Allen Taylor & Company Pty Ltd trading as Boral Timber & Ors v Norman Leslie Harrison [2010] NSWSC 1021 (9 September 2010)

Last Updated: 15 November 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Allen Taylor & Company Pty Ltd trading as Boral Timber & Ors v Norman Leslie Harrison [2010] NSWSC 1021
This decision has been amended. Please see the end of the judgment for a list of the amendments.

JURISDICTION:


FILE NUMBER(S):
2010/290608

HEARING DATE(S):
8 September 2010


EX TEMPORE DATE:
9 September 2010

PARTIES:
Plaintiff-Allen Taylor & Company Pty Ltd t/as Boral Timber
Defendant-Norman Leslie Harrison

JUDGMENT OF:
Slattery J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff- L.Gor
Defendant- D.A.Allen

SOLICITORS:
Plaintiff-L.Walker, Colin, Biggers & Paisley
Defendant-D. Phair, Proctor, Phair Lawyers


CATCHWORDS:
REAL PROPERTY
Torrens title
caveats against dealings
application for extension of caveat
caveator supplies credit to caveatee’s company
uncertainty in description of charge in guarantee alleged
whether caveatable interest
charge arguably created
form of caveat alleged to be defective due to misidentification of caveatee
whether caveat requires amendment
whether deficiencies in caveat can be disregarded under Real Property Act s74L
deficiency not fatal to the validity of caveat
deficiency disregarded
whether caveat interferes with interests of both joint tenants as registered proprietors of the subject property
only one registered proprietor joined as a party
no interference with interest or other joint tenant
caveat may be extended without joining other joint tenant
caveat extended.

LEGISLATION CITED:
Real Property Act 1900, ss 74F, 74K, 74L
Real Property Regulation 2008, Clause 7, Schedule 3

CATEGORY:
Procedural and other rulings

CASES CITED:
Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2009] QCA 134; [2010] 1 Qd R 202
Andrews v Wilcox [2008] NSWSC 280
Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415
Cini v Pets Paradise Franschising (SA) Pty Ltd [2008] SASC 287; (2008) 102 SASR 177
Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630
Hedley v Roberts [1977] VicRp 33; [1977] VR 282
Leros Pty Limited v Terara Pty Limited [1992] HCA 22; (1992) 174 CLR 407
Ron Medich Properties Pty Ltd v McGuirk [2010] NSWSC 552
Tsan and Anor v Electronic Resources Aust Pty Ltd Supreme Court of NSW, 24 July 1997 (Unreported) Hodgson J, BC 9707703
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429
Windella (NSW) Pty Ltd v Ronald James Hughes & Ors [1999] NSWSC 1129; (1999) 49 NSWLR 158

TEXTS CITED:
Butt, Land Law, 6th Edition, Law Book Co, [1448]

DECISION:
1. The plaintiffs have leave to file in Court the Amended Summons dated 7 September 2010.
2. The operation of caveat number AE482747 be extended until further order.
3. The operation of caveat number AE482743 be extended until further order.
4. The plaintiffs’ costs of and incidental to the hearing of 8 and 9 September 2010 be reserved to abide by the final result of these proceedings.
5. Liberty to restore on 2 day’s written notice before Slattery.
6. These Orders be entered forthwith.
The Court notes:
1. The agreement of the parties to expedite the District Court proceedings as set out in the minute annexed to this Order.
2 That the parties:
2.1 will in good faith and use their best endeavours to agree the proper deductions and adjustments on completion of the sale of the property the subject of Orders 1 and 2; and
2.2 if such agreement can be reached, the plaintiffs will provide a withdrawal of the caveats in Orders 1 and 2 in return for a bank cheque made payable to the Supreme Court of New South Wales.
3. The Defendant’s intention to apply to the Court for the release of $55000 to pay his costs to date of the District Court proceedings.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST


SLATTERY J

THURSDAY, 9 SEPTEMBER 2010

2010/290608 ALLEN TAYLOR & COMPANY PTY LTD T/AS BORAL TIMBER v NORMAN LESLIE HARRISON

EX TEMPORE JUDGMENT

1 HIS HONOUR:- The plaintiffs Allen Taylor & Co Pty Limited trading as “Boral Timber” (Allen Taylor & Co) and Oberon Softwood Holdings Pty Limited trading as “Boral Timber” (Oberon) have for many years supplied timber to Homebush Bay Timber Pty Limited. Both Oberon and Allen Taylor & Co are subsidiaries of Boral Limited.

2 On 7 July 2004 a principal of Homebush Bay Timber, Mr Norman Leslie Harrison, executed a Credit Application (“the agreement”) and a Personal Indemnity and Guarantee Agreement (“the guarantee”) with Boral Limited to enable each of Allen Taylor & Co and Oberon to supply timber on credit to Homebush Bay Timber. Mr Harrison’s personal guarantee was required to enable the continuation of timber supply on credit. The parties continued trading for some years after 2004.

3 In 2009 Homebush Bay Timber defaulted on its credit obligations to both Allen Taylor & Co and to Oberon. Homebush Bay Timber was placed in external administration. Allen Taylor & Co and Oberon have not been able to recover the moneys alleged to be due to them from Homebush Bay Timber. Both Allen Taylor & Company and Oberon now look to Mr Harrison on his personal guarantee.

4 In February 2009 each of Allen Taylor & Company and Oberon lodged caveats on a residential property that Mr Harrison and his wife own at Blakehurst in suburban Sydney. Mr and Mrs Harrison sold the Blakehurst property on 14 August 2010. The sale is scheduled for settlement on 24 September 2010. Mr and Mrs Harrison served lapsing notices under Real Property Act 1900 (NSW), s 74J seeking the removal of these caveats. In response Allen Taylor & Company and Oberon commenced these proceedings seeking orders as plaintiffs under Real Property Act s 74K extending the caveats and seeking a declaration that each of them has a charge over the Blakehurst property. The defendant, Mr Harrison resists the extension of these caveats. That is the principal issue for trial before me today.

5 In May 2009 Allen Taylor & Co commenced proceedings in the Local Court against Mr Harrison on his guarantee. In the same month Oberon commenced proceedings against Mr Harrison on his guarantee in the District Court of New South Wales. Mr Harrison seeks statutory relief to set aside the agreements and the guarantees. All those proceedings are not yet resolved but the parties are moving towards a final hearing in the District Court.

6 The Blakehurst property was sold for $1.26 million. The first mortgagee of the property is Perpetual. A mortgage statement from Perpetual for the Blakehurst property shows that as at 14 August 2010 the amount owing to the bank was $800,000. Subject to adjustments for water rates and other sales fees, Mr Harrison anticipates that his share of the proceeds of sale of the property will be approximately $215,330. He has deposed that it is his intention to pay from these proceeds of sale all the personal debts that he currently owes. Oberon and Allen Taylor & Co say that a combination of the moneys due to each of them, plus their costs of the Local and District Court proceedings, plus the anticipated costs of bringing these proceedings to completion plus the amounts outstanding for the supply of goods, together with interest, would produce a total amount secured under the charge to a figure in excess of $300,000.

7 Mr Harrison’s wife has not been joined to these proceedings. If Allen Taylor & Company and Oberon are not successful in securing an extension of the caveat but if they otherwise establish an equitable interest as chargees in the Blakehurst property, they seek injunctive relief to restrain Mr Harrison from dealing with the proceeds of sale. Allen Taylor & Company and Oberon make clear that they do not wish to interfere with the distribution of the proceeds of sale from the Blakehurst property to Mrs Harrison. The question is what will happen to Mr Harrison’s share of the proceeds of sale.

The Issues

8 Mr Harrison raises the following issues in the proceedings. First he argues that that no moneys are due to Allen Taylor & Company and Oberon upon the proper construction of the guarantee, nor, he argues, does any caveatable interest arise under the guarantee. Secondly, he argues that in the caveat there is a misdescription of the chargee of the charge, which cannot be amended and which itself becomes a reason not to extend the caveat. Thirdly, he argues that the caveat is defective because it was lodged in respect of only one of the two joint tenants of the Blakehurst property, namely in respect of Mr Harrison’s interests. Mrs Harrison is not a party to the proceedings and yet the caveat and the loan agreement purport to bind the whole of the land.

9 Anticipating possible difficulty with some of these points the plaintiffs have sought to amend their summons claiming relief under Real Property Act s 74K(2) amending the caveat upon the application to extend and also under s 74L to allow defects in the caveat to be ignored. The Court must deal with these issues to decide whether or not the caveat can be extended.

(1) Ambiguity in the Guarantee

10 Mr Harrison’s first argument relates to an alleged ambiguity in the guarantee. Mr Harrison’s submits that the guarantee is ambiguous or is so uncertain in its operation that it is incapable of enforcement. The determination of this first question requires examination of the terms of the agreement and the guarantee.

11 The agreement was made in the form of a credit application. The guarantee was an ancillary part of the credit application. The “supplier” in the agreement is defined to include bodies corporate related to Boral Limited, such as Allen Taylor & Co and Oberon. The “customer” is Homebush Bay Timber. The relevant terms of the agreement are the following:

“CREDIT ACCOUNT TERMS AND CONDITIONS

1. TERMS OF ACCOUNT

a) Payment of your account must be made by the due date, which will be advised to you if your application is successful.

b) The customer must advise the Supplier in writing of any changes in its business structure as shown in this application within two (2) business days of such change occurring. The person or entity, shown in the Supplier’s records as the Customer, remains liable to the Supplier for Goods supplied until the Supplier has accepted a fresh credit application from the person or entity operating the new business structure.

If you fail to observe either of the terms, or you have made a misrepresentation to the Supplier or given information which is untrue, credit facilities may be withdrawn and all charges made to your account will become due immediately.

2. OVERDUE ACCOUNTS

a) Any amount not paid by the due date will, at the discretion of the Supplier, be subject to interest charged at 1 % above the overdraft rate applicable to amounts in excess of $100,000, as charged by the National Australia Bank Limited and calculated on monthly balances.

b) The customer agrees to pay all legal costs, stamp duty where applicable, and any expense incurred by the Supplier in connection with recovery of amounts overdue.

c) The Customer agrees to charge all their equitable interest in freehold or leasehold property. The Customer agrees to deliver to the Supplier within seven (7) days of demand, a properly executed Memorandum of Mortgage in a form approved by the Supplier, and which includes a covenant providing that interest may be charged on all outstanding monies at rates set from time to time by Section 94 of the Supreme Court Act 1970 (NSW), and otherwise in accordance with Memorandum 0860000, registered at the office of the Registrar General in Sydney.”

12 The guarantee was executed at the same time as the agreement. The guarantee relevantly provides for the plaintiffs, each of which as Boral Limited subsidiaries come within the definition “supplier”, to respond to the request by the guarantor, Mr Harrison, to supply goods on credit to Homebush Bay Timber. The terms of the guarantee apply to the supply upon the plaintiffs’ election to supply goods to Homebush Bay Timber under the agreement. The terms of that guarantee relevant to the current dispute between the parties are:

“1. I will indemnify the Supplier against any losses, costs, charges and expenses of any nature, which it might incur as a result of any default by the Customer or arising under this Guarantee.

2. I will also be responsible to the Supplier for all outstanding monies due now or at any time in the future for Goods supplied by the Supplier to the Customer from time to time.

...

5. This Guarantee and Indemnity extends to credit given to the Customer in the future by a company which is not now, but at the time that such credit is extended, has become a related body corporate of the Supplier and may in such case be enforced by the Supplier.

...

9. The Guarantor hereby agrees to charge all their equitable interest in freehold or leasehold property. The Guarantor agrees to deliver to the Supplier, within seven (7) days of demand, a property executed Memorandum of Mortgage in a form approved by the Supplier and which includes a covenant providing that interest may be charged on all outstanding monies at rates set from time to time by Section 94 of the Supreme Court Act 1970 (NSW), and otherwise in accordance with Memorandum 0860000, registered at the office of the Registrar General in Sydney.

If the charge created by this clause is or becomes void or unenforceable, it may be severed from this agreement without any effect on its validity; and the Guarantor will not be exonerated in whole or part. Nor will the Supplier’s rights, remedies or recourse against the Guarantor or any other Guarantor in any way be prejudiced or adversely affected by such severance.”

13 The first two sentences of clause 9 of the guarantee, the guarantor’s charge, are identical in form to the first two sentences of clause 2(c) of the agreement, the customer’s charge. Mr Harrison submits that the charge in the first sentence of clause 9 of the guarantee does not clearly describe what particular obligations of Homebush Bay Timber are secured by the guarantee. His submission is that the first sentence of clause 9 assumes that there are some obligations secured in the rest of the guarantee but that this charging clause does not identify exactly what they are. He points out that it is not clear whether the obligations secured in the first sentence are the obligations created in clauses 1, 2 or 5 of the guarantee. He says that the lack of a clear choice among these possible obligations means that the guarantee is too uncertain to be enforced.

14 The defendant has a heavy onus to demonstrate that the plaintiffs’ claim to a caveatable interest in the Blakehurst property does not have substance. The parties have asked the Court not to decide any question of the construction of the guarantee on a final basis, although the Court offered to do so. It is said that the construction of this clause may soon arise in the District Court proceedings and that evidence may yet be adduced in those proceedings, which could bear upon the issue of construction. That is the approach that the Court will take.

15 In my view the plaintiffs have a strong argument that the words of charge in the first sentence of clause 9 apply to all of the obligations described in clauses 1, 2 and 5 of the guarantee. I reach this view for two main reasons. Firstly, the Court of Appeal of the Supreme Court of Queensland has recently considered the first two sentences in clause 2 (c) in the agreement and confirmed in Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2009] QCA 134; [2010] 1 Qd R 202 at [46]- [52], that the charging provision in clause 2(c) creates an immediate equitable charge in respect of a series of obligations created by clauses 2(a) and 2(b). Although Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd is concerned with the agreement rather than the guarantee, the charging clause in each is identical. The problem is the same here as it was in Allen’s Asphalt, construing the precise obligations that are the subject of the charge in the first sentence of clause 9 and clause 2(c). The Court of Appeal in Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd relevantly said:

“[46] The contentions put forward by the appellant’s counsel were as follows. Clause 2(c) contains a two-step process. The first step is an agreement by the customer “to charge all their equitable interest in freehold or leasehold property”. The second step sets out the mechanism for doing so, namely, delivery of a properly executed Memorandum of Mortgage within seven days of demand. The heading under which the charging clause appears is “Overdue Accounts”, not “Overdue Amounts”, such as, for example, interest and costs. At best, the equitable charge consequently attaches to “Overdue Accounts”, not interests and costs. For the latter to be included in the charge “an equitable mortgage would be necessary”, but an equitable mortgage has not arisen as no demand to execute a Memorandum of Mortgage has been made. Consideration [47] The appellant’s contentions do less than justice to equitable principles and the language of the agreement. In accordance with what is known as the doctrine in Walsh v Lonsdale (1882) 21 Ch D 9, an agreement for consideration to execute a mortgage or charge over certain property when required creates an equitable mortgage or charge. The applicable equitable principle or maxim is that “equity looks on that as done which ought to be done.” Whether those words create a charge over the appellant’s land depends on determining the intention of the parties. That intention is to be determined objectively by reference to to “what a reasonable person would have understood [the words] to mean”. And to ascertain that “normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction”. Such a reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation which they were in at the time of the contract. It is appropriate also to refer to the following often quoted observations of Romer J in Cradock v Scottish Provident Institution (1893) 69 LT 380, at 382:

‘To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the court can fairly gather from the instrument an intention by the parties that the property there referred to should constitute a security’.

[48] Clause 2(c) contains an agreement by the appellant to charge all its “equitable interest in freehold or leasehold property”. It commences with the words “The Customer agrees to charge” and it identifies the property to be charged. There is no good reason for qualifying the first sentence of cl 2(c) by reference to the second sentence. That sentence provides the respondent with the means of obtaining a Memorandum of Mortgage with express enforcement provisions should the respondent deem such further protection necessary or desirable. It is unlikely, in my view, that the contractual intention behind cl 2(c) was that the respondent be denied the protection of a charge after supplying goods until such time as a Memorandum of Mortgage was demanded or entered into. That would tend to ensure, contrary to the appellants interests, that the respondent would call for the execution of a Memorandum of Mortgage immediately in the event of default or even before that. The charging provision is extremely broad in its ambit but that is not an impediment to its validity or enforceability. [49] Clause 2(a) provides for interest to accrue on unpaid monies at a specified rate. Under cl 2(b) the appellant agrees to pay all expenses incurred by the respondent “in connection with recovery of amounts overdue”. Clause 2(c), the last of the three sub-clauses in cl 2, contains an agreement by the appellant to charge its freehold and leasehold property. Clause 2(c) also provides for the Memorandum of Mortgage to include a covenant “providing that interest may be charged on all outstanding monies at rates set from time to time by s 94 of the Supreme Court Act 1970 (NSW), and otherwise in accordance with Memorandum 0860000 ...”. Those words, perhaps, assist the argument that no charge is created until execution of the Memorandum of Mortgage, as it seems curious that the Memorandum of Mortgage would provide for an interest rate different from that in cl 2(a).[50] I do not consider, however, that the stipulation of two interest rates provides much assistance to the appellant. However cl 2(c) is construed, the agreement provides for two interest rates. The cl 2(a) rate applies until the mortgage takes effect and there is nothing untoward in the charge created by cl 2(c) securing payment of interest which accrued at the cl 2(a) rate prior to the grant of the mortgage.[51] Clause 2(c) does not identify expressly what is secured by the charge. But consideration of the agreement as a whole, which is both desirable and necessary, does not leave one in any doubt on the point. The agreement deals with only one category of payment by the appellant in addition to the category provided for in each of cll 2(a) and 2(b): payment for goods purchased by it. It is inconceivable that a reasonable person with the background knowledge of the parties would conclude that the charge agreed to be given by cl 2(c) did not secure the payment of the outstanding balance of the appellant’s account. It is scarcely less conceivable that such a person would not understand the charge to be in respect of the cll 2(a) and 2(b) monies also. There could be no sensible commercial purpose for differentiating between the categories of obligation when considering the provision of security.

[52] The second sentence of cl 2(c) provides for interest on “all outstanding monies”. It is thus implicit that the Memorandum of Mortgage is to secure payment of “all outstanding monies”. There is no sensible reason why the charge and mortgage would secure payment of different monies. And “outstanding monies” is an apt description of the three categories of monies required to be paid under the agreement.”

16 In my view it is strongly arguable that the same logic applies to the charging sentence in clause 9 of the guarantee. In the guarantee the words “all outstanding monies” in the second sentence of clause 9 apply in my opinion to all the categories of money obligations created under clauses 1, 2 and 5 of the guarantee. There is no sensible reason why the charge and the mortgage in clause 9 of the guarantee would secure the payment of different monies. And “outstanding monies” is an apt description of all the categories of monies payable under the guarantee. Were this case being decided at a final hearing and were there no further evidence to be adduced, it would be difficult to see why this logic from Allen’s Asphalt would not apply to the guarantee, producing the result that it would be upheld as creating an equitable charge over the Blakehurst property in respect of all monies outstanding under all the obligations created by clauses 1, 2 and 5 of the guarantee. But that is not something that I have to finally decide now.

17 My second reason for saying that the words of charge in the first sentence of clause 9 apply to all of the obligations described in clauses 1, 2 and 5 of the guarantee is that the guarantee is a commercial document that was clearly intended to achieve something and will not be held void for uncertainty or ambiguity except in the most extreme and intractable of cases: see Murphy and Anor v Wright [No 2] [1992] NSWCA 168 at page 4 citing Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 436 – 437 per Barwick CJ. Unless construed in the way contended for by the plaintiffs the guarantee would be wholly nugatory, a consideration which may be weighed against the contra proferentem principle and the principle that guarantees are construed strictissimi juris in favour of a guarantor: Tsan and Anor v Electronic Resources Aust Pty Ltd Supreme Court of NSW, 24 July 1997 (Unreported) Hodgson J, BC 9707703. Also, the extreme breadth of a charging provision is not necessarily an impediment to its validity or enforceability: Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415.

18 Clause 9 of the guarantee is likely to be held to secure at least some of the obligations elsewhere in the guarantee, otherwise it would be a meaningless provision. The provision would secure at least the obligations created in clauses 1 or 2 of the guarantee. Although I might observe at his point that there may be very little practical difference between the scope of the monies referred to in clause 1 of the guarantee and those referred to in clause 2. Accordingly, the plaintiffs have established that they have an arguable case that the guarantee creates an equitable charge over Mr Harrison's interest in the Blakehurst property in respect of all the monies claimed.

(2) Amending the Caveat

19 The second issue is a question of whether the caveats can be amended. The defendant Mr Harrison points out that there is an obvious mistake in the "Nature of estate or interest" described in Schedule 1 of each caveat. Schedule 1 of each caveat refers to giving an equitable charge to “Homebush Bay Timber Pty Ltd” as chargee. Of course Homebush Bay Timber is the "customer" under the supply agreement created by the credit application form, not the chargee. The plaintiffs concede this is an error and submit that Oberon should be described as the chargee in Schedule 1 of its caveat and Allen Taylor & Co as the chargee in the other caveat. The question arising now is whether this error affects the validity of each caveat and whether the error is curable by an amendment to the caveat.

20 In my view for the reasons which follow this error is a defect in each caveat that is capable of being disregarded under s 74L or alternatively capable of amendment upon extension of the caveat under Real Property Act s 74 K(2). Real Property Act s 74L allows the Court to disregard strict compliance with the requirements of the Real Property Act and regulations. It provides:

“74L Strict compliance with formalities with respect to caveats not necessary

If in any legal proceedings a question arises as to the validity of a caveat lodged under a provision of this Part, the court shall disregard any failure of the caveator to comply strictly with the requirements of this Part, and of any regulations made for the purposes of this Part, with respect to the form of the caveat.”

21 This is a clear case for the application of Real Property Act s 74L. The description of Homebush Bay Timber as the party to whom the charge is given in Schedule 1 to the caveat could only be a mistake and one for which the correction is obvious and indisputable. Homebush Bay Timber never had the benefit of a charge under any agreement involving these parties. Schedule 1 of each caveat identifies the credit application, which correctly specifies the name of the caveatee as each of the plaintiffs, whose names should appear as the chargee in each caveat. In his judgment in the Windella (NSW) Pty Ltd v Ronald James Hughes & Ors [1999] NSWSC 1129; (1999) 49 NSWLR 158 at [25] – [27] Justice Santow summarised the relevant principles as to the operation of Real Property Act s 74L, as “the Court now has the power to overlook any deficiencies in the drafting of the caveat provided the caveator possesses a caveatable interest of some description and even though that latter is not specified at all". The full passage from his Honour’s reasons is the following:

“[25] Thus even if the defect is taken to exist, I am satisfied that it is the kind of defect which the Court is required to disregard under s74L of the Real Property Act[26] Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 and In the Marriage of Stevens (1991) 15 Fam LR 51 indicate that in New South Wales the court now has the power to overlook any deficiency in the drafting of the caveat provided that the caveator possesses a caveatable interest of some description and even though that latter is not specified at all. In Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd, Clarke JA (at 471-472) reviewed the amendments made to the Real Property Act 1900 (NSW), which accompanied the introduction of s74K and s74L and said:

‘It is clear that the legislature has set out in these sections to remedy the problems which previously arose from a technical approach to the description of the interest claimed in the caveat, the unrestricted specifications of the dealings the recording of which were forbidden by the caveat and the lodging of caveats which on their face did not comply with the requirements of the relevant part of the Act’

He considered that s74L excused both a technical deficiency in the description of the interest claimed and an excessively wide prohibition against dealings (at 475). In In the Marriage of Stevens (supra), failure to describe the interest claimed as an interest capable of supporting a caveat was excused on the basis that the evidence showed that the caveator did have an interest in the property. At 53, Cohen J said:

‘I regard the reference to the form of the caveat [in s74L] as including issues over whether the caveatable interest claimed in the document is a caveatable interest. If this is not the case, the purpose of the whole part [of the Act] ... is defeated. It was recently amended in such a way that its clear intent is to overcome the strict rules for validity of caveats which had, until the amendment, developed through judicial interpretation.’

[27] I should make it clear that based on these authorities the curative power of s74L is clearly not to be treated as limited to technical defects in areas other than the description of the estate or interest. I have already concluded that the present defect, if it be one, is certainly not of such fundamentality as to give rise to an interest unknown to the law. Clearly enough the Plaintiff has a caveatable interest as equitable mortgagee in relation to the mortgagors equity of redemption which, though unregistered, can be called in aid though the present description be deficient. That indeed is precisely what s74L mandates.[28] Finally, I should say that I do not consider that s74L, when operative, creates any necessity for orders to the effect that a substitute caveat be lodged which omits or corrects the non-compliant material. Such an interpretation would ignore the mandatory language of s74L.”

22 Here the description of the chargee in each caveat is obviously mistaken. Misdescribing the name of the customer as the chargee in Schedule 1 is not compliant with Real Property Regulation (2008) Clause 7, Schedule 3 which requires the caveat to describe the caveator and the claimed interest. The plaintiffs have already shown that each arguably has a caveatable interest in the subject property.

23 No amendment to the caveat is required nor is it necessary to substitute a new caveat without this error. As Justice Santow pointed out in Windella at [27], the mandatory language of Real Property Act s 74L makes such a substitution unnecessary.

24 Were it necessary to decide the question, and because of the application of Real Property Act s74L it is not, I would also be prepared to make an order amending the caveat under the power conferred by Real Property Act, s 74K which allows the Court if it satisfied that the “caveator’s claim may have substance” to make an order extending “the operation of the caveat concerned for such period as is specified in the order or until the further order of that Court, or make such other orders as it thinks fit...” by substituting the name of the plaintiff for that of Homebush Bay Timber in each caveat: see for example Cini v Pets Paradise Franschising (SA) Pty Ltd [2008] SASC 287; (2008) 102 SASR 177 at [39] Bleby J and Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630.

25 In my view Palmer J’s decision in Ron Medich Properties Pty Ltd v McGuirk [2010] NSWSC 552 relied upon as the foundation of the defendant's contention that amendment using Real Property Act s 74K(2) is not possible in these circumstances, is distinguishable. In Ron Medich Properties, Palmer J declined an application to extend a caveat claiming “an equitable interest pursuant to a constructive trust”, where the facts relied on were the “use of the caveator’s funds to acquire an interest in the property” and where the caveator’s real claim was as mortgagee through the operation of the equitable doctrine of subrogation. In Ron Medich Properties there was no application to amend the caveat under Real Property Act s74K(2). Also as Justice Palmer observed, a person not the registered proprietor, reading the caveat, would have no idea of the nature and extent of the interest actually claimed: Ron Medich Properties Pty Ltd v McGuirk [2010] NSWSC 552 at [8] and see Leros Pty Limited v Terara Pty Limited [1992] HCA 22; (1992) 174 CLR 407. In my view, the error in this case is so minor and its solution so obvious that it could not be said that that kind of problem arises.

(3) Misdescription of the Registered Proprietors

26 The last issue raised by the defendant arises from the fact that Mr and Mrs Harrison are the registered proprietors of the Blakehurst property as joint tenants but Mrs Harrison is not a party to the proceedings. Mr Allen on behalf of Mr Harrison submits that the caveats either misdescribe the registered proprietors of the property or, alternatively, produce a situation in which the whole of the estate is subject to the command of the caveat thereby interfering with the interest of Mrs Harrison. He submits that no order can be made in those circumstances without joining her as a party.

27 The issue so raised is an interesting one. To analyse Mr Harrison’s argument it is necessary to examine the caveats closely. Oberon’s caveat may be used as the example. They are both in relevantly identical terms. It relevantly provides the following in this case.

“(D) REGISTERED

PROPRIETOR NORMAN LESLIE HARRISON

PO BOX 283

ROOTY HILL NSW

Postcode: 2766

(E) CAVEATOR OBERON SOFTWOOD HOLDINGS

PTY LIMITED T/AS BORAL TIMBER

091 426 452

PO BOX 224

COOROY QLD

Postcode: 4563

(I) SCHEDULE 1 Estate or interest claimed

Nature of the estate or interest in the land
An equitable interest by way of an equitable charge given by Norman Leslie Harrison (“the registered proprietor”) to Homebush Bay Timbers Pty Ltd CAN: 000 777 042 over the freehold interest of the registered proprietor.
By virtue of the instrument referred to below.
Nature of instrument	Date	Parties
Credit Application	07/07/2004	Oberon Softwood Holdings Pty Limited t/as Boral Timber and Homebush Bay Timbers Pty Ltd CAN: 000 777 042 and Norman Leslie Harrison.
By virtue of the facts stated below.
The equitable charge is to secure the sum of $74,134.06 (together with interest on the balance outstanding from time to time and the caveators’ costs as between the solicitor and own client of any legal action), being monies due and payable by Norman Leslie Harrison, the registered proprietor, to the caveator pursuant to the credit application. The monies are due and payable in respect to goods sold and delivered.

(J) SCHEDULE 2 Action prohibited by this caveat

1. The recording in the Register of any dealing other than a plan affecting the estate or interest claimed by the caveator and set out in Schedule 1.

2. The registration or recording of any plan other than a delimitation plan affecting the estate or interest claimed by the caveator and set out in Schedule 1.

3. The registration of delimitation plan No.

4. The granting of any possessory application with respect to the land referred to above.

5. The recording in the register of any dealing affecting the estate or interest of which the caveator is registered proprietor.

6. The granting of an application to extinguish the created by .

7. The recording in the Register of a writ affecting the estate or interest claimed by the caveator and set out in Schedule 1.

(K) STATUTORY DECLARATION

I, Leanne Walker solemnly and sincerely declare that

1. To the best of my knowledge, information and belief the caveator has a good and valid claim to the estate or interest set out in Schedule 1.”

28 Without reference to authority or land titles practice this caveat does appear to me to be carefully drawn to achieve the purpose of identifying and affecting only the interest in the land held by Mr Harrison and not the interest held by his wife with him as joint tenant. Only his name is entered against the description in Box (D), “Registered Proprietor” of the Oberon caveat. In the “Nature of the estate or interest in the land” claimed only Mr Harrison is referred to as the “registered proprietor” and the interest claimed is only “over the freehold interest of the registered proprietor”. The prohibition sought by the caveat is “against the recording in the Register of any dealing...affecting the estate or interest claimed by the caveator....”, which is only a claim against Mr Harrison’s interest. The estate or interest so identified in Schedule 1 is the interest affected by the equitable charge allegedly given by Mr Harrison. The only prohibition on dealings in Schedule 2 of the caveat is a prohibition upon dealing with that interest of Mr Harrison and no more.

29 It is in my view appropriate for box D of the caveat to refer to Mr Harrison's interest in the Blakehurst property alone, rather than the interests of both Mr Harrison and Mrs Harrison, the registered proprietors as joint tenants. This seems to me to be consistent with the operation of Real Property Act s 74F, which authorises the lodgement of caveats “prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled” and consistent with the requirements of Real Property Regulation (2008) Clause 7 Schedule 3 paragraph 1 which requires “Particulars of the nature of the estate or interest in land claimed by the caveator.” The plaintiffs’ caveats only appropriately identify Mr Harrison’s interest in the Blakehurst property against which they claim an estate or interest.

30 I am fortified in this conclusion by counsel for the plaintiffs, Mr Gor, referring me to the published practice of the Land Titles Office in relation to the completion and acceptance of caveats where the interests of less than all the registered proprietors of a parcel of land are the subject to the caveat. The Registrar General's Directions in relation to caveat lodgement deal with the proper completion of box D of caveats in such circumstances in the following way:

“A caveat may be lodged against less than all of the registered proprietors. The caveat will be recorded against all of the registered proprietors shown at Note (D).

If a caveat is drawn against all of the registered proprietors at note (D) but the claim at note (I) is against less than all of the registered proprietors, a 28 day notice of intended registration (form 10-0180D) must be sent by the examining officer. If the caveat is not subsequently altered by the lodging party and proceeds to registration, the caveat must be marginally noted as follows: 28 day notice of intended registration sent.”

31 Baalman & Wells – Land Titles Office Practice paragraph [40.350] gives a similar instruction:

“Name and Address of Registered Proprietor. The name and, if known, the address of the registered proprietor should be stated. This requirement may be dispensed with by the Registrar-General.

If there is more than one registered proprietor but the caveator's claim only relates to less than all of the registered proprietors then only the names of the registered proprietors against who the claim relates should be set out (ie leave out the name of any registered proprietor who is not subject to the claim, for example, where only one of two registered proprietors have borrowed money and charged his or her interest in the land as security).

If all of the registered proprietors' names are set out but the claim at "Estate or Interest Claimed" (see following) is clearly against less than all of the proprietors, then the Registrar-General will send a notice to the lodging party stating that after 28 days the Caveat will be recorded against only those proprietors who are the subject of the claim, unless before that time written reasons are provided as to why the Caveat should not be so recorded.”

32 Against this conclusion, Mr Allen deploys on behalf of Mr Harrison the decision of Hammerschlag J in Andrews v Wilcox [2008] NSWSC 280 in which he submits a contrary conclusion was reached. It is true that in Andrews v Wilcox [2008] NSWSC 280 Hammerschlag J ordered the withdrawal from the title of registered proprietor joint tenants (Mr and Mrs Wilcox), of a caveat lodged on behalf of a chargee (Ms Andrews) who had a charge against the interests of only one of them (Mr Wilcox). In Andrews v Wilcox the other joint tenant Mrs Wilcox had not been served and did not appear. But in Andrews v Wilcox Hammerschlag J found, at [21], that the caveat was unsustainable because it prohibited dealings by the other joint tenant, Mrs Wilcox, and at [25], “The caveat on its face extends and is recorded as extending, to affecting a dealing by Mrs Wilcox with her interest”. This was the effect of the Andrews v Wilcox caveat because it merely claimed an “equitable mortgage” in the property without obviously limiting the claim to the interests of one joint tenant.

33 The distinguishing factor here is that each caveator/chargee, Oberon and Allen Taylor and Co did not make the same error as was made by Ms Andrews in Andrews v Wilcox. The plaintiffs made clear by the form of drafting of these two caveats that they did not seeks to prohibit Mrs Harrison dealing with her interest in the Blakehurst property. The claim is limited to Mr Harrison’s interest. Mr Gor also made clear in submissions that the plaintiffs did not wish to do anything to impede Mrs Harrison receiving her half share of the net proceeds of sale of the Blakehurst property.

34 The limitation of Oberon’s and Allen Taylor & Co’s claimed interest in their caveats to the interests of the one joint tenant, Mr Harrison is important. A co-owner (whether joint tenant or tenant in common) may grant an interest over or encumber his or her own interest in the land; and, the other co-owner must submit to the grant or encumbrance, unless it improperly interferes with that co-owner’s rights to the land, including the right to possession: Hedley v Roberts [1977] VicRp 33; [1977] VR 282, at 288 and Butt, Land Law, 6^th Edition, Law Book Co, [1448]. Where a caveat on its face interferes with the right of the other co-owner to deal with the land and where it has not been demonstrated that the other co-owner consents to the continuation of the caveat, then the caveat cannot stand: Andrews v Wilcox [2008] NSWSC 280 at [28]. In my view a clear attempt has been made to avoid that problem here and the caveat is not defective on that ground.

Conclusions and Orders

35 For those reasons the defendants’ arguments against the extension of the caveats fail. Had they succeeded I would have been prepared in this case to grant an injunction restraining Mr Harrison from dealing with proceeds of sale of the Blakehurst property. There is a serious question to be tried on the issue of whether the Oberon and Allen Taylor & Co have an equitable charge over the Blakehurst property. Given that the plaintiffs do not wish to interfere with the completion of the sale or with Mrs Harrison’s portion of the proceeds, the balance of convenience would favour the grant of an injunction.

36 I have discussed with counsel in the course of argument that it is of considerable concern that something be done in relation to the pressing debts that Mr Harrison needs to pay. It is imperative that the District Court proceedings be resolved as soon as possible so that Mr Harrison will be in as good a position as possible to meet the obligations of his other creditors. He should not be caught in a situation where he cannot pay creditors simply because these various proceedings have not been resolved. That is a situation, which should not be allowed to affect him adversely, if it can be avoided.

37 In my view the appropriate course is to direct the parties to bring in short minutes of order to give effect to these reasons. But I propose to make it a condition of the grant of relief that an appropriate timetable to bring the District Court proceedings to a rapid conclusion is agreed between the parties. Such a condition is justified by the application of Civil Procedure Act 2005, s 56. I will stand the matter in the list until the parties are in a position to hand up short minutes of order to give effect to these reasons.

Later in the Day

38 I will make orders in accordance with the short minutes of order set out below:

1. The plaintiffs have leave to file in Court the Amended Summons dated 7 September 2010.

2. The operation of caveat number AE482747 be extended until further order.

3. The operation of caveat number AE482743 be extended until further order.

4. The plaintiffs’ costs of and incidental to the hearing of 8 and 9 September 2010 be reserved to abide by the final result of these proceedings.

5. Liberty to restore on 2 day’s written notice before Slattery 6. These Orders be entered forthwith.

The Court notes:

1. The agreement of the parties to expedite the District Court proceedings as set out in the minute annexed to this Order.

2. That the parties:

2.1 will in good faith and use their best endeavours to agree the proper deductions and adjustments on completion of the sale of the property the subject of Orders 1 and 2; and

2.2 if such agreement can be reached, the plaintiffs will provide a withdrawal of the caveats in Orders 1 and 2 in return for a bank cheque made payable to the Supreme Court of New South Wales.

3. The Defendant’s intention to apply to the Court for the release of $55000 to pay his costs to date of the District Court proceedings.

**********

AMENDMENTS:


11/11/2010 - Typographical errors and amendments made by consent - Paragraph(s) Para 5, line 4: delete "and equitable"
Para 6, line 1: replace "1.62" with "1.26"
Para 6, line 2: replace "Macquarie Bank" with "Perpetual"
Para 11, quote 2(c) at line 2: insert comma after word "Supplier"
Para 25, line 2: replace "defendants'" with defendant's"


LAST UPDATED:
11 November 2010