Mijo Developments Pty Ltd v Royal Agnes Waters Pty Ltd

[2007] NSWSC 199

CITATION:	Mijo Developments v Royal Agnes Waters [2007] NSWSC 199
HEARING DATE(S):	6 March 2007
JUDGMENT DATE :	9 March 2007
JUDGMENT OF:	Hammerschlag J
DECISION:	The defendants through their counsel having undertaken to the Court not to dispose of their respective interests in the land pending final determination of proceedings No. 1135/2007 or other order of the Court, other than by refinancing the land, the Court orders that (a) Queensland Land Registry Caveat No. 710196975 be removed forthwith; (b) Queensland Land Registry Caveat No. 710196989 be removed forthwith; and (c) Queensland Land Registry Caveat No. 710196981 be removed forthwith.
CATCHWORDS:	CONVEYANCING – Torrens system – Caveats against dealings – Who may lodge – Meaning of phrase “person claiming an interest in a lot” under s 122(1)(a) of the Land Title Act 1994 (QLD) – Meaning of phrase “right…in relation to the land…” under s 36(b) of the Acts Interpretation Act 1954 (QLD) which defines “interest” – Urgent application by motion seeking order for removal – Whether serious question to be tried – Effect of failure to give usual undertaking as to damages – Evaluation of balance of convenience in circumstances of default under mortgage where non-removal would result in appointment of receivers, where funding for refinancing of mortgages secured by caveatees subject to removal of caveat, and where undertaking given by caveatees to caveators that other than refinancing there would be no disposition of interest in the lots pending final determination of dispute
LEGISLATION CITED:	Land Title Act 1994 (QLD) Acts Interpretation Act 1954 (QLD) Industrial Relations Act 1996 (NSW) Acts Interpretation Amendment Act 1991 No. 30 (QLD)
CASES CITED:	Francis Travel Marketing Pty Limited v Virgin Atlantic Airways Limited (1996) 39 NSWLR 160 Surfers Paradise Investments Pty Limited v United Investments Pty Limited, Eilazak Pty Limited [1997] QSC 179 (25 September 1997) at 10 Latec Investments Limited v Hotel Terrigal Pty Limited (in liquidation) (1965) 113 CLR 265 Double Bay Newspapers v AW Holdings (1996) 42 NSWLR 409 Ruthol Pty Limited v Mills [2003] NSWCA 56 Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 84 R v Murphy (1985) 158 CLR 596 at 611 Fountain v Alexander (1982) 150 CLR 615 at 629 Muschinski v Dodds (1985) 160 CLR 583 at 615 Fisher v Madden as Receiver and Manager of Data Flow Computer Services Pty Limited (2001) 54 NSWLR 179 Colley v Futurebrand FHA Pty Limited (2005) 63 NSWLR 291 Prior v Sherwood (1906) 3 CLR 1054 Attorney-General (Hong Kong) v Reid (1994) 1 AC 324 Re Armstrong, ex parte Gilchrist (1896) 17 QBD 521 Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249 at 260 and 311 Jean-Pierre Cosmetics Pty Ltd v Gary Trustwell and Associates Pty Ltd (1994) 6 BPR 13,497
PARTIES:	Mijo Developments Pty Limited & Anor Royal Agnes Waters Pty Limited & Anor
FILE NUMBER(S):	SC 001135/2007
COUNSEL:	G Hiley QC with C Ward (Plaintiffs/Respondents on the motion) M Holmes QC with S Free (Defendants/Applicants on the Motion)
SOLICITORS:	James Beatty & Associates (Plaintiffs/Respondents on the motion) Clinch Neville Long (Defendants/Applicants on the Motion)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMMERSCHLAG J

9 MARCH 2007

1135/2007 MIJO DEVELOPMENTS PTY LIMITED & ANOR v ROYAL AGNES WATERS PTY LIMITED & ANOR

JUDGMENT

Background

1 This is an application, brought as a matter of urgency, by motion dated 2 March 2007, under s 127(1) of the Land Title Act 1994 (QLD) (“the Act”) by three caveatee companies each seeking an order that a caveat (in identical terms) be removed from the title of a Lot of which it is the registered owner. The three Lots are situated in Queensland and are known as the Sansara Land, the Airport Land and the Tree Bar Land respectively.

2 The caveatees are Royal Agnes Waters Pty Limited which owns the Sansara Land, Royal 1770 Airport Pty Limited which owns the Airport Land and Royal 1770 Tree Pty Limited which owns the Tree Bar Land. These companies will collectively be referred to as the defendants.

3 The caveats were lodged on 19 December 2006.

4 The caveator of the Sansara Land is Mijo Developments Pty Limited. The caveator of the Airport Land and Tree Bar Land is Mijo Investments Pty Limited. These companies will collectively be referred to as the plaintiffs.

5 Each caveat is in the following terms: “Interest being claimed – an equitable interest of an estate in fee simple.”

6 The grounds of the claim specified in each caveat are in the following terms:

“Pursuant to the Registered Owner’s equitable fraud, false and misleading representations and unconscionable conduct the Registered Owner obtained a transfer in the land from the Caveator. By reason of the Registered Owner’s equitable fraud, false and misleading representations, unconscionable conduct and the Registered Owner’s breach and/or repudiation of the deed between the parties dated 5 July 2006, a copy of which is attached hereto, the Caveator is entitled to a reconveyance of the land.”

7 The plaintiffs have sued the defendants in this Court by Statement of Claim filed on 17 January 2007 for relief including a declaration that the defendants hold the land on “constructive trust” and an order that the defendants “forthwith do all things necessary to restore to the plaintiffs title to the properties…”. The proceedings were commenced after the defendants gave notice to the plaintiffs pursuant to s 126(2) of the Act requiring them to start a proceeding in a court of competent jurisdiction to establish the interest claimed under the caveats.

8 The parties are agreed that this Court has jurisdiction to deal with the application and that it should do so even though the relevant land is in Queensland. The parties are situated within the jurisdiction of the Court and are amenable to its jurisdiction. The application is brought under a Queensland statute and is to be determined according to the laws of that State. It was not suggested on behalf of any party that the common law of New South Wales is any different to that of Queensland: cf Francis Travel Marketing Pty Limited v Virgin Atlantic Airways Limited (1996) 39 NSWLR 160 at 165-166.

9 The Lots were transferred to the respective defendants pursuant to a deed made on 5 July 2006 and the transfers were registered on 11 October 2006.

10 Each of the Lots is encumbered by mortgage.

11 The Sansara Land is encumbered by a first mortgage in favour of HFL Australia Limited (“HFL”) (an entity related to Hanover Property Finance Limited) which mortgage expired on 28 February 2007 with an outstanding balance owing to the mortgagee of approximately $19.5M, and is presently accruing default rate interest at 20 per cent per annum which approximates $10,685.00 per day.

12 The Airport Land and Tree Bar Land are encumbered by a first mortgage in favour of Westpac Banking Corporation (“Westpac”) which has also expired. The current balance outstanding exceeds $3.015M. Interest is accruing at a default rate approximating $1,125.00 per day.

13 Both the Airport Land and the Tree Bar Land are encumbered by second mortgages to St Laurence Lending Limited which mortgages expired on 31 May 2006. The current outstanding balance exceeds $2.787M and is accruing interest at 25 per cent per annum, amounting to not less than $1,900.00 per day.

14 There is a third mortgage over each of the Lots in favour of HFL which is collateral to the first mortgage over the Sansara Land.

15 The HFL and Westpac mortgages were on title at the time the Lots were registered in the names of the defendants.

16 The plaintiffs, and a Mr Michael Robson who is also one of the plaintiffs suing on the Statement of Claim, were said by Mr Hiley QC (with whom Mr Ward appeared) for the plaintiffs, to be liable to HFL and Westpac under those instruments on personal covenants or guarantees. Documents were tendered in this regard, including a letter of demand dated 6 February 2007 from Westpac to Mijo Investments Pty Limited claiming in excess of $2M. I proceed on the basis that the plaintiffs and Mr Robson, who is a director of the plaintiffs, are so liable.

17 The evidence on the application also establishes that Westpac has had meetings with two receivers and if circumstances do not change with respect to its payment prospects may well appoint receivers under its mortgages early next week.

18 The evidence establishes that the defendants have loan approvals and documentation for the refinancing of the HFL first mortgage over the Sansara Land by Investec Bank (Australia) Limited (“Investec”) and a facility for a second mortgage over the Sansara Land by Hanover Property Finance Limited. The defendants also have a loan approval for a first mortgage facility on the Airport Land by National Australia Bank Limited and an offer from St Laurence Capital Limited of first mortgage funding to assist with refinancing existing debt over the Tree Bar Land.

19 According to the unchallenged evidence the defendants are now in a position to effect a refinance of the Lots but are prevented from effecting a discharge of the mortgages presently on them by operation of the caveats.

20 It is these circumstances which make the matter urgent.

The Issues

21 Under s 122(1)(a) of the Act a caveat may be lodged relevantly for present purposes, by “a person claiming an interest in a lot” (emphasis added).

22 Under s 127(1) of the Act a caveatee may at any time apply to the Supreme Court for an order that a caveat be removed.

23 Under s 127(2) the Court may make such orders on the terms it considers appropriate.

24 Even though the caveatees are the moving parties for removal of the caveats, it was common ground between the parties that the approach to be adopted under the Queensland enactment is akin to the approach taken with respect to the grant of an interim injunction, that is, the caveator must establish a serious issue to be tried as to the interest it claims and the balance of convenience must favour maintenance of the caveat: Surfers Paradise Investments Pty Limited v United Investments Pty Limited, Eilazak Pty Limited [1997] QSC 179 (25 September 1997) at 10.

25 In the Statement of Claim the plaintiffs make the following allegations, which Mr Hiley described as the high water mark of their case:

“49. Further or in the alternative, on or about 5 July 2006 the Fourth Defendant and the Defendants by their solicitor Mr Peter Clinch represented to the Plaintiffs that:
a. the Sydney office of Investec required executed blank transfers to be provided to the Defendants so that the London office of Investec could be satisfied as to the bona fides of the Plaintiffs and that there was no impediment to the taking of security by Investec over the Land; and
b. the Transfers would not be registered until such time as the Investec Funding was drawn down (together the “Investec Representations”).
50. At all material times the Defendants were aware that the Plaintiffs relied upon the Representations and Investec Representations. …
57. Further or in the alternative, the conduct of the Defendants in proceeding to Registration of the Transfers in circumstances in which the Defendants:
a. have not arranged for the refinance of the Sansara Debt, the Tree Bar Debt and/or the Airport Debt; or
b. have not procured the Investec Funding
constitutes equitable fraud upon the Plaintiffs. …
59. The First to Third Plaintiffs are entitled to be restored to the title of the Land. …
61. Further or in the alternative, by reason of the failure of the Defendants to procure the Investec Funding, the First, Second and Third Defendants hold the title to the Land on constructive trust for the First to Third Plaintiffs.”

26 Mr Holmes QC, who together with Mr Free, appeared for the defendants, accepted for the purposes of the application that there was evidence to found the factual allegations pleaded in paragraphs 49 and 50 of the Statement of Claim.

27 It is therefore incumbent on the plaintiffs to establish that there is a serious issue to be tried that those matters, and what is alleged in the Statement of Claim to flow from them, amount to claiming an interest in a lot under s 122(1)(a) of the Act. It is also necessary for the balance of convenience to favour maintenance of the caveats or at least not favour their removal.

Consideration

28 The term “interest” in s 122(1)(a) of the Act is affected by the definition of that term in s 36 of the Acts Interpretation Act 1954 (QLD) which is as follows:

“ Interest, in relation to land or other property, means--

(a) a legal or equitable estate in the land or other property; or

(b) a right, power or privilege over, or in relation to, the land or other property.”

29 All parties accepted that this definition is to be applied to the term “interest” in s 122(1)(a) of the Act.

30 Mr Hiley accepted for the purposes of the application that the plaintiffs did not come within (a) of the definition in s 36 of the Acts Interpretation Act (QLD). He put the case entirely on the basis that what was claimed was “a right in relation to the land”, which he articulated as “a right to be restored as the registered proprietor”.

31 Mr Holmes put that the averments in the Statement of Claim did not give rise to an interest in a Lot, or to something which could, at this point in time, be described as an interest in a Lot.

32 His initial approach in argument was that all the plaintiffs have is a “mere equity” and that the imposition of a constructive trust was, in the manner pleaded, merely remedial and until relief was conferred on the plaintiffs by the Court they had no legal or equitable interest in the land.

33 This is an approach (it seems to me) which is appropriate where the issue is whether what is asserted is an equitable interest or something less or where there is a question of priorities: see for example Latec Investments Limited v Hotel Terrigal Pty Limited (in liquidation) (1965) 113 CLR 265; Double Bay Newspapers v AW Holdings (1996) 42 NSWLR 409; and Ruthol Pty Limited v Mills [2003] NSWCA 56.

34 In this instance that approach seems to me to be of no assistance. What is to be determined is whether what is asserted is a right in relation to land. A “mere” equity is clearly capable of being such a right. An exercise directed to characterising a right or body of rights either as an equitable interest or as a mere equity does not assist the resolution of the question here. Asserting it to be a “mere equity” in relation to the land here (as Mr Holmes did) may entail the axiomatic conclusion that it is an interest as defined.

35 Mr Holmes put that as pleaded there was no basis for the imposition of a constructive trust by the Court or a basis for the Court to order a reconveyance of the land. I do not agree.

36 The pleading could no doubt have been better expressed, but the substance of what is pleaded is that the plaintiffs executed blank transfers on the basis of representations that they would not be registered unless certain things happened. Given those things did not happen the transfers were fraudulent at least in an equitable sense and accordingly, the plaintiffs say they have an immediate right to get the land back. The substance of paragraph 61 of the Statement of Claim is that until the condition for registration of transfer had been fulfilled, that is,the Investec Funding obtained, the blank transfers were in effect being held on trust, or as Mr Hiley put, “in escrow”.

37 What is being asserted, in my view, reduced to its essentials, is the plaintiffs saying they have been cheated out of their land and that they are entitled to get it back. This, it seems to me, is the assertion of a right in relation to that land, and it is asserted against the current legal owner of it. The fact that the assistance of the Court is needed to vindicate it does not distinguish it from any other right, the vindication of which needs the assistance of the Court.

38 The phrase “in relation to” is one of wide import and is satisfied by a connection or association between the two things in question. It should not be read down unless there be compelling reasons to do so: see Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 84; R v Murphy (1985) 158 CLR 596 at 611; and Fountain v Alexander (1982) 150 CLR 615 at 629. There is, in my view, a direct and immediate connection between the entitlement asserted and the land itself. It is a claim for the land to be reconveyed. There may be an intermediate step of the imposition of a constructive trust to achieve a reconveyance but that may in fact not be necessary if the plaintiffs’ averments are made out.

39 In any event, the imposition of a constructive trust may be seen, as was said by Dean J in Muschinski v Dodds (1985) 160 CLR 583 at 615, as an in personam remedy attaching to property. Moreover, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration before equity will recognise the prior existence of such a trust: Muschinski v Dodds at 614. In Surfers Paradise Investments Pty Limited v United Investments Pty Limited, Eilazak Pty Limited at 8 Ambrose J, after reviewing the authorities concerning the relationship between constructive trusts and caveats, held that it is no answer to a person’s claim to lodge a caveat to say that the concept of a constructive trust is purely remedial and incapable of giving rise to a proprietary caveatable interest until its declaration.

40 The attention of Ambrose J was it seems, somewhat remarkably, not drawn to the definition of interest in s 36 of the Acts Interpretation Act (QLD) which, it seems to me would have been a more direct route to the same conclusion reached by his Honour without the necessity to find a proprietary interest.

41 Mr Holmes also put that all the defendants had was a right to approach the Court or to bring proceedings so that there was no right which could fairly be described as one being “in relation to” land. In support of this submission he referred to two decisions of the New South Wales Court of Appeal concerning s 106 of the Industrial Relations Act 1996 (NSW) which confers power on the Industrial Relations Commission to make orders in relation to unfair contracts, namely Fisher v Madden as Receiver and Manager of Data Flow Computer Services Pty Limited (2001) 54 NSWLR 179 and Colley v Futurebrand FHA Pty Limited (2005) 63 NSWLR 291. In considering that statutory provision the Court held that it does not confer defined rights on a party to an unfair contract. It does no more than confer jurisdiction on the Commission to grant particular relief.

42 I do not accept this submission because the position of a wronged party seeking to have his property restored is not relevantly analogous to a claimant for statutory relief under s 106 of the Industrial Relations Act (NSW).

43 Mr Holmes also put that the position of the plaintiffs involved a dramatic enlargement of the notion of a caveatable interest which was not consistent with the “comparatively benign statutory purpose of the insertion into the Acts Interpretation Act (QLD) of the definition of interest which took place by the Acts Interpretation Amendment Act 1991 No.30 (QLD) whose stated object was “to amend the Acts Interpretation Act 1954 to facilitate Plain English drafting and the reprinting of legislation, and for other purposes”. Firstly, there does not seem to be any good reason why sub-paragraph (b) of the definition should not be given its ordinary operation. Secondly, that sub-paragraph clearly is in addition to the notions of legal or equitable interest. Thirdly, there does not seem to me in the circumstances of this case, to be anything dramatic in a party claiming back property previously his, being entitled to caveat that right. I accordingly do not accept this submission.

44 There was, after some constructive debate, an argument put by Mr Holmes that “right” in sub-paragraph (b) of the definition means a right presently exercisable to do something affecting the property. Some support for this might be derived from the fact that “right” in the section is in the company of the terms “power or privilege over” which arguably entail such a concept, and therefore imply some limitation on the “right in relation to” component on the basis of the noscitur a sociis maxim of construction: see e.g. Prior v Sherwood (1906) 3 CLR 1054.

45 Mr Hiley’s response was that the plaintiffs were in any event asserting a presently exercisable right to get back their land. He relied on what Lord Templeton said in Attorney-General (Hong Kong) v Reid [1994] 1 AC 324 at 331 that as soon as the bribe was received the false fiduciary held the bribe on constructive trust for the person injured.

46 On the one hand, it seems to me that the term “right in relation” to land must be read in its context. On the other hand, it is clear that the definition in sub-paragraph (b) expands interest well beyond legal or equitable interest. For example, the term “power” is itself defined in the Acts Interpretation Act (QLD) as including authority. Power is sometimes referred to as a term of art denoting the donee of it to deal with or dispose of property not his own, the power itself not being considered property; Re Armstrong, ex parte Gilchrist (1896) 17 QBD 521 at 531 and 532. The same could no doubt be said of the term “authority”.

47 It is not necessary for me to resolve this debate. Nor would it be feasible to attempt to do so in an interlocutory matter to be determined urgently.

48 My view is that the words used in the definition are clearly capable of the construction contended by the plaintiffs and therefore there is sufficient foundation for the argument to overcome the threshold of a serious issue to be tried.

49 This of course says nothing about whether the plaintiffs will succeed at trial. Their claims are hotly contested by the defendants and there are substantial cross-claims.

50 I turn now to the balance of convenience.

Balance of Convenience

51 The usual undertaking as to damages is almost universally required from an applicant for interlocutory relief: Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249 at 260 and 311. The giving of such an undertaking has been referred to as the price required by the Court for the gravity of an injunction: Jean-Pierre Cosmetics Pty Ltd v Gary Trustwell and Associates Pty Ltd (1994) 6 BPR 13,497.

52 The giving of the usual undertaking, although now often considered to be an independent requirement, is also a matter which may go to the balance of convenience. In the circumstances of this case, where refinancing on favourable terms is being prevented by the caveats, the failure to proffer the undertaking is on its own sufficient reason to order removal. But there is more.

53 The defendants through their counsel proffer an undertaking to the Court that they will not dispose of their respective interests in the land pending final determination of the proceedings or other order of the Court other than refinancing the land. This in my view effectively protects the plaintiffs’ position.

54 The main proceedings have been expedited. Although no hearing date has been set, the plaintiffs through their counsel proffer an undertaking to the Court to prosecute them with all due expedition.

55 Additionally, the defendants have the immediate prospect of refinancing the mortgages on the properties and avoiding the onerous penalty interest that is accruing if the caveats are removed which prospect may be lost if the caveats stay. Although Mr Hiley put that if the caveats are removed the plaintiffs forego the opportunity themselves to refinance the mortgages, there is no evidence which indicates that they are in a position to do so. There was tendered a letter from Investec dated 27 June 2006 to Mr Ngu of Newtown Developments Pty Ltd offering a refinancing facility which had a three day acceptance time limit. Nothing further was adduced by the plaintiffs.

56 There is also the threat of the imminent appointment by Westpac of receivers which will probably dissipate if the caveats are removed. Self evidently such an appointment could have a negative effect on the realisable value of the land and the prospects of development by the defendants.

57 Mr Holmes put that the balance of convenience is “all one way”, namely in favour of removal of the caveats. It may not be all one way but it heavily favours removal. The caveats should accordingly be removed.

Conclusion

58 The orders of the Court will be as follows:

The defendants through their Counsel having undertaken to the Court not to dispose of their respective interests in the land pending final determination of proceedings No. 1135/2007 or other order of the Court, other than by refinancing the land the Court orders that:

a Queensland Land Registry Caveat No. 710196975 be removed forthwith;

b Queensland Land Registry Caveat No. 710196989 be removed forthwith; and

c Queensland Land Registry Caveat No. 710196981 be removed forthwith.

59 The parties should bring in Short Minutes to give effect to these orders which may be entered forthwith.

60 The plaintiffs are to pay the costs of the motion.

61 The exhibits may be returned.

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