Mytton-Watson v Mytton-Watson - [2013] WASC 416

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MYTTON-WATSON -v- MYTTON-WATSON [2013] WASC 416

CORAM: EDELMAN J

HEARD: 19 NOVEMBER 2013

DELIVERED : 19 NOVEMBER 2013

FILE NO/S: CIV 2707 of 2013

BETWEEN: TIMOTHY JAMES MYTTON-WATSON
Plaintiff
AND
TERRANCE ROGER MYTTON-WATSON
First Defendant
SIDNEY MARGARET MYTTON-WATSON
Second Defendant
COMMONWEALTH BANK OF AUSTRALIA
Third Defendant
REGISTRAR OF TITLES
Fourth Defendant

Catchwords:

Real property - Caveats - Originating summons seeking extension of operation of caveats - Whether caveats should be extended - Pending settlement of mortgagee sale of properties over which caveats are registered - Caveats sole impediment to exercise of mortgagee's power of sale - Balance of convenience - Originating summons dismissed with costs

Legislation:

Transfer of Land Act 1893 (WA), Pt V

Result:

Originating summons dismissed; caveats not extended

Category: B

Representation:

Counsel:

Plaintiff:     In person
First Defendant             :     In person
Second Defendant         :     In person
Third Defendant           :     Mr B C Smith
Fourth Defendant          :     No appearance

Solicitors:

Plaintiff:     In person
First Defendant             :     In person
Second Defendant         :     In person
Third Defendant           :     Gadens Lawyers
Fourth Defendant          :     No appearance

Cases referred to in judgment:

Bateson v Jones [2013] WASC 8
Binningup Nominees Pty Ltd as trustee for the Lakewood Shores Unit Trust v Brogue Tableau Pty Ltd [2004] WASC 14
His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15
Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222
KWS Capital Pty Ltd v Love [2013] WASC 294
Mytton-Watson v Commonwealth Bank of Australia [2012] WASCA 232
Mytton-Watson v Commonwealth Bank of Australia [2013] HCASL 44
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150

EDELMAN J:

Introduction

This morning I heard an application by the Commonwealth Bank which effectively sought removal of caveats maintained by the plaintiff, Mr Timothy Mytton‑Watson, over two properties in relation to which the Commonwealth Bank is the mortgagee in possession.
It appeared from the submissions and affidavit evidence filed prior to the oral hearing this morning that the orders sought by the Commonwealth Bank were opposed by Mr Mytton‑Watson. In oral submissions this morning, and from a written document handed up to me at this morning's hearing, it appears that Mr Mytton‑Watson no longer substantively opposes the orders, although he does not consent to them. These are the reasons why I considered it appropriate that the orders be made.

Background and facts

Last week Mr Mytton‑Watson applied to extend caveats he had lodged over two properties. Mr Mytton‑Watson had been given notice of the lapse of the caveats by a letter from the Registrar of Titles dated 23 October 2013. He did not bring the application to extend the caveats until 12 November 2013. The application was framed as a 'consent application' between Mr Mytton‑Watson and his parents, the registered proprietors of the land and his alleged debtors.
The application was refused by a registrar. So Mr Mytton‑Watson sought an urgent hearing. The application came before me ex parte on 13 November 2013, the day before the caveats expired. Mr Mytton‑Watson submitted that the Commonwealth Bank had no interest in the proceedings and no basis to be present. I ordered that the Commonwealth Bank be joined to these proceedings and I adjourned the proceedings to allow Mr Mytton‑Watson to serve the application on the Commonwealth Bank.
On 14 November 2013, Mr Mytton‑Watson informed me that the application and orders for the hearing had been left at the Commonwealth Bank which was not open at the time. I extended the caveat number L761927 about which I had information that it was due to lapse that day. I extended the caveat upon Mr Mytton‑Watson's undertakings, including an undertaking that he would serve various documents, including my order, on the Commonwealth Bank. Liberty to apply with 48 hours' notice was granted.
On 15 November 2013, the Commonwealth Bank contacted my associate and applied to dismiss Mr Mytton-Watson's application.
The Commonwealth Bank's evidence is that it is the mortgagee of two properties. The first and second defendants are the mortgagors of both properties. The properties are located at 44 and 46 Saunders Way, Karragullen. They are, respectively, lot 15 on deposited plan 230188 and lot 16 on deposited plan 230188.
On 14 June 2012, the Commonwealth Bank obtained judgment from Master Sanderson against the first and second defendants for $666,851.54 plus interest at the rate specified in the loan agreements from the date of judgment until payment. The Commonwealth Bank also obtained an order for possession of those properties.
The first and second defendants applied for a stay and sought leave to appeal out of time to the Court of Appeal. Their applications were dismissed on 15 November 2012.[1]
[1] Mytton-Watson v Commonwealth Bank of Australia [2012] WASCA 232.
The first and second defendants then applied for special leave to appeal to the High Court of Australia. That application was dismissed on 10 April 2013.[2]
[2] Mytton-Watson v Commonwealth Bank of Australia [2013] HCASL 44.
On 9 September 2013, the Commonwealth Bank entered a contract of sale to sell 44 Saunders Way for $321,500. On 2 October 2013, the purchaser obtained unconditional finance approval. The settlement date under the contract was 23 October 2013.
On 11 October 2013, the Commonwealth Bank entered a contract of sale to sell 46 Saunders Way for $245,500. The settlement date under the contract was initially 7 November 2013 but it was extended to this Friday, 22 November 2013.
On 21 and 24 October 2013, the Commonwealth Bank applied to the Registrar of Titles under s 138B of the Transfer of Land Act 1893 (WA) requiring Mr Mytton‑Watson to seek a court order to prevent the caveats from lapsing. The Registrar of Titles issued notices to Mr Mytton‑Watson informing him that unless a court order were obtained the caveats would lapse on 14 November 2013 (44 Saunders Way) and 19 November 2013 (46 Saunders Way).
As I have mentioned, in the ex parte application by Mr Mytton‑Watson which came before me on 13 and 14 November 2013, Mr Mytton‑Watson obtained orders extending caveat number L761927 (44 Saunders Way) until further order. The Commonwealth Bank now seeks orders discharging the extension of that caveat. Caveat number L761929 (46 Saunders Way) expires today. Both caveats are the only obstacles to settlement of the sales negotiated by the Commonwealth Bank. It is convenient to consider at the same time whether both should be extended.

Principles concerning whether the caveats should be extended

The principles concerning when a caveat should be extended are well known. They derive from Part V of the Transfer of Land Act 1893 (WA). I summarised those principles in KWS Capital Pty Ltd v Love[3] as follows:
[3] KWS Capital Pty Ltd v Love [2013] WASC 294 [32] - [36].
In assessing whether to grant the extension of the caveat the two broad issues are
(1)whether the caveator's claim in respect of the estate or interest in land 'has or may have substance', and
(2)whether the balance of convenience favours the retention of the caveat and the appropriate orders to be made.
The first issue is whether the caveator's claim in respect of the estate or interest in land 'has or may have substance'. This is sometimes expressed as whether the caveator can show that there is a serious question to be tried, or whether the caveator can prove a prima facie case.
The requirement that the caveator's claim of substance be in respect of the estate or interest in land has been held to mean that the claim must concern a 'proprietary interest' in land.
If the caveator's claim in respect of the estate or interest in land 'has or may have substance' then the caveat may be extended. The exercise of the discretion to extend has sometimes been described as the 'balance of convenience'.
The issues of (1) whether the claim 'has or may have substance' and (2) whether the balance of convenience favours the extension of the caveat are not independent. Even if a claim has or may have substance, the caveat might not be extended having regard to factors including the apparent strength or weakness of the claim.

The fundamental obstacle to extending the caveats in this case

The evidence filed on behalf of the Commonwealth Bank is that as at 15 November 2013 the total amount of money owed by the first and second defendants was $809,022. That total amount owed is secured by a first registered mortgage over 44 and 46 Saunders Way.
The total which will be received from the mortgagee sale of the two properties is $567,000. Even before costs of sale, rates and taxes this amount is considerably less than the amount secured by the Commonwealth Bank's first registered mortgage.
In his affidavit evidence, Mr Mytton‑Watson asserts an interest in the land at 44 and 46 Saunders Way based upon 'having advanced money, chattels and performed work and provided services in relation to the said land over the period the defendants have owned the said land'.[4] He asserts that this debt has been admitted in a deed executed in 2011.
[4] Affidavit of Mr Mytton-Watson sworn 12 November 2013.
There are several possible deficiencies in Mr Mytton Watson's evidence as being evidence which might support a caveat.
First, the evidence, which does not annex the deed, might fall short of establishing the basis for a claim of substance for an estate or interest in the land.
Secondly, whatever estate or interest in the land which might arise would not support the absolute caveats which Mr Mytton‑Watson lodged. Mr Mytton‑Watson initially acknowledged this deficiency but effectively submitted that, if this were decisive, he would seek leave to lodge a 'notice' caveat which forbids registration of any transfer or instrument until after notice of the intended registration or dealing is given to the caveator.[5] It is, however, difficult to see the utility in any such caveat in circumstances in which Mr Mytton‑Watson has been given notice of the pending settlements of both properties.
[5] See Binningup Nominees Pty Ltd as trustee for the Lakewood Shores Unit Trust v Brogue Tableau Pty Ltd [2004] WASC 14.
Thirdly, there may be doubt about Mr Mytton‑Watson's undertaking as to damages. In written submissions handed up this morning, Mr Mytton‑Watson explained that he cannot maintain his undertaking based on proceedings which might be brought in the District Court or Magistrates Court.
Ultimately, it is not necessary to decide any of these points because there is a more fundamental, and currently insurmountable, obstacle to Mr Mytton‑Watson's claim to maintain the caveats. This obstacle is that the balance of convenience in this case necessitates that the caveats be removed.
As Mr Mytton‑Watson says in his affidavit, '[t]here is no issue that the Commonwealth Bank holds the first registered mortgage and as such has unfettered entitlements, and certainly their interest is not subject to my [unregistered] interest ... I claim to be entitled after the bank'.[6]
[6] Affidavit of Mr Mytton-Watson sworn 12 November 2013 [7] - [8].
In Navarac Pty Ltd v Moondancer Holdings Pty Ltd[7] Pullin JA said:
It is true that experience shows that parties are most commonly in dispute about the existence of a caveatable interest. Balance of convenience issues are usually of little or no significance where the caveator claims an estate in fee simple or a leasehold estate. In those fairly common cases, it is 'unusual', as Owen J states, that once an arguable case is made out by the caveator that there is such a caveatable interest, that balance of convenience issues will result in removal. However, if for example the interest claimed by the caveator is a security interest or an interest in competition with another claimant against the registered proprietor, then balance of convenience issues may become decisive.
[7] Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150, 159 [22].
In His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated,[8] the Church sought to maintain a caveat over certain land. A bank held a registered mortgage over the same land. The interest claimed by the Church in support of its caveat was an asserted power to obtain a reconveyance of the registered title from the current registered proprietor. Barker J held that there was a serious issue to be determined in the action between the Church and the current registered proprietor of the land, but that the caveat would not be extended due to balance of convenience considerations as between the Church and the bank.[9] His Honour relied upon the decision in Kerabee Park Pty Ltd v Daley,[10] where Holland J observed that statute gives the right to caveat not for the purpose of giving notice to the world by the caveator to an estate or interest in the land, but rather, for the purpose of protecting the caveator's interests from being defeated by the registration of a dealing without the caveator having had the opportunity to invoke the assistance of the Court to give effect to his interest: [11]
... it would seem to me to follow that a caveator should have no right to prohibit registration of a dealing to which his alleged interest in the land would not entitle him to object, if he were to invoke the assistance of the court. A subsequent encumbrancer, registered or unregistered, has no right whatever to interfere in, or object to, a proper exercise by a mortgagee of the mortgagee's power of sale, and would have no ground on which to seek the intervention of the court, notwithstanding the fact that registration of the transfer to the purchaser would discharge or defeat all mortgage interests in the land whether registered or not ...
The only class of case which the defendants suggest might lead the court, at the instance of a subsequent mortgagee or encumbrancer, to interfere to restrain registration of a transfer to a purchaser upon the exercise of a mortgagee's power of sale is that of fraudulent or improper sales, such as were instanced above. Assuming for the moment that the mere possibility of a fraudulent or improper mortgagee's sale would entitle the holder of an unregistered mortgage to lodge a caveat prohibiting the registration of all dealings with the land except upon notice to him, it would not follow, in my opinion, that a caveator would be justified in continuing to maintain his caveat, when requested by the mortgagee to withdraw it for the purpose of promoting the prospects of a successful sale by the mortgagee, when the caveator could not point to any circumstance suggesting that the mortgagee was, or might be, going to exercise his powers improperly, or might fail to apply surplus proceeds in the manner required by the law.
[8] His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15.
[9] His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15 [83] - [84].
[10] Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222.
[11] Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222, 228.
In Bateson v Jones[12] Pritchard J applied this decision, holding that
[t]he same principles appear to me to be applicable in this case. The Bank's mortgage was registered prior to Mr Bateson's caveat (which asserts his unregistered equitable interest in the property). There is no evidence to suggest that the Bank is acting fraudulently or improperly in relation to the exercise of its power of sale as mortgagee. The Bank proposes to retain the surplus funds from the sale to be distributed amongst the caveators by agreement between them, or pursuant to an order of the Court. Counsel for the Bank has indicated that the Bank is amenable to an order of the Court to confirm that that will occur, although there may be some question about whether an order could properly be made in these proceedings to that effect. I will discuss that with counsel in a moment.
[12] Bateson v Jones [2013] WASC 8 [47].
The only possible basis for distinguishing these cases arises from matters contained in an affidavit sworn yesterday, 18 November 2013, by Mr Mytton-Watson. In that affidavit, Mr Mytton‑Watson says that he examined the property at 46 Saunders Way on 17 November 2013. He says that persons describing themselves as the purchasers were damaging the property. He said that they were making 'adjustments' and damaging the garden. He also says that the property is not in the condition it was in when his parents (the registered proprietors) vacated it and that the property has been ransacked and seriously damages. For this reason Mr Mytton‑Watson asserts that he has a cause of action against the Commonwealth Bank for failing adequately to secure the property while in possession and failing adequately to realise the security.
There are several reasons why this evidence does not affect my conclusion on the balance of convenience that the caveats should not be extended.
First, even if Mr Mytton‑Watson, as a creditor of the registered proprietors, has some action against the Commonwealth Bank for failing adequately to realise the security or failing adequately to protect the property, then on the evidence before me his loss could only arise if the sale price of the properties (which has been set at $567,000) would otherwise have been greater than $809,022. The evidence falls far short of establishing this.
Secondly, even if there were some basis to restrain the Commonwealth Bank from selling the properties then the persons directly affected are the first and second defendants and it is arguable that a restraint would harm their interests rather than assist them. This point was acknowledged by Mr Mytton‑Watson in written submissions which he handed up at the hearing this morning. He submitted that '[w]hile a part of me wants to seek that the caveat remain and protect me as it was intended to, I can also see that the caveat prevents the sales, making the financial damage worse. The caveat would have the effect of obstructing the completion which would mean that there is no clarity about the loss for the purposes of our [asserted] causes of action'.[13]
[13] Written submissions of Mr Mytton-Watson dated 18 November 2013 [7].

Conclusion

For these reasons, orders were made to conclude the operation of the two caveats from today. The Commonwealth Bank sought their costs of the application. In circumstances in which the extension of the caveats was sought by originating process with no underlying action and, for the reasons I have explained above, the application by the Commonwealth Bank was successful and was brought of necessity due to the pending completion of sales of the properties (which application was, until this morning, opposed), it was appropriate that the originating summons be dismissed with costs.
The parties agreed that costs should be fixed. After brief conferral, they agreed that the costs should be fixed in the amount of $2,000. Having regard to the draft bill of costs presented by the Commonwealth Bank that amount is appropriate.