Union Finance Pty Ltd v Rateki Pty Ltd (No 2) - [2007] SASC 11

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
UNION FINANCE PTY LTD & ORS v RATEKI PTY LTD & ANOR (NO 2)
[2007] SASC 11
Reasons of Judge Lunn a Master of the Supreme Court
24 January 2007
REAL PROPERTY
Caveats - test for continuing now is showing a prima facie case as laid down by the High Court in Australian Broadcasting Corporation v O'Neill (2006) 229 ALR 457 - whether debts owed to various, but not all, of the plaintiffs could be secured by a mortgage given to some, but not all, of the plaintiffs - further extension of time refused.

UNION FINANCE PTY LTD & ORS v RATEKI PTY LTD & ANOR (NO 2)
[2007] SASC 11
Reasons on defendants’ application to terminate the extension of a caveat.

JUDGE LUNN: The defendant, Rateki Pty Ltd (“Rateki”), is the registered proprietor of several properties at Hindmarsh (“the Hindmarsh properties”). The defendant, de Angelis, is the sole director of Rateki. The claims by the plaintiffs against the other defendants are not material to this application.
The plaintiff, Union Finance Pty Ltd (“Union”), is a provider of short term finance. Its sole director is Sandra de Maria (“de Maria”). The other two plaintiffs are lenders of money who have had dealings with the defendants in conjunction with Union, but the evidence does not disclose anything about the nature of their respective relationships with Union. There is nothing to suggest that where loans have been made by more than one lender the loan is not a wholly joint loan by all of the named lenders.
On 12 November 2002 Rateki executed a mortgage in favour of the plaintiffs Union and Tripodi to secure a loan made by Union and Tripodi to the defendants (“the 1^st loan”). The initial drawdown on this loan was $150,000. It is in dispute whether this mortgage of 12 November 2002 was also to secure any subsequent indebtedness. On 13 November 2002 Union and Tripodi lodged a caveat No 9463821 (“the Caveat”) on the titles to the Hindmarsh properties. In it they claimed an interest as mortgagee under the mortgage of 12 November 2002.
On 15 May 2006 Rateki warned the Caveat. This led to Union and Tripodi instituting this action on 6 June 2006 to seek an extension of the time for its removal. After an exchange of affidavits, and a full hearing on 17 July 2006, I extended the time for its removal until further order, but made its extension subject to the plaintiffs diligently prosecuting this action with expedition and a review if Rateki adduced evidence that its contract of October 2005 for the sale of the Hindmarsh properties was ready for settlement. Additional plaintiffs and defendants were only joined on 6 November 2006 and an entirely fresh amended statement of claim was filed on that day. In view of my other rulings below it is not necessary to pursue whether the plaintiffs had pursued the action with expedition as required by my order of 17 July.
On 3 November 2006 Rateki had taken out an application that the extension of the caveat should cease. Its counsel argued this application on the basis that on the evidence now before the Court Union and Tripodi had no entitlement to maintain the Caveat and that the balance of convenience was now in the favour of Rateki because the contract for the sale of the Hindmarsh properties was ready for settlement.
When I made the order on 17 July 2006 I had intended that only the issue of the balance of convenience should be revisited if the conditions which I had imposed on the extension of the caveat were not satisfied. However, as there has been significant change in the applicable law of which I was not aware as at 17 July 2006 Rateki is entitled to have the whole matter reconsidered in accordance with the law as it has now been laid down by the High Court.
In Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198 Cox J held that applications for extensions of time for the removal of caveats should be governed by the same test as would apply if the caveator was seeking an interlocutory injunction against the caveatee in the terms of the caveat. This approach was approved by the Full Court in Nexus Mortgage Securities Pty Ltd v Starmaker (No 51) Pty Ltd (1997) 193 LSJS 474. In determining the application on 17 July 2006 I applied the test of whether there was a serious question to be tried as part of the applicable criteria following what had been laid down by the High Court in Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1983) 47 ALR 398 and a number of subsequent cases. However, in its judgment delivered on 28 September 2006 in Australian Broadcasting Corporation v O’Neill (2006) 229 ALR 457 at 478-480 the majority of the High Court has superseded the “serious question to be tried” test for the previous “prima facie case” test interpreted to mean that the plaintiff must show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. This is the test which is now to be used, together with balance of convenience, for extensions of time to remove caveats. I now proceed to consider whether on this test the order of 17 July 2006 should be maintained. I approach the question afresh without considering myself constrained by the previous rulings which I have made.
The plaintiffs’ claims to have various alleged liabilities of the defendants secured by the mortgage of 12 November 2002 given by Rateki involves consideration of a series of convoluted and ill-documented transactions between the parties. The affidavits and pleadings filed show major disputes between the parties about what occurred.
Rateki does not dispute that the mortgage of 12 November 2002 was given to Union and Tripodi to secure an advance of $150,000 which was lent by them. However, its case in essence is that the mortgage secured no more than that $150,000 and interest on it, and that it has all been repaid.
On 28 November 2002 the plaintiffs, Union and Santovic, and two other persons, R & J Papalia (“the Papalias”), entered into another agreement with the defendant to loan a further amount of $450,000 to them (“the 2^nd loan”). It was a term of that loan agreement that Rateki would grant a mortgage over the Hindmarsh properties to secure this loan. On 9 December 2002 Rateki executed such a mortgage in favour of all the lenders. That mortgage was never registered and no caveat was lodged in support of it. The plaintiffs now contend that the terms of the mortgage of 12 November 2002 are wide enough to encompass this 2^nd loan.
Paragraph 26 of the amended statement of claim pleads that on 1 April 2003 Union and Tripodi entered into a loan agreement with the defendants for a loan of $325,000 on terms that Rateki would give a mortgage for it secured over the Hindmarsh properties (“the 3^rd loan”). However, the only documentation for this loan agreement which was put forward by the plaintiffs was a partial pro forma loan agreement where the only lender named is Tripodi. The name of Union does not appear in the partial document exhibited to de Maria’s affidavit as “SDB”. The only evidence put forward by the plaintiffs was a bald assertion by de Maria that it was a loan by Union and Tripodi, but no evidence was adduced to establish the source of the funds or otherwise to show that Union was a joint lender. How Union intends to prove at trial that it was a joint lender is not disclosed. Rateki did not execute any further mortgage over the Hindmarsh properties in respect of this alleged loan. Again, the plaintiffs contend it is secured by the mortgage of 12 November 2002.
On 30 January 2004 the plaintiffs, Union and Sanville Properties Developers Pty Ltd (”Sanville”), entered into an agreement to lend $250,000 to the defendants (“the 4^th loan”). Again, there was a term that Rateki would grant a mortgage over the Hindmarsh properties to secure this loan. No such mortgage was executed. Again the plaintiffs contend that the indebtedness under this 4^th loan is secured by the mortgage of 12 November 2002.
On 1 May 2004 the defendants executed a further loan agreement in which the only lender named is Union and which the plaintiffs claimed was an extension of the liabilities under earlier loans which were overdue for payment. Again the agreement provided for a further mortgage to be given by Rateki over the Hindmarsh properties, but it was not given. It is unclear how Union alone entered into this agreement which purported to affect rights of repayments held by other plaintiffs and the Papalias under earlier agreements.
The mortgagee in the mortgage of 12 November 2002 is defined as Union and Tripodi, but it is always referred to in the singular. There is nothing in the document which expressly makes the respective rights of Union and Tripodi joint and several as distinct from joint. Counsel for the plaintiffs referred to clause 12.2 which defines “monies hereby secured” in terms of the principal sum “and all and every other sum or sums of money which the Mortgagee has advanced or shall hereafter advance or pay to the mortgagor ….. and every other sum or sums of money which shall from time to time during the continuance of this security be or become due or owing by the mortgagor to the mortgagee in any manner whatsoever”. While this provision may well extend the mortgage to other moneys which the defendants jointly owe to Union and Tripodi it is unduly straining the terms of document to extend it to moneys which the defendants owe to either Union and/or Tripodi jointly with other persons who are not parties to this mortgage. As mentioned above, the plaintiffs’ evidence that the 3^rd loan of 1 April 2003 was by Union jointly with Tripodi is not supported by any specific evidence.
The uncontradicted evidence was that repayments totalling $736,000 have been made by the defendants to Union. It was not suggested that such payments to Union were not sufficient to discharge the indebtedness of the defendants to Union and Tripodi jointly under the mortgage of 12 November 2002 for the 1^st loan. While it is not for me to make any final determination on the point, on the evidence before me I doubt the balance of the moneys owed on the 2^nd, 3^rd and 4^th loans made by various of the plaintiffs and the Papalias to the defendants is secured by the mortgage of 12 November 2002. The plaintiffs have not shown a sufficient likelihood of success on this issue to justify the continuation of the caveat until trial. The trial is unlikely to take place for some substantial time and Rateki seems likely to be prejudiced in its sale of the Hindmarsh properties if the Caveat is continued.
A further reason why the Caveat should not be allowed to stand relates to its form. The caveators are only the two plaintiffs, Union and Tripodi. It does not refer to any of the other two plaintiffs and the Papalias. However, the case put forward by the plaintiffs appears to be that the mortgage of 12 November 2002 secures some undefined indebtedness of the defendants to the other plaintiffs and the Papalias. (There is no suggestion that the plaintiffs Union and Tripodi are trustees for the other plaintiffs or the Papalias over the indebtedness of the defendants to those other persons). Although it is very unclear on the evidence before me, it appears that the plaintiffs are contending that the mortgage of 12 November 2002 secures joint liabilities of various combinations of the respective plaintiffs and the Papalias under the 2^nd, 3^rd and 4^th loans. For a caveat to be allowed to remain on a title it must correctly identify a legally maintainable interest in the land by caveators: Caravan & General Finance Pty Ltd v Clearview Developments Pty Ltd (1976) 404; Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485. This includes naming all of the holders of alleged joint interest as caveators. As this has not occurred the Caveat is defective.
The order of 17 July 2006 extending time for the removal of caveat No 9463821 is to be discharged.