Pezzano Enterprises Pty Ltd v Mias
[2023] WASC 168
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PEZZANO ENTERPRISES PTY LTD -v- MIAS [2023] WASC 168
CORAM: LUNDBERG J
HEARD: 22 MAY 2023
DELIVERED : 22 MAY 2023
PUBLISHED : 24 MAY 2023
FILE NO/S: CIV 1036 of 2023
BETWEEN: PEZZANO ENTERPRISES PTY LTD
Plaintiff
AND
CONRAD WILLIAM MIAS
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Application to extend caveat - Caveat lodged pursuant to an express charge granted under a Credit Agreement - Serious question to be tried that there is a caveatable interest - Balance of convenience favours maintenance of caveat - Requirement for undertaking as to damages - Turns on own facts
Legislation:
Bankruptcy Act 1966 (Cth), s 58
Consolidated Practice Directions, PD 4.3.4
Transfer of Land Act 1893 (WA), ss 137, 138B and 138C
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | J Allison |
| First Defendant | : | In person |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Arns & Associates |
| First Defendant | : | In person |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Bashford v Bashford [2008] WASC 138
Bride v The Registrar of Titles [2015] WASC 11
Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Metenco Pty Ltd v Smith [2023] WASC 17
Morris Finance Ltd v Brown [2017] FCAFC 97; (2017) 350 ALR 86
National Provincial and Union Bank of England v Charnley [1924] 1 KB 431
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150
Palazzo Homes Pty Ltd v Goh [2010] WASC 407
Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171
Table of Contents
A. Introduction and summary
B. Background
Procedural history
Factual context
C. Legislation and relevant principles
D. Issues for determination
E. Disposition
The interest claimed by the plaintiff as caveator
Whether the plaintiff's claim as caveator has or may have substance
Balance of convenience
Undertaking as to damages
F. Orders
LUNDBERG J:
(This judgment was delivered ex temporaneously on 22 May 2023 and has been edited from the transcript to correct matters of grammar and include complete references. The hearing was conducted as a remote hearing.)
A. Introduction and summary
This is the plaintiff's application for an order pursuant to s 138C of the Transfer of Land Act 1893 (WA) (TLA) extending the operation of a caveat which the plaintiff lodged on the first defendant's land in Subiaco, pursuant to an express legal charge in favour of the plaintiff granted under a written commercial agreement.
The very purpose of the caveat which has been lodged by the plaintiff is to restrain the first defendant, as the registered proprietor, from dealing with the land in a way which will defeat or derogate from the incidents attaching to the plaintiff's proprietary interest. In the present circumstances, the first defendant remains indebted to the plaintiff, there being a judgment debt in favour of the plaintiff. The removal of the caveat would operate to destroy the benefit of the security interest and permit the first defendant to deal with the real estate without first having to account to the plaintiff.
Having heard from the parties and reviewed the supporting affidavit material, it is my view that an order should be made that the caveat be extended until further order. My brief reasons are as follows.
B. Background
Procedural history
The proceeding was commenced by Originating Summons filed on 16 January 2023. A chamber summons was filed on the same day seeking urgent relief.
The matter was brought on for urgent hearing on 19 January 2023, and the parties agreed an interim regime allowing for the extension of the caveat pending the resolution of this matter. That interim regime was the subject of orders made by this court on 19 January 2023.
The matter was listed for hearing before me on 22 May 2023. For the purposes of that hearing, the plaintiff relied upon the brief affidavit of Mr Giuseppe Ienco sworn 16 January 2023 and an outline of submissions dated 4 April 2023. I also received an affidavit sworn by the first defendant on 27 March 2023. No written submissions were filed by the first defendant, although directions had been made requiring that this be done.
The plaintiff was represented at the hearing by Mr J Allison. The first defendant appeared on his own behalf. The second defendant, the Registrar of Titles, has taken no active part in the proceedings and did not appear at the hearing.
Factual context
On 10 October 2016, the plaintiff, the first defendant and Mias Group Pty Ltd entered into a commercial credit agreement pursuant to which the plaintiff supplied fruit and vegetables to Mias Group Pty Ltd on credit.[1] I will refer to this as the Credit Agreement. The first defendant is a signatory to the Credit Agreement in his capacity as a guarantor. He was, at the time, a director of Mias Group Pty Ltd.[2]
[1] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [4] and Attachment GI‑3 (pgs 9 ‑ 11).
[2] Affidavit of Mr Conrad William Mias sworn 27 March 2023, [4].
Pursuant to the Credit Agreement which I have just mentioned, the first defendant guaranteed the obligations of Mias Group Pty Ltd to the plaintiff. Having a director of a contracting party guarantee that party's obligations, coupled with a form of security, is a relatively orthodox commercial arrangement.
Further, the Credit Agreement provided that no time or other indulgence whatsoever that may be granted by the plaintiff to Mias Group Pty Ltd shall in any manner whatsoever affect the liability of the first defendant under the agreement and the liability of the first defendant shall continue to remain in full force and effect until all monies owing to the plaintiff have been paid and all obligations have been performed.
Further, by the Credit Agreement, the first defendant charged his right, title and interest as beneficial owner and as trustee of every trust in all real estate which he had or may have, to secure his obligations under the Credit Agreement.
The relevant clauses of the Credit Agreement are as follows:
[32]In consideration of Pezzano Enterprises entering into this Agreement each Guarantor unconditionally and irrevocably guarantees to Pezzano Enterprises the due and punctual payment of all debts and monetary liabilities including without limitation sums of money, interest, costs, damages, charges and expenses which are, or which may become payable by the Applicant to Pezzano Enterprises on any account an in any capacity ('Guaranteed Moneys') and, as a separate and independent obligation, agrees to indemnity and keep Pezzano Enterprises indemnified from and against any claim, action, loss, damage, cost, expense, outgoing or payment suffered, paid or incurred by Pezzano Enterprises in relation to the non-payment or non-recovery of the Guaranteed Moneys.
[33]Each Guarantor jointly and severally acknowledges and agrees that this Guarantee and Indemnity ('the Guarantee') is given upon and subject to the following conditions: ‑
[33.1]In the event of the Applicant failing to pay Pezzano Enterprises any Guarantees Moneys the Guarantor will immediately pay such monies to Pezzano Enterprises.
[33.2]In the event of the Applicant failing to carry out of perform any of its obligations the Guarantor will immediately carry out and perform the same.
[33.3]The Guarantor shall be deemed to be jointly and severally liable with the Applicant (in lieu of being merely a surety for it) for the payment of the Guaranteed Moneys and it shall not be necessary for Pezzano Enterprises to make any claim or demand on or to take any action or proceedings against the Applicant or make any demand against the Guarantor before commencing proceedings against the Guarantor to pay the Guaranteed Moneys or to carry out and perform the obligations herein contained.
[33.4]No time or other indulgence whatsoever that may be granted by Pezzano Enterprises to the Applicant shall in any manner whatsoever affect a liability of the Guarantor hereunder the liability of the Guarantor shall continue to remain in full force and effect until all monies owing to Pezzano Enterprises have been paid and all obligations have been performed.
[34]The Guarantor hereby charges their respective right, title and interest as beneficial owner and as trustee of every trust in all real estate which they or any of them now have or at any time hereafter may have to secure their obligations under this Agreement with Pezzano Enterprises.[3]
[3] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, Attachment GI‑3 (pg 11).
It is uncontentious that, as at 4 April 2018, Mias Group Pty Ltd had become indebted to the plaintiff in the sum of $18,695.57. Further, on 7 June 2018, the plaintiff obtained a judgment against both Mias Group Pty Ltd and the first defendant in the Magistrates Court. The judgment was in the sum of $20,711.97.[4]
[4] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [5] - [8].
On 7 August 2018, and pursuant to the Credit Agreement, the plaintiff then proceeded to lodge a caveat against the first defendant's property. The caveat is N959676 (Caveat).[5] The property in question is Lot 5 on Strata Plan 36805, being the whole of the land comprised in certificate of title Volume 2539 Folio 968 more commonly known as Unit 2, 223 Bagot Road, Subiaco WA 6008 (Subiaco Property).[6] The first defendant is the registered proprietor of the Subiaco Property. There appear to be other caveats lodged on the title to the Subiaco Property and, indeed, the first defendant has indicated from the bar table today that an additional caveat may have been lodged relatively recently.[7]
[5] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [9] and Attachment GI-1.
[6] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [3] and Attachment GI-2.
[7] ts 14.
In early 2023, the first defendant caused a 21‑day notice to be issued requiring the removal of the Caveat (pursuant to s 138B(1) TLA).[8] This notice was the catalyst for the plaintiff to commence these proceedings.
[8] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [11].
C. Legislation and relevant principles
Section 137 TLA enables a beneficiary or other person claiming an estate or interest in land to lodge a caveat.
A caveat has been described as a form of 'statutory injunction' which prevents registration of a dealing against land until the caveator has been given a reasonable opportunity to justify the caveat by pursuing such remedies as they may have: J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, 552 (Barwick CJ, McTiernan and Owen JJ agreeing); Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 44 ‑ 45 (Owen J); and Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27 [68] (Buss JA, as his Honour then was).
Section 138C(2) TLA empowers the court to extend the operation of a caveat. The terms of s 138C TLA are as follows:
(1)A caveator who is served with a notice under section 138B(1) may apply to the Supreme Court, in accordance with rules of the court, for an order extending the operation of the caveat.
(2)On the hearing of an application under subsection (1), the Supreme Court -
(a)if satisfied that the caveator's claim has or may have substance -
(i)may make an order extending the operation of the caveat for such period as is specified in the order; or
(ii)may make an order extending the operation of the caveat until the further order of the court; or
(iii)may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;
and
(b)if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and
(c)may make such ancillary orders in relation to the application as it thinks fit.
(3)An interim order under this section may be made ex parte unless the court orders otherwise.
(4)The applicant shall ensure that the Registrar is served with a copy of each order made by the court on an application under subsection (1).
The principles this court will apply in determining an application such as the present are well settled and were summarised by Beech J (as his Honour then was) in Bashford v Bashford [2008] WASC 138. The relevant principles include the following:
(a)The onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists: Bashford at [47].
(b)It is not appropriate to attempt to resolve conflicts of evidence on affidavit: Bashford at [48].
(c)The caveat will not be removed unless the claim to an estate or interest in the land appears to be without foundation: Bashford at [49].
(d)The balance of convenience is a factor to be considered in an application to extend the operation of a caveat. However, interlocutory removal of a caveat will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat: Bashford at [50].
Edelman J in Bride v The Registrar of Titles [2015] WASC 11 [12] ‑ [16] explained the issues which arise on a caveat extension application in the following manner:
[12]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.
[13]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. In assessing whether the caveator has proved that the claim has, or may have substance, the court does not ordinarily evaluate the applicant's evidence or undertake a preliminary trial.
[14]The requirement that the caveator's claim of substance be in respect of a claim of an 'estate or interest in land' has been held to mean that the claim must concern a proprietary interest in land.
[15]The second issue is the balance of convenience in extending the caveat. The court considers the balance of convenience when it decides whether to exercise its discretion to extend the caveat. The balance of convenience is not independent of the strength or weakness of the caveator's claim. Rather, the apparent strength or weakness of the case for relief at trial is a relevant consideration on the balance of convenience.
[16]An important factor in considering the balance of convenience is if the failure to extend a caveat will have the effect of destroying, or substantially impairing, the benefit of the proprietary interest which is claimed. (footnotes omitted)
D. Issues for determination
The issues relied upon by the parties in relation to this application are relatively narrow in compass. For the purposes of the present application, there are three issues for determination, which to some extent are interrelated.
The first issue is to properly characterise the interest claimed by the plaintiff and assess whether it is an 'estate or interest in land'. That is, does the claim concern a proprietary interest in land?
The second issue, having characterised the interest which is claimed, is to assess whether I am satisfied that the plaintiff's claim as caveator 'has or may have substance'. This requires that I consider whether the caveator has demonstrated there is a serious question to be tried as to whether a caveatable interest exists.
The third issue is to consider and weigh the balance of convenience. The court considers the balance of convenience when it decides whether to exercise its discretion to extend the caveat. Putting it another way, if the claim does or may have substance, then I have a discretion whether to make an order extending the operation of the Caveat for such period as is specified in the order, and may make such other orders as I think fit concerning the Caveat or the Subiaco Property.
E. Disposition
The interest claimed by the plaintiff as caveator
Turning first to properly characterise the interest claimed by the plaintiff, I note the Caveat lodged by the plaintiff describes the estate or interest being claimed as 'chargee', and expressly refers to clause 34 of the Credit Agreement.[9] The Caveat, as lodged by the plaintiff, is a subject to claim caveat, which prevents any subsequent dealing being registered unless the dealing is expressed to be subject to the caveator's claim: s 137(1) TLA.[10]
[9] Affidavit of Mr Giuseppe Ienco sworn 16 January 2023, [9] and Attachment GI-1.
[10] Section 137(1) TLA provides that: 'Any beneficiary or other person claiming any estate or interest in land under the operation of this Act or in any lease mortgage or charge under any unregistered instrument document or writing or under any equitable mortgage or charge by deposit without writing or by devolution in law or otherwise may lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or until after notice of the intended registration or dealing be given to the caveator or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat.' (underlining added)
The interest claimed by the plaintiff thus arises solely by virtue of the contractual right in clause 34 of the Credit Agreement. By that provision, the first defendant purported to grant to the plaintiff a charge over the Subiaco Property in order to secure the obligations owed by the first defendant to the plaintiff as guarantor under the Credit Agreement. No particular form of words is required to create a charge. In my view, it is clear that the clause in question, on its face and if valid, would create an equitable charge in favour of the plaintiff. That is a proprietary interest granted by way of security, which confers rights in rem. If valid, it would entitle the plaintiff, as the holder of the charge, to resort to the property in question solely for the purpose of satisfying the liability due to it.[11]
[11] Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171 [46] (Allanson J); and National Provincial and Union Bank of England v Charnley [1924] 1 KB 431, 449 ‑ 450 (Atkin LJ).
I am satisfied that the interest claimed by the plaintiff, assuming the charging clause is valid and not impeached in some way by the first defendant, is an estate or interest in the Subiaco Property, and is a proprietary interest. Further, it is unnecessary for the clause to expressly afford the plaintiff a right to lodge a caveat. Permission is not an element of s 137 TLA. It is the legal effect of the clause in question which is important.
Whether the plaintiff's claim as caveator has or may have substance
The plaintiff maintains that its Credit Agreement is valid and asserts that it provided a proper foundation for the Caveat to be lodged on the title of the first defendant's property. The plaintiff contends the Credit Agreement supports the Caveat remaining on the title. The plaintiff asserts the Credit Agreement operated, in part, to charge the first defendant's land in favour of the plaintiff, in the manner I have described in the preceding paragraphs.
The plaintiff asserts that the grounds advanced by the first defendant do not displace the validity of the Caveat or the Credit Agreement, in any way.
The matters raised by the first defendant include a contention that the Subiaco Property was purchased by the first defendant with the intention of becoming property of the first defendant's superannuation fund, the trustee of which is Conrad Mias Super Pty Ltd. The first defendant asserts he signed the Credit Agreement in his capacity as managing director of Mias Group Pty Ltd and he is no longer involved with that company (having ceased to be a director and also ceased day to day involvement with that business). The first defendant is also now bankrupt. Finally, the first defendant requires the removal of the caveat for the purpose of leasing the Subiaco Property, and there is evidence before me that a third party was interested in acquiring a lease of the property.[12] This final point goes only to the balance of convenience.
[12] Affidavit of Mr Conrad William Mias sworn 27 March 2023, [3] - [9]. It remains unclear to me why the prospective tenant is insisting on the removal of the caveat.
The plaintiff is of course correct. None of the matters identified by the first defendant, whether taken individually or collectively, operate to undermine or defeat the plaintiff's caveatable interest in the Subiaco Property, which provides the foundation for the lodgment of the Caveat. The plaintiff's claim as caveator has substance.
Specifically, it is arguable (and strongly so) that the Credit Agreement operated to charge the first defendant's real estate as security for his obligations to the plaintiff under that agreement. The terms of clause 34 of the Credit Agreement expressly provide for this charge. The existence of the contractual charge supports the plaintiff's ability to lodge a caveat over the Subiaco Property, and for that caveat to remain in operation until the underlying obligation has been discharged.
Further, the first defendant's bankruptcy does not operate to extinguish the plaintiff's rights in rem against the property.[13] In general terms, s 58 Bankruptcy Act deals with the vesting of a bankrupt's property in the trustee and provides that it is not competent for a creditor to enforce remedies against the person or property of the bankrupt in respect of a provable debt, save as otherwise provided in the statute. Section 58(5) Bankruptcy Act is relevant in this regard. It provides that:
Nothing in this section affects the right of a secured creditor to realise or otherwise deal with his or her security.
[13] Bankruptcy Act 1966 (Cth), ss 58(1) and 58(5) (Bankruptcy Act).
It is unnecessary to enter the debate as to the operation of s 58(5) Bankruptcy Act in the context of proceedings such as the present. It is sufficient that I refer to the decision of the Full Federal Court in Morris Finance Ltd v Brown [2017] FCAFC 97; (2017) 350 ALR 86, recently referred to by Strk J in this court in Metenco Pty Ltd v Smith [2023] WASC 17 [44] ‑ [47]. The Full Federal Court concluded it was contrary to the text, context, and purpose of s 58(5) Bankruptcy Act to exclude from its operation judicial processes to enforce an equitable charge (and judicial processes to extend the operation of a caveat to protect an equitable charge): Morris Finance Ltd v Brown [8] and [36] (Beach, Markovic and Moshinsky JJ). Accordingly, it is not necessary for the plaintiff to seek leave to bring or continue these proceedings, and the first defendant's bankruptcy does not otherwise preclude the caveat extension order which the plaintiff seeks on the present application.
A further related issue which arose during the course of the hearing is the legal effect, if any, of the timing of the debt in this case. The debt against the first defendant arose after the first defendant's trustee in bankruptcy was appointed. The trustee was appointed on 11 December 2017 and the debt which arose under the Credit Agreement pertains to the provision of goods and services by the plaintiff in the period from 21 December 2017 to 13 March 2018. I raised this issue with the parties during the hearing. The submission on the part of the plaintiff was that this factual circumstance does not undermine the validity of the security interest and, in any event, the plaintiff has the benefit of a judgment debt in its favour which was obtained following the appointment of the trustee in bankruptcy. I agree with this submission. My assessment is that the timing does not undermine the validity of the Credit Agreement or the plaintiff's security interest. The simple reality is that the plaintiff obtained a judgment debt in its favour in June 2018 and any argument as to the impact of the first defendant's bankruptcy ought properly have been raised at that point.
For present purposes, I record that I am satisfied the plaintiff's claim has or may have substance. That is to say, I am satisfied the plaintiff's claim that the Credit Agreement operates as a charge is arguable and, indeed, strongly arguable in the circumstances. There is thus a serious question to be tried.
Balance of convenience
I am cognisant that the amount owed to the plaintiff, which is said to be the basis for the Caveat having been lodged, is rather modest. The first defendant also contends that he requires the removal of the caveat to facilitate the leasing of the Subiaco Property. These matters go to the balance of convenience.
It is relevant that the underlying debt is modest relative to the current value of the Subiaco Property (the debt is about 10% of the value of the property, according to the assertion of the first defendant made from the bar table during the hearing),[14] and also relevant that the first defendant wishes to enter into a commercial transaction which is apparently inhibited by the Caveat.
[14] ts 13.
Against this, the removal of the Caveat in the present case (which gives rise to a proprietary interest in favour of the plaintiff and which is intended to operate as a form of security) would undermine the purpose of the arrangement the parties agreed to by the terms of the Credit Agreement. It has been said in this court that it would be unusual to remove a caveat unless the claim appears to be without foundation. In Custom Credit Corporation, Owen J held as follows (Malcolm CJ and Walsh J agreeing):
In my opinion, the balance of convenience is a factor to be considered in an application under s 138. However, it seems to me that interlocutory removal of a caveat where an arguable case as to the existence of the caveatable interest has been demonstrated, will be unusual. It is important to bear in mind the nature and purpose of a caveat under the Torrens System. By its very nature, a caveatable interest must be a proprietary interest in land. The purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidents attaching to that proprietary interest until the respective rights of the parties have been honoured (if there is agreement) or determined (if there is disagreement). In many cases, removal of the caveat will have the effect of destroying for all practical purposes, the benefit of the proprietary interest. For example, a creditor, having a specific security interest in land, will rank as an unsecured creditor once the property, the subject of the specific security, no longer exists. This will often be the result of removal of a caveat which permits the registered proprietor to sell the property free from any practical obligation to account to the secured creditor for the proceeds of sale.[15] (emphasis added)
[15] Custom Credit Corporation (50) (Owen J).
This same point was echoed by Edelman J in the authority referred to at [20] above. In Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150, Pullin JA (with whom Miller and Newnes JJA agreed) commented that balance of convenience issues are usually of little or no significance where the caveator claims an estate in fee simple or a leasehold estate. Pullin JA observed that, in those fairly common cases, it would be 'unusual' that balance of convenience issues would result in removal of the caveat once an arguable case was made out by the caveator that there was a caveatable interest (endorsing the comments of Owen J in Custom Credit Corporation).
In contrast, where the interest claimed by the caveator is a security interest or an interest in competition with another claimant against the registered proprietor, balance of convenience issues may prove to be decisive: Navarac Pty Ltd v Moondancer Holdings Pty Ltd [22] (Pullin JA).
In the present case, although the interest created by the equitable charge is proprietary in nature, the essence of the underlying agreement is to establish a security arrangement in favour of the plaintiff, confined to securing the obligations arising under the Credit Agreement. As this is a security arrangement, my view is that the interests relevant to the balance of convenience should be weighed carefully rather than approaching the matter from an assumption that the removal of the Caveat would be unusual.
Pointing in favour of the maintenance of the status quo, it is important to recognise that the first defendant was a signatory to an agreement which expressly authorised a charge over his real estate in favour of the plaintiff. There is no credible suggestion the first defendant misunderstood the Credit Agreement in any way, or was unclear about the nature of its provisions.[16] Properly advised, the first defendant ought to have contemplated that, in the event his obligations as guarantor crystalised and were not discharged by him in some way acceptable to the plaintiff, the plaintiff might avail itself of the security it obtained, including by placing a caveat on his real estate. This is a rather natural consequence flowing from the execution of an instrument which includes a charge over real estate. The fact that he has ceased his role with Mias Group Pty Ltd is neither here nor there, as far as the validity of the Credit Agreement is concerned.
[16] Affidavit of Mr Conrad William Mias sworn 27 March 2023, [4].
Further, this is not a case in which the existence or validity of the caveatable interest is seriously challenged in any way. The first defendant has also not proffered some other valuable security to replace the Caveat. For example, by the payment of the amount owing into court. Had that been done, it might have been efficacious to order the removal of the Caveat, to be replaced with the alternative security.
Ultimately, although the amount owing to the plaintiff is rather modest and the first defendant has asserted he has a commercial imperative to deal with the land, the balance weighs in favour of maintaining the Caveat, in my view. The plaintiff has a valid agreement and charging clause in its favour, and is owed a sum which is now the subject of a judgment debt. The first defendant has it within his gift (and has always had it within his gift) to pay the judgment sum, but has not done so. Of course, the first defendant is presently subject to sequestration orders and the company which he controlled and which entered into the Credit Agreement has now been wound up, so I infer the most likely source of funds for the discharge of the judgment debt would be the proceeds of sale of the Subiaco Property. In any event, the arguments the first defendant has deployed in these proceedings to preclude the Caveat having continuing effect, are very weak and, in contrast, the position of the plaintiff is strongly arguable.
I am thus not persuaded that the matters raised by the first defendant justify the removal of the Caveat. The balance of convenience favours the extension of the Caveat.
Undertaking as to damages
The final point to address is the provision of an undertaking as to damages. Practice Direction 4.3.4 of the Consolidated Practice Directions provides that:
1.Where a party is subjected to a restraint imposed by an interlocutory injunction or an interlocutory undertaking to the Court, (whether the application for an injunction is made without notice being given to the other party (ex parte), by consent, or otherwise) the party having the benefit of the restraint will generally be required to give to the Court the usual undertaking as to damages in the terms set out below. The undertaking will also be required to be given by any party obtaining the benefit of an order under:
(a)s 138 of the Transfer of Land Act 1893, having the effect of extending a caveat lodged under s 137 of that Act pending the determination of the claim in respect of which the caveat was lodged; or
(b) s 138C of the Transfer of Land Act 1893, having the effect of extending the operation of caveats after a s 138B notice
2.Any party seeking and obtaining the benefit of any such injunction, undertaking or order will generally be required to give the usual undertaking as to damages, regardless of whether such party is named in the proceedings as a plaintiff, as a defendant, or otherwise.
3.The undertaking as to damages will not usually be required from the State [or Commonwealth] except where the State [or Commonwealth] is suing to assert a proprietary or contractual right. In appropriate cases, the Court may relieve a party from the requirement to give the usual undertaking or may require modification or extension of the usual undertaking.
4.It should be noted that the usual undertaking, by its terms, unless otherwise ordered, remains operative during the period of any extension (whether by consent or otherwise) of the injunction, undertaking or order in connection with which it was originally given
5.The form of the usual undertaking is as follows:
The plaintiff or defendant (as the case may be) undertakes to the court that he will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction, or this interlocutory undertaking to the court, or the caveat as extended by this order (as the case may be) or of interim continuation thereof, such compensation as the court may in its discretion consider in the circumstances to be just, such compensation to be assessed by the court or in accordance with such directions as the court may make and to be paid in such manner as the court may direct.
I raised with counsel for the plaintiff during the hearing the necessity for an undertaking to be given, as is required by PD 4.3.4.[17] Quite apart from the Practice Direction, the court is empowered by s 138C(1)(c) TLA to make such ancillary orders in relation to the application it thinks fit, which would extend to an order which requires a caveator to give an undertaking as to damages. The giving of the undertaking is the usual price for the extension of the operation of the caveat. The court may dispense with the need for such an undertaking in an appropriate case.[18]
[17] ts 11.
[18] Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [29] ‑ [31] (Le Miere J).
The present case is not an appropriate one in which to dispense with this requirement. Having raised the matter with counsel for the plaintiff during the hearing, and afforded him an opportunity to obtain instructions, I was informed from the bar table that the plaintiff would provide the necessary undertaking as to damages in accordance with PD 4.3.4.[19]
[19] ts 12.
F. Orders
In the circumstances, subject to the plaintiff providing an undertaking as to damages in the usual terms, I will order that, pursuant to s 138C(2)(a)(ii) TLA, the operation of caveat number N959676 lodged against the first defendant's land at Lot 5 on Strata Plan 36805, being the whole of the land comprised in certificate of title Volume 2539 Folio 968, be extended until further order of the court.
As to costs, subject to hearing from the parties, I propose to order that the first defendant pay the plaintiff's costs of the action including the chamber summons dated 16 January 2023, to be taxed if not agreed.
The plaintiff submits that it is not necessary to programme the matter to a further or final hearing from this point. This is because, according to the plaintiff, the caveator's claim requires no further examination at a further hearing and the obligation it seeks to secure is already the subject of a judgment debt. Instead, the plaintiff submits that it remains for the first defendant to commence substantive proceedings to challenge the caveator's claim, if he so wishes. I agree with this submission. I therefore propose to order that this action otherwise be adjourned until further order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IHN
Associate to the Honourable Justice Lundberg
24 MAY 2023
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