Paton v Hynes

[2011] WASC 106

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   PATON -v- HYNES [2011] WASC 106

CORAM:   COMMISSIONER SLEIGHT

HEARD:   8 APRIL 2011

DELIVERED          :   8 APRIL 2011

FILE NO/S:   CIV 1555 of 2011

BETWEEN:   MICHAEL RAMON PATON

Plaintiff

AND

PETER GERALD HYNES
First Defendant

REGISTRAR OF TITLES
Second Defendant

Catchwords:

Conveyancing - Caveat - Extension of caveat - Form of equitable charge - Balance of convenience

Legislation:

Transfer of Land Act 1893 (WA), s 138B, s 138C

Result:

Caveat extended

Category:    B

Representation:

Counsel:

Plaintiff:     Mr G J Mettam

First Defendant             :     In person

Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Butcher Paull & Calder

First Defendant             :     In person

Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

Avco Financial Services Ltd v White [1977] VR 561

Composite Buyers Ltd v Soong (1995) 38 NSWLR 286

Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95

Re Charge Card Services Ltd [1987] Ch 150

Spunter Pty Ltd v Hall [2006] WASC 6

1. COMMISSIONER SLEIGHT: Pursuant to s 138C of the Transfer of Land Act 1893 (WA) (the Act), the plaintiff, Mr Michael Ramon Paton applies for an order that the operation of caveat number L507879 be extended until further order of the court. The application is by an originating summons with a chamber summons seeking urgent orders.

Background

1. The application by Mr Paton is supported by an affidavit sworn by him on 31 March 2011.  From this affidavit the following facts can be ascertained:

   1.Mr Paton, as trustee for the Paton Family Trust, entered into a loan agreement with the defendant, Mr Peter Gerald Hynes.  The loan agreement is dated 20 April 2010.  Pursuant to the loan agreement the Paton Family Trust lent the defendant $57,000 which was paid on 23 April 2010.  The loan was for a period of three months and was repayable with interest of 6% per month.

   2.The loan agreement is awkwardly worded.  It does not contain a clause agreeing that any security is provided for the loan.  However, item 1 of the schedule to the agreement states as follows:

   26 Pleasant Grove, Falcon WA 6219.
   Lot 38 Plan 13502 Vol 1593 Fol 517

   (This loan is secured by the above security.  The lender reserves the right to encumber the properties located above by way of caveat/unregistered second mortgage to protect their interests)

   Clause 4.5 of the loan agreement provides some recognition of the security arrangement.  It provides:

   The lender acknowledges that borrower is currently selling down part of the subject property, and the borrower may require from time to time, a release of caveat security to enable purchaser's of said security within the subject property to settle.  The lender will agree to do so upon request, and upon receipt of $5000 at settlement to reduce the principal owing.

   3.Mr Hynes, is the registered proprietor of the land described in item 1 of the schedule of the loan agreement (which I will refer to in this decision as 'the property').

   4.The amount payable under the agreement has not been paid.

   5.On 5 December 2010, solicitors acting for the Paton Family Trust lodged caveat L507879 against the property claiming on behalf of the Paton Family Trust an interest 'in equity as equitable chargee'.  The basis for claiming the equitable charge is the loan agreement.

   6.Despite repeated demands by a financial broker acting on behalf of the Paton Family Trust, Mr Hynes has not repaid the loan amount pursuant to the loan agreement.  Further, Mr Hynes has not indicated to the plaintiff, Mr Paton, that Mr Hynes has a purchaser for part of the property and requests a release of the caveat as provided in cl 4.5 of the loan agreement.

   7.On 3 March 2011 Mr Paton commenced proceedings in the District Court of Western Australia claiming $94,620 plus costs and interest, being amounts Mr Paton says are now due under the loan agreement.  Mr Hynes has filed an appearance to this writ and a defence (albeit that the plaintiff in these proceedings has yet to file a statement of claim).

   8.Pursuant to s 138B of the Act the Registrar of Titles at the request of Mr Hynes sent a written notice dated 18 March 2011 to Mr Paton to the effect that unless Mr Paton within 21 days obtained an order from the Supreme Court extending the caveat and a copy of that order is lodged at the Titles Office, then the caveat would lapse. The caveat will lapse on 11 April 2011 pursuant to this notice.

General principles

1. The general principles that apply to an application to extend a caveat were set out in the decision of Jenkins J in Spunter Pty Ltd v Hall [2006] WASC 6 [13] ‑ [15]:

   The Act, s 137 provides that a person claiming any estate or interest in land may lodge a caveat forbidding the registration of any dealing affecting the claimed estate or interest.  The purpose of a caveat is to act as a statutory injunction to the Registrar of Titles to prevent registration of dealings with the land until notice has been given to the caveator.  This enables the caveator to pursue such remedies as he or she may have against any person lodging a dealing for registration:  J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 552 per Barwick CJ.

   The Act, s 138B provides that the proprietor of land in respect of which a caveat has been lodge may apply for the caveator to be served with a notice to the effect that unless the caveator applies to extend the operation of the caveat it will lapse within 21 days. The Act, s 138C provides that on the hearing of an application for the extension of a caveat this Court, if satisfied that the caveator's claim has or may have substance, may, amongst other things, make an order extending the operation of the caveat.

   The onus is on the caveator to satisfy the court at the hearing of an application for an extension of a caveat that the caveator's claim has or may have substance.  This has been interpreted as an onus to satisfy the court that there is a serious question to be tried as to whether a caveatable interest exists.  The caveator must also satisfy the court that the balance of convenience favours the retention of the caveat.  However, if there is a serious question to be tried it will be an unusual case where the balance of convenience favours removal of the caveat:  Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 at 50.

2. There is no doubt that an equitable charge creates a proprietary interest which is able to be protected by a caveat:  Re Charge Card Services Ltd [1987] Ch 150; Avco Financial Services Ltd v White [1977] VR 561; Composite Buyers Ltd v Soong (1995) 38 NSWLR 286.

Conclusions

1. In this matter Mr Hynes is unrepresented.  He concedes that under the terms of the loan agreement he owes money to the plaintiff.  However, he claims that the loan agreement is unenforceable on the basis that neither the broker who organised the loan nor Mr Paton is a licensed credit provider.  Mr Hynes says he relies upon legislative provisions that recently came operative.  Although he was unable to provide any particulars it would appear that his reference to the provisions that recently came into operation is a reference to the National Consumer Credit Protection Act 2009 (Cth) (the NCCP Act) which has been adopted by each of the States of Australia. This legislation generally came into operation on 1 July 2010.

2. At the time the loan agreement came into existence the Consumer Credit (Western Australia )Act 1996 was in operation which put into force in Western Australia a National Consumer Credit Code.  This was repealed as from 1 July 2010.

3. I have not had the benefit of any assistance from Mr Hynes as to the operation of the provisions of the NCCP Act or the repealed Consumer Credit (Western Australia) Act 1996. On the face of it there appears to be difficulties faced by Mr Hynes in relying upon consumer credit legislation. Both s 170 of the Consumer Credit Code under the Consumer Credit (Western Australia) Act 1996 and s 193 of the National Credit Code under the NCCP Act have a provision that in the absence of an express provision in the Code, an agreement is not automatically void and unenforceable due to a breach of the Code. Mr Hynes has been unable to direct me to any provision which makes the loan agreement automatically void or unenforceable. The civil remedies available under the Codes are discretionary albeit they include a power to grant an injunction, compensation or an order from the court declaring that the credit contract is void.

4. Mr Hynes concedes that, but for what he describes as a technical argument that neither Mr Paton nor the broker held a credit provider licence, Mr Hynes owes the amount as set out in the loan agreement.

5. I conclude that in view of the security provisions contained in the loan agreement and the uncertainty as to whether a remedy may be available to Mr Hynes under credit consumer legislation, that the plaintiff has established that there is a serious issue to be tried that the plaintiff has an equitable interest in the property as chargee to secure an outstanding loan.

6. The loan is a significant loan and on the material before me the loan has been outstanding since July 2010.  In these circumstances, I conclude that the balance of convenience is that the caveat should be extended.  In doing so I take into account the observations of Pullin JA in Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 that in cases involving a claim by way of security, the issue of the balance of convenience can be more contentious. Even an interim order can have a significant effect, if for example, there is some proposed contract in respect of the property that is due to settle. However, in this case, Mr Hynes has indicated that there is no pending settlement. The challenge to the caveat appears to have been precipitated by the action of the plaintiff in commencing proceedings in the District Court of Western Australia for recovery of the alleged debt.

7. In the circumstances I propose to make an order that the operation of caveat L507879 be extended until further order.

8. Further, there will be an order that the plaintiff provide an undertaking as to damages in the usual form as provided in the Consolidated Practice Directions.  The undertaking is to be filed by the plaintiff within seven days and failing the filing of the undertaking the order will lapse.

9. The order for the extension of the caveat is an interim order.  It does not dispose of the originating summons.  I have not heard full argument in relation to the contention of Mr Hynes that the loan agreement is unenforceable pursuant to consumer credit legislation.  If he wishes to pursue this issue he can take steps to list the originating summons for hearing.  On the hearing he will need to support his contention with reference to specific legislative provisions and authorities.

10. There will be an order that costs on the chamber summons be reserved.