National Australia Bank Ltd v Waldron and Registrar of Titles
[2015] VSC 141
•21 April 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2015 00997
| IN THE MATTER of s 90 of the Transfer of Land Act1958 NATIONAL AUSTRALIA BANK LTD (ABN 12004044937) | Plaintiff |
| v | |
| CYBIL NICKETT WALDRON (also known as CYBIL NICKETT SGARGETTA) and THE REGISTRAR OF TITLES | First Defendant Second Defendant |
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JUDGE: | ZAMMIT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 April 2015 |
DATE OF JUDGMENT: | 21 April 2015 |
CASE MAY BE CITED AS: | National Australia Bank Ltd v Waldron & Registrar of Titles |
MEDIUM NEUTRAL CITATION: | [2015] VSC 141 |
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PROPERTY LAW – Transfer of Land Act 1958 – Removal of caveats – Priority of registered interest – Serious question to be tried – Balance of convenience.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Segal | Gadens Lawyers |
| For the Defendant | Mr M Gronow | N/A |
HER HONOUR:
Introduction
The plaintiff brings an application by originating motion seeking removal of a caveat pursuant to s 90(3) of the Transfer of Land Act 1958.
The history of this matter relates to a property, being the land described in Certificate of Title Vol 04244 Fol 765, known as 92 Old Coach Road, Kalorama, Victoria (‘the property’).
Pursuant to a written agreement dated 10 September 2007 from the plaintiff, National Australia Bank Ltd (‘the bank’) to Elliott Daniel Sgargetta (‘Mr Sgargetta’), the bank provided Mr Sgargetta financial accommodation by way of a choice package fixed rate home loan (‘loan agreement’). The security for the loan agreement is a registered mortgage over the property. Mr Sgargetta is the defendant’s (Mrs Sgargetta) husband. On 4 January 2007, Mr Sgargetta provided a mortgage over the property to the bank to secure the loan agreement (‘mortgage’). It was registered in the Register Book in dealing No AE 912489W on 21 February 2007.
Under the loan agreement, the bank advanced $300,000 to Mr Sgargetta, such amount being secured by the mortgage. As at 23 January 2015, Mr Sgargetta is in default under the loan agreement and mortgage and is indebted to the bank in the amount of $453,433, excluding costs and expenses.
On 8 October 2008, Mrs Sgargetta executed a contract of sale (‘Contract of Sale’) with her husband to purchase the property. At the time they were living in the property and were engaged in the purchase of a new property at 1 Driffield Crescent, Sassafras, Victoria. They were looking to refinance with Suncorp Bank and Bankwest. The sale price under the Contract of Sale was $385,000.
Mrs Sgargetta deposes that the purpose of purchasing the property from her husband was so that her parents could live in the property which would be close to her and her husband. Mrs Sgargetta’s parents were living in the USA at the time and it was Mrs Sgargetta’s understanding that the property could not be purchased in their names because they were foreign citizens and it was not a new property.
It was Mrs Sgargetta’s intention to purchase the property on her parent’s behalf and it be registered in Mrs Sgargetta’s name even though her parents would live there. It was Mrs Sgargetta and her husband’s intention that her husband would use the purchase moneys Mrs Sgargetta paid to him for the property to fund the purchase of a new house in Sassafras, where they now live.
On 4 December 2008, a caveat registered No AG229854R (‘caveat’) was lodged by Mrs Sgargetta and registered on the title to the property by the second defendant, the Registrar of Titles. The caveat that Mrs Sgargetta claims over the property is ‘as purchaser under a contract note dated 8 October, 2008 made between Elliott Daniel Sgargetta as vendor and Cybil Nickett Waldron as purchaser’.
Pursuant to the Contract of Sale, Mrs Sgargetta paid her husband an initial holding deposit of $8,000 in two instalments of $5,000 on 12 September 2008 and $3,000 on 15 September 2008, which was paid prior to the signing of the Contract of Sale. Mrs Sgargetta then paid the first instalment amount of $177,000 on 7 December 2008.
Mrs Sgargetta deposes that the source of the initial payment and the first instalment amount totalling $185,000 to her husband, were funds from her parents.
In accordance with the Contract of Sale, Mrs Sgargetta still had to pay $200,000, in addition to the $185,000 already advanced.
Mrs Sgargetta was aware that her husband had a mortgage and loan with the bank and that the property was security for the loan. The bank had provided to Mr Sgargetta and their conveyancer a payout statement for approximately $299,000 to pay out the mortgage and loan settlement on 1 December 2008. The Contract of Sale between Mr and Mrs Sgargetta did not proceed, as Mr Sgargetta raised a dispute with the bank over the amount required to discharge the mortgage. This subsequently became the subject of court proceedings between Mr Sgargetta and the bank.
On 8 June 2012, County Court of Victoria proceeding No CI-12-02770 was commenced by the bank against Mr Sgargetta seeking an order for possession of the property and the total amount owing under the loan agreement and the mortgage (‘County Court proceeding’).
On 17 February 2014, judgment for possession of the property and debt was entered in the County Court proceeding, whereby the County Court ordered that the bank recover from Mr Sgargetta possession of the property and that Mr Sgargetta pay to the bank the sum of $440,441.19 plus interest and costs (‘judgment’).
On 27 February 2014, Mr Sgargetta filed a Notice of Appeal in the Supreme Court of Victoria, Court of Appeal (‘Court of Appeal’) to appeal the judgment (proceeding No S APCI 2014 0029).
On 30 July 2014, the Court of Appeal made an order dismissing Mr Sgargetta’s appeal.
On 31 July 2014, a warrant of possession was issued by the County Court for possession of the property.
By letter dated 4 August 2014, the bank wrote to Mrs Sgargetta requesting that she withdraw the caveat. The letter enclosed a withdrawal of caveat form.
As at 28 January 2015, the bank’s solicitors, Gadens, had not received a response to the letter dated 4 August 2014.
On 7 August 2014, Mr Sgargetta filed a stay application summons in the Court of Appeal seeking orders that there be a stay on the judgment and a stay of the order made by the Court of Appeal until Mrs Sgargetta’s application for special leave was heard and determined by the High Court of Australia (‘stay application’).
On 11 August 2014, Mr Sgargetta filed an application for special leave to appeal to the High Court (‘special leave application’).
On 22 August 2014, the Court of Appeal made orders refusing the stay application and dismissing Mr Sgargetta’s summons filed 7 August 2014.
On 25 November 2014, the bank took possession of the property.
On 11 December 2014, the High Court of Australia published the results of the special leave application. The special leave application was dismissed.
By letter dated 16 December 2014, the bank wrote to Mrs Sgargetta requesting that she withdraw the caveat. No response has been received to the 16 August 2014 letter.
There is another caveat registered on the title of the property, being caveat AK157557N and dated 30 January 2013, lodged by Create Capital Pty Ltd in its capacity as a mortgagee.
Marketing of the property by a real estate agent retained by the bank is to commence shortly, with a view to sale of the property.
The bank relies upon the affidavit of Kevin Pringle sworn 28 January 2015.
Mrs Sgargetta relies on an affidavit sworn 6 April 2014.
Both parties rely on written submissions.
General principles
The relevant principles to be applied in an application under s 90(3) of the Transfer of Land Act 1958 were conveniently summarised by Dodds-Streeton J in Goldstraw v Goldstraw.[1] Her Honour said:
Section 90(3) is in the nature of a summary procedure analogous to the determination of interlocutory injunctions. The Court’s power under s.90(3) is discretionary. In that context, it is recognised that the caveator bears the onus of establishing that there is a serious question to be tried that he or she does have the estate or interest in the land claimed. That is, ‘in order to resist successfully the applications for removal of caveats (the caveator’s) arguments must be directed towards the assertion of an interest in the subject land in the light of relevant principles of property and equity law’. Further, if the caveator does establish the serious question to be tried in relation to the estate or interest claimed, the weight of authority indicates that the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.[2]
[1][2002] VSC 491 (‘Goldstraw’).
[2]Goldstraw [30] (footnotes omitted).
Warren CJ in Schmidt v 28 Myola Street Pty Ltd[3] said:
Without being exhaustive, the proper exercise of the discretion under s 90(3) will involve considering: in which party’s favour the balance of convenience lies; whether there is a serious question to be tried; and whether the caveator claims an interest wider than what the caveator may be entitled. These questions inform the ultimate consideration, that is, whether the caveator has discharged his or her onus of justifying the maintenance of the caveat. The process is comparable to the exercise undertaken in granting or denying an interlocutory injunction.[4]
[3](2006) 14 VR 447.
[4]Ibid [32] (footnotes omitted).
As a general rule, when considering the balance and convenience, the Court should take whichever course appears to carry the lower risk of injustice if the Court should turn out to have been ‘wrong’, in the sense of declining to order summary removal of the caveat where the caveator fails to establish its right at trial, or in failing to order summary removal of a caveat where the registered proprietor succeeded at trial.
There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator. The stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is adequate that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question, in accordance with its normal proprietary rights.
Serious question to be tried
The bank accepts that a purchaser of property under an enforceable contract of sale has an equitable interest in the land, which can be supported by a caveat. The bank submits that in this case, the Contract of Sale, which was scheduled to settle in December 2008, did not proceed. Mrs Sgargetta’s evidence is that she is still ready, willing and able to complete the Contract of Sale by paying the balance of the purchase price of $200,000 to her husband or the bank. Even though the Bankwest loan approval has lapsed, Mrs Sgargetta’s evidence is that she is able to obtain this sum from family members. Mrs Sgargetta maintains that she wants the property as a residence for her parents who still wish to move to Australia to be near her, her husband and children.
The bank submits that even if the Court is to accept that the Contract of Sale remains on foot, even though it has been over six years since settlement was due to take place, Mrs Sgargetta’s subsequent equitable caveatable interest in the property is not one which could take priority over the bank’s registered legal interest.
The bank submits that a registered interest enjoys a benefit of indefeasibility and is superior to an unregistered interest. In this case, the bank submits that there is no right to maintain a caveat blocking the exercise of the power of sale because the caveator’s interest could not take priority over the registered mortgagee’s interest in the land.[5]
[5]National Australia Bank Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd (1990) 21 NSWLR 96, 102–3.
The bank relies on the decision of Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd[6] (‘Law Mortgagees Queensland Pty Ltd’) noting the approach of the New South Wales Court of Appeal in Vukicevic v Alliance Acceptance Co Ltd & Anor.[7] The bank also relies on the cases of NAB v Bridge Wholesale Acceptance Corporation (Australia) Ltd[8] and Kerrabee Park Pty Ltd v Daley[9] to support its submissions.
[6][1999] VSC 360 (Warren J) (as she then was) (‘Law Mortgagees Queensland Pty Ltd’).
[7]Unreported, NSWCA (1987) CCH Aust & NZ Conveyancing Report, 270.
[8](1990) 21 NSWLR 96.
[9][1978] 2 NSWLR 222.
In Law Mortgagees Queensland Pty Ltd, the plaintiff’s interest as registered mortgagee arose before the creation of any equitable interest in the caveat. Her Honour said in that case:
Hence, in the present proceeding it was not until after registration of the plaintiff’s mortgage that any caveatable interest could first have arisen. It follows, therefore, that because the plaintiff’s interest as registered mortgagee arose before the creation of any equitable interest claimed in the caveats, the plaintiff's mortgage prevails and the caveats must be removed. I observe that this approach was adopted in Vukicevic v Alliance Acceptance Co Ltd & Anor.
However, even if the interest claimed in the caveats had existed prior to registration of the plaintiff’s mortgage, the caveats must still be removed because notwithstanding the order of creation of the interest claimed by the Thirteenth Corp and of the plaintiff’s mortgage, in the absence of fraud, the plaintiff as registered mortgagee holds its registered estate in the Land free of the claims of Thirteenth Corp. So much arises from s 42 of the Transfer of Land Act 1958.[10]
[10]Law Mortgagees Queensland Pty Ltd, [13]–[14] (footnotes omitted).
Her Honour went on to say in this case that:
Finally, and in any event, the court would only entertain the maintenance of the caveats on the condition that Thirteenth Corp amend the caveats, institute proceedings forthwith to establish the interest claimed, and, most importantly, pay into court the whole of the amount due under the mortgage: … ‘The caveator should not have been permitted to use its caveat to delay the completion of the mortgagee's sale without submitting to the terms which would have been imposed upon it if it had sought an injunction against completion of the sale’ … In summary, therefore, the caveats must be removed firstly because the interest of the plaintiff is first in priority, secondly, there is no allegation of fraud to support interference with the paramountcy of the prior interest of the plaintiff, thirdly, the interests upon which the caveats are based are not equitable interests in land and fourthly, the proper remedy to Thirteenth Corp is an order for damages. Although the court does not reach the point, there is a fifth factor, namely, the failure of Thirteenth Corp to proffer any security.[11]
[11]Ibid [19]–[22].
In Law Mortgagees Queensland Pty Ltd, the contract of sale relied upon by the caveator was not unconditional at the relevant time because it was subject to approval of a plan of subdivision. On behalf of Mrs Sgargetta, it is submitted that this is in contrast to the present case as the Contract of Sale was and is unconditional. It is submitted that Mrs Sgargetta will, conditional upon paying the balance of the purchase price, under her Contract of Sale be entitled to a transfer of a registrable estate in fee simple over the entire property.
Despite the fact that in Law Mortgagees Queensland Pty Ltd neither the deposit nor any other money was paid under the contract of sale,[12] the contract of sale was incomplete as in the present case. The interest claimed in the caveats in both cases is an equitable interest under an uncompleted contract of sale. On this basis, the cases are not distinguishable.
[12]Ibid [3].
It is submitted on behalf of Mrs Sgargetta that the two cases of NAB v Bridge Wholesale Acceptance Corporation (Australia) Ltd[13] and Kerrabee Park Pty Ltd v Daley,[14] where the caveat was lodged by a subsequent legal or equitable mortgagee of the land, in circumstances where the prior first registered mortgagee was entitled to first payment out of the proceeds of the proposed mortgagee sale of the land, are distinguishable from the present case.[15] This is because in the present circumstances, Mrs Sgargetta claims an interest in the whole land, in the form of the caveat, rather than an interest as a mortgagee.[16]
[13](1990) 21 NSWLR 96.
[14][1978] 2 NSWLR.
[15]Outline of Submissions of First Defendant [13].
[16]Ibid [14].
The bank’s reference to these two cases supports their submission that the registered mortgagee’s interest has priority over a subsequent equitable interest in the form of a caveat[17] and that a mortgagee is entitled to an order for the removal of a caveat.[18] The bank’s reference to these cases is to establish the legal principle, regarding priority of interests between a subsequent caveatable interest and a prior registered mortgage, to support their argument that the bank’s interest takes priority over Mrs Sgargetta’s.
[17]Plaintiff’s Outline of Submissions for Removal of Caveat [17].
[18]Ibid [20].
The difference in the facts of the case do not render them distinguishable as the legal principle, regarding priority of interests (rather than the nature of the interests), is still relevant.
In Vukicevic v Alliance Acceptance Co Ltd,[19] the interest granted was not an interest in the whole land, or an entitlement to become registered proprietor of it, but a non-exclusive profit a prendre in equity.[20] On behalf of Mrs Sgargetta, it is submitted that this is distinguishable as Mrs Sgargetta will, conditional upon paying the balance of the purchase price under her Contract of Sale, be entitled to a transfer of a registrable estate of fee simple over the entire property.
[19]Unreported, NSWCA (1987) CCH Aust & NZ Conveyancing Report, 270.
[20]Unreported, NSWCA (1987) CCH Aust & NZ Conveyancing Report.
The bank’s reliance on this case was in reference to Warren J (as she then was) noting the approach adopted by the New South Wales Court of Appeal who considered that a registered mortgage has priority over a subsequent equitable interest claimed in a caveat and that it was not until after the registration of the mortgage that any caveatable interest could have arisen.[21]
[21]Law Mortgagees Queensland Pty Ltd [13].
Therefore, the case is not distinguishable as counsel for Mrs Sgargetta asserts. The legal principle of priority of interests remains relevant to the present proceeding.
As discussed, accepting that Mrs Sgargetta purchased the property under an enforceable contract and that she has an equitable interest in the land which can be supported by the caveat, the Contract of Sale did not proceed. Even if it is accepted that the Contract of Sale remains on foot, which is somewhat questionable, given a period of six years has elapsed, any subsequent equitable caveatable interest which Mrs Sgargetta may have in the property is not one which will take priority over the bank’s registered legal interest. The fundamental principle set out in Law Mortgagees Queensland Pty Ltd, that the bank’s interest as registered mortgagee arose before the creation of any equitable interest in the caveat lodged by Mrs Sgargetta and the mortgage prevails and, accordingly, the caveat must be removed. The legal principle of priority of interests remains relevant to the present proceeding.
It was submitted on behalf of Mrs Sgargetta that the caveat lodged by Mrs Sgargetta predates the plaintiff’s enforcement of its right in obtaining judgment for possession of the property and taking possession. It seems to me that this argument is misconceived. The bank’s registered interest, which enjoys the benefit of indefeasibility, in the absence of fraud, was established at the time it registered the mortgage on the property. The fact that enforcement proceedings were subsequently commenced is not relevant to the date at which the bank’s registered interest was created.
In addition, even though Mrs Sgargetta submits that she is willing and able to complete the Contract of Sale with Mr Sgargetta, there is no evidence before this Court that it can or will be discharged. Ultimately, it may well be that Mrs Sgargetta can complete the Contract of Sale however, this will give her a right under the Contract of Sale with Mr Sgargetta. It does not provide a basis to give her an interest that has priority over the bank’s registered interest.
In the circumstances, I do not consider that there is a serious question to be tried.
Balance of convenience
For completeness, even though not necessary given my finding that there is no serious question to be tried, in relation to the balance of convenience I consider that it favours removal of the caveat.
It may well be that Mrs Sgargetta is still ready, willing and able to complete the Contract of Sale and that she desires the property be her parents’ residence in the future.
There is no evidence before the Court of the parents’ intentions and there is nothing precluding Mrs Sgargetta and/or her parents from purchasing the property in due course when it is put on the market.
It is submitted that the bank has not pointed to any prejudice it will suffer by removal of the caveat other than being delayed in being able to sell the property pursuant to its mortgage. The bank relies on Kerabee Park Pty Ltd v Daley[22] for the principle that a caveat would be readily removed on the application of a registered mortgagee who wishes to exercise the power of sale.
[22][1978] 2 NSWLR 222.
I consider there is prejudice to a mortgagee where the presence of a caveat on its title is detrimental to the proper exercise of the statutory power of sale, due to the reduced marketability of the property and in circumstances where the caveator has no grounds for proceeding to restrain the registration of a transfer by the mortgagee.
Further, the proposed amount to be paid under the Contract of Sale as discussed is insufficient to discharge the amount owed to the bank. Finally, although the Court does not reach the point, there is a complete failure by Mrs Sgargetta to proffer any security to pay into court the whole of the amount due under the mortgage.
Order
Accordingly, it follows that the plaintiff succeeds on its application and I will make declarations and orders as proposed in the bank’s summons dated 5 March 2015, subject to hearing the parties on the question of costs.
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