Etex Australia Pty Ltd v Shi [2021] NSWSC 498

Supreme Court New South Wales

Medium Neutral Citation: Etex Australia Pty Ltd v Shi [2021] NSWSC 498 Hearing dates: 5 May 2021 Date of orders: 5 May 2021 Decision date: 05 May 2021 Jurisdiction: Equity - Duty List Before: Henry J Decision: Caveat extended. To the extent that the caveat has already lapsed, grant leave to file a further caveat. Catchwords: LAND LAW – caveats – extension of operation of caveat – where charge created by guarantee for credit agreement – where judgment for amount owed under credit agreement partially satisfied Legislation Cited: Real Property Act 1900 (NSW), ss 74J, 74K, 74O Cases Cited: Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202 Coast Reo Pty Ltd v O'Brien & Ors [2006] NSWSC 613 McMillan v Dunoon [2005] VSC 440 Sutherland v Vale [2008] NSWSC 759 Xcel Rural Properties Pty Ltd v South Creek Dairy Pty Ltd & Anor [2002] NSWSC 139 Texts Cited: Nil Category: Procedural rulings Parties: Etex Australia Pty Ltd (formerly known as Knauf Plasterboard Pty Ltd) (ACN 003 621 010) (Plaintiff) Hewei Shi (First Defendant) Shixian Lu (Second Defendant) Representation: Counsel: J Burnett (Plaintiff)

Solicitors: Turks Legal (Plaintiff) File Number(s): 2021/125094 Publication restriction: Nil

Judgment – Ex Tempore (Revised) 1. HER HONOUR: This is an application by the plaintiff, Etex Australia Pty Ltd, for an order extending the operation of a caveat in respect of land at Lochville St, Wahroonga (Wahroonga property). A lapsing notice has been issued in relation to the caveat and there is a possibility it will expire today or in the next few days. 2. The matter came before me in the duty list yesterday for an order extending the caveat on an ex parte basis. Having regard to s 74K(3) of the Real Property Act 1900 (NSW), I made orders for short and substituted service to ensure that the application and affidavit relied on by the plaintiff were brought to the attention of the defendants. 3. The first and second defendants, who are husband and wife, are the registered proprietors of the Wahroonga property. The first defendant holds a ninety-nine percent share in the Wahroonga property. The other one percent share is held by the second defendant. 4. The defendants are not represented at today's hearing. Although the hearing is being conducted by telephone, the court officer called the matter outside the court room. There was no appearance. As there is evidence that the orders for short service were complied with, I am satisfied that the interested parties have been served and that it is appropriate to proceed with the plaintiff's application. 5. On an application for an extension of a caveat, a test which is substantially the same as that for an interlocutory injunction applies. First, the applicant must demonstrate that a caveat has or may have substance, where the phrase "may have substance" encompasses the concept of a seriously arguable case. The second matter that the Court will have regard to is the balance of convenience and any prejudice or other discretionary considerations: Sutherland v Vale [2008] NSWSC 759 at [11]. 6. Based on the evidence before me, I am satisfied that it is seriously arguable that the plaintiff has a caveatable interest in the Wahroonga property. 7. The caveat lodged by the plaintiff on 3 February 2016, AK190678, identifies the particulars of the estate or interest in the land as an equitable interest in respect of the share of the first defendant only as chargee pursuant to cl 5 of a guarantee for a commercial credit account agreement between the plaintiff and the first defendant dated 23 November 2014 in the amount of $125,901.51. 8. The evidence identifies that the first defendant was the sole director of Bright Building Service Pty Ltd (Bright Building), a company which had entered into a commercial credit account agreement with the plaintiff in 2014 (Credit Agreement) and is now deregistered. Under the Credit Agreement, the first defendant provided a guarantee in favour of the plaintiff for all of Bright Building's indebtedness and liabilities and unconditionally indemnified the plaintiff against all losses, costs and expenses in connection with the plaintiff's enforcement of its rights against Bright Building and the guarantee. 9. The guarantee in the Credit Agreement also included a charging provision, by which the first defendant charged all of her interest in land as security for the performance of her obligations under the guarantee. The interest of a chargee under a contract is a recognised interest in respect of which a caveat may properly be lodged. The charge creates an equitable interest in the land on the part of the caveator: see, for example, Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202; Coast Reo Pty Ltd v O'Brien & Ors [2006] NSWSC 613. 10. The plaintiff has taken action in District Court proceedings against Bright Building and the first defendant to recover debts owed under the Credit Agreement and the guarantee. On 20 May 2016, judgment was entered against Bright Building and the first defendant by default in the amount of $129,677.78. Part payment has been made in the amount of $70,000 but other steps taken to recover the balance of the judgment debt have been unsuccessful. The evidence is that, as at 5 May 2021, the first defendant owed the plaintiff the amount of $100,928.04. Entering judgment against the first defendant, as guarantor for Bright Building's debts, does not preclude the plaintiff from relying upon the charge in the guarantee over the Wahroonga property as supporting its caveatable interest. The right to rely upon the charge is not merged in the judgment: McMillan v Dunoon [2005] VSC 440 at [21]. 11. As to the balance of convenience, there is evidence that the plaintiff's solicitor had been in contact with the second defendant in relation to the debts claimed and the caveat, during which the second defendant expressed a desire to refinance the Wahroonga property. However, the terms on which and when the defendants wish to refinance are not clear. In any event, and as counsel for the plaintiff submitted, extending the operation of the caveat should not prevent any refinance from taking place in circumstances where the plaintiff would consent to terms that enabled its interest to continue to be secured. 12. As the first and second defendants have not appeared, there is no other evidence that points to any substantial prejudice to them if the Court were to grant the extension of the caveat on this application. In these circumstances, I am satisfied that the balance of convenience weighs in favour of extending the caveat and will grant the extension order sought by the plaintiff upon the usual undertaking as to damages having been proffered. 13. Because of the risk that the caveat may have lapsed, the plaintiff also seeks an order for leave to lodge a further caveat in respect of the same interest claimed pursuant to s 74O(2)(a) of the Real Property Act. 14. The principles to be applied in considering whether to grant such an order are closely aligned to the principles that apply in extending a caveat: Xcel Rural Properties Pty Ltd v South Creek Dairy Pty Ltd & Anor [2002] NSWSC 139 at [4]. 15. I am satisfied that this is an appropriate case to make the order sought by the plaintiff for leave to lodge a further caveat if the caveat has in fact lapsed. The evidence makes clear that the plaintiff's solicitor engaged in significant attempts to resolve the issue with the defendants following receipt of the lapsing notice. During the course of discussions, the defendants did not dispute the debt claimed or the plaintiff's entitlement to lodge and retain the caveat on the title of the Wahroonga property. There is also evidence of representations having been made by the second defendant that led the plaintiff to believe that evidence of service of the lapsing notice would not be lodged with the Registrar-General and that a deed poll and consent to a further caveat would be signed by the defendants as late as 2pm on 4 May 2021. 16. For these reasons, I make the following orders: 1. Upon the usual undertaking as to damages given by the plaintiff through its solicitors, the operation of caveat AK190678 be extended pursuant to s 74K of the Real Property Act until further order of the Court. 2. To the extent that caveat AK190678 has lapsed prior to lodgment of this order with the Registrar-General in accordance with s 74J of the Real Property Act, grant leave to the plaintiff to lodge a further caveat in respect of the same interest claimed in caveat AK190678 pursuant to s 74O(2) of the Real Property Act. 3. The summons be listed for directions before the Equity Registrar at 9.30am on Thursday, 20 May 2021. 4. The defendants pay the plaintiff's costs of the application to extend the operation of caveat AK190678. 5. Liberty to apply to the Equity Duty Judge on twenty-four hours' notice. 6. These orders be entered forthwith.