Montaigne Pty Ltd v Nerana at Nicholson Pty Ltd
[2004] VSC 116
•1 April 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 5180 of 2004
| MONTAIGNE PTY LTD | Plaintiff |
| v. | |
| NERANA AT NICHOLSON PTY LTD | First Defendant |
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JUDGE: | MANDIE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 April 2004 | |
DATE OF JUDGMENT: | 1 April 2004 | |
CASE MAY BE CITED AS: | Montaigne Pty Ltd v Nerana at Nicholson Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 116 | |
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REAL PROPERTY – Transfer of Land Act 1958 (Vic) – application for removal of caveat – whether land development agreement arguably gave rise to a caveatable interest of the caveator as second mortgagee in equity
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C. Macauley SC with Mr D. Guidolin | Wisewoulds |
| For the First Defendant | Mr R. Greenberger | Robert James |
HIS HONOUR:
This is an application pursuant to s.90(3) of the Transfer of Land Act 1958 for removal of a caveat on the titles to certain land in East Gippsland, being the land in Certificates of Title Vol. 10376 Folio 999 and Vol. 10377 Folio 000, comprising some 170 hectares in total. Part of the land is zoned for a tourist resort and marina, because it is adjacent to the Nicholson River at Nicholson. The rest of the land is zoned rural under the East Gippsland Planning Scheme. The plaintiff is the registered proprietor of the land.
The first defendant has lodged a caveat claiming an interest as second mortgagee and the grounds of the claim are stated “as second mortgagee pursuant to a land development agreement dated 11 October 2002 between the caveator, Montaigne Pty Ltd [the plaintiff] and Douglas John Matthew Harle and Barbara Anne Harle”. Mr Harle is the director of the plaintiff and Barbara Anne Harle is his wife. The first defendant, “N.A.N.”, seeks to amend the caveat so as to claim, in the alternative to what appears in it at the moment, a claim as mortgagee in equity.
The claim to a caveatable interest depends on the terms of the land development agreement referred to in the caveat. It is unnecessary to refer to all the terms of the land development agreement, but it could loosely be described as an arrangement between the parties to it to further the development of the land in accordance with the zoning of the land for a tourist resort and marina. The parties to the land development agreement are expressed to be Mr and Mrs Harle and N.A.N., but it is clear from a reading of it and from the execution clause that the plaintiff is also a party. It executed the agreement by its sole director and secretary, Mr Harle.
The claim by N.A.N. to a right to a second mortgage, which no doubt is a claim in equity, although it is not expressly so referred to in the caveat - it is a claim in equity if it is anything - is based on Clause 2.4 of the land development agreement, which provides that -
“As security for the payment of all moneys due to the Developer from the Land Owner under or pursuant to this Agreement and otherwise as security for the performance by the Land Owner of all of its other obligations under or pursuant to this Agreement, the Land Owner hereby agrees to immediately grant (or procure the granting of) in favour of the developer the following (“Developer Security”):
2.4.1a registered mortgage over the Land (which will rank second in priority only to a mortgage acting as security for the Development Loan).
The Land Owner will immediately execute all necessary documents for the Developer’s Security in the form prepared by the Developer’s solicitors, noting that all the Developer’s Solicitors’ legal costs and expenses (including stamp duty, ASIC and registration fees) shall be a Project Cost.”
The “land owner” is Mr and Mrs Harle and the “developer” is N.A.N. The plaintiff is in fact the registered proprietor of the land and holds it as trustee under a trust deed. It seems to be common ground, at least for the purposes of this application, that the plaintiff had no power under the trust deed to vest the land in Mr and Mrs Harle, although the agreement itself contains provisions to the contrary. Clause 26.5 says:
“As evidenced by its execution of this Deed, Montaigne [the plaintiff] acknowledges and agrees that:
26.5.1the Land Owner is the sole beneficial owner of the Land and is presently entitled to be registered as sole legal owner of the Land.
26.5.2Montaigne will execute all necessary documents on request to facilitate registration of the Land Owner as the sole legal owner of the land.
26.5.3if required by the Developer, Montaigne will execute all necessary documents on request to facilitate registration of the developer security referred to in Clause 2.4…”
Then there is an appointment of the developer as an attorney to sign documents.
It is submitted on behalf of N.A.N. that the entitlement under the mortgage is produced by a number of other provisions of the land development agreement, the first of which is Clause 13.4. I preface that by saying that it seems to be again common ground that this land development agreement has been terminated. It has been purportedly terminated both by the plaintiff, or the land owner, on the one hand and N.A.N. on the other hand, but it seems to be agreed that it has been terminated. But that has this effect: that 13.4 provides, subject to a clause about an option to purchase which is not presently material, that:
“…upon the termination of this Agreement for any cause whatsoever a full account in writing shall be taken of all of the assets of the Project and of all liabilities connected with the Project and immediately after such account shall be taken the Property (in its then developed state) shall be realised and sold to the best advantage, and the moneys arising from such sale and other moneys of the project shall be applied in accordance with Clauses 9 and 10 of this Agreement.”
In my opinion, it is seriously arguable that this clause is applicable to the termination which has occurred, namely, “termination for any cause”, and that there is an obligation on the parties to proceed in accordance with Clause 13.4. That takes one to Clauses 9 and 10. Clause 9 has a detailed formula for the application of what are called the “project proceeds”, but it commences by saying -
”The Developer and Land Owner acknowledge and declare that they have entered into this Agreement governing the Project with the intention of each separately deriving a monetary gain from the development and sale of the Property.”
Then it goes on to provide for expenses being paid out of project proceeds and then for a sharing of the net proceeds between the land owner and the developer according to a formula in Clause 9.3, depending upon the amount of consideration constituted by those proceeds. Clause 10 provides for what is to happen on the sale of the property, and again, after deduction of expenses, refers one back to Clause 9 as to the distribution of net proceeds between land owner and developer.
In my opinion it is seriously arguable that those provisions apply to the present situation and that, if the land is sold, the division has to be in accordance with those provisions. There is perhaps an obligation that the land must be sold, having regard to the termination provision. Of course there may be other arguments about the way these provisions work, and there are no doubt other arguments about whether one or both parties are in breach of other provisions of the agreement, but in my view there are serious questions and serious issues here, which can only be determined at trial, relating to this obligation.
The next step in the argument of N.A.N. is that those obligations created by Clauses 13.4, 9 and 10 are secured by the mortgage which is provided for in Clause 2.4, and again I think that is at the least seriously arguable, because the mortgage there referred to is not simply to be granted as security for the payment of moneys due to the developer, but also as ”security for the performance by the land owner of all of its other obligations under or pursuant to this agreement”; and I think that is arguably applicable to obligations created by Clause 13.4 and Clauses 9 and 10. If this obligation to create a mortgage was entered into simply by the registered proprietor, then I would have little difficulty in saying that there was a caveatable interest; but the matter is complicated by the fact that it is argued by the plaintiff that Mr and Mrs Harle have no equity in the land whatsoever, it being held under a trust deed, and they therefore had no ability to do what they purported to do in Clause 2.4 of the agreement, namely, grant a second mortgage. I do not know that that is necessarily an answer.
I think that it is at least seriously arguable that there is a case in equity, by estoppel or otherwise, given that both the registered proprietor and the Harles themselves are parties to this agreement, and given the express terms of cl. 26.5, that in equity there is a caveatable interest in the land by virtue of the provisions of this agreement. I cannot conclude that no caveatable interest is expressed in the caveat which has been recorded on the title. It seems to me a matter which has to go to trial to be determined after full evidence and argument, and it would prejudice the caveator’s claim if the caveat were removed. There is no reference to a claim in equity in the caveat, but I do not find it necessary to consider whether the Court has power to order an amendment to the caveat or, if so, whether such an amendment should be permitted, because I think that the caveat fairly describes the nature of the estate or interest claimed and the basis of it. I do not think there is any magic in the words “in equity”. It is readily apparent that, if one claims an interest as second mortgagee pursuant to a land development agreement, it is not a claim as a legal mortgagee, but clearly a claim as a mortgagee in equity. At any rate, there are serious questions about that and I would not remove the caveat on that basis. There is a serious claim here protected by the caveat.
I think that is really the end of the matter. References were made in the course of argument to the balance of convenience. I have not as yet mentioned that the first mortgagee, who is registered on the title, is seeking to sell the land at auction, and I have no doubt that the presence of the caveat might affect the price which was obtained at a mortgagee’s auction, but I do not think that consideration can govern this application, particularly where, as counsel for N.A.N. points out, the removal of the caveats would permit or enable the plaintiff to make arrangements with other parties which might detrimentally affect the arguable interest of N.A.N. as second mortgagee.
I think it would be inappropriate to remove the caveat and the application is dismissed.
I should add that there is a further application which was foreshadowed, seeking an order that another caveat which has been lodged, claiming an interest as mortgagee in equity not be registered, but given that the registered caveat is not to be removed I see no point in making an order in relation to that.
(Discussion ensued.)
HIS HONOUR: I think that probably Mr Greenberger is right that there has to be a percentage reduction. I will make the following orders:
1. Originating motion dismissed.
2. Order plaintiff to pay 75% of first defendant's costs of the proceeding, including this application.
3. I will reserve liberty to apply.
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