Supreme Court New South Wales Medium Neutral Citation: Ghannam v BB&B Penrith Pty Ltd [2021] NSWSC 1131 Hearing dates: On the papers Date of orders: 7 September 2021 Decision date: 07 September 2021 Jurisdiction: Equity Before: Darke J Decision: Plaintiff ordered to pay defendant's costs. Catchwords: COSTS – plaintiff commenced proceedings to extend the operation of his caveat – caveat recorded on title of Lot in strata development of which the defendant was registered proprietor – parties settled caveat dispute but not the costs of the proceedings – plaintiff's caveat failed to specify his interest in the Lot and was therefore fundamentally defective – continuation of caveat would also prejudice the defendant's ability to obtain refinancing and therefore imperil completion of the development – such an outcome would prevent the defendant from conveying the Lot to the plaintiff – continued operation of caveat highly inconvenient in these circumstances – defendant offered to protect the plaintiff's interest in the Lot in exchange for removal of the caveat – held that it was inevitable the caveat would have been ordered to be withdrawn – order made that the plaintiff pay the defendant's costs Legislation Cited: Real Property Act 1900 (NSW) ss 74F, 74L Cases Cited: Hanson Construction Materials v Vimwise Civil Engineering (2006) NSW ConvR 56-137; [2005] NSWSC 880 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 Category: Costs Parties: Jamal Ghannam (Plaintiff) BB&B Penrith Pty Ltd (Defendant) Representation: Counsel: Mr S Lipp (Plaintiff) Solicitors: SD Commercial Lawyers (Plaintiff) Hall Partners (Defendant) File Number(s): 2021/215340 Publication restriction: None Judgment Introduction 1. The plaintiff commenced these proceedings by Summons on 28 July 2021, in which the plaintiff urgently sought interlocutory relief to extend the operation of his caveat. 2. Before the Court determined the dispute, the parties sent consent orders to the Court. The caveat dispute was thereby resolved, but the question of costs remained outstanding. The Court directed the parties to provide written submissions on the question of costs, such question to be dealt with on the papers. 3. In that regard, the plaintiff relies on written submissions dated 19 August 2021. The defendant relies on the written submissions of 15 August 2021 and submissions in reply dated 19 August 2021. The plaintiff seeks no order as to costs, and the defendant seeks costs on an indemnity basis. Background 1. In 2017, the plaintiff exchanged contracts for sale in respect of Lots 2 and 6 of an off-the-plan unregistered strata scheme in Penrith. The vendor was the defendant, who is the registered proprietor and developer of the Lots. The plaintiff advanced $440,000 to the defendant pursuant to the contracts. 2. On 22 October 2019, the plaintiff arranged for a caveat to be lodged in respect of Lot 2. The caveat form prompts the caveator to supply particulars of the estate or interest that they claim. The plaintiff's caveat form is, in this respect, blank. But the plaintiff did indicate that the estate or interest claimed was by virtue of "PURCHASE OF UNIT 2 & 6/29-31 CASTLEREAGH ST PENRITH FOR A COMBINED UPFRONT CASH PAYMENT OF $440,000.00". 3. The land has not yet been fully developed. On 19 December 2019, the Australian and New Zealand Banking Group Limited entered into possession of the defendant's property as a mortgagee in possession. 4. On 14 July 2021, the plaintiff's solicitors received a letter dated 8 July 2021 from the defendant's solicitors. The letter enclosed a Lapsing Notice in respect of the plaintiff's caveat. A document inquiry from the NSW Land Registry Services shows that the Lapsing Notice was lodged by Scott Ashwood Pty Ltd. 5. Before the commencement of proceedings, the parties' solicitors communicated with each other by email. The defendant's solicitor sought the removal of the caveat to enable a refinancing to occur. There was some urgency due to the mortgagee in possession having threatened to appoint administrators to the defendant if the loan was not fully repaid. The defendant told the plaintiff they would have "no issue" if the plaintiff lodged another caveat after the refinance occurred. 6. As noted, the parties ultimately drafted consent orders that removed the need for a judicial resolution of the caveat dispute. Under the consent orders, the plaintiff agreed to remove his caveat, and the defendant gave an undertaking not to deal with Lot 2 other than to complete a sale or refinancing of the property. Further, if any sale or refinancing occurred, the defendant would ensure that there would be sufficient funds to pay the plaintiff an amount to protect his interest in the property. Resolution of Issues 1. As noted, the plaintiff seeks no orders to costs. In that regard, the plaintiff submits that he acted reasonably in commencing proceedings, particularly because he was not aware who caused the Lapsing Notice to be issued, and communications with the defendant's solicitor were said to be unhelpful. In those circumstances, the plaintiff submits it was entirely appropriate to commence these proceedings so he could protect his interest in Lot 2. 2. The defendant submits that the caveat was completely baseless. Emphasis is placed on the lack of description of the interest or estate claimed in the caveat. Further, the defendant submits that the caveat "would have been ordered to have been removed" in circumstances where its removal was necessary to refinance the development of the property. 3. In my opinion, it is manifest that an order for the removal of the caveat was bound to occur. A costs dispute is generally not to be determined on the outcome of a hypothetical hearing. However, where a particular outcome is manifest, the Court may make a costs order accordingly: see Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [3]. 4. When deciding whether to extend the operation of a caveat, the Court will ask whether there is a serious question to be tried as to the existence of the caveator's interest that is claimed. The plaintiff clearly had an interest in Lot 2 that was capable of being the subject of a caveat. The difficulty for the plaintiff is that the caveat failed adequately to describe his interest in the property, which was left blank on the caveat form. 5. Section 74F of the Real Property Act 1900 (NSW) provides that a caveat lodged under this section must specify the "prescribed particulars" of the legal or equitable estate or interest to which the caveator claims to be entitled. In Hanson Construction Materials v Vimwise Civil Engineering (2006) NSW ConvR 56-137; [2005] NSWSC 880, Campbell J agreed at [31] with the proposition that it is insufficient for a caveat to claim an interest pursuant to an agreement, without specifying the nature of the interest. That is exactly the position of the plaintiff's caveat. 6. Campbell J also found that the question of whether a caveat adequately describes the estate or interest is to be decided from the point of view of a person examining the caveat, who, with legal advice, could ascertain the estate or interest claimed: Hanson Construction Materials v Vimwise Civil Engineering (supra) at [28] and [32]. As noted, the plaintiff's caveat refers to a purchase of Lots 2 and 6 with an upfront cash payment of $440,000. To someone with legal advice, they may surmise that the description refers to the caveator having an equitable estate in fee simple. But this is not the only possibility. The plaintiff could perhaps be asserting an interest in the nature of a purchaser's lien. 7. Where the form of a caveat is in issue, section 74L of the Real Property Act is salient. That section excuses any failure of the caveator to comply strictly with requirements with respect to the form of a caveat. However, as Campbell J stated in Hanson (supra) at [34]: The dispensing power which is contained in section 74L is one which merely excuses defects of form. The failure to specify the nature of the interest, in as fundamental a way as has happened in the present case, is more than a defect of form. 1. A similar failure has occurred here. The caveat is fundamentally defective, not merely formally so: there is an absence of any specified interest claimed by the caveat. In these circumstances, it seems inevitable that the Court would have declined to extend the operation of the plaintiff's caveat as sought. 2. Even if the above conclusion is incorrect, I think that the caveat was bound to fail for a different reason. When considering the extension of a caveat, the Court also considers the balance of convenience, that is, whether the continued operation of the caveat is more convenient than the cessation of its operation. 3. In this regard, it is difficult to understand why the caveat would have remained on the title to Lot 2. The defendant developer was in a strained position, having their property in the possession of the first mortgagee. If the caveat were not removed, the defendant would have been prejudiced in obtaining adequate refinancing. Such an outcome would have further imperilled the defendant's progression towards completing the development. This, of course, would prevent the defendant from conveying Lot 2 to the plaintiff and thereby undermine the interest that the plaintiff sought to protect by the lodgement of his caveat. Continuation of the caveat would thus risk the interests of the developer and the caveator. Such an outcome strikes me as being highly inconvenient. Additionally, the defendant seemed willing to protect the plaintiff's interest in the properties. Its director offered to return the plaintiff's investment in exchange for the withdrawal of the caveat; alternatively, it was suggested that the plaintiff could lodge a caveat again once the refinance was completed. In circumstances such as the present, it was inevitable that the caveat would have been ordered to be withdrawn, at least on terms that would safeguard the plaintiff's interest in Lot 2, such as those suggested by the defendant. 4. As noted, the plaintiff submitted that he acted reasonably in commencing proceedings because he did not know who lodged the Lapsing Notice. It might be said that the plaintiff thereby could not assess the balance of convenience because he was uncertain who claimed to be adversely affected by the caveat's operation. 5. However, I do not accept that submission. The Lapsing Notice was attached to a letter from the defendant's solicitor dated 8 July 2021, and the parties' solicitors were in recent correspondence about the plaintiff removing his caveat to enable the defendant's desired refinancing. The plaintiff was therefore in a position to consider the possibility that the defendant was responsible for the Lapsing Notice. There is no indication, other than in an email sent after the Summons was filed, that the plaintiff made inquiries to ascertain whether it was the defendant who caused the Lapsing Notice to be lodged. The defendant's solicitor acknowledged that it did. 6. In my opinion, it is manifest that the caveat would not have been extended. It is therefore appropriate that the Court order the plaintiff to pay the defendant's costs of the proceedings. 7. However, I do not think that the plaintiff's behaviour warrants an adverse costs order on an indemnity basis. The plaintiff has a clear interest in the defendant's property, and it cannot be concluded on the evidence that the plaintiff lodged the caveat in bad faith. There is an absence of any relevant delinquency to justify a costs order on the indemnity basis. 8. Accordingly, the Court orders that the plaintiff pay the defendant's costs of the proceedings on the ordinary basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 September 2021