Zorostar Pty Ltd v Arian Investments Pty Ltd
[2016] WASC 348
•31/10/16
ZOROSTAR PTY LTD -v- ARIAN INVESTMENTS PTY LTD [2016] WASC 348
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 348 | |
| Case No: | CIV:2750/2016 | 19 OCTOBER 2016 | |
| Coram: | BEECH J | 31/10/16 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Application for order extending caveat dismissed | ||
| B | |||
| PDF Version |
| Parties: | ZOROSTAR PTY LTD ARIAN INVESTMENTS PTY LTD THE REGISTRAR OF TITLES |
Catchwords: | Real property Torrens title Caveats Whether operation of caveat should be extended Turns on own facts |
Legislation: | Transfer of Land Act 1893 (WA), s 138C |
Case References: | Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 Bashford v Bashford [2008] WASC 138 Bride v The Registrar of Titles [2015] WASC 11 Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Gangemi v Gangemi [2009] WASC 195 Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407 Midland Brick Company Pty Ltd v Welsh [2006] WASC 122; (2006) 32 WAR 287 Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150 Palazzo Homes Pty Ltd v Goh [2010] WASC 407 Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 Porter v McDonald [1984] WAR 271 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ARIAN INVESTMENTS PTY LTD
First Defendant
THE REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Torrens title - Caveats - Whether operation of caveat should be extended - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA), s 138C
Result:
Application for order extending caveat dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr E M E John
First Defendant : Mr A P Hershowitz
Second Defendant : No appearance
Solicitors:
Plaintiff : Symons & Co
First Defendant : Paiker & Overmeire
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Bashford v Bashford [2008] WASC 138
Bride v The Registrar of Titles [2015] WASC 11
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Gangemi v Gangemi [2009] WASC 195
Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407
Midland Brick Company Pty Ltd v Welsh [2006] WASC 122; (2006) 32 WAR 287
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150
Palazzo Homes Pty Ltd v Goh [2010] WASC 407
Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171
Porter v McDonald [1984] WAR 271
1 BEECH J: The plaintiff (Zorostar) applies for an order extending the operation of the caveat it lodged over property owned by the first defendant (Arian). Zorostar and Arian jointly purchased the property in 2008, with Zorostar acquiring a 30% interest and Arian a 70% interest. In late 2012, Zorostar transferred its 30% interest to Arian. Zorostar claims that it has not been paid the price for its 30% interest, so that it has an unpaid vendor's lien which sustains its caveat.
2 For the reasons that follow, I am not persuaded that Zorostar's claim that it has not been paid the price of its 30% interest has sufficient merit to justify the extension of the caveat.
The facts
3 It is common ground that in 2008 Arian and Zorostar together acquired the property at 61 York Street, Subiaco (the Property), with Arian acquiring a 70% interest and Zorostar a 30% interest.1
4 The arrangements surrounding the funding of the purchase are in dispute.
5 The purchase of the 70% interest acquired by Arian was funded by a loan in the joint names of Arian and Zorostar. By letter dated 6 February 2008, National Australia Bank (NAB) approved a market rate facility in the amount of $1.54 million to assist with the purchase of the Property.2 On 22 February 2008, NAB sent to the two companies a letter of offer for the market rate facility of $1.54 million and an overdraft facility of $220,000.3
6 On 26 February 2008, Zorostar and Arian executed a mortgage of the Property to NAB. The certificate of stamp duty for the mortgage stated that the sum secured was $1.76 million (reflecting the $1.54 million and the $220,000).4
7 In his supplementary affidavit, Mr Khosravi on behalf of Zorostar asserts that 'at all material times, it was agreed between [Zorostar] and [Arian] that [Zorostar] should not have been responsible for any monies owing under [the $1.54 million facility]'.5 Counsel for Zorostar rightly conceded that this generalised assertion is not evidence of any such agreement.6
8 On 29 February 2008, NAB wrote to Arian and Zorostar advising that both the market rate facility of $1.54 million and the overdraft facility of $220,000 had been fully drawn down and disbursed in accordance with the companies' instructions.7
9 Also on 29 February 2008, NAB wrote to Mr Khosravi in relation to an account in Zorostar's sole name. The letter advised that the 'above limit is now available'. It further stated that a disbursement for the purchase settlement in the amount of $453,529.34, as well as stamp duty of $1,570, had been taken from the account.8
10 Mr Bordbar asserts in his affidavit9 that this letter is confirmation of Zorostar's existing line of credit. The terms of the letter do not sit easily with that assertion.
11 Mr Khosravi's affidavit annexes an email from a manager at NAB which Mr Khosravi says details how finance for the purchase was structured.10 This email was sent to both Mr Khosravi and Mr Bordbar. Relevantly, it includes the following:
(1) It sets out a summary of the relevant facilities and explains the interest obligations in relation to them.
(2) It provides a summary of what occurred at settlement, as follows:
(a) The total sum of $2,456,712.30 was funded by $1.54 million on the market rate facility, $220,000 on the overdraft facility and the balance of $696,712.30 by Mr Khosravi paying $498,356 and Mr Bordbar paying $198,356.
(b) Mr Khosravi's share of the balance is said to be $300,000 plus half of the remaining balance.
(c) Mr Khosravi's share of the amount to be paid was funded by $453,529.34 that he was to draw from a new line of credit after paying out an existing line of credit, and $44,826 drawn from another line of credit.
13 In February and March 2011, there was an email exchange between Mr Bordbar and Mr Khosravi about payments in relation to the purchase of the Property. On 27 February 2011, Mr Khosravi emailed Mr Bordbar stating that he was attaching the final figures relating to the interest on the Property up to 31 March 2011. Mr Khosravi said that 'hopefully we should be able to finalise the change over before then'. Mr Bordbar responded by email of 2 March 2011, stating '[t]he amount you paid for the purchase of York Street over and above your 30% is $367,787.39'. He went on to ask '[c]an you tell how you have calculated the interest on this amount from settlement till 31 March 2011 to be $245,271.01!?'. On 4 March 2011, Mr Bordbar wrote a further email stating that the interest for the money paid by Mr Khosravi over and above the 30% was $79,351.39. He said that this sum, the initial money paid by Mr Khosravi ($598,356) and the money plus interest for the works at the Property ($14,826) added up to $692,534. Mr Bordbar's email stated that this was the amount he would ask for to buy out Zorostar's interest in the Property.12
14 The parties signed a deed dated 29 November 2012 (the Deed). The Deed recorded that Zorostar sold its 30% interest in the Property for the price of $540,000. Clause 2 provided that settlement of the sale would occur by 31 December 2012 and that at settlement Arian would pay the purchase price by bank cheque or otherwise as agreed.13
15 It appears that the Deed was signed in the period from 3 December 2012 to 6 December 2012.
16 On 2 December 2012 at 11.22 pm, Mr Khosravi sent an email to Mr Bordbar.14 His email contained the following:
(1) 'In accordance with the 30 June 2011 financial statements for [Arian and Zorostar] the amount to be paid out to [Zorostar] is $577,582 but say $577,000. Please note the deed should be modified accordingly.'
(2) 'Further to our earlier discussions of [2 December 2012], please be advised that [Arian] is required to pay a sum of money in the order of $577,000 - $690,000 to [Zorostar], the exact amount to be determined and confirmed by both parties urgently.'
(3) He proposed that Arian agree to provide a bank cheque for $14,425 (being 2.5% of $577,000) as an initial deposit.
(4) 'As per our agreement [Arian] agrees to pay to Zorostar the monthly interest on the outstanding money owing to Zorostar starting from January 2013.'
(5) 'A formal written agreement will be exchanged between both parties as soon as possible.'
(6) He requested confirmation of acceptance of these terms by Mr Bordbar signing and returning the email.
17 The following day Mr Bordbar responded by email to Mr Khosravi.15 He signed a printed copy of this email, and dated it 3 December 2012. Mr Bordbar's email included the following:
(1) His comments were intended to respond to and clarify Mr Khosravi's email. Mr Bordbar said that he would sign and send 'this document' to Mr Khosravi, which he evidently did.
(2) 'The Deed amount is based on 30% of the refinance figure of $1.8 million for York Street and it is not a reflection of the money owed to [Zorostar].'
(3) 'The amount owed to [Zorostar] will be confirmed and finalised in January/February 2013.'
(4) 'An amount of $15,000 towards the amount owed to [Zorostar] will be paid on or before 21 December 2012.'
(5) He agreed that Arian would pay Zorostar the monthly interest on the outstanding money owed.
(6) His email would constitute the written agreement, but the amount owed needed to be confirmed and documented.
(7) In addition, the Deed and land transfer form would be signed by both parties on 3 December 2012.16
18 The parties signed the transfer instrument on 6 December 2012.17
19 Mr Khosravi says in his affidavit that he has not received the amounts owed. He also says that he recalls signing an agreement setting out the total amount owed by Arian to Zorostar, but he does not have a copy of that agreement.18
20 Mr Bordbar states that at the time of settlement of the transfer of Zorostar's 30% interest in the Property there was no exchange of funds, and that at the time of the transfer the loan and the liability of both parties to NAB was extinguished.19 Arian refinanced its loan arrangements to enable the loan to NAB to be paid out, following which Arian became the sole borrower.20 The parties signed a discharge authority with NAB.21 Mr Khosravi did not adduce any evidence to the contrary.
21 Arian made payments of $3,000 to Zorostar on 12 October, 10 November 2015, 16 December 2015, 11 March 2016, 6 May 2016 and 15 June 2016, and a payment of $5,000 on 10 February 2016.22
22 In the middle of this year, the parties exchanged emails making competing assertions about what had occurred in relation to the purchase of the Property and the transfer of Zorostar's 30% interest, and about their respective rights and interests.23
23 On 25 July 2016, Zorostar lodged a caveat on the Property.24
The caveat
24 The caveat is, in form, an absolute caveat. It claims an 'interest as lienee' on the ground that Zorostar is an unpaid vendor under a contract of sale between the parties dated 28 November 2012. That is plainly a reference to the Deed.
Extension of caveat: legal principles
25 The principles relating to an extension of a caveat under s 138C of the Transfer of Land Act 1893 (WA) are well known. I apply the outline of principles stated by Edelman J in Bride v The Registrar of Titles:25
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.
26 As a matter of form, a caveat must definitely or explicitly specify the estate or interest claimed. It must reveal to the registered proprietor the nature and extent of the claim.26
27 A caveat must not go beyond the legitimate claim necessary to protect the caveator's rights.27
28 If a caveat is defective in form it should not be extended, unless it is amended to remedy the defect.28
29 On an application to extend a caveat there is a limited power to allow the terms of the caveat to be amended. Amendment may be permitted so as to enable the caveat to express better or more fully the interest which is claimed in it. However, amendment is not permitted so as to alter the interest which is claimed and thereby claim a different interest.29
30 The court has power to amend a caveat that, when lodged, was an absolute caveat so that, instead of absolutely forbidding registration, it forbids registration of an instrument unless it is subject to the claim of the caveator.30
31 In an application for an extension of a caveat, it is not appropriate to resolve conflicts of evidence on affidavit.31
32 In the exercise of the court's discretion under s 138C the balance of convenience is a relevant factor. There is no rule of law that once an arguable case for a caveatable interest has been established, removal of the caveat will only be ordered if it is shown that the circumstances are so unusual that the caveat should be removed. The discretion is to be exercised having regard to the particular circumstances of the case. Observations in cases32 to the effect that it would be unusual to discharge a caveat once an arguable caveatable interest has been shown are general observations made by reference to the particular facts in each case. Those observations will often apply where the caveator claims an interest in fee simple. However, the position may be different if a lesser interest is claimed.33
The form of the caveat
33 In my view, the form of the caveat is defective in several respects. First, the equitable lien arises only in relation to the Property sold by Zorostar, namely an undivided 30% share of the Property. Secondly, the caveat states that Zorostar's interest arises under the Deed. Zorostar's case before me is that it has a claim that arises under a contract of sale that is partly constituted by the Deed, but also constituted by an agreement in writing signed shortly thereafter, and partly oral. Thirdly, in my view, the caveat should be a subject to claim caveat, not an absolute caveat. The effect of a subject to claim caveat was explained by Mason CJ, Dawson and McHugh JJ in Leros v Terara.34 It means that a subsequent instrument of transfer can be registered, but that registration does not defeat the caveator's claim. Nor does registration validate the claim; the claim is preserved to enable the caveator to establish its claimed interest, if it can. A subject to claim caveat would fully protect Zorostar's claim to an interest in the Property.
34 In my view, if the caveat were to be extended, Zorostar would need leave to amend the caveat to remedy these defects. However, for reasons I will explain, I am not persuaded that the operation of the caveat should be extended.
Does Zorostar's claim have, or may it have, substance?
35 In the caveat, Zorostar claims an interest as unpaid vendor under the Deed. The Deed provides that the consideration for the sale by Zorostar of its 30% interest in the Property is $540,000. Thus, the caveat asserts that this $540,000 is unpaid.
36 Counsel for Zorostar conceded, rightly, that there is no prima facie case that the $540,000 (or any part of it) remains unpaid.35 The unchallenged evidence establishes that:
(1) as at 1 December 2012, Arian and Zorostar had a joint debt (or debts) to NAB in an amount of approximately $1.8 million, secured over the Property;
(2) as at that time, Zorostar owned a 30% share of the Property, and Arian owned a 70% share of the Property;
(3) the sum of $540,000 referred to in the Deed was calculated as 30% of $1.8 million;
(4) in December 2012, the parties' joint debt(s) to NAB was paid out by a refinancing in the form of a borrowing in the sole name of Arian; and
(5) as a result of the discharge of the joint debt, and its replacement with a debt in the sole name of Arian, Zorostar's liability to NAB was extinguished.
37 As counsel for Zorostar accepted, the discharge of the parties' joint debt to NAB constituted payment by Arian of the consideration of $540,000 under the Deed.
38 Thus, Zorostar's claim as made in the caveat is unsustainable.
39 Counsel for Zorostar submitted that it has established a prima facie case that it is an unpaid vendor in relation to amounts owed to it by Arian in addition to the $540,000. In support of that submission counsel relied on [20] - [22] of Mr Khosravi's primary affidavit, and the email exchange between the parties on 2 and 3 December 2012.36
40 Mr Khosravi's evidence and those emails establish a prima facie case that Arian owed or would owe Zorostar amounts in addition to the $540,000 referred to in the Deed. However, for the reasons that follow, Zorostar has not established a prima facie case37 that the parties agreed that those additional amounts would be part of the purchase price of its 30% interest.
41 Mr Khosravi's primary affidavit includes, relevantly, the following:
(a) He refers to the Deed and to the emails exchanged on 2 and 3 December 2012.38
(b) He states that he executed the transfer of the 30% interest on 6 December 2012.39
(c) He says that 'around' the time he executed the transfer he signed another agreement detailing the total amount owed by Arian to Zorostar. Despite his requests, Arian has not given him a copy of that agreement. He believes that it stated that Arian would pay Zorostar an amount in excess of $540,000.40
42 As counsel for Zorostar conceded,41 Mr Khosravi does not say in his two affidavits that he and Mr Bordbar agreed that the price to be paid by Arian to Zorostar for Zorostar's 30% interest would include amounts beyond the $540,000 referred to in the Deed or, in particular, that it would include the additional amounts referred to in the parties' email exchange on 2 and 3 December 2012.
43 I turn to the emails relied on by Zorostar.
44 Mr Khosravi's email of 2 December 2012 asserted an amount owing of $577,000 and requested that the Deed be amended accordingly. Thus, Mr Khosravi evidently contemplated that the full amount owing by Arian to Zorostar would be reflected in the purchase price for Zorostar's 30% interest. That is what the parties had contemplated earlier.42 However, in his email response on 3 December 2012, Mr Bordbar proposed a different approach. He said in effect that the price in the Deed reflected an amount of 30% of the refinancing sum of $1.8 million, and that it would not be changed. Further, he said that the full amount owed by Arian to Zorostar would be worked out in January or February 2013, and that Arian would pay the monthly interest on that amount and would make a payment of $15,000 by 21 December 2012. Mr Bordbar's email further stated that the transfer of the 30% interest would be signed on 3 December 2012. Thus, it was clear from this email that settlement of the sale by the transfer and payout of the loan would proceed, while the further agreement in relation to the total amount owed to Zorostar would be dealt with later.
45 There is no evidence from Mr Khosravi of any conversation between him and Mr Bordbar in or around the time of the transfer.
46 In the absence of evidence of any such conversation, it seems to me that the only reasonable interpretation of the parties' communications and conduct is that the parties agreed that:
(1) the sale of Zorostar's 30% interest under the Deed would proceed to settlement;
(2) other amounts owed to Zorostar would be dealt with separately and subsequently. The parties would, in January or February 2013, finalise a further agreement as to the amount owed in relation to their previous dealings.
47 There is nothing in the parties' conduct to even arguably support a conclusion that they agreed that the further amount owed was a part of the purchase price of the 30% interest. Their conduct, and the instruments they signed, point entirely the other way.
48 First, the purchase price stated in the Deed is $540,000.
49 Secondly, the transfer instrument states that the consideration for the transfer was pursuant to the Deed, and the instrument is stamped with a dutiable value of $540,000.
50 Thirdly, settlement of the sale of the 30% interest was completed in December 2012 in circumstances where the Deed made no reference to any further amounts owing and Mr Bordbar had proposed that these amounts be confirmed and finalised in January or February 2013.
51 Fourthly, the caveat lodged by Zorostar asserts an interest as an unpaid vendor under the Deed, and makes no reference to any obligations apart from those under the Deed.
52 For the reasons I have stated, I am not persuaded that Zorostar has established a prima facie case sufficient to sustain an extension of the operation of the caveat. In coming to that conclusion, I do not overlook the absence of any evidence from Arian of any intention to deal with the Property in the short term and, consequently, the absence of any evidence of immediate prejudice to it.
53 I also take into account that the effect of refusing to extend the caveat's operation is, in practical terms, to destroy the benefit of the claimed proprietary interest. However, as Newnes JA has observed,43 the potential seriousness of the consequences of refusing to extend the operation of a caveat must not distract attention from the caveator's obligation to justify its maintenance. A party who fails to show any likelihood of success does not overcome that failure by showing that they would suffer severe consequences if relief were refused.
Conclusion
54 For these reasons, I would discharge the interim order extending the operation of the caveat and dismiss Zorostar's application.
55 I will hear from the parties as to costs, but, on the face of things, costs should follow the event.
1 Affidavit of Ardeshir Khosravi sworn 6 October 2016 (Khosravi) [4] -[7], annexure AK1; affidavit of Mohammed Benham Bordbar sworn 14 October 2016 (Bordbar) [6].
2 Bordbar, annexure MB1.
3 Bordbar, annexure MB2.
4 Bordbar, annexure MB4.
5 Supplementary affidavit of Ardeshir Khosravi sworn 17 October 2016 (Khosravi 2) [4].
6 ts 23.
7 Bordbar, annexure MB3.
8 Khosravi , annexure AK2.
9 Bordbar [10].
10 Khosravi [10], annexure AK3.
11 Bordbar, annexure MB5.
12 Khosravi, annexure AK4.
13 Khosravi, annexure AK5.
14 Khosravi, annexure AK6.
15 Khosravi, annexure AK6.
16 Khosravi, annexure AK6.
17 Khosravi, annexure AK7.
18 Khosravi [20] - [21].
19 Bordbar [24].
20 Bordbar [25].
21 Khosravi, annexure AK13, pages 84 - 85.
22 Khosravi 2, annexures AK16, AK17.
23 Khosravi, annexure AK8.
24 Khosravi, annexure AK9.
25Bride v The Registrar of Titles [2015] WASC 11 [11] - [16].
26Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407, 422 - 423.
27Midland Brick Company Pty Ltd v Welsh [2006] WASC 122; (2006) 32 WAR 287 [342]; Gangemi v Gangemi [2009] WASC 195 [44].
28Bashford v Bashford [2008] WASC 138 [55] and the cases there cited.
29Bashford v Bashford [51] and the cases there cited; Palazzo Homes Pty Ltd v Goh [2010] WASC 407 [14].
30Palazzo Homes Pty Ltd v Goh [23].
31Porter v McDonald [1984] WAR 271, 276.
32 Such as Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50.
33Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150 [20] - [21], [29].
34Leros v Terara (420).
35 ts 20, 24 - 25.
36 ts 15, 17 - 18, 24 - 25.
37 In the sense used in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65].
38 Khosravi [12] - [18].
39 Khosravi [19].
40 Khosravi [20] - [22].
41 ts 16, 18.
42 See Mr Bordbar's email of 4 March 2011 (Khosravi, annexure AK4); see also Khosravi 2 [8].
43Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [44], Pullin JA agreeing [21].
5
11
1