The Croatian Club Limited v Westwood Capital Pty Limited

[2024] NSWSC 895

Supreme Court

New South Wales

Medium Neutral Citation:

The Croatian Club Limited v Westwood Capital Pty Limited [2024] NSWSC 895

Hearing dates:

27 June 2024, last written submissions received 2 July 2024

Date of orders:

25 July 2024

Decision date:

25 July 2024

Jurisdiction:

Equity

Before:

Pike J

Decision:

(1) Pursuant to s 74O of the Real Property Act 1900 (NSW), the plaintiff has leave to lodge a caveat in the same form as Caveat AR332854 on the title to Lot 1 in DP236825, Lot 14 in DP132440, Lot D in DP382627, and auto-consol 15118-2.

(2)   The parties confer and provide to the chambers of Pike J by no later than 5 August 2024 any agreed orders as to costs.

(3)   In the event that the parties are not able to reach an agreement as to costs, each party is to provide to the chambers of Pike J by no later than 7 August 2024, any submissions and other material relied on in relation to costs, such submissions not to exceed three pages, whereupon the question of costs will be determined on the papers.

Catchwords:

REAL PROPERTY – caveats – application for leave to lodge a caveat – whether lapsing notice was served – whether clause of contract gives rise to caveatable interest or non-monetary obligations – whether Registrar-General has a duty to determine the validity or correctness of material evidencing service of a lapsing notice

Legislation Cited:

Real Property Act 1900 (NSW), ss 74J, 74MA, 74O, 138

Statutory Declarations Act 1959 (Cth) s 8

Cases Cited:

CJRedman Construction Pty Ltd v Tarnap Pty Ltd (2005) 12 BPR 23,395

Coco C’Bay Association (Inc) v Paddison [2022] WASC 5

Commercial Union Assurance Co of Australia Ltd v FerrcomPty Ltd (1991) 22 NSWLR 389

Hanover Investments Pty Ltd v Registrar General [1999] NSWSC 21

Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987

Nguyen v Sage Consultant Group Pty Ltd (2021) 20 BPR 41,989; [2021] NSWSC 753

Patel v H Lal & AssociatesPty Ltd [2008] NSWSC 964

Ralph Symonds Australia Pty Ltd v Pacific Property Investments Pty Ltd (1988) 10 BPR 18,729

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

Sheik v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FMCA 621

Wells Corporation Pty Ltd v Akkari [2012] NSWSC 323

West Coast Developments Pty Ltd v Lehmann [2013] VSC 617

West Coast Developments v Lehmann [2014] VSC 293

Xcel Rural Properties Pty Ltd v South Creek Dairy Pty Ltd (2002) 10 BPR 19,607; [2002] NSWSC 139

Texts Cited:

D J Farrands, The Law of Options and other Pre-Emptive Rights, (3rd ed, 2023, Thomson Reuters)

Category:

Principal judgment

Parties:

The Croatian Club Limited ACN 000 412 331 (Plaintiff)
Westwood Capital Pty Ltd ACN 169 490 653 (First Defendant)
Registrar-General, Land Registry Services NSW (Second Defendant)

Representation:

Counsel:
G Ng SC (Plaintiff)
M Condon SC with J M Kadar (First Defendant)

Solicitors:
Hall & Wilcox (Plaintiff)
Jordan Djundja Lawyers (First Defendant)

File Number(s):

2023/157905

Publication restriction:

Nil

JUDGMENT

1. Prior to 13 August 2021, the plaintiff (the Club) was the registered proprietor of the land known as 21 Canterbury Road, Punchbowl (previously 921-925 Punchbowl Road, Punchbowl), constituted by Lot 1 in DP236825, Lot 14 in DP132440, Lot D in DP382627, and auto-consol 15118-2 (collectively the Property). The first defendant (Westwood Capital) is now the registered proprietor of the Property.

2. On 13 August 2021, the Club procured the registration of Caveat AR332854 (Original Caveat) against the title to the Property. That caveat was lapsed on 25 January 2022. By summons filed 17 May 2023, the Club now seeks, inter alia:

(a) a declaration that the Club has a caveatable interest in the Property;

(b) an order that the Original Caveat be reinstated as if it had been continuously registered on the Property since 13 August 2021; or

(c) in the alternative, an order granting the Club leave pursuant to s 74O of the Real Property Act 1900 (NSW) (“the Act”) to lodge a further caveat on the title to the Property in the same terms as either the Original Caveat or a caveat lodged by the Club following the lapsing of the Original Caveat, this being Caveat AT70785 (“the Second Caveat”).

3. The proceedings were heard on 27 June 2024 with further brief written submissions thereafter. Mr G Ng SC appeared for the plaintiff and Mr M Condon SC and Mr J M Kadar appeared for the first defendant. The second defendant, Registrar-General Land, Registry Service NSW, filed a submitting appearance save as to costs.

4. For the reasons set out below the Club should have leave, pursuant to s 74O of the Real Property Act 1900 (NSW) (the Act), to lodge a further caveat on the title to the Property in the same terms as the Original Caveat.

Overview of the facts

5. On 8 July 2014, the Club entered into a Heads of Agreement with Westwood Capital and its sole director and secretary, Bill Gertos (Mr Gertos) pursuant to which, inter alia, the Club agreed to grant a call option in respect of the Property to Westwood Capital.

6. On 29 December 2014, a call option deed (Call Option Deed) was entered into, the terms of which included:

(a) in consideration of the payment of a Call Option Fee in the amount of $2,600,000, the Club granted to Westwood Capital the right to purchase the Property for $26,000,000 (“the Option”) (cl 2.1);

(b) the Option could be exercised during an Exercise Period, defined to mean the period commencing on 29 December 2014 and expiring at 5.00pm on the date that was 28 months after the date of commencement of the Exercise Period (cl 2.7); and

(c) during the Exercise Period, Westwood Capital and Mr Gertos were to use all reasonable endeavours at the former’s cost to obtain all governmental and other approvals required in relation to the mixed use redevelopment of the Property, including the Club Premises, being premises to be constructed as part of the Development from which the Club would operate a licensed club and which was required to be no less than 1,500 square metres (cl 6.1).

7. Clause 4.1 of the Call Option Deed provided:

4.1 Lodging caveat

Unless the Grantee obtains the prior written consent of the Grantor and, if necessary, the Financier, the Grantee must not register a caveat on title to the Property unless and until:

(a) the mortgage granted to the Financier as contemplated by clause 3.2(b) has been registered in accordance with the requirements of the Real Property Act 1900 (NSW); and

(b) the Financier approves the form of caveat proposed to be lodged by the Grantee; and

(c) the Grantee enters into any deed of subordination or other deed or arrangement reasonably required by the Financier in relation to the interests of the Financier.

8. The Exercise Period for the Option was then extended twice, initially pursuant to a Deed of Amendment dated 19 May 2017, and thereafter pursuant to a further Deed of Amendment dated 24 July 2018.

9. On 27 December 2019, and upon the exercise of the Option during the extended Exercise Period, the Club, as vendor, and Westwood Capital, as purchaser, entered into a contract for the sale of land in respect of the Property (the Contract). Clause 15 of the Contract relevantly provides as follows:

(a) The parties acknowledge and agree that the vendor intends to undertake the Development and that the Development will include the Club Premises.

(b) As soon as practicable after the Development Consent for the Development (that includes the Club Premises), the purchaser must prepare a plan of subdivision which identifies the Club Premises and the Additional Area Premises as lots on a proposed plan of subdivision.

(c) In consideration of the payment of $1, the purchaser grants to the vendor an option to acquire the Club Premises and the Additional Area.

(d) Upon receipt of a written request from the vendor, the purchaser must enter into a separate Call Option Deed in the form attached to this contract, which grants a Call Option over the Club Premises and, if requested by the vendor, over the Additional Area Premises.

(e) The vendor may exercise either or both of the Club Premises Option or the Additional Area Option at any time during the Exercise Period by providing written notice to the purchaser. For the avoidance of doubt, the vendor does not need to exercise both the Club Premises and the Additional Area Option simultaneously and may elect to exercise each option independently of one another at any time during the Exercise Period. The contract of sale will be in the form provided by the vendor and based on the NSW General Conditions of contract and the vendor’s nominated special conditions.

(f) As security for the performance of the purchaser’s obligations under this special condition, the purchaser, on and from completion, grants a charge over the Property to the vendor and the purchaser consents to the vendor lodging a caveat, at any time after completion, on title to the Property in respect of that charge and the obligations which it secures. The vendor must consent to the lodging of any plan of subdivision pertaining to the Development and the transfer of any lot on that plan to a third party, unless the plan or transfer would materially impact on the Club Premises and the vendor’s rights under this contract.

(g) If the vendor exercises the Club Premises Option and or the Additional Area Option:

(i) the vendor will pay to the purchaser the Club Premises Price and Additional Areas Premises Price as applicable;

(ii) the purchaser must construct the Club Premises and/or the Additional Areas Premises and completion for the Club Premises will occur once the Club Premises reach practical completion, to the purchaser’s satisfaction; and

(iii) after acquiring the Club Premises, the purchaser must initially use the Club Premises for the operation of the Club.

10. The term “Development” is defined in clause 1 of the Contract to mean “the development of the Property which must include the Club Premises, multiple residential towers with mixed commercial and retail use, open space and basement car parking or as otherwise agreed with the Grantor in writing”. The term “Club Premises” is then given the same definition as in the Call Option Deed, relevantly the premises to be constructed as part of the Development from which the Club will operate a licensed club on the Property. The definition also sets out certain requirements for the Club Premises.

11. The terms “Additional Area Option” and “Club Premises Option” are both defined in clause 1 to mean “the option granted by the purchaser to the vendor under special condition 15(c)” to acquire the Club Premises/Additional Area for the Club Premises Price/Additional Area Purchase Price.

12. The “Exercise Period” is defined as:

The period commencing on completion under this contract and expiring at 5.00pm on the day that is the later of the following dates:

a) the granting of a development approval for the Development;

b) the preparation of a plan of subdivision showing the Club Premises located on a separate lot in accordance with this approval; and

c) 60 days from the date of this contract.

13. Mention should also be made of clause 17 of the Contract, which states:

(a) The purchaser must expeditiously complete the Development by the date which is 28 months after the later to occur of:

(i) completion of this contract (with vacant possession); or

(ii) if a lease to the vendor is granted by the purchaser under special condition, the date on which the vendor (as tenant under such lease) vacates the property (or part of it) occupied under the lease,

unless otherwise agreed in writing by the parties.

(b) For the purposes of this special condition 17, the Development will be deemed to be complete, if the Club Premises are constructed and transferred to the vendor and the vendor is able to access, use and occupy the Club Premises without unreasonable interference from surrounding building works and an occupation certificate has been issued by the relevant authority certifying the Club Premises are fit for occupation.

14. Westwood Capital also initially placed some reliance on clause 22 which provides:

Until special condition 16 has been satisfied, the purchaser may not deal with its interest in the Property, other than by registering a mortgage securing finance provided to complete this contract, including not granting any charge or other security interest, right, option, easement or encumbrance to any person, without the prior written consent of the purchaser [sic vendor]. However, the purchaser may enter into contracts to sell off the plan residential lots in the proposed Development to third parties subject to such contracts of sale not interfering in any way with the vendor’s rights under this contract, including its option over the Club Premises and Additional Areas.

15. The day after the hearing concluded the parties provided to the Court a joint note to the effect that special condition 16 was satisfied upon completion of the Contract and therefore clause 22 ceased to have effect upon completion.

16. Finally, clause 31 states that “[a]ny provision of this contract which is capable of taking effect after completion will not merge on completion but rather will continue in full force and effect.”

17. Westwood Capital became the registered proprietor of the Property on 13 August 2021 and the Original Caveat was recorded on the title to the Property on that day.

18. On 21 November 2021, Westwood Capital made application for the preparation of a lapsing notice in respect of the Original Caveat (Lapsing Notice). It is in dispute as to whether the Lapsing Notice was ever served on 21 December 2021. The Club disputes this and I deal with this issue below.

19. A statutory declaration was subsequently completed and lodged with the Registrar-General contending that the Lapsing Notice was served on 21 December 2021 (Statutory Declaration). Accordingly, on 25 January 2022 the Original Caveat was lapsed in accordance with s 74J of the Act.

20. The lapsing of the Original Caveat did not come to the attention of the Club until early May 2023.

21. On 10 May 2023, Caveat AT70785 (Second Caveat) was registered against the title to the Property.

22. These proceedings were then commenced by Summons filed 17 May 2023.

23. On 16 August 2023, Westwood Capital filed a motion seeking orders to progress a refinance. That motion was settled between the parties on terms that the Second Caveat be withdrawn and then replaced by a third. That refinance occurred on 29 February 2024 and a new mortgage was registered on title. Simultaneously with the registration of the mortgage, the Second Caveat was withdrawn and replaced by Caveat AT864026 (Third Caveat).

24. A Priority Deed was entered into dated 26 February 2024 pursuant to which the Club subordinated its interest to the payment of the incoming mortgagee’s priority – being the sum of $21.5 million.

25. In March 2024, a new caveat, AT889635, was registered on title in favour of “Athemee [sic] Securities Pty Limited” claiming an estate in fee simple in the Property by virtue of adverse possession and stating that the claim is supported by a “Loan Agreement and General Security Agreement dated 12 August 2021”. Documents have since been lodged with the Registrar-General seeking to withdraw this caveat and replace it with another caveat in favour of Athenee Securities Australia Pty Ltd (being the correct name) (Athenee Securities).

26. Athenee Securities was a company of which Mr Gertos was once a director and shareholder. He has not been a director or shareholder since earlier this year.

Overview of the contentions advanced

27. Against this background, the parties raised a number of contentions. Some were raised in written submissions filed prior to the hearing. Others emerged in oral address. As I understood those contentions, the following issues ultimately arose for my determination.

1. Was the Lapsing Notice served on the Club on 21 December 2021 as contended for by Westwood Capital? Westwood Capital contended in effect, that it was not necessary for the Court to determine this issue because even if it was determined that the Lapsing Notice was not served, the Court still had a discretion under s 138 of the Act as to whether to rectify the Register, a discretion which ought to be exercised having regard to the same matters relevant to the exercise of the Court’s discretion under s 74O of the Act.

2. If it was served, the Club contends that the Registrar-General was not justified in relying on the Statutory Declaration provided by Westwood Capital because of its date anomaly and as such, the Registrar-General could not have been satisfied that the requirements of s 74J of the Act had been met and the Court should order pursuant to s 138 of the Act, that the Original Caveat be placed back on the title to the Property. Westwood Capital disputes that there was any anomaly with the Statutory Declaration and/or that the Registrar-General is under any duty to investigate the adequacy of the Statutory Declaration as contended for by the Club and as such, if the Lapsing Notice was served it is a matter for the Club to satisfy the Court under s 74O of the Act that leave should be granted to lodge a further caveat.

3. If the Lapsing Notice was not served, then the Club contends that an order should be made under s 138 of the Act in effect rectifying the Register by reinstating the Original Caveat as if it had been continuously registered on the Property since 13 August 2021. Westwood Capital contends on a number of bases that no order should be made under s 138 of the Act, including:

1. The Club does not have a caveatable interest because, properly construed, the Club does not have any option or, if it does, the charge under clause 15(f) does not create a caveatable interest as it secures only a non-monetary obligation; and

2. Section 138 of the Act confers a discretion on the Court which should be exercised having regard to the same matters that are relevant to an application under s 74O of the Act.

The Club disputed each of these contentions.

4. Whether the Court should grant leave under s 74O of the Act for the Club to lodge a further caveat, it being accepted that leave cannot be granted nunc pro tunc with respect to the Third Caveat. Westwood Capital contended that leave should not be granted. It initially proffered an undertaking by Westwood Capital not to deal with the Property other than for the purposes of refinancing, but this undertaking was withdrawn the day after the hearing concluded. Westwood Capital contended that if leave was to be granted that leave should be on terms which reserve to Westwood Capital the ability to seek to have the caveat removed to permit it to obtain further finance and a form of words was proposed to give effect to this. The Club contended that leave should be granted without terms.

28. It is not necessary for the Court to determine all of these issues.

Was the Lapsing Notice served on the Club?

29. There was no dispute that Mr Constantinos Filis (Mr Filis) attended at the offices of Hall & Wilcox Solicitors – the address stated in the Original Caveat – and hand delivered at about 9.36am or 9.38am, two envelopes which were received by Ms Tracey Pham (Ms Pham) who at that time was occupying the reception at Hall & Wilcox. The dispute relates to what was in the two envelopes.

30. Westwood Capital contends that the Lapsing Notice was in one of the envelopes and that the other contained a covering letter dated 15 December 2021 and an attached letter dated 28 October 2021 relating to the fire safety certificate for the Club Premises. The Club contended that the contents of the two envelopes were identical – being the covering letter and attached letter relating to the fire safety certificate. No Lapsing Notice was served, according to the Club.

31. At 10.21 am on 21 December 2021, Ms Pham sent an email to Maurice Doria of Hall & Wilcox in Sydney – being the person to whom the letters dated 15 December 2021 and 28 October 2021 were addressed – stating:

Please see attached for mail we received at our Melbourne office delivered by Con Filas. Two envelopes were received, though they appear to be the same documents.

32. Attached to the email were four pages in two separate PDF files, each PDF file containing a copy of the letters dated 15 December 2021 and 28 October 2021.

33. Two copies of a statutory declaration purportedly made by “Con Filas”, presumably being Mr Filis, were placed into evidence. Each purports to have been made before Constantine Savell, a Justice of the Peace who is apparently an associate of Mr Gertos. It is apparent on an examination of the two documents that there are subtle differences between them such that it would appear that two declarations were in fact prepared.

34. The first document – which was lodged with the Registrar-General – declares that the declaration was made on Wednesday 29 December 2021, although the date at the bottom of the page next to Mr Savell’s signature and stamp appears to be “24/12/21”. The document also has text struck through in relation to the basis on which Mr Savell was satisfied as to the identity of Mr Filis.

35. The second document contains a different signature for Mr Filis, a different signature and stamp for Mr Savell, and is clearly dated “24/12/21” although the declaration purports to have been made on “Wednesday 29^th December 2021”. It also does not have any text struck through.

36. Both Ms Pham and Mr Filis made affidavits and were cross-examined. Paragraphs 5 to 8 of Ms Pham’s affidavit are as follows:

5. While I do not have a specific recollection of the all the events of 21 December 2021, I have refreshed my memory by reviewing the incoming mail booklet and an email that I sent to Maurice Doria, a partner in our Sydney office also on 21 December 2021.

6. The incoming mail booklet records that at 9.36am on 21 December 2021, I accepted delivery of two hand delivered letters. In accordance with my usual practice, I recorded the hand delivery, scanned the documents and emailed them to the intended recipient, Mr Doria.

7. After I opened the envelope, I noticed the letters were identical comprising 2 letters dated 15 December 2021 attaching two additional identical letters dated 28 October 2021. Annexed and marked “A” is a copy of the email and attachments I sent to Mr Doria on 21 December 2021 at 10.21am.

8. Later that day, after I had finished covering reception, I took the letters to the Service Hub. The relevant entry in the incoming mail booklet records that:

a. Con Filas [sic] delivered documents on 21 December 2021 at 9.36am; and

b. At 12.30pm on the same date, I delivered the documents to the Service Hub.

Annexed and marked “B” is a copy of the incoming mail booklet showing the 21 December 2021 entry.

37. In cross-examination, Ms Pham said that she had an actual recollection that:

1. Mr Filis attended reception and delivered the two envelopes;

2. She then sent an email requesting another service hub employee to attend and collect the envelopes; and

3. When no one came to reception to collect the envelopes, she then opened the envelopes and scanned them to Maurice Doria.

38. Ms Pham denied the proposition that she was served with a copy of the Lapsing Notice.

39. Mr Filis’ affidavit evidence was to the following effect:

1. In about the first week of December 2021, Mr Gertos instructed him to serve a Lapsing Notice on Hall & Wilcox in Melbourne and that he should pick up the documents from Mr Gertos’ solicitor;

2. On or about 20 December 2021, he collected the documents from Mr Gertos’ solicitor – they were in two envelopes which were unsealed;

3. He took out the documents from one of the envelopes and observed that it was a document that had the words “Lapsing of Caveat Application” on the document. He says that he had a clear recollection of this as he did not know what a lapsing of caveat document was. He took out the document from the other envelope and saw that the document related to something about fire services;

4. He took the documents, left the office, and sealed the envelopes. The next day, on the morning of 21 December 2021, he travelled to Melbourne, travelled to the Hall & Wilcox office, and left the two envelopes with the receptionist at reception;

5. When he returned to Sydney, he prepared the Statutory Declaration before Mr Con Savell on 29 December 2021; and

6. The two envelopes contained two different documents. They did not contain a duplicate, one of the other.

40. Mr Filis maintained this evidence in cross-examination.

41. On the evidence before me, I am satisfied that the Lapsing Notice was not served on the Club on 21 December 2021, and I so find. I reject the theory advanced by Westwood Capital that Ms Pham lost the Lapsing Notice.

42. Ms Pham struck me as an honest witness, and I accept her evidence. She had an actual recollection of what relevantly occurred.

43. More importantly, her evidence is supported by the contemporaneous email sent to Maurice Doria at 10.21 am to the effect that the two envelopes contained the same documents.

44. This email was sent at the time of scanning which was immediately after Ms Pham opened the two envelopes. There was no reason for Ms Pham to have written what she did in the email unless it recorded her observations at the time. If, as contended for by Westwood Capital, Ms Pham had lost one of the envelopes, or at least its contents, this does not explain why Ms Pham stated that the two envelopes contained the same documents. The email clearly records that two envelopes were received and their contents were the same. If an envelope had been lost, she would likely only have referred to one envelope being received. If the contents of one of the envelopes had been lost, there is no reason by Ms Pham would have stated that the contents were the same.

45. By contrast, Mr Filis’ evidence appears to be based entirely on his recollection – some three and a half years after the event – that he looked in the envelopes and observed that one contained the Lapsing Notice.

46. There is also nothing in Mr Filis’ evidence to give me any real confidence that he in fact served the Lapsing Notice. For example, there is nothing to suggest that Mr Filis took copies of the documents prior to serving them and then used those copies at the time of making this declaration.

47. Mr Filis was also not able to recall making two declarations.

48. Further, no evidence was called from Westwood Capital’s lawyers – who are the same lawyers acting in these proceedings – to the effect that the Lapsing Notice was contained in one of the two envelopes collected by Mr Filis from their offices. I infer that this evidence would not have assisted Westwood Capital: see Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 per Handley JA.

49. In reaching this conclusion, I do not need to go so far as, and do not go so far as, concluding that Mr Filis’ Statutory Declaration was a knowingly false declaration. I am simply not satisfied on the evidence that the Lapsing Notice was in fact served. I am satisfied that it was not.

Does the Club have an option to acquire the Club Premises and Additional Area?

50. I turn now to consider the threshold issue raised by Westwood Capital as to why the Club does not have a caveatable interest – namely that the Club does not have an option to acquire the Club Premises and the Additional Area.

51. The gravamen of the argument advanced by senior counsel for Westwood Capital was that, properly construed, no option to acquire the Club Premises or Additional Area arose until a Call Option Deed was entered into as required under clause 15(d) of the Contract. This is against the background of it not being in dispute that, contrary to what is stated in clause 15(d), there was no “Call Option Deed” attached to the Contract at the time of its execution. Indeed, it was not suggested that there has ever been in existence a “Call Option Deed” which ought to have been attached to the Contract.

52. The Club contended that there was no warrant to construe clause 15 of the Contract as effectively requiring, as a condition precedent to the existence of an option, entry into a Call Option Deed.

53. I do not accept the contentions advanced by Westwood Capital that entry into a Call Option Deed is necessary to create the options.

54. The usual principles of contractual construction apply: D J Farrands, The Law of Options and other Pre-Emptive Rights, (3^rd ed, 2023, Thomson Reuters) at page 10ff and the authorities there referred to.

55. Clause 15(c) provides:

In consideration of the payment of $1, the purchaser grants to the vendor an option to acquire the Club Premises and the Additional Area.

56. The plain and ordinary meaning of these words are clear – to grant the option on the payment of the consideration of $1. True it is that these words must be construed in context, including the other sub-clauses in clause 15 and the rest of the Contract. This context confirms the plain meaning of clause 15(c).

57. Clause 15(d) begins “[u]pon receipt of a written request from the vendor, the purchaser must…” suggesting that the obligation of the purchaser to enter into the Call Option Deed is only upon receipt of a written request from the vendor. There is nothing in the language used to require the Club (the vendor) to make a written request. If the parties had intended this to be a formal requirement for the grant of an option, particularly in light of the clear words in clause 15(c), they could easily have said so.

58. The term “Call Option Deed” does not appear to be a defined term.

59. The terms “Club Premises Option” and “Additional Area Option” – which are used throughout clause 15 – are defined terms and are defined in clause 1 in similar terms as “the option granted by the purchaser to the vendor under special condition 15(c)” (my emphasis). These definitions make no reference to clause 15(d) and fit comfortably with the ordinary meaning of clause 15(c) as containing the grant.

60. Clause 15(g) sets out what is to occur, on exercise of either the Club Premises Option or the Additional Area Option and it was not suggested that there are necessary matters that are not set out that would be expected to be contained in the missing Call Option Deed. In other words, it was not suggested that the existing contractual provisions were somehow incomplete.

Should the Court order under s 138 that the Original Caveat be placed back on file?

61. Having determined that the Lapsing Notice was not served on the Club and also having rejected Westwood Capital’s contention that the Club does not have an option, the issue then arises as to whether the Court should order that the Original Caveat be reinstated as if it had been continuously registered on the Property since 13 August 2021.

62. The Club contended that this should occur by reason of two independent arguments. First, because the Lapsing Notice was not in fact served. Second, because the Registrar-General could not have been satisfied, by reason of the alleged incorrect date on the Statutory Declaration provided, attesting to the service of the Lapsing Notice, that the Lapsing Notice had in fact been served.

63. Westwood Capital contended that the Court could not be satisfied that the Club in fact has a caveatable interest, because the charge granted under clause 15 only secures non-monetary obligations. Absent a determination that the Club in fact has a caveatable interest – prayer 5 sought in the Summons – there is no power to make an order under s 138 of the Act, as the power under this section is only ancillary.

64. As to the second basis relied on by the Club, Westwood Capital contended that the Registrar-General had no duty of the kind contended for by the Club, being a duty to in effect determine the correctness of the documentation or exercise a discretion about the evidence provided to it and was perfectly entitled to rely on the Statutory Declaration filed in the present case.

65. I consider each of these issues below. Ultimately, however, it is not necessary for me to reach any final view on either of these grounds as the present dispute is more appropriately resolved through the prism of whether the Club should be permitted to lodge a further caveat under s 74O of the Act.

Does the charge create a caveatable interest?

66. Two related arguments were advanced by Westwood Capital. First, a charge which purports to secure only non-monetary obligations does not create a caveatable interest. Relatedly, there is not a caveatable interest if the charge purports to secure performance of a non-monetary obligation in circumstances where that obligation has not been breached. This latter argument was also raised in the context of whether, as a matter of discretion under s 74O of the Act, the Club should be permitted to lodge a further caveat.

67. Clause 15(f) provides that Westwood Capital grants a charge over the Property “as security for the performance of the purchaser’s obligations under [clause 15]”, i.e. to construct the Club Premises and/or the Additional Area Premises an exercise of either or both options.

68. It was not in dispute that the charge did not secure the performance of a monetary obligation. Senior counsel for Westwood Capital relied on the decision of Bryson J in Ralph Symonds Australia Pty Ltd v Pacific Property Investments Pty Ltd (1988) 10 BPR 18,729 (Ralph Symonds) in support of the proposition that such a charge does not create a caveatable interest.

69. The authorities in this area were relatively recently reviewed by Solomon J in Coco C’Bay Association (Inc) v Paddison [2022] WASC 5 (Coco C’Bay). His Honour considered at [95], that the decision of Young J in Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 (Kingstone Constructions), properly understood, stood for the proposition that a charge “may go beyond securing the payment of money and secure the performance of a contract” and in so doing may “operate as a charge that secures damages that flow from a breach of performance.”

70. Solomon J also referred to two related proceedings in the Supreme Court of Victoria – a decision of Robson J in West Coast Developments Pty Ltd v Lehmann [2013] VSC 617 and a decision of McMillan J in West Coast Developments v Lehmann [2014] VSC 293. At [54], Solomon J concluded that each of these decisions stands for the proposition that a serious question to be tried exists as to whether a charge over land can secure non-monetary obligations in a contract.

71. Solomon J also observed that in none of Ralph Symonds, nor either of the West Coast Developments decisions, was any consideration given to the matter raised in Kingstone Constructions as to whether the charge operated in respect of damages that may flow from the failure to perform the agreement.

72. Having regard to the decision of Solomon J in Coco C’Bay and the authorities referred to in that decision, I am satisfied that it is at least arguable that the charge created by clause 15 in the present case is sufficient to create a caveatable interest. Senior counsel for Westwood Capital accepted as much.

73. In circumstances where it is clear, that in the context of considering whether leave should be granted under s 74O of the Act to lodge a further caveat, the Court generally applies the considerations relevant to an application to extend a caveat (see Xcel Rural Properties Pty Ltd v South Creek Dairy Pty Ltd (2002) 10 BPR 19,607; [2002] NSWSC 139 (Xcel Rural Properties) which include whether there is a sufficiently arguable case of a caveatable interest, there is merit in the position advanced by Westwood Capital that the present application should be considered through the prism of s 74O of the Act. The provisions of the Act governing the lapsing and withdrawal of caveats are inherently interlocutory: see Nguyen v Sage Consultants Group Pty Ltd (2021) 20 BPR 41,989; [2021] NSWSC 753 at [363] per Robb J. I propose to consider it through the prism of s 74O of the Act.

74. Although not necessary to decide the point, I incline to the view, having regard to the decision of Young J in Kingstone Constructions, as analysed by Solomon J in Coco C’Bay, that the charge in the present case creates a caveatable interest in the Property.

75. Again, although not strictly necessary to decide this point, I incline to the view, having determined that the Lapsing Notice was not served, and that the Club has a caveatable interest, this would be an appropriate case for the Court to order, pursuant to s 138 of the Act, that the Original Caveat be reinstated as if it had been continuously registered on the Property since 13 August 2021. As will become apparent below, I reject the contentions advanced by Westwood Capital that, in the context of s 74O of the Act, leave should not be granted or terms should be imposed on the grant of leave.

Should the Registrar-General have refused to lapse the Original Caveat?

76. The Club contended that the Registrar-General should not have lapsed the Original Caveat on the basis that because the Statutory Declaration was apparently made on 29 December 2021, but purportedly witnessed on 24 December 2021, the Registrar-General could not have been satisfied, without more, that the Statutory Declaration was valid, and thus could not have been satisfied that the requirements of s 74J of the Act were met.

77. Westwood Capital contended that it was far from obvious that the date of the witnessing of the Statutory Declaration was 24 December 2021 and, in any event, there was no duty on the Registrar-General to check the legal validity or correctness of the material lodged in accordance with s 74J of the Act.

78. Section 74J provides:

(1)  Where a caveat lodged under section 74F remains in force, the Registrar-General shall, on an application being made in the approved form by the registered proprietor of an estate or interest in the land described in the caveat, prepare for service on the caveator a notice to the effect that, unless the caveator has, before the expiry of 21 days after the date of service of the notice -

(a)  obtained from the Supreme Court an order extending the operation of the caveat for such further period as is specified in the order or until the further order of that Court, and

(b)  lodged with the Registrar-General the order or an office copy of the order,

the caveat will (subject to evidence of due service of the notice on the caveator) lapse in accordance with subsection (4).

(2)  The applicant must, within 4 weeks after the issue of the notice, lodge with the Registrar-General, in the form of a statutory declaration or such other form as the Registrar-General may accept, evidence of the due service of the notice on the caveator.

(3)  If the applicant does not comply with subsection (2), the Registrar-General -

(a)  may refuse to take any further action in connection with the notice prepared under subsection (1), or

(b)  may serve on the applicant a notice allowing a further 4 weeks from the date of issue of that notice for lodgment of the evidence and, if the evidence is not lodged within the further period, may refuse to take any further action in connection with the notice prepared under subsection (1).

(4)  If -

(a)  the evidence required by subsection (2) is lodged within the time permitted by this section, and

(b)  the caveator has not lodged with the Registrar-General the order or office copy of the order referred to in subsection (1) in accordance with that subsection,

the Registrar-General is to make a recording in the Register to the effect that the caveat has lapsed, and the caveat so lapses on the making of that recording.

79. No authority was cited by the Club in support of the proposition that the Registrar-General had a duty to consider whether the material lodged satisfied the statutory requirements. The Club relied on Sheik v Minister for Immigration [2004] FMCA 621 (Sheik), a decision of McInnis FM of the then Federal Magistrates Court of Australia to the effect that (at [16]) the Migration Review Tribunal, in the context of the relevant statutory provisions, “has a duty to properly assess documents presented to it for and on behalf of the applicant and as a first essential step must determine whether or not in the case of a statutory declaration the document complies with the requirements of law”.

79. McInnis FM held that the statutory declaration which purported to have been declared on 15 December 2001 but witnessed on neither 21 nor 25 December 2001, clearly does not comply with the lawful requirements of a declaration. The lawful requirements referred to are contained in s 8 of the Statutory Declarations Act 1959 (Cth), which requires a declaration to be made before a prescribed person, it being contended that given the discrepancy between the date of witnessing, the statutory declaration could not have been made before a prescribed person.

80. It is clear that the statutory regime relevant in Sheik is far removed from s 74J of the Act, and I did not understand counsel for the Club to contend otherwise. The Migration Review Tribunal was conducting a review of a decision of a delegate of the Minister not to grant a particular visa. Given the markedly different statutory regimes, I do not derive much assistance from Sheik.

81. Such observations which do exist in the context of the Act provide some support for the position advanced by Westwood Capital. In Patel v H Lal & AssociatesPty Ltd [2008] NSWSC 964, Brereton J stated at [8]:

[8] Ms Patel has suggested that the Registrar General would not lapse the caveat if aware that the proceedings were on foot. I have to say, first, that that is not the Court's experience of how the Registrar General operates – to the contrary, the Registrar General will lapse a caveat unless a sealed minute of an order of the Court extending the caveat is served before the date on which it is due to lapse; and, secondly, as I understand the operation of Real Property Act, s 74J(4), if evidence of service of the lapsing notice is lodged, the Registrar General has no discretion but is obliged to make a recording in the register to the effect that the caveat has lapsed.

83. His Honour’s observations do not address the present issue of the quality of the material lodged. They really go no further than suggesting a limited role for the Registrar-General.

84. There is nothing in the words of s 74J that obviously imposes a duty on the Registrar-General to consider the quality of the material lodged, or more accurately in the context of the present dispute, whether the Statutory Declaration lodged complies with the legal requirements for a valid statutory declaration. The words of s 74J(2) – “in the form of a statutory declaration or such other form as the Registrar-General may accept” – perhaps suggest a degree of flexibility as to the material the Registrar-General may accept as evidencing service of a lapsing notice.

85. The issue is obviously an important one in the context of the operation of the Act and may well have consequences or implications beyond the statutory scheme for the lapsing of caveats. It is a point on which the Registrar-General may well wish to be heard. Although a party to the present proceedings, the Registrar-General understandably filed a submitting appearance save as to costs, it not being clear at that stage that this point would be raised.

86. Given that it is not necessary for me to determine this issue to decide the present dispute, I do not consider that it would be in the interests of justice to facilitate the Registrar-General being given an opportunity to be heard on this point. I otherwise do not express any concluded views on it.

Should the plaintiff be permitted to lodge a further caveat?

87. It was not in dispute between the parties that s 74O of the Act cannot operate to confer leave nunc pro tunc in respect of a caveat that has already been lodged: see Hanover Investments Pty Ltd v Registrar General [1999] NSWSC 21; CJRedman Construction Pty Ltd v Tarnap Pty Ltd (2005) 12 BPR 23,395 at [23] per Brereton J (CJ Redman). The Club thus accepted that s 74O operates to deprive the Third Caveat of any effect.

88. The issue was whether leave should be granted to lodge a further caveat.

89. The test to be applied was not in dispute. In Xcel Rural Properties at [4], Campbell J stated:

[4]…The circumstances that give rise to an application under s74O to lodge a further caveat are closely analogous to the circumstances in which application is made to extend a caveat. In my view, similar principles apply, namely, consideration of whether there is a serious question to be tried that the caveator has the interest claimed in the caveat, and whether the balance of convenience favours the making of the order.

90. In its written submissions, Westwood Capital contended that the Court should not, in the exercise of its discretion, grant leave to the Club to lodge a further caveat. Westwood Capital relied on the following matters:

1. The Club already has the benefit of undertakings by Westwood Capital given on 24 August 2023;

2. To the extent that there is a caveatable interest, it protects a right of performance that (presently) has not been translated into damages;

3. The Club took 16 months to react to the lapsing of the First Caveat. Notably, Westwood Capital took no steps to deal with the Property during that period; and

4. The Club lodged the Second Caveat when it had no legal right to do so. That caveat hindered Westwood Capital’s ability to refinance during the course of 2023 and early 2024.

91. Westwood Capital also offered in its written submissions, in lieu of its undertaking given on 24 August 2023, to undertake to the Court that it will not deal with the Property other than to obtain finance to be used to discharge its obligations under clause 15(f) of the Contract. At the hearing on 27 June 2024, I requested that Westwood Capital provide a form of wording of this undertaking.

92. The next day I was notified that Westwood Capital no longer sought to proffer an undertaking to the Court and that in the event that the Court found there to be a caveatable interest and was minded to exercise its discretion (either under s 74O or s 138) to grant leave to permit the Club to lodge a further caveat, Westwood Capital proposed that such leave would be on the following terms:

a) Leave is granted to the plaintiff to lodge the caveat on the basis that the caveat is not intended to prevent the lodgement of dealings by Westwood or any third parties in order to discharge its obligations to undertake the Development defined in Clause 1 of the Contract for Sale dated 27 December 2019, including but not limited to the registration of:

i. Security instruments;

ii. Leases;

iii. Easements required by planning consent;

iv. Covenants required by planning consent;

v. Consolidation of titles.

b) To give effect to Order [XX] above, upon a written request from Westwood to withdraw its Caveat in order to discharge its obligations to undertake the Development defined in Clause 1 of the Contract for Sale dated 27 December 2019 and undertake any other steps required to comply with the obligations, the Club shall withdraw it within 3 business days and thereafter have leave pursuant to s74O to file a Caveat in synonymous terms to the Caveat withdrawn.

93. Given the withdrawal of any undertaking, the first of the matters relied on by Westwood Capital set out above at [90(a)] can be put to one side.

94. As regards the second matter – set out at [90(b)] above, I have already found, as set out above, that the Club has an arguable case that it has a caveatable interest. This is on the basis that the charge presently exists, and it is at least arguable that a charge which secures performance of a non-monetary obligation is sufficient to create a caveatable interest. It was also not in dispute that under clause 15(f) properly construed, Westwood Capital consented to a caveat being lodged at any time after completion – in effect a standing consent. The fact that the right of performance protected has not presently been translated into damages is not of much significance and does not provide a basis for the Court to refuse leave to a further caveat being lodged.

95. Westwood Capital contended that, unlike for example a mortgage securing payment of monies, which can be redeemed by the mortgagor, there is no means by which Westwood Capital can, in effect, redeem the charge. Having regard to the nature of the charge in the present case, Westwood Capital contended that it could remain on the title for a considerable period including up to the expiry of any limitation period for commencement of a claim for damages for breach of the obligations secured.

96. As contended by counsel for the Club, there are many ways in which the charge could, in effect, be redeemed, including if the options are not exercised, the obligations are performed by Westwood Capital or Westwood Capital pays any damages caused by reason of a breach of the obligation. In any event, Westwood Capital consented to a caveat being placed on title. The fact that there is no present intention to enforce the charge is often the case at the time a caveat is lodged on title and does not provide a basis for its removal: see, Wells Corporation Pty Ltd v Akkari [2012] NSWSC 323 at [28] per White J; CJ Redman at [25]ff per Brereton J.

97. As to the third matter relied on – set out at [90(c)] above – it is clear that Westwood Capital took no steps to deal with the Property during the period from February 2022 to May 2023 when there was no caveat on title. The point is, however, of little significance in the discretionary mix, in circumstances where Westwood Capital no longer offers the undertaking that it had previously foreshadowed and where it contractually agreed to the Club placing a caveat on title.

98. The fourth matter relied on, at [90(d)], proceeds on the basis that the lodging of the Second Caveat hindered Westwood Capital’s ability to refinance during the course of 2023 and early 2024. I am not satisfied that this factual contention has been made good on the evidence, at least to the extent that such hindrance was significant. The starting point is obviously that in May 2023 the Club found out that the Original Caveat had been removed in circumstances where it contends, as I have found, that no Lapsing Notice was ever served on the Club. The Club then lodged the Second Caveat, which necessitated Westwood Capital bringing an application by motion dated 16 August 2023 to permit Westwood Capital to carry out a refinance. That application was settled with orders made on 24 August 2023 permitting the refinance to occur, with the Second Caveat being withdrawn and the Third Caveat then being lodged.

99. The Priority Deed was then entered into in February 2024 whereby the Club agreed to subordinate its interest to the incoming financier in the amount of $21.5 million. It appears from the evidence that the Priority Deed was negotiated over several months but there is nothing to suggest that the position adopted by the Club in these negotiations was unreasonable or that the “delay” was of any significance in the overall scheme of the Development.

100. The issue that then arises is whether the presence of a caveat on the title to the Property would likely cause prejudice to Westwood Capital. A related issue is whether the Court should impose a condition on any grant of leave to lodge a further caveat in the terms sought by Westwood Capital as set out above.

101. The gravamen of the position advanced by Westwood Capital in this regard is that the parties obviously contracted on the basis that Westwood Capital would carry out the Development and that it would be necessary to raise funding from third parties to permit this to occur. It was contended that the existence of a caveat from the Club on title would make refinancing and other activities significantly harder. Reliance was placed on the opinion of Mr Gertos, the sole director of Westwood Capital based on his 20 years’ experience as a property developer.

102. The Club disputed that the existence of a caveat would cause any significant prejudice to Westwood Capital pointing to the fact that the Club has an interest in having the Development completed and had cooperated to date in relation to the proposed refinancing, including in subordinating its position under the Priority Deed. Reliance was also placed on the fact that Westwood Capital appears to have no issue with the caveat recently lodged on title by Athenee Securities. To impose the condition sought by Westwood Capital would be to rewrite the contractual bargain between the parties. If Westwood Capital had wanted an express contractual right along the lines now sought to be imposed by way of a condition on the grant of leave, it could and should have bargained for this as it did in clause 4 of the Call Option Deed (extracted above).

103. The existence of the caveat is not likely, in my view, to cause any significant prejudice to Westwood Capital. The concerns expressed by Mr Gertos in his affidavit are stated at a level of generality. To date the Club has adopted a cooperative approach as one would expect given that it has a strong interest in having the Development built. There is no reason to suspect that this position will change. Westwood Capital has not provided any basis to suggest that it might.

104. The fact that Westwood Capital also appears prepared to tolerate the caveat recently placed on title by Athenee Securities also suggests that the existence of any caveat from the Club is unlikely to be of any real significance and certainly not such as to provide a basis to refuse leave to permit a further caveat or to condition the grant of leave in the manner proposed.

105. There is also force in the Club’s submission that the condition sought to be imposed as a term of the grant of leave involves a rewriting of the contractual bargain. If Westwood Capital wanted such an express right, it could and should have sought to have it included in the Contract.

106. Whilst there was no dispute that the background to the Contract was the construction of the Development, that third party finance would be needed to carry out the Development, and that both parties, including the Club, owed implied obligations to do all things necessary to enable the other party to have the benefit of the bargain and correlative negative obligations (see, for example, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J), those matters do not equate to the Club being required to, in effect, consent to lifting its caveat in the circumstances set out in Westwood Capital’s proposed condition.

107. In the event that a dispute arises an application can be brought by Westwood Capital under s 74MA of the Act for the caveat to be withdrawn, which can then be determined in the context of a concrete set of facts.

108. For these reasons, I propose to grant leave to the Club to lodge a further caveat without imposing any conditions on the grant of that leave.

109. As for costs, my preliminary view is that the Club has been successful and should have its costs. I will direct the parties to seek to agree on costs and failing agreement to file brief written submissions and I will determine the issue on the papers.

Orders

110. The Court orders that:

1. Pursuant to s 74O of the Real Property Act 1900 (NSW), the plaintiff has leave to lodge a caveat in the same form as Caveat AR332854 on the title to Lot 1 in DP236825, Lot 14 in DP132440, Lot D in DP382627, and auto-consol 15118-2.

2. The parties confer and provide to the chambers of Pike J by no later than 5 August 2024 any agreed orders as to costs.

3. In the event that the parties are not able to reach an agreement as to costs, each party is to provide to the chambers of Pike J by no later than 7 August 2024, any submissions and other material relied on in relation to costs, such submissions not to exceed three pages, whereupon the question of costs will be determined on the papers.

**********

Decision last updated: 25 July 2024