Swinburne v Bose
[2016] WASC 299
•20 SEPTEMBER 2016
SWINBURNE -v- BOSE [2016] WASC 299
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 299 | |
| Case No: | CIV:2452/2016 | 7 SEPTEMBER 2016 | |
| Coram: | BANKS-SMITH J | 20/09/16 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Caveat extended | ||
| B | |||
| PDF Version |
| Parties: | PETER RAYMOND SWINBURNE SHANE KUMAR BOSE REGISTRAR OF TITLES |
Catchwords: | Real property Application to extend caveat Whether equitable charge arises from loan agreement Construction of written agreement Whether debt due Balance of convenience |
Legislation: | Transfer of Land Act 1893 (WA), s 138C |
Case References: | Above All Rigging & Site Modifications Pty Ltd v Lang [2015] WASC 414 Bashford v Bashford [2008] WASC 138 Bride v The Registrar of Titles [2015] WASC 11 Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230 Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471 Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 Miluc Pty Ltd and Commissioner of State Revenue [2008] WASAT 68 Porter v McDonald [1984] WAR 271 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 Saraceni v Mentha [2011] WASC 94 Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162 Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 Troncone v Aliperti (1994) 6 BPR 97,455; (1994) NSW ConvR 55-703 Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
SHANE KUMAR BOSE
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Application to extend caveat - Whether equitable charge arises from loan agreement - Construction of written agreement - Whether debt due - Balance of convenience
Legislation:
Transfer of Land Act 1893 (WA), s 138C
Result:
Caveat extended
Category: B
Representation:
Counsel:
Plaintiff : Mr A J Aristei
First Defendant : Mr J M Burke
Second Defendant : No appearance
Solicitors:
Plaintiff : Irwin Legal
First Defendant : MDS Legal
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Above All Rigging & Site Modifications Pty Ltd v Lang [2015] WASC 414
Bashford v Bashford [2008] WASC 138
Bride v The Registrar of Titles [2015] WASC 11
Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471
Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382
Miluc Pty Ltd and Commissioner of State Revenue [2008] WASAT 68
Porter v McDonald [1984] WAR 271
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65
Saraceni v Mentha [2011] WASC 94
Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164
Troncone v Aliperti (1994) 6 BPR 97,455; (1994) NSW ConvR 55-703
Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171
- BANKS-SMITH J:
Introduction
1 The plaintiff applies by originating summons pursuant to s 138C of the Transfer of Land Act 1893 (WA) (TLA) for an order extending a caveat over property owned by the first defendant. The application was supported by an affidavit of the plaintiff filed 24 August 2014, and the undertaking as to damages as required by Supreme Court Practice Direction 4.3.4.
2 The matter first came before me on 29 August 2016. There was some urgency to the initial application in that absent any order, the caveat was due to lapse at midnight on 1 September 2016.
3 At the first hearing, an order was made by consent that the operation of the caveat be extended until further order. Directions were made as to the filing of further evidence and submissions.
4 The first defendant owns the relevant property with his wife as joint tenants. The caveat purports to affect only the interest of the first defendant. Accordingly, inquiries were made as to whether the first defendant's wife wished to be heard on the application. The first defendant's solicitors subsequently informed the court that his wife was aware of the proceedings but did not wish to be heard.
5 In summary, the central issue between the parties is whether a provision in loan agreements made between the plaintiff and the first defendant that provides for a caveat to be lodged upon default in payment, grants a caveatable interest.
Legal principles to be applied on extension application
6 The general principles relating to an extension of a caveat under s 138C of the TLA are well established. They were summarised by Edelman J in Bride v The Registrar of Titles,1 as follows:
Section 137 of the Transfer of Land Act 1893 (WA) enables a beneficiary or other person claiming an estate or interest in land to lodge a caveat. Section 138C(2) provides for the Supreme Court's powers when a caveator applies to the Supreme Court for an order extending the operation of a caveat, as follows:
'(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.'
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.
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.
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.
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.
The caveat
7 The first defendant is the registered proprietor (as joint tenant) of a property in Canning Vale (Property). The certificate of title reveals a mortgage in favour of the Commonwealth Bank registered 21 December 2015, a caveat lodged by TL Rentals Pty Ltd (TLR caveat) and, relevantly, a subject to claim caveat lodged by the plaintiff on 28 July 2016. That is the caveat the subject of this application.
8 The caveat notifies that an estate or interest is claimed as follows:
Equitable charge as to the interest of [the first defendant] only (by provision of an express right for the caveator to caveat the land, pursuant to loan agreements between the caveator and [the first defendant]).
9 On 10 August 2016, and on the first defendant's application, the Registrar of Titles provided to the plaintiff a notice under s 138B of the TLA, informing him that the caveat would lapse at midnight on 1 September 2016, absent any Supreme Court order under s 138B(2)(a).
Plaintiff's evidence
10 The plaintiff has filed three affidavits which disclose the following.
11 The plaintiff started a wholesale fruit and vegetable surplus business in 2004, trading under the business name 'About Produce'. The business was owned by a company of which the plaintiff is the sole director and shareholder, About Produce Pty Ltd.
12 In April 2015, the plaintiff negotiated with the first defendant for the sale of the business. The plaintiff says that at that time, the first defendant told him that he had various assets including the Property, two other commercial lots in Canning Vale, a trucking business in Perth and in the eastern states, and three properties in New Zealand.
13 By an offer dated 20 May 2015 (first offer), the first defendant offered to purchase the business for $850,000.2 The offer utilises a standard REIWA form and was prepared by Goodwin Mitchell O'Hehir as agent for the seller. The purchaser is described as Kushal Bose Transport Pty Ltd (KBT). The first defendant is the sole director and shareholder of KBT.
14 By letter dated 2 October 2015 from the first defendant to the plaintiff, the first defendant confirmed he had agreed to buy the business for $850,000.3 He claimed that the bank which was providing finance was only willing to provide $550,000 towards the acquisition. On that basis he offered to pay an additional $100,000 if the plaintiff provided vendor finance of $300,000, all repayable over two years. In the letter, the first defendant says that the bank does not need to know about the vendor finance agreement.
15 The plaintiff agreed to provide vendor finance as requested. Neither party appears to have been represented by lawyers in the negotiations. The first defendant said he would draft the loan agreement 'with his lawyer', but that did not come to pass. The plaintiff then drafted two loan agreements himself, both made between the plaintiff and first defendant.
16 I note that the financial arrangement was not vendor finance in the strict sense as it was made between the plaintiff and the first defendant in their personal capacities and not between the companies that comprised the vendor and purchaser. However, there is clearly a connection between the sale of the business by the plaintiff's company and the loan agreements.
17 On 15 October 2015, a second offer to purchase the business was presented by KBT to About Produce Pty Ltd in the same format, but with a stated purchase price of $550,000 (second offer).4 The offer was accepted.
18 The loan agreements were also executed on 15 October 2015. Both agreements are headed 'Terms and Conditions of Loan Finance'.5
19 By the first loan agreement, the first defendant agreed to repay the sum of $300,000 over a term of two years. Clause 5 of the first loan agreement provides that:
Repayments of Lender Finance will be made monthly with a set amount of 24 payments of $12,500 AUD deposited every month into the lender's nominated account. These payments will commence on 10 January 2016.
20 Clause 5a of the first loan agreement provides that:
If there is any default in repayment for more than 2 months [then] Peter Swinburne (the lender) has the legal right to take caveat over [the Property].
21 By the second loan agreement, the first defendant agreed to repay the sum of $120,000 over a term of two years. That sum was said to be made up of $100,000 by way of 'loan interest' on the $300,000, and $20,000 by way of purchase price for a Hino truck.
22 Clause 5 of the second loan agreement provides that:
Repayments of Lender Finance will be made monthly with a set amount of 24 payments of $5,000 AUD deposited every month into the lender's nominated account. These payments will commence on 10 January 2016.
23 Clause 5a of the first loan agreement is mirrored in the second loan agreement.
24 There are other provisions common to the first and second loan agreements as to the first defendant maintaining life insurance and income protection insurance to be applied towards outstanding monies. There are also terms relating to the plaintiff's employment by the business post settlement and to the effect that amendments to the loan agreements are to be signed by both parties.
25 On the date the loan agreements were signed (15 October 2015), the plaintiff first met with the first defendant and his wife and gave the draft documents to him. In the draft loan agreements, cl 5a read:
If there is any default in repayment for more than 2 months than Peter Swinburne (the lender) has the legal right to take full possession of all plant and equipment belonging to About Produce.
26 At the meeting, the words 'full possession of all plant and equipment belonging to About Produce' were manually struck through and the words, 'caveat over [the Property]' were substituted. The parties initialled the change.
27 The plaintiff says that the change was made in the following circumstances:6
At the meeting, Bose and Shyamali [the first defendant's wife] stated words to the effect that they could not give me the right to take possession of all plant and equipment belonging to the Business as they were looking at on-selling the assets to a 3rd party and leasing them back. I then stated to Bose and Shyamali that I wanted security if I was going to give vendor finance and said words to the effect of 'what have I got as security for my loan if you go bust?' Bose then said 'you have my house - you can put a caveat on my house as security for the loan, so you will be paid.' We then agreed to amend clause 5a of the loan agreements to reflect this and handwrote those amendments in front of Bose and Shyamali on 15 October 2015.
28 According to the plaintiff, settlement of the sale of business took place on about 21 December 2015. The transfer of business name to KBT is in evidence.7
29 The effect of the express terms of the respective loan agreements is that the first defendant was required to make monthly payments of $17,500 commencing on 10 January 2016. However, the plaintiff says that the loan agreements were subsequently varied orally such that the first payment became due on 22 February 2016.
30 According to the plaintiff's table of payments:8
(a) the first monthly payment of $17,500 was due on 22 February 2016. By 28 May 2016 (the date two months prior to the caveat lodgement date of 28 July 2016), four payments in the total sum of $70,000 should have been made. The first payment was in the sum of $4,200 and was made on 23 March 2016. By 28 May 2016, 10 payments in the sum of $4200 had been made to the plaintiff, a total of $42,000. There was therefore a shortfall of $28,000;
(b) for each of April and May 2016, four payments of $4200 were made ($16,800) instead of $17,500 per month;
(c) if the default position is considered at the date of the caveat, then $105,000 ought to have been paid but the amount paid was $67,200; and
(d) only one further payment of $4200 has been made and the first defendant remains in default.
31 A bank statement is in evidence which shows that 16 payments of $4,200 were made to the plaintiff during the period 23 March 2016 to 11 July 2016.9
First defendant's evidence
32 The first defendant filed an affidavit in opposition to the application. In that affidavit, he does not refer to the first offer or the 2 October 2016 letter. He refers to the second offer, agrees that a meeting was held on 15 October 2015 during which he received the draft loan agreements and agrees that amendments were made to the draft loan agreements. He denies telling the plaintiff he owned the assets referred to by the plaintiff.
33 His evidence as to the conversation about cl 5a is:10
After reading [the first version of clause 5a], I said to the plaintiff that I would not be able to give him possession of the Business' plant and equipment because I had arranged for the plant and equipment to be purchased by another company at settlement of the sale of Business and leased back to [KBT].
The plaintiff then said he could change the clause so that instead of taking possession of the plant and equipment, he could take a caveat over the Property. I said OK. The plaintiff then amended clause 5a and we both initialled the change.
34 The first defendant also says:11
No funds were advanced to me pursuant to the [L]oan [A]greements.
The purchase price for the Business stated in the contract is a total of $550,000.
35 The first defendant claims he stopped making payments to the plaintiff because of a dispute about the 'contra account' that applied post settlement as between the vendor and purchaser companies. He says there was an oral variation to the loan agreements such that he was not supposed to commence making payments until mid-March 2016.
The relevance of the competing evidence
36 There is conflicting evidence as to what was said at the meeting of 15 October 2015 (particularly as to whether the word 'security' was used) and as to the dates of commencement of payment. That conflict cannot be resolved in an application of this nature.12
37 Further, there are issues as to the admissibility of the evidence about the change in wording to cl 5a.
38 Whether or not such evidence is admissible depends upon the nature of the final relief sought by the plaintiff in substantive proceedings.
39 At the hearing, counsel for the plaintiff indicated that he intended to issue proceedings against the first defendant with respect to the outstanding payments and seek final relief. The causes of action were said to include, 'specific performance of a contract made partly orally and partly in writing' and rectification, 'so that the document should embody the true agreement'.13
40 Since the hearing, the plaintiff has issued a writ with indorsed statement of claim, a matter brought to my attention on 15 September 2016.14 Both parties (with leave) then filed supplementary submissions.
41 Relevantly, the plaintiff's statement of claim seeks relief, 'to the extent necessary to enforce his rights pursuant to the equitable charge'. The plaintiff pleads that the terms of the loan agreements include the written terms and also an oral term, 'that the plaintiff was empowered to lodge a caveat against the first defendant's interest in the property and to enforce the first defendant's payment of his obligations under clause 5a of the [loan agreements] by the sale of that interest if there was any outstanding sum owing for a period of over two months'. The plaintiff refers to this as the additional term. In the alternative, the plaintiff seeks rectification of the loan agreements such that cl 5a is amended to reflect the additional term. In short, the pleaded causes of action are consistent with the intended causes of action anticipated at the hearing.
42 The first defendant says the issue of whether or not the loan agreements disclose a caveatable interest is to be determined as a matter of construction of the written loan agreements only. He says the contracts are complete and are entirely written. If the only issue were one of construction of the written agreements, then I accept for the purpose of this application the first defendant's submission that extrinsic evidence as to the reason for the amendment is not admissible.15
43 I also take into account the first defendant's submissions as to the heavy onus that the plaintiff bears in establishing oral terms in the face of a contract that appears on its face to be entire. Two of the principles collected by Campbell JA in Masterton Homes Pty Ltd v Palm Assets Pty Ltd16 as to deciding whether an agreement that parties have entered is one that is wholly in writing, or partly written and partly oral, are particularly relevant:
(1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties;
(2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them.
44 There is no doubt the plaintiff may have difficulty in establishing that the parties agreed on terms in addition to those appearing in the loan agreements. There is nothing that clearly suggests the parties objectively intended that the contract would be partly in writing and partly oral. Having said that, the additional term is not inconsistent with the written agreement and so cannot simply be dismissed at this point. By their nature, oral agreements are sometimes disputable.17 The competing evidence must be assessed in the substantive proceedings.
45 However, insofar as a claim for rectification is concerned, it proceeds on the basis that the contract is written. For rectification claims, evidence of conversations may well be relevant and admissible.18 If the loan agreements were rectified, then rectification operates retrospectively.
46 I approach the determination of this application on the basis that the primary issue is whether the written terms of the loan agreements give rise to a caveatable interest, without regard to any additional term allegedly agreed orally. The first defendant's contentions are accordingly addressed. However, I also take into account whether there is a serious question to be tried as to the other causes of action the plaintiff pursues.
Threshold point - debt owing for two months
47 There was some dispute as to whether it was necessary to establish that default in payment had continued for two months in order to trigger an entitlement to lodge the caveat. In my view, that dispute falls away because in any event there is a prima facie case that there was default in payment of the sums due that continued for two months, whether one takes 22 February 2016 or 23 March 2016 as the date of the first payment obligation. No notice of default was required to trigger the payment obligation, the time for payment being express.
Principles - caveatable interests and loan agreements
48 The plaintiff claims an equitable charge over the Property to secure repayment of the monies owing under the two loan agreements. Reliance is placed on cl 5a. There are no express words creating an equitable charge.
49 The question is whether an implication may be drawn from the terms of the agreements. As expressed in Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd:19
In a contractual setting, the question is whether the contractual parties have expressly or impliedly evinced an intention to appropriate property for the discharge of a debt or other obligation and to give the creditor a present right to have the property made available
50 It is not uncommon for a debtor to give a creditor a right to lodge a caveat in a contract that acknowledges a debt and provides for its repayment. Regrettably, such clauses often do not make clear what the parties intend. The court has been left to determine on many occasions whether such a clause gives rise to an equitable charge.
51 As noted by Le Miere J in Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd,20 it was formerly thought that a purely contractual right could not be elevated to a caveatable interest merely because the parties agree that a caveat can be lodged, but this view 'may now be too narrow'.
52 The decision usually cited as suggesting a broader approach is that of the New South Wales Court of Appeal in Troncone v Aliperti.21 In Troncone, the court considered a clause which read (relevantly) as follows:
The Debtor authorises the Creditors to lodge a caveat on any property owned by the Debtor to protect his interest.
53 Mahoney JA said that:
In order to determine the present appeal, it is not necessary to determine what is the precise nature of the interest in the land which, by this implied grant, was passed to the creditors. It is, in my opinion, sufficient to conclude that it was an interest which, within the Real Property Act 1900, would support the lodgement of the caveat.
54 Meagher JA agreed with Mahoney JA but added:
First, once one reaches the conclusion that Mr Aliperti did intend to grant each of his lenders an interest in his land, that interest in the circumstances can only be an equitable charge.
Secondly, since the clause in question was of obvious importance to the parties to the transaction, one can assume it was not intended to be meaningless; and, unless one construes it as granting a charge, it would be meaningless.
55 There has been some debate as to whether those statements were intended to be statements of a principle to be applied in all cases where there is an authority to lodge a caveat or propositions based on the facts of the case.
56 In Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd,22 Allanson J traces the debate and I respectfully adopt his summary:
The next question is what implication should be drawn from an agreement that a party to a contract may place a caveat on title. This has been the subject of recent consideration in several cases, particularly in New South Wales. In Taleb v National Australia Bank Ltd [2011] NSWSC 1562; (2011) 82 NSWLR 489 [60] - [61], Bryson AJ said
'… In my view the meaning conveyed by a contractual document, including what is conveyed by implication, must be understood by addressing the terms and the whole terms of the document in question, and there is no principle or true principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money. In my opinion Mahoney JA did not state such a principle in Troncone v Aliperti and in my opinion there cannot be such a principle, because a principle of law of that kind would divert the court from addressing the terms of each document to discover what it means, by expression and by implication.
The circumstances that there was a debt and that there is to be a caveat, together with the nature of the caveat, certainly direct attention to whether it was intended that the debt should be protected by a charge or some other interest. It is quite likely that there was some such intention in the mind of one party or of both, but if that intention is not found expressed or by implication in their document there is no equitable interest. Authorisation to lodge a caveat does not create by necessary implication the conclusion that there must have been an intention to create an equitable interest, and that there must have been the further intention that that interest should be a charge over the property.'
In Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393 [82] - [83], Gleeson JA (Meagher and Leeming JJA agreeing) said:
'Whether it is possible to discern from the authorisation to lodge a caveat (given by a registered proprietor), an intention to create a charge which would support a caveat is the subject of conflicting views in the authorities. The conflict relates to whether there is a principle establishing what implication must be drawn in all cases from the authority to lodge a caveat in connection with an obligation to pay money, or whether each case is to be addressed by reference to the terms of the contractual document to discover what it means, by expression and by implication: Taleb v National Australia Bank Ltd [2011] NSWSC 1562; 82 NSWLR 489 at [60] per Bryson AJ.
In my view, Bryson AJ was correct to observe in Taleb that the statements of Mahoney JA and Meagher JA in Troncone v Aliperti (1994) 6 BPR 13,291 are not to be taken as such a principle. Rather, they are to be taken as a proposition to be derived from the facts in Troncone. So much is clear from the summary of the proposition in Troncone, given by McLelland CJ in Eq in Coleman v Bone (1996) 9 BPR 16,235 at 16,239:
"... if in a contract between A and B, A grants B authority to lodge a caveat in respect of property of A, that grant carries with it by implication such estate or interest in the property as is necessary to enable that authority to be exercised. Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money (Troncone at BPR 13,293-4, ConvR 60,020 per Meagher JA)."'
'[W]here the only right given to the creditor is to lodge a caveat, it might be difficult to determine whether the parties intended the lender to have a charge over the relevant property. A mere right to lodge a caveat, without more, should not give the creditor a charge: see Taleb v National Australia Bank [2011] NSWSC 1562; (2011) 82 NSWLR 489 at (61); cf Coleman v Bone (1996) 9 BPR 16,235 and Iaconis v Laza [2007] NSWSC 1103; (2007) 13 BPR 24,937. However, it may be, when all of the circumstances are considered, and the relevant term is construed in its context, the court should find by implication that the parties intended that the creditor would be entitled to a charge: see Murphy v Wright. Where the relevant term uses words such as "charge" and "mortgage" the conclusion that the term was intended to create a security in favour of the lender may be relatively easy to reach.'
58 In Miluc Pty Ltd and Commissioner of State Revenue,24 the relevant agreement provided that the debtor granted the creditor the right to lodge a caveat over certain land, 'in consideration for the loan'.25 In issue was whether the agreement constituted a mortgage or charge assessable for duty under the Stamp Act 1921 (WA). Barker J held that the right of the creditor to lodge the caveat was given in connection with the obligation of the debtor to pay the money. His Honour held that the deed comprised an equitable charge. Importantly, however, the agreement also contained a clause whereby the parties agreed that the caveat could be withdrawn if 'other property as provides sufficient security' were provided. Barker J considered this confirmed that the parties thought they were providing security in the first place.
59 In Yaran Holdings, Allanson J was unable to imply the grant of a caveatable interest from the existence of a debt and an express right to lodge a caveat. However, in that case there was a suite of documents, one of which contained provisions inconsistent with the implication of a grant of security.
60 Similarly, in Above All Rigging,26 Mitchell J was unable to find such grant. The relevant clause provided that:
The [first defendants] hereby agree to permit the [plaintiff] to register a caveat over all [the specified property].
61 His Honour was dealing with a liability under a guarantee of a loan and not under a direct loan, and distinguished cases dealing with loan obligations on that basis.
62 Ultimately, little can be gained from attempting to compare the precise wording of clauses considered in other cases. The differences are often subtle. Whether or not the relevant intention to grant an interest in the land can be implied will always depend upon the terms of the relevant contract in the particular circumstances to hand.
Plaintiff's claim to caveatable interest has or may have substance
63 In this case, I am persuaded that on balance, there is an arguable case that an intention to grant an equitable charge is to be implied so that the caveat 'may have substance' within the meaning of s 138C of the TLA. The case is not as clear as others: words such as 'security' and 'charge' or even 'safe guard' are not used. Their absence is not decisive. I am influenced by the inclusion of the words in cl 5a, 'If there is any default in repayment'. It seems to me that there is a reasonable argument that the authority to caveat linked with the obligation to pay the plaintiff and the focus on the position that arises upon default, reflects an intention that the interest granted under the loan agreements is an equitable charge.
64 Furthermore, taking into account the conflicting evidence as to the relevant conversation, the nature of the transaction as described by the plaintiff and the fact that the loan agreements were not drafted by lawyers, I consider there is a serious question to be tried as to the alternate plea of rectification.
65 I am satisfied for the purpose of this application that the consideration for the business was understood by the parties to be $850,000 (albeit by payment under the second offer and by the loan agreements) and that the loan agreements were a means by which $300,000 of that consideration (plus a fee/interest/truck payment) was to be paid. The first defendant's own letter of 2 October 2015 is consistent with this view.
66 The defendant's implicit suggestion in his evidence that the loan agreements operated independently of the business transaction and his evidence that 'no moneys were paid' to him by the plaintiff is not consistent with the documentary evidence as to the nature of the transaction, nor the fact that some repayments were made by the first defendant.
67 Against that backdrop, and where the parties anticipated property in the business passing while there was still money due by the first defendant to the plaintiff, there is a serious question to be tried as to whether the parties intended those future payments to be secured, such that rectification might be available. The argument as to there being an additional oral term, whilst not without some significant difficulties for the plaintiff, also meets the threshold test of a serious question to be tried in the particular circumstances of this application.
Balance of convenience
68 The first defendant says the balance of convenience does not favour the extension of the caveat because its presence is preventing him from refinancing his debts and those of KBT.
69 The first defendant says that the Property is valued at approximately $775,000 and is encumbered by a first registered mortgage to CBA in respect of which the bank is owed around $540,000.27 He discloses other assets such as trucks (encumbered) and a car. He sets out details of other bank accounts, including business loan accounts with CBA.
70 The first defendant has received a letter from CBA advising that accounts have been referred to the bank's group credit structuring area due to defaults in payment. The letter states that the bank is 'concerned with the current financial position of the group'. The letter requires regular reporting on refinancing attempts from 25 July 2016, and a letter of unconditional refinancing by 12 September 2016 with settlement by 31 October 2016.28
71 The first defendant's evidence said to establish prejudice is as follows:29
I am currently seeking to refinance all of my and [KBT's] loans, including the agreement with TL Rentals. The plaintiff's caveat is preventing me from refinancing the loans.
If the plaintiff's caveat is not removed, I believe based on the letter from CBA that CBA will commence legal action against me and [KBT] which will result in the repossession of the property, the liquidation of KBT and the forced closure of the Business.
72 The evidence as to the caveat being the cause of prejudice is not compelling.
73 There is no evidence of the nature of attempts to refinance or that financiers have pointed to the plaintiff's subject to claim caveat as a bar to such refinancing. There is no evidence as to the effect of the TLR caveat on those attempts. There is no evidence that it is not the registered mortgage and the apparent default under that mortgage that are causing difficulties with refinancing. In the circumstances, there is no evidence that persuades me that it is the caveat that is depriving the first defendant of the ability to refinance. The first defendant's opinion as to CBA's intentions upon default can be given no real weight but in any event, there is no evidence that any threatened action is caused by the presence of the caveat, rather than by the first defendant's apparent financial difficulties.
74 The lodgement of a caveat was permitted and anticipated by the loan agreements and its practical impact on a refinancing can hardly be a surprise to the first defendant.
75 On the other hand, if the caveat lapses and the plaintiff is ultimately found to have had an equitable charge under the loan agreements, then the benefit of that charge may be lost. It is unusual to remove a caveat unless the claim appears to be without foundation.30 It may be that ultimately there is insufficient equity in the Property to facilitate payment to the plaintiff but the position is not currently clear and may alter if some of the debts are in fact refinanced. In my view, the balance of convenience favours the extension of the caveat pending the determination of final relief as to the obligations and rights under the loan agreements.
Conclusion
76 In reaching my view as to the balance of convenience, I have taken into account the fact that proceedings seeking final relief have now been issued and presumably will proceed efficiently. I would not have been prepared to make an order extending the caveat on an open-ended basis. I propose to make an order extending the operation of the caveat until further order in those fresh proceedings.
77 The fresh proceedings are to be entered in the CMC List. I will hear the parties as to the precise orders.
1Bride v The Registrar of Titles [2015] WASC 11 [11] - [16] (footnotes omitted). Also referred to by Mitchell J in Above All Rigging & Site Modifications Pty Ltd v Lang [2015] WASC 414 [4].
2 First Swinburne affidavit (24 August 2016), PRS-4.
3 First Swinburne affidavit, PRS-1A.
4 Second Swinburne affidavit (29 August 2016), PRS-51.
5 First Swinburne affidavit, PRS-2, PRS-3.
6 Second Swinburne affidavit (29 August 2016) [5].
7 First Swinburne affidavit, PRS-4C.
8 Third Swinburne affidavit (2 September 2016), PRS-R3.
9 First Swinburne affidavit, PRS-5.
10 Bose affidavit (1 September 2016) [14] - [16].
11 Bose affidavit [18], [20].
12Porter v McDonald [1984] WAR 271, 276; Bashford v Bashford [2008] WASC 138 [48].
13 ts 28. In his original submissions the plaintiff sought, in the alternative, an injunction to enforce an implied negative covenant, but this was not pressed at the hearing: ts 24.
14 Amended writ of summons issued 14 September 2016, CIV 2626 of 2016.
15 The first defendant relies upon the construction principles summarised in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [33] - [45].
16Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 [90].
17Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471 [33] - [35].
18Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 [124] - [128]; Saraceni v Mentha [2011] WASC 94 [51].
19Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162 [28].
20Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 [38].
21Troncone v Aliperti (1994) 6 BPR 97,455; (1994) NSW ConvR 55-703.
22Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 171 [61] - [63].
23Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230 [30].
24Miluc Pty Ltd and Commissioner of State Revenue [2008] WASAT 68.
25Miluc Pty Ltd and Commissioner of State Revenue [11].
26Above All Rigging [11].
27 Bose affidavit, SKB-26. It was said by the first defendant's counsel that other CBA liabilities are secured by the mortgage. I was asked to infer the secured debt was in fact therefore greater. There was no evidence to found such an inference: ts 55. None of the mortgage or facility letters were in evidence.
28 Bose affidavit, SKB-26.
29 Bose affidavit [54] - [55].
30Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 48.
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