Permanent Mortgages Pty Ltd v Pastro - [2018] SASC 5

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
PERMANENT MORTGAGES PTY LTD v PASTRO
[2018] SASC 5
Judgment of The Honourable Justice Parker
30 January 2018
REAL PROPERTY - TORRENS TITLE - INDEFEASIBILITY OF TITLE - EXCEPTIONS TO INDEFEASIBILITY - FRAUD OR FORGERY
REAL PROPERTY - TORRENS TITLE - INDEFEASIBILITY OF TITLE - EXCEPTIONS TO INDEFEASIBILITY - IN PERSONAM EXCEPTION
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - WHO MAY LODGE AND WHAT INTEREST SUFFICIENT - OTHER CASES
EQUITY - GENERAL PRINCIPLES - UNCONSCIONABILITY, UNCONSCIONABLE DEALINGS AND OTHER FORMS OF EQUITABLE FRAUD - KNOWLEDGE
This is an appeal against orders of a Master of this Court relating to the enforcement by the respondent of various mortgages.
The appellant challenged the decisions by the Master:
1. to refuse to refer the matter to the ordinary civil list for trial;
2. to direct the Registrar General to remove a caveat;
3. not to extend the time for removal of other caveats over the subject properties.
Held, per Parker J, dismissing the appeal:
1. The appellant does not have an arguable case, supported by evidence, which if accepted could give rise to a defence based on any of the statutory exceptions to the doctrine of indefeasibility.
2. The appellant has not shown that there is a serious question to be tried concerning the caveatable interest or that the balance of convenience favours the continuation of the caveat or extension of time to remove the caveats.
Real Property Act 1886 (SA) ss 69, 191, referred to.
Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Stone v Leonardis (2011) 110 SASR 503; Moonta Town Corporation v Rodgers (1980) 26 SASR 143, discussed.

PERMANENT MORTGAGES PTY LTD v PASTRO
[2018] SASC 5

PARKER J: This is an appeal against orders made by a Master of this Court relating to the enforcement by Permanent Mortgages Pty Ltd (PM) of mortgages. The subject mortgages were granted as security for loans taken out by a company with which the appellant was connected, SA Property Developments Pty Ltd (SAPD).[1]
[1] The Court has been informed that this company has gone into voluntary liquidation.
At the conclusion of the appeal hearing I dismissed the appeal and provided brief oral reasons. I said that I would later publish more comprehensive reasons. These are my reasons.
The following orders made by the Master are the subject of the appeal:
·The refusal of an application by the appellant for the matter to be referred from the possession list to the general civil list;
·The direction to the Registrar General to remove a caveat registered by the appellant against the title of certain land he owns at Sturt and which is subject to a mortgage held by PM; and
·The refusal of an application to extend the time for removal of caveats registered by the appellant in relation to properties he owns at Modbury Heights and Campbelltown, which are also subject to a mortgage granted by…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] SASC 5
Decision Date: 30 January 2018

CaseChat Overview and Summary

In the case of Permanent Mortgages Pty Ltd v Pastro, the appellant, Mr Pastro, appealed against decisions made by the Master of the Supreme Court of South Australia. The dispute centred on the validity of mortgages granted by Mr Pastro to the respondent, Permanent Mortgages Pty Ltd (PM), over various properties. These mortgages were intended to secure loans made to a company, SAPD, of which Mr Pastro was a director. The primary issues before the court involved the exceptions to the doctrine of indefeasibility of title under the Real Property Act 1886 (SA) and whether the appellant had raised an arguable case that could result in the matter being referred to the ordinary civil list instead of being dealt with in the summary possession list.

The court was required to determine whether Mr Pastro's case was arguable in relation to the exceptions to indefeasibility based on fraud, forgery, or unconscionable conduct by PM. The court examined the evidence presented to ascertain if there was any basis to argue that the mortgages were obtained through forgery or that PM had engaged in unconscionable conduct. The court noted that there was no evidence to support the appellant's claims of forgery or unconscionability. The court held that the appellant had not raised an arguable case supported by some evidence which, if accepted, could give rise to a defence based on fraud, forgery, or unconscionable conduct by PM.

In reaching its decision, the court considered the statutory exceptions to the doctrine of indefeasibility as outlined in the Real Property Act 1886 (SA). The court concluded that since there was no evidence of forgery or unconscionability, the exceptions did not apply. Additionally, the court found that the appellant had not demonstrated that the Master had erred in refusing to extend the time for removal of the caveats or in directing the Registrar General to remove a caveat registered by the appellant. The court found that the Master's decisions were correct and dismissed the appeal in all respects. Consequently, the court upheld the summary possession proceedings and directed that the caveats be removed without further extension.

Orders

Orders of the court

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Background

Background to the litigation

Clearly, some of those grounds make little sense. I will consider that issue below. Background ASIC records indicate that the appellant was a director of SAPD between 21 December 2012 and 4 October 2016. However, he asserts that he has no knowledge of that appointment, albeit that ASIC received documents purportedly signed by the appellant confirming his acceptance of the appointment. The appellant does not dispute that he continues to hold one share in SAPD. Mr Peter Rakic was at all material times a director of SAPD and since 4 October 2016 has been the sole director. He holds 99 of the 100 shares issued in SAPD. The primary, and probably the only, business activity of SAPD was a project to construct a number of residential units on land it owned at Port Hedland in Western Australia. For reasons that are not entirely clear, but which may be linked to the decline of the iron ore industry in WA and the insolvency of the builder, that project has not been completed. SAPD borrowed substantial funds from PM for the purposes of the Port Hedland project. The security for those borrowings was provided entirely by the appellant. He granted mortgages in favour of PM over the properties he owns at Sturt, Modbury Heights and Campbelltown. The appellant also granted security to Pepper Finance Corporation Ltd (Pepper Finance) over land he owns at Flagstaff Hill and to Liberty Financial Pty Ltd over a block of flats he owns at Whyalla Norrie. SAPD granted a mortgage to Pepper Finance over the Port Hedland property. While Mr Rakic guaranteed the loans taken out by SAPD, he did not provide any security to PM. The appellant has asserted that he was not aware that Mr Rakic was not providing any security. A joint venture agreement between SAPD, Mr Rakic and the appellant dated 19 October 2015 records that the appellant had granted mortgages to PM over the Sturt, Campbelltown and Modbury Heights properties as security for the monies borrowed by SAPD. I note that the appellant provided security for the borrowing by SAPD seven months before the making of the joint venture agreement. The joint venture agreement also records that the appellant has granted unregistered second mortgages to Pivot Way Pty Ltd over the Campbelltown, Modbury Heights, Sturt and Whyalla Norrie properties. Pivot Way was trading as McGrath Homes and was the proposed builder of the Port Hedland units. The joint venture agreement provides that at the conclusion of the Port Hedland development, Mr Rakic will be paid a management fee and the appellant a security fee as consideration for him providing security for the loans to SAPD. The provisions in the joint venture agreement relating to the payment of the management fee and security fee are not relevant to the outcome of this appeal and were not addressed in submissions by either party. Thus, it is not necessary for me to make any finding about the effect of those provisions. However, I note that payment of the management and security fees appears to be contingent upon the ultimate success of the Port Hedland project. Thus, the apparent effect of the agreement and the security granted by the appellant over his properties was to place him at serious financial risk if the Port Hedland project did not succeed. The loan applications

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In view of my findings concerning the fraud, forgery and unconscionability issues, there is not a serious question to be tried in relation to the extension of the caveats. Accordingly, I consider that the Master did not err in refusing to exercise the discretionary power to extend the time for removal of the caveat.Conclusion I do not consider that the appellant has raised an arguable case supported by some evidence which, if accepted, could give rise to a defence based on the statutory exceptions to the doctrine of indefeasibility based upon either fraud or forgery. I also have come to the same conclusion in relation to the in personam exception based on allegedly unconscionable conduct by PM. I therefore found that the Master correctly decided that the matter should continue to be dealt with in the summary possession list and not referred to the ordinary civil list. For those reasons I dismissed that element of the appeal. I also found that the Master did not err in directing the Registrar General to remove a caveat registered by the appellant against the title of the Sturt land. I further found that her Honour did not err in refusing the application to extend the time for removal of caveats registered by the appellant in relation to the properties at Modbury Heights and Campbelltown. For these reasons, I dismissed the appeal in all respects.

Ratio Decidendi

Legal Principle Established

PM was represented by counsel in the proceedings before the Master and on the appeal. Counsel submitted that neither the fraud, nor the forgery exceptions to the doctrine of indefeasibility could possibly arise and it was not arguable that PM had acted unconscionably. Accordingly, the appellant has not raised an arguable case supported by some evidence which, if accepted, could give rise to a defence. Thus, there is no basis to refer the matter to the ordinary civil list. Consideration In Moonta Town Corporation v Rodgers, the Full Court held that if an arguable case is not shown by a respondent to an application for possession, the applicant is entitled to the making of an order.[20] The decision of the Full Court was affirmed by the High Court in Rodgers v Moonta Town Corporation.[21] After having referred to Rodgers, the decision of Judge Burley in National Australia Bank v Lekakis[22] and to that of Besanko J in Bayford v St George Bank Limited,[23] Peek J held in Westpac Banking Corporation v Chadha that:In summary, provided that the applicant for an order for possession has met the requirements specified in Part XVII, Real Property Act 1886, the applicant is prima facie entitled to that order. However, if the Court is satisfied that the defendant has raised an arguable case supported by some evidence which, if accepted, could give rise to a particular defence, the matter may be referred to the ordinary civil trial list for determination.[24][20] (1980) 26 SASR 143.[21] (1981) 37 ALR 49.[22] (2003) 230 LSJS 330.[23] [2003] SASC 210.[24] [2012] SASC 223 at [35]. Whether or not the appellant has an arguable case so as to require referral to the general list depends upon whether the fraud or forgery exceptions to the doctrine of indefeasibility are arguable or, alternatively, whether the existence of an in personam exception is arguable based upon unconscionable conduct by PM. The forgery exception It is convenient to consider first whether the appellant has established an arguable case that the forgery exception to the doctrine of indefeasibility may be available to him so as to result in the setting aside of the mortgages granted to PM. Section 69 of the Real Property Act 1886 (SA) provides that the title of every registered proprietor of land is absolute and indefeasible subject only to the qualifications set out in that section. The principle of indefeasibility extends to a registered mortgage.[25] Section 69(b) creates an exception to the indefeasibility principle by providing that a certificate or other instrument of title that has been obtained by forgery is void. However, there is an important proviso included in s 69(b) which preserves the indefeasibility of title where the registered proprietor has taken bona fide for valuable consideration.[25] Merrell Associates Ltd v HL (Qld) Nominees Pty Ltd [2010] SASC 155. This should have been allocated an SASCFC citation as it is a Full Court decision. The making of the loan applications to LaTrobe was a preliminary step in the process leading to the grant of the mortgage. LaTrobe received the relevant loan applications in its capacity as agent and manager for PM. Those applications had been completed with the assistance of Bernie Lewis Finance in its role as a mortgage broker. The identity of the appellant (and also Mr Rakic) had been verified by Mr Stehbens, a Justice of the Peace. Mr Stehbens sighted and took copies of the appellant’s passport and a Medicare card. There is no evidence to suggest the certification provided by Mr Stehbens was false.