Nasseri v Martello Property Pty Ltd
[2024] VSC 561
•4 September 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
PRACTICE COURT
S ECI 2024 04324
| TARENAH NASSERI | First Plaintiff |
| – and – | |
| MORTEZA SERAJANSARI | Second Plaintiff |
| v | |
| MARTELLO PROPERTY PTY LTD (ACN 644 428 124) | Defendant |
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JUDGE: | Ginnane J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 August and 4 September 2024 |
DATE OF JUDGMENT: | 4 September 2024 |
CASE MAY BE CITED AS: | Nasseri v Martello Property Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 561 |
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REAL PROPERTY – Sale of land – Caveats – Whether caveator had an estate or interest in land – Pending sale of property – First caveat claiming freehold estate – No basis for caveat – Order for caveat removal – Second caveat claiming interest in land as chargee – Claim that caveator advanced funds for development project – Dispute about rights under Development Management Agreement – Serious question to be tried – Balance of convenience favours maintenance of second caveat – Transfer of Land Act 1958 s 90(3).
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | In person | |
| For the Second Plaintiff | In person | |
| For the Defendant | Ms C Jones | Appian Lawyers |
HIS HONOUR:
The plaintiffs seek orders for the removal of two caveats registered on the certificate of title of land in Kew East. The orders are sought under s 90(3) of the Transfer of Land Act 1958. The first plaintiff, Ms Taraneh Nasseri, is the registered proprietor of the land. The second plaintiff, Mr Morteza SerajAnsari, is her former husband who claims 50 per cent of the net equity in the land, as a result of a property settlement and because of his contributions to the property’s purchase. Mr SerajAnsari made an affidavit, but because he is living overseas, he participated in the hearings remotely.
The caveats were lodged by Martello Property Pty Ltd (‘Martello’), which had entered into a Development Management Agreement (‘DMA’) with Ms Nasseri for the development of the land. Martello carries on business as a developer and project manager.
As the caveator, Martello must establish a serious question to be tried that it has an estate or interest in the land which supports the caveats and that the balance of convenience favours their maintenance until trial.[1]
[1]Piroshenko v Grojsman (2010) 27 VR 489, 491 [7].
On 23 May 2024, the second plaintiff, Mr SerajAnsari also registered a caveat on the title to protect his claimed interest in the land.
Ms Nasseri has entered into a contract to sell the property for $1.88 million with settlement pending. The Kew East property was the family home of the plaintiffs and their children. The property is mortgaged to the National Australia Bank and secures debt of approximately $1.5 million, thus leaving a net equity in the property of approximately $380,000. The mortgage was granted by Ms Nasseri and Mr SerajAnsari. However, recently mortgage repayments have not been made.
The evidence at present is that Ms Nasseri discussed with Ms Candice Hammer, the director of Martello, a joint development of the property with the construction of two town houses. Martello and Ms NasFseri executed a Memorandum of Understanding in September 2021 and in October 2021 entered into the DMA.
Under the DMA, Ms Nasseri appointed Martello to develop the land, provide development services and complete the project in accordance with the DMA and procure project funding with the assistance of Ms Nasseri. Amongst other things, Martello agreed to undertake, or procure others to undertake, all development services, and make, or join in as a party to, all applications for, or procure, all project approvals.
On 17 April 2022, Martello lodged its first caveat stating that its ground of claim was an agreement with the registered proprietor dated 28 October 2021. The estate or interest claimed was a freehold estate and the caveat sought an absolute prohibition on dealings with the property.
At the hearing, Martello advanced no basis for the first caveat and said that it had unsuccessfully sought to have it removed. In my opinion, that caveat should not have been registered because Martello had no basis to claim the freehold estate in the property. I will order its removal.
The City of Boroondara apparently did not support the proposed two town house development and Ms Hammer’s evidence was that she and Ms Nasseri agreed to vary the DMA so that one luxury house would be constructed on the land.
In October 2022, Ms Nasseri and the Old Burke Road Unit Trust, which was established for the development, contracted with Wellington Builders Pty Ltd (‘Wellington Builders’) for the construction of a double storey dwelling on the property for $1,505,000.
Martello’s case is that it advanced $425,600 under the DMA between October 2021 and January 2023. Ms Hammer says that Martello provided development services, including preparing feasibility updates for the project, managed the provision of architectural services, the demolition of the existing dwelling, the provision of engineering services, engaged the building surveyor and oversaw the building permit and protection works processes and managed the tender process for the appointment of the builder.
Ms Hammer contends that Ms Nasseri would not sign loan documents provided by a financier to obtain project funding and would not sign the engineer’s fee proposal. Ms Nasseri contended that the proposed loan did not provide for the capitalisation of interest as was required. In March 2023, Ms Nasseri emailed Wellington Builders instructing it to stop work under the contract.
In March 2023, Ms Nasseri issued a purported notice of termination of the DMA on the ground that Martello had failed to notify her that development approvals had been obtained by the approval date of 27 October 2023. Martello considered that the development approval was not required and that the purported termination of the DMA was a repudiation of the contract. It says that it accepted that repudiation on 14 April 2023 and has demanded payment of monies loaned by it under the DMA, but they have not been repaid.
On 14 July 2023, Martello registered its second caveat, which claims an interest as a chargee. The ground of the claim was again the DMA. The submissions on the two hearing dates were almost entirely directed to the second caveat.
On 23 July 2023, Martello commenced proceedings in this Court (S ECI 2023 03265) (‘the Martello proceeding’) against Ms Nasseri seeking declarations and orders that the sum of $425,600 was due and payable by her under the DMA, that it was entitled to be registered as mortgagee of the property under the DMA, that the sum of $425,600 was owing to it as a charge on the property, that Ms Nasseri execute and provide it with a Developer Mortgage as security under the DMA, and that Ms Nasseri pay it the sum of $425,600 in default of which the property was to be sold so that amount could be repaid.
Ms Nasseri denied that she was obliged to provide Martello with a mortgage. In her counterclaim, she alleged that Martello had represented to her that it would provide all project cost funding, including payment of her monthly mortgage costs, that Martello or Ms Hammer had sufficient funding to pay for project costs and mortgage repayments, that Martello and Ms Hammer guaranteed or represented to her that she would receive $2.3 million in addition to a split of profits, that Martello or Ms Hammer guaranteed or represented to her that Martello would not register a caveat on the property’s title, except in the case of default, and that those representations induced her to enter the DMA. She alleged that the representations were a collateral warranty to the DMA and that Martello and Ms Hammer have acted contrary to the representations and breached the collateral warranties, engaged in misleading or deceptive conduct and are estopped from asserting key allegations on which Martello’s claims rely. She claimed that as a result she suffered loss and damage, being building costs paid to Wellington Builders, mortgage and holding costs of the land, any amounts she is liable to pay to Martello and losses associated with the collapse of the development project, including loss of profit, diminution in the value of the land and loss of opportunity. She claimed that in breach of the DMA, Martello failed to use reasonable endeavours to procure the development approvals by the approval date and failed to obtain project funding, which was to include capitalised interest, and thereby had repudiated the DMA. She alleged that she accepted the repudiation and the agreement came to an end. She also claimed that the contract was frustrated because two town houses were not built and the project changed to the construction of a single home without an official variation.
Ms Nasseri’s counterclaim also makes allegations about Martello and Ms Hammer and their performance of functions under the DMA and their breach of duties of care owed to her. Ms Nasseri sought to bring a derivative claim against Ms Hammer, but that application was dismissed by this Court.[2]
[2]Ruling of Efthim AsJ in Martello Property Pty Ltd v Nasseri (S ECI 2023 03265) (Supreme Court of Victoria, unreported, 30 May 2024).
Provisions of the Development Management Agreement
I next consider the provisions of the DMA that are relevant to Martello’s second caveat.
The definitions in cl 1.1 include:
Project Assets means the Land and any other assets acquired or created from time to time for the purposes of the Project and, for the avoidance of doubt, includes the Subdivided Lot.
Project Financier means the provider of the Project Funding.
Project Funding means a loan facility to be provided by the Developer by the Project Financier to be secured by first ranking Security over the Project Assets subject to the provisions of Clause 5.4.
Security means a charge, mortgage, lien or other Security Interest.
Clause 2 is titled ‘Appointment To Develop Land’ and includes:
2.1 Appointment
The Landowner appoints the Developer to:
2.1.1 Develop the Land;
2.1.2 provide the Development Services; and
2.1.3 complete the Project in accordance with this Agreement.
Clause 3.3 states:
Interest in the Land
3.3Other than as specifically provided for in this Agreement, the Developer does not have any interest in the Land.
Clause 5.3, which is part of cl 5 ‘Funding’ states:
5.3.1Subject to 5.3.2, the Landowner agrees to provide the Land as security for the Project Funding;
5.3.2A Project Financier’s rights under that mortgage against the Landowner being limited to enforcement action against the Land only;
5.3.3The Landowner must, if and when requested to do so by the Developer:
(a) consent to a mortgage against the Land in favour of the Project Financier;
(b) do all other things as may be necessary to enable the Developer to procure, obtain and the Project Funding including without limitation, signing documents.
Clause 7.6 is part of the clause dealing with ‘Landowner’s Obligations’ and states:
7.6 Developer Mortgage
7.6.1 To secure to the Developer:
(a) the Developer’s entitlement to the Development Fee[3] and other payments due under the Agreement; and
[3]Clause 12.4 provides definition.
(b) the performance by the Landowner of its other Obligations under this Agreement,
the Landowner must subject to clause 5.4[4] grant the Developer Mortgage to the Developer.
7.6.2For the avoidance of doubt, the rights of the Developer under the Developer mortgage are in addition to the Developer’s rights under the Agreement.
[4]Clause 5.4 is a liability limitation provision.
Clause 18 is headed ‘Caveat’, and states:
Caveat
18.1The Landowner hereby consents to the lodging and registration of a caveat on the Land by the Developer.
18.2The Developer agrees that it will reasonably consent to any subsequent dealing that the Landowner may wish to register in respect of the Land, to the extent that such dealing is not contrary to the Developer’s interest in the Property.
Ms Nasseri’s submissions
Ms Nasseri argued that Martello did not have a right to register its second caveat as a chargee because it did not have a Developer Mortgage as provided for in the DMA. In any event, she argued that Martello could not register the second caveat in July 2023 because the DMA had been terminated in April 2023.
Ms Nasseri also submitted that cl 3.3 provided that Martello did not have any interest in the land, other than as specifically granted by the DMA. Martello could only acquire an estate or interest in the land if it obtained a Developer Mortgage under cl 7.6. Any consent by her to the lodging and registration of a caveat that might result from the terms of cl 18.1 was only operative after she had granted Martello a Developer Mortgage under cl 7.6 and that had not occurred.
Ms Nasseri submitted that Martello was not a Project Financier, a term which was intended to apply to financial institutions, and it did not have any security interest in the land. Project Funding meant a loan facility to be provided to the developer, being Martello, by the Project Financier.
Martello’s submissions
Martello submitted that it had a caveatable interest in the land as an equitable chargee pursuant to the DMA. Martello relied on the provisions of cls 5.3.1 and 18.1 of the DMA.
Martello submitted that under the DMA, Ms Nasseri provided the land as security for the project funding that it had provided.
Analysis of serious question to be tried issue
The circumstances that may give rise to an equitable charge have been described as follows:
To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the court can fairly gather from the instrument and intention by the parties that the property therein referred to should constitute a security.[5]
[5]See Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307 at [19] (Habersberger J referring to the judgment of Harper J in Crampton v French, who in turn referred to the judgment of Romer J in Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382).
I consider that Martello has established a serious question to be tried that cls 5.3.1 and 18.1 of the DMA create an equitable charge in its favour and therefore an estate or interest in the land that supports the second caveat. Because such a charge would be enforceable in equity, it would survive the termination of the contract.
I consider that cl 5.3.2 does not limit the effect of cl 5.3.1 in this case. The Landowner agreed by cl 5.3.1 to provide the land as security for the Project Funding, save when a mortgage has been granted under cl 5.3.3.to the Project Financier. If that had occurred, the Project Financier’s rights under that mortgage against the Landowner would have been limited to enforcement action against the land only. But as a mortgage had not been granted to the Project Financier, the operation of cl 5.3.1 remained unaffected and continued to have the effect that the Landowner agreed to provide the land as security for the Project Funding.
I have taken into account Ms Nasseri’s argument that because Martello did not obtain a Developer Mortgage, cl 3.3 has the effect that it did not have a security interest in the land. However, I consider that cl 7.6.2 counts against that argument by providing that the right to obtain a Developer Mortgage does not otherwise diminish any security interest that Martello has in the land. In addition, cl 18.1, the caveat clause, arguably supports the conclusion that Martello has an equitable charge over the land because it contains the Landowner’s consent to Martello lodging and registering a caveat on its title. The right to lodge a caveat given by a contract, in this case by cl 18 of the DMA, is a factor which may support the conclusion that there is a serious question to be tried that an equitable charge exists. However, the contractual right to lodge a caveat is not decisive of the issue of whether the contract creates an equitable charge, as that ultimately turns on the construction of the entire document and the rights that it confers.[6]
[6]Trancone v Aliperti (1994) 6 BPR 13,291; Coleman v Bone (1996) 9 BPR 16,235; Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174 [82]-[83]; and Ta Lee Investment Pty Ltd v Antonios (2019) 19 BPR 39,153, [2019] NSWCA 24 [79]-[114].
It is not necessary to determine the amount that the equitable charge may secure if, at the final hearing of this proceeding, such a charge is found to exist. It may not be the $425,600 that Martello claims, it may be less. Mr SerajAnsari in his oral submissions, and Ms Nasseri in her most recent affidavit, have focused on the payments, which form part of the $425,600 and which they contend are not connected to the development project. Ms Nasseri alleges that some payments have been made to businesses associated with Martello or Ms Hammer. The payments totalling $425,600 are detailed in exhibits to Ms Hammer’s second affidavit which was filed following the adjournment of the hearing on 27 August and the leave I ultimately gave to both parties to file further affidavits. Those payments are likely to require examination and assessment in the Martello proceeding.
However, there is sufficient evidence to establish for present purposes that Martello advanced some payments for the project. Such evidence, when taken with the provisions of cls 5.3.1 and 18.1, supports the existence of a serious question to be tried that Martello has an equitable charge over the land, which would provide it with a caveatable interest.
I consider that Martello arguably comes within the definition of Project Financier in the DMA, as it is defined to mean the provider of the Project Funding and Martello contends that it has provided such funding. But I do not consider that issue to be determinative as to whether Martello has established that there is a serious question to be tried that it has a caveatable interest in the land.
I have taken into account the affidavit of Ms Wheeler filed on behalf of Ms Nasseri. However, I consider that it is not directly relevant to whether Martello has an estate or interest in the land.
Balance of convenience
I next consider whether Martello has established that the balance of convenience favours the maintenance of its second caveat until trial.
Martello proposed that the second caveat be removed on the condition that the settlement proceed and the net proceeds be paid into its solicitor’s trust account, or into Court, to await the determination of the Martello proceeding. That is not acceptable to the plaintiffs. Ms Nasseri informed the Court that she had taken the first steps to declare bankruptcy. She has other liabilities, including those to Wellington Builders, as a result of orders made in this Court.[7]
[7]Nasseri v Wellington Builders Pty Ltd & Ors [2024] VSC 200.
It is significant that Mr SerajAnsari, who has registered his own caveat over the title to the land, does not agree to Martello’s proposal unless, at settlement, he receives his share of the net proceeds of the property.
The factors I consider relevant to the balance of convenience are as follows. If the caveats remain in place, the sale for $1.88 million will presumably not proceed. The proceeds of sale after the discharge of the Bank’s mortgage would be about $380,000. If the sale does not settle, the Bank may well attempt to sell the property with no certainty of what amount would be obtained. But Mr SerajAnsari’s caveat would remain and may restrict any such sale. Potential additional complications may be caused by Ms Nasseri’s foreshadowed bankruptcy and Mr SerajAnsari’s indication that, in that event, he will seek to be added as a joint registered proprietor of the property.
Because of all these matters, there is no simple solution. I have balanced the plaintiffs’ claims for monies owing to them following the termination of the DMA, Mr SerajAnsari’s claims to 50 per cent of the proceeds of sale, and also Martello’s claims in the Martello proceeding, which, if successful, could result in a judgment for more than the net proceeds of sale of the property.
All these claims cannot be reconciled unless by agreement of the parties and creditors. Even if I considered that the balance of convenience otherwise favoured the removal of the second caveat, Mr SerajAnsari’s caveat would remain and no application has been made to the Court to remove it.
I have found that Martello has established that it has a serious question to be tried that it has an estate or interest in the land justifying the maintenance of the second caveat until trial. In all the circumstances, I can see no option but to decide that the balance of convenience favours the maintenance of Martello’s second caveat, with Mr SerajAnsari’s caveat also remaining unaffected.
Therefore, I order the Registrar of Titles to remove the first caveat, which is AV538087F which was registered on 17 April 2022 from Certificate of Title, Volume 06730 Folio 946. For the reasons I have previously discussed, I consider there was no basis for its registration. I otherwise dismiss the plaintiffs’ summons dated 23 August 2024.
Costs
Costs would normally follow the event which may be regarded as Martello’s success in maintaining its second caveat. However, I consider that there should be a significant reduction in the costs that Martello is awarded because of the plaintiffs’ success in having the first caveat removed. Little time or submissions were directed to the plaintiffs’ application to remove the first caveat. Martello did not submit that it should remain on the title. I consider that there never was a proper basis for the registration of the first caveat, which claims a freehold estate in the land to be registered. It is very important that caveats only be registered where there is an arguable basis for the estate or interest in land that they claim. There was no such basis for the registration of the first caveat which has remained on the title for more than two years.
In the circumstances, I order that the plaintiffs pay the defendant half its costs on a standard basis of the plaintiffs’ summons filed 23 August 2024. I consider that both plaintiffs must be ordered to pay those costs because they have both taken part in the two hearing days.
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