Saafin Constructions Pty Ltd v Vidak
[2015] VSC 441
•25 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
S CI 2015 03611
| SAAFIN CONSTRUCTIONS PTY LTD | Plaintiff |
| v | |
| KATHERINE VIDAK | First Defendant |
| and | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | WARREN CJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 August 2015 |
DATE OF JUDGMENT: | 25 August 2015 |
CASE MAY BE CITED AS: | Saafin Constructions Pty Ltd v Vidak & anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 441 |
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REAL PROPERTY — Removal of caveat — Whether serious question to be tried — Agreement document said to give rise to caveatable interest allegedly procured by duress — Alleged option to purchase land — No consideration provided — Balance of convenience favourable to removal of caveat — Transfer of Land Act 1958 s 90(3).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M C White | NOH Legal |
| For the First Defendant | Mr J G Levine | Toorak Law Pty Ltd |
| For the Second Defendant | No appearance |
HER HONOUR:
The plaintiff seeks the removal of a caveat under s 90(3) of the Transfer of Land Act 1958.
The parties filed affidavits which were, in part, incomplete as to the facts. However, the essential facts may gleaned from the affidavits which I now summarise.
The plaintiff’s factual allegations
The plaintiff (‘Saafin’) is a corporation and has as one of its directors Wael Elsaafin, who deposed on affidavit as to the facts relied upon by the plaintiff. I set those out in the following paragraphs.
Saafin is the registered proprietor of the fee simple in the land at 65-67 Arden Street, North Melbourne (‘the North Melbourne property’), described in Certificate of Title Volume 08614 Folio 340. Another entity, Talara Nominees, is the registered mortgagee of the North Melbourne property. The first defendant (‘Ms Vidak’) lodged a caveat, number AL631976P, over the North Melbourne property (‘the caveat’). In the caveat, Ms Vidak described the caveatable interest as an ‘implied, resulting or constructive trust’. When the plaintiff’s lawyers requested that the caveat be removed, Ms Vidak through her lawyers produced a document entitled ‘Agreement’ which was said to give Ms Vidak grounds to lodge the caveat (‘the agreement document’). It provided as follows:
Agreement
DATE: 22nd August 2013
This is an agreement between Saafin Constructions Pty. Ltd.
and
Ms Katherine Vidak of 2 Eglington Court, Taylors Hill, 3037
According to the agreement, Saafin Constructions owes the amount of $200,000 to Ms Vidak, this amount of money will be paid back in full one week after getting the final certificate of occupancy permit of building the 27 apartment project of 65-67 Arden Street., North Melbourne, which owned [sic] by Saafin Constructions Pty. Ltd.
Alternatively, Ms Kathrine [sic] can buy and move to one of the apartments at the settlement date after paying the difference in the price of the unit she is moving in, depends on the market price at that time.
The document is then purported to be signed by Mr Elsaafin and one Hassan El Safin, another of Saafin’s directors, and to have been witnessed by one Mahmoud Ramahi, described as the site manager of the Arden Street project. There is a place for a signature by Ms Vidak but the document is not signed by her. Mr Elsaafin does not dispute execution and alleges that the agreement document was procured by duress and under the threat of physical harm.
The circumstances of the agreement document
Mr Elsaafin deposed that in about July 2013 he was visited by one Ali Chaouk (the first defendant’s husband) together with another man not known to him. Mr Chaouk allegedly advised Mr Elsaafin that they had lost a large sum of money as a result of a business deal involving a broker whom Mr Elsaafin knew. Mr Chaouk was said to have explained he could not recover that money from the broker as he had disappeared, however he had heard that Saafin was planning a large apartment project in the city. Mr Elsaafin deposed that Mr Chaouk said he and his wife, now identified as Ms Vidak, stood to lose Ms Vidak’s family home because of the money lost with the broker. Mr Elsaafin explained, he said, that he had nothing to do with the broker and was not responsible for their financial loss.
Mr Elsaafin deposed:
At that stage, the other male who was covered in tattoos said that he was in prison for the past 10 years and he does not care if he goes back to prison and that he heard I have 3 kids and a family home nearby. I was in fear for my safety and [that] of my family and said that I would try to help them out once the project is finished (by the project I meant the proposed apartment development on the North Melbourne Property).
Mr Elsaafin deposed that he subsequently received threatening calls and text messages from Mr Chaouk. He said he told Mr Chaouk he did not have any money, but that once the proposed development of the North Melbourne property was completed, he could give Ms Vidak $200,000 or a reduction in the purchase price of that sum in one of the apartments in the project.
He asserted on behalf of Saafin that there was no basis for the caveat and that the agreement document was unenforceable.
The first defendant’s factual allegations
Ms Vidak did not provide an affidavit herself. Instead, an affidavit affirmed by her husband, Mr Chaouk, was filed on her behalf.
Mr Chaouk deposed that the plaintiff signed the agreement document on 22 August 2013. He said that it acknowledged Saafin owed Ms Vidak the sum of $200,000 and provided her with an option to purchase a property in the North Melbourne development. Mr Chaouk deposed that he was in prison at the time the agreement was signed and he denied that any pressure had been placed upon Mr Elsaafin to sign it. Further, he said that the plaintiff signed the agreement as a result of a property development that it had promoted via Mr Elsaafin and as a result of which Ms Vidak had lost a substantial sum of money. Mr Chaouk relied on the fact that in early 2011 Mr Elsaafin promoted a property development at 48–50 Gamalite Drive, Melton West (‘the Melton West property’). Mr Chaouk deposed that the Melton West property was financed through the ANZ Bank and that at a meeting in January or February 2011 at which Mr Chaouk was present, Mr Elsaafin said he needed to get rid of the Melton West property so that he could obtain further loans from the bank.
Mr Chaouk deposed that as a result of that meeting he provided Mr Elsaafin with a shelf company, Gateway Communications Pty Ltd (‘Gateway’), to undertake the development (presumably, it was intended that the Melton West property would be transferred to Gateway). In addition, Ms Vidak provided Mr Elsaafin with her tax file number, tax returns and other financial documents.
Mr Chaouk deposed that the plaintiff sold the Melton West property to Gateway for the sum of $900,000 notwithstanding that it had been valued at $600,000. It was alleged that Mr Elsaafin arranged a loan for $665,000 from ANZ for the purchase of that property, guaranteed by Ms Vidak and secured by mortgages over the Melton West property and Ms Vidak’s home at Taylors Hill. The loan fell into arrears and ANZ commenced proceedings to obtain possession of the Melton West property. Mr Chaouk stated that ANZ sold the property for $360,000 and pursued Ms Vidak for a further sum of $475,000. Ultimately Ms Vidak settled the proceeding with the ANZ Bank for a payment of $100,000.
It is these circumstances that are relied upon by the first defendant, Ms Vidak, to make out the interest that is the subject of the caveat.
Further factual allegations of the plaintiff
In a second affidavit, sworn after that of Mr Chaouk, Mr Elsaafin deposed as to circumstances relating to a separate corporation, Sacfin Homes Pty Ltd (‘Sacfin’). He deposed that he was a director of Sacfin, which was placed into external administration and had a liquidator appointed on 4 April 2012. Sacfin was previously the registered proprietor of the Melton West land (and therefore, presumably, the transferor to Gateway).
Mr Elsaafin deposed by way of background that through an acquaintance, Mr Hassoun, he was introduced to Mr Chaouk and his father at a meeting in early 2011. Mr Elsaafin deposed that at the meeting the Chaouks expressed interest in building six townhouses on the Melton West land. Mr Elsaafin said he told the Chaouks he already had an offer for $660,000 but that his asking price was $700,000.
According to Mr Elsaafin, the Chaouks subsequently asked to meet Mr Elsaafin, to which he agreed. At the meeting the Chaouks requested that the contract sale price for the Melton West property be increased to $900,000 so that they could use part of the funds to commence construction, presumably of the units. It seems the property was then sold to Gateway for that amount.
Mr Elsaafin deposed that, at settlement, only $605,000 was tendered by the Chaouks for Gateway as the purchaser, rather than the agreed sum of $900,000. He deposed that the Chaouks agreed to pay the balance, that is the remaining sum up to $900,000, after a GST refund was obtained.
Subsequently the GST refund sum of $82,118 was paid to Sacfin. It is not clear what happened in relation to the remaining shortfall in the payment of the sale price.
Mr Elsaafin deposed that about one year after settlement he was contacted by Mr Hassoun, who advised that the Chaouks had lost money through a broker. Mr Elsaafin alleged that in early 2013 he received threatening calls from Mr Chaouk’s father through Mr Hassoun and, also, direct calls and texts from Mr Chaouk. Mr Elsaafin said he was told that unless he paid the Chaouks money to cover the money stolen by the broker they would do something to Mr Elsaafin and his family. Mr Elsaafin deposed that in early 2013 he met with Mr Chaouk’s father, Mr Hassoun and Ms Vidak’s lawyer.
Mr Elsaafin deposed that Saafin, the owner of the North Melbourne property, has had no commercial dealings with Ms Vidak.
The urgency for the caveat removal
Mr Elsaafin deposed that Saafin has sold a number of apartments to be built on the North Melbourne property off the plan and that a refinance in respect of Saafin’s mortgage over the North Melbourne property is being finalised. The mortgage is presently held by a private lender and Saafin pays interest at 11.9% per annum. Approval from another bank has been obtained which will charge interest at the lower rate of 5.7% per annum. The title search to the North Melbourne property reveals a number of caveats in addition to that lodged by Ms Vidak, however Mr Elsaafin deposed that the other caveators have agreed to withdraw them to enable the refinance to be finalised. He deposed that Saafin has suffered financial loss as a result of Ms Vidak’s caveat as without the ability to refinance under its mortgage, Saafin is exposed to approximately $8,800 per month in additional interest charges. Further, Saafin will not be able to commence construction of the development project on the North Melbourne property which will lead to Saafin losing the development opportunity and risk the ultimate liquidation of Saafin.
Legal principles
Section 90(3) of the Transfer of Land Act 1958 confers a discretion upon the Court to be exercised in similar terms to applications for interlocutory injunctive relief.[1] It falls to a caveator to satisfy a two-stage test: first, that there is a serious question to be tried that the caveator has the estate or interest which is claimed in the subject land; and secondly, that the balance of convenience favours the maintenance of the caveat until trial.[2] Application of the test aids and informs, but does not subsume, the exercise of the Court’s discretion.[3]
[1]Piroshenko v Grojsman (2010) 27 VR 489, 491 [7] (Warren CJ).
[2]Ibid.
[3]Ibid 491-2 [11].
A serious question to be tried?
Putting to one side the circumstances of the execution of the agreement document, in particular, the allegations of threats of violence, the question arises as to whether Ms Vidak has demonstrated on the evidence before the Court an equitable interest that would support the caveat over the North Melbourne property. Some observations must be made. First, the agreement document does not provide for any consideration. Secondly, the basis upon which the alleged debt is owed is undefined and uncalculated; so far as it is explained in Mr Chaouk’s affidavit, it seems to be asserted that because Ms Vidak lost money in the Melton West property transaction dealing with corporations, namely, Gateway Communications and Sacfin Homes, Saafin in some way became indebted to her. The alleged obligation is not explained or substantiated. Thirdly, if any agreement or debt arose, on the basis of Mr Chaouk’s affidavit it arose with respect to the Melton West property. As a result, in so far as a corporation was relevant, it was Sacfin and not Saafin; Saafin was not involved in the Melton West property transaction. Fourthly, the caveat does not mention or describe the Melton West property, the alleged agreement document or any other matter that might connect Saafin with Ms Vidak.
Ms Vidak bears the onus of justifying the maintenance of the caveat. In my view, nothing has been made out or demonstrated in the affidavit of Mr Chaouk to substantiate an implied, constructive or resulting trust as asserted in the caveat.
In Piroshenko v Grojsman, I said:
[I]t should be noted that the onus which the caveator must discharge is an onus with respect to an interest or rights in land. Caveats are not “bargaining chips”. It is not sufficient for the caveator to establish a prima facie case that they have contractual, equitable or statutory rights against the caveatee; their interest or rights must attach to the property with respect to which the caveat has been lodged.[4]
[4]Ibid 495 [23].
On analysis, Ms Vidak as the caveator has not made out her assertion of an implied, constructive or resulting trust attaching to the North Melbourne property in the light of the relevant legal principles. Even if Mr Chaouk’s assertions were accepted without challenge, they would not establish the equitable interest claimed under the caveat.
In the course of argument counsel for Ms Vidak submitted that she had an option to purchase the North Melbourne property arising from the alleged agreement. It was submitted that the agreement constitutes an option to purchase and, also, an acknowledgement that Saafin will pay the amount of $200,000 to Ms Vidak. In Laybutt v Amoco Australia Pty Ltd,[5] Gibbs J described an option to purchase as ‘an option granted inter vivos and for valuable consideration’[6] and as ‘a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option … it gives the grantee the right, if he performs the stipulated conditions, to become the purchaser.’[7]
[5](1974) 132 CLR 57.
[6]Ibid 70.
[7]Ibid 76.
Options to purchase are caveatable interests.[8] In Schmidt v 28 Myola Street Pty Ltd,[9] I explained that s 89 of the Transfer of Land Act was broad enough to encompass many equitable interests.[10] The difficulty for the first defendant here is that the high point of her evidence is the agreement document. Whilst that document refers to the North Melbourne property, there is no evidence of the provision of any consideration. The alleged agreement does no more than assert that Saafin owes Ms Vidak $200,000. There is no evidence that Saafin received anything in return for the signing of the agreement document and, further, nothing is said in Mr Chaouk’s affidavit to reveal an obligation owed by Saafin to Ms Vidak. It is well settled law that consideration must move from a promisee for a contract to be legally enforceable.[11] I am not satisfied on the evidence before the Court that any legally enforceable contract has given Ms Vidak a caveatable interest in the North Melbourne property.
[8]See ibid; CFHW Pty Ltd v Burness [2014] VSC 451, [25].
[9](2006) 14 VR 447.
[10]Ibid 453 [20].
[11]Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, 853 (Lord Haldane); Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392, 407 [66] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ).
Where the balance of convenience lies
I turn to the question of where the balance of convenience lies, although it is not strictly necessary to do so given the conclusion I have reached. In essence, I should take the course which ‘appears to carry the lower risk of injustice if it should turn out to have been “wrong”’.[12] For the plaintiff, Saafin, the risk if the caveat is not removed means it faces potential liquidation. Nothing was put forward against that position by Ms Vidak, such as loss she might suffer. In so far as she may be owed monies by Saafin, or for that matter Mr Elsaafin or anybody else, there is no barrier to her pursuing that entity or person for those monies (absent insolvency). There is nothing put forward to indicate that the balance of convenience lies in any way in favour of Ms Vidak. Accordingly, if it were necessary to decide on the balance of convenience I would consider that the caveat should be withdrawn. For these reasons, I will order the removal of the caveat.
[12]Bradto Pty Ltd v Victoria (2006) 15 VR 65, 73 (Maxwell P and Charles JA).
It was proposed by Ms Vidak that in the event I determined to order the removal of the caveat, such removal should be conditional upon the payment into court of the $200,000 debt. Such a condition is unnecessary given the view I have taken of the evidence relied upon by Ms Vidak. In any event, there was no deposition that she had issued proceedings to recover the $200,000. Indeed, the debt was not sufficiently substantiated; rather, it was merely asserted by Mr Chaouk in his affidavit.
Finally, I observe that the Registrar of Titles as second defendant has indicated that there will be no participation in the hearing and the event will be abided. I would make orders accordingly.
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