides as follows:
(1)A caveator who is served with a notice under section 138B(1) may apply to the Supreme Court, in accordance with rules of the court, for an order extending the operation of the caveat.
(2)On the hearing of an application under subsection (1), the Supreme Court —
(a)if satisfied that the caveator's claim has or may have substance —
(i)may make an order extending the operation of the caveat for such period as is specified in the order; or
(ii)may make an order extending the operation of the caveat until the further order of the court; or
(iii)may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;
and
(b)if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and
(c)may make such ancillary orders in relation to the application as it thinks fit.
(3)An interim order under this section may be made ex parte unless the court orders otherwise.
(4)The applicant shall ensure that the Registrar is served with a copy of each order made by the court on an application under subsection (1).
In the submissions filed on behalf of Metecno, counsel referred to and relied upon the legal principles in relation to the extension of caveats under s 138C of the Transfer of Land Act as they are set out in Bashford v Bashford.[30]
[30] Bashford v Bashford [2008] WASC 138 [42] ‑ [56].
On behalf of Metecno, it was acknowledged by counsel that to make an order under s 138C of the Transfer of Land Act, the court must be satisfied that the caveator's claim (being the estate or interest in land claimed in the caveat) has or may have substance, and that the caveator bears the onus of demonstrating that there is a serious question to be tried as to whether a caveatable interest exists.[31] In determining whether to exercise its discretion under s 138C, the court will also consider where the balance of convenience lies.[32]
[31] Plaintiff's submissions par 12(a) ‑ (b).
[32] Plaintiff's submissions par 12(d).
It was submitted on behalf of Metecno that the interest claimed in the Ferndale property is an equitable charge, arising under cl 7 of the Guarantee and Indemnity, which constitutes a proprietary interest able to be protected by a caveat.[33]
[33] Plaintiff's submissions par 14, citing Spunter Pty Ltd v Hall [2006] WASC 6 [21], citing Re Charge Card Services Ltd [1987] Ch 150; Avco Financial Services Ltd v White [1977] VR 561; Composite Buyers Ltd v Soong (1995) 38 NSWLR 286.
Further, it was submitted that the existence of a serious question to be tried involves demonstrating a sufficient likelihood of success to justify the preservation of the status quo in all the circumstances.[34] How strong the likelihood of success must be depends on the nature of the rights asserted and the practical consequences likely to flow from the order sought.[35] Thus whether there is a serious question to be tried and consideration of the balance of convenience are not separate inquiries.[36]
[34] Modular Forms Pty Ltd v Cecich [2015] WASC 177 [8].
[35] Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [42] ‑ [44], citing Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82.
[36] Modular Forms Pty Ltd v Cecich [8]
In circumstances where Metecno has not been paid in relation to invoices issued for goods supplied under the Credit Agreement, Metecno contends that there is a serious question to be tried and the balance of convenience favours orders extending the operation of Caveat O385625 to allow Metecno to maintain the security afforded to it by virtue of that caveat.[37]
[37] Plaintiff's submissions par 24.
Metecno accepts that the form of the caveat should be amended to a 'subject to claim' caveat in accordance with the principle that a caveat should not go beyond the legitimate claim necessary to protect its interests.[38]
[38] Plaintiff's submissions par 23.
At the hearing of the application, counsel for Metecno also addressed the court's power to grant the relief sought in circumstances where Mr Smith is a bankrupt.[39]
[39] ts 9 ‑ 10 (1 February 2023).
Counsel referred the court to the Bankruptcy Act 1966 (Cth) and s 58 titled 'Vesting of property upon bankruptcy - general rule'. I note that s 58 is a section within pt IV of the Bankruptcy Act, which part concerns proceedings in connexion with bankruptcy, and within div 4 which concerns the effect of bankruptcy on property and proceedings.
Despite the vesting of property in bankruptcy contemplated by s 58, subsection (5) provides that nothing in that section affects the right of a secured creditor to realise or otherwise deal with his or her security.
Counsel submitted that by operation of s 58, there was no prohibition or impost on Metecno prosecuting this application, and referred to the decision of Morris Finance Ltd v Brown (2017) 350 ALR 86; [2017] FCAFC 97, in support of the same.
Disposition
Should the operation of the caveat be extended?
On the basis of the materials before me, I am satisfied that Metecno has shown cause why Caveat O385625 lodged on 9 April 2020 as against the Ferndale property should be extended.
First, I was satisfied that, on the evidence presented to the court, Metecno's claim for an interest in the Ferndale property raises a serious question to be tried and may have substance.
I was satisfied that Mr Smith's status as a bankrupt did not affect the right of Metecno to seek to protect its security interest in the Ferndale property. I proceed on the basis that it is contrary to the text, context and purpose of s 58(5) of the Bankruptcy Act to exclude from its operation judicial processes to enforce an equitable charge,[40] and it follows, judicial processes to extend the operation of a caveat to protect an equitable charge.
[40] Bankruptcy Act s 58(5); Morris Finance Ltd v Brown [8], [36].
I have had regard to the terms of the Guarantee and Indemnity, particularly cl 7, which is reproduced at [15] above, and note that cl 7 provides that Mr Smith (as Guarantor) charges in favour of Metecno (described in the Guarantee and Indemnity as the Company) as security for his obligations to Metecno, all right title and interest in any land held now by Mr Smith alone or jointly with anyone or acquired by Mr Smith at any time as beneficial owner and as trustee of every trust. There is evidence before me of the creation of an equitable charge, an interest in land capable of supporting a caveat.
I note that cl 7 goes on to state that if Altiform defaults in payment or any amount owed to Metecno, Mr Smith specifically authorises Metecno to lodge a caveat against any dealings with any such property without prior demand for payment from Mr Smith and appointed Metecno as his Attorney for this purpose.
To the extent there could be any argument that on the proper construction of cl 7, Metecno's right to caveat the Ferndale property only arose after Altiform had defaulted 'in payment or any amount owed to Metecno', I note that Ms Chiem deposes that there was a default in payment by Altiform (as 'the Customer') and an amount was owed to Metecno at the time of lodgment of Caveat O385625.[41]
[41] First Chiem affidavit par 8; plaintiff's submissions par 4; see [16] above.
For the purpose of this hearing I am satisfied that Metecno as applicant has established that there is a serious question to be tried as to Metecno's claim for an interest in the Ferndale property.
Secondly, I am cognisant of the detriment that the removal of Caveat O385625 may have to the interests of Metecno.
Thirdly, I have no evidence of the prejudice that might be suffered by Mr Smith should the operation of the caveat be extended.
Having weighed these matters in the balance, on the evidence before me, Metecno had shown cause why its caveat over the Ferndale property ought be extended.
Form of the caveat
Metecno acknowledged by its application and in its submissions that the absolute caveat lodged by Metecno went beyond the legitimate claim necessary to protect its rights and that Caveat O385625 should be expressed to operate only to protect Metecno's rights as equitable chargee. That is, Metecno should have lodged a subject to claim caveat, not an absolute caveat.[42]
[42] Plaintiff's submissions par 23.
Having due regard to the overall merits of Metecno's application, I am satisfied that the requested amendment ought be made and it is appropriate that the continued operation of Caveat O385625 be conditional upon amendment.
Undertaking as to damages
In support of the application, Metecno proffered an undertaking as to damages in the usual form. The undertaking was appropriately proffered and the orders that will be made will reflect that the relief granted is subject to that undertaking.
Conclusion and orders
For these reasons, I am satisfied that Metecno has shown cause why its caveat over the Ferndale property ought be extended. It is also appropriate that Caveat O385625 be amended on the first page thereof by deleting the word 'Absolute' and replacing that word with 'Subject to the Caveator's claim'.
For these reasons, I will make orders in the following terms:
1.The requirement for conferral of the chamber summons filed on 25 January 2023 pursuant to the Rules of the Supreme Court 1971 (WA) O 59 r 9(1), be waived.
2.Caveat O385625 registered against 38 Bursaria Crescent, Ferndale in the State of Western Australia, being Lot 286 on Plan 10446, and being the whole of the land described in Certificate of Title Volume 1347 Folio 145, is amended to forbid the registration of any instrument affecting the estate or interest claimed by the plaintiff unless such instrument is expressed to be subject to the claim of the caveator.
3.The operation of Caveat O385625 registered against 38 Bursaria Crescent, Ferndale in the State of Western Australia, being Lot 286 on Plan 10446, and being the whole of the land described in Certificate of Title Volume 1347 Folio 145, as amended by order 2, is extended on an interim basis until further order of this Court.
4.The costs of the application by chamber summons filed on 25 January 2023 be reserved.
5.Each party have liberty to apply to relist the chamber summons filed on 25 January 2023 for hearing to proceed on an inter‑partes basis, alternatively, to vary or set aside these orders or with respect to costs, on no less than 3 business days' notice to the other parties.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RW
Associate to the Judge
2 FEBRUARY 2023
22
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