Supreme Court New South Wales Medium Neutral Citation: Stonebark Pty Ltd v Disage Pty Ltd [2022] NSWSC 1015 Hearing dates: 21 July 2022 Date of orders: 21 July 2022 Decision date: 21 July 2022 Jurisdiction: Equity - Duty List Before: Black J Decision: Caveat to lapse after 21 July 2022. Plaintiff to pay the defendant's costs of and incidental to the hearing, as agreed or as assessed. Matter listed in the Equity Registrar's List on 28 July 2022. Catchwords: LAND LAW — Caveats — Extension of operation of caveat — Summons must seek final relief — Where plaintiff seeks an extension of operation of a caveat or, alternatively, leave to lodge a further caveat — Where plaintiff sought a declaration that it has a caveatable interest in the property as final relief — Whether the summons properly identified the final relief sought by the plaintiff. Legislation Cited: Duties Act 1997 (NSW), s 304 Real Property Act 1900 (NSW) s 74H, s 74J, s74K, s 74L, s 74O Cases Cited: Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260 Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd Circuit Finance Pty Ltd v Crown and Gleeson Securities Pty Ltd [2005] NSWSC997 Delaforce v Simpson‑Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 GE Capital Finance Pty Ltd v Sunset Investments Pty Ltd [2005] NSWSC 1205 Jones v Baker [2002] NSWSC 89 Mayrin DM v Deng [2019] NSWSC 1552 Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd [2002] ANZ Conv R 85, Depsun Pty Ltd v Tahore Pty Ltd (1990) ANZ Conv R 334 Muschinski v Dodds (1985) 160 CLR 583 Peters v Lithgow Forge Pty Ltd [2010] NSWSC 283 Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158; [1999] NSWSC 1129 Wu v Dardaneliotou [2008] NSWSC 1319 Category: Principal judgment Parties: Stonebark Pty Limited (Plaintiff) Disage Pty Limited (Defendant) Representation: Counsel: M Collins (Plaintiff) A Vernier (Defendant) Solicitors: O'Hearn Lawyers (Plaintiff) Catalyst Legal (Defendant) File Number(s): 2022/203007 Judgment – EX TEMPORE (REVISED 26 July 2022) Nature of the application 1. By Summons filed on 11 July 2022 the Plaintiff, Stonebark Pty Ltd ("Stonebark") sought an order, under s 74K of the Real Property Act 1900 (NSW) that the operation of a caveat on a property at North Rothbury in New South Wales be extended until further order of the Court or, alternatively, that leave be granted under s 74O of the Real Property Act for Stonebark to lodge a further caveat on title of the property. Stonebark sought, by way of final relief, only a declaration that it has a caveatable interest in the property. That has had unfortunate, and wholly avoidable, consequences for the result of the application. 2. On 13 July 2022, by agreement of the parties, but without any evidence being led and without any determination on the merits, Slattery J extended the caveat until further order of the Court, rather than to a fixed date. The matter was relisted today and the question whether the caveat should be continue was agitated. It is ultimately not necessary to determine whether that agitation involves an application by the Defendant, Disage Pty Ltd ("Disage") to set aside the order made by Slattery J, going forward, or whether it involves an application by Stonebark to continue the relief sought, since nothing in this application turns on any question of onus of proof. That question only arises because Slattery J's order was made until further order, rather than until the date on which the matter would next be before the Court, namely today. Affidavit evidence 1. Stonebark relies on the affidavit dated 11 July 2022 of its director, Mr McDougall, in support of the application. Mr McDougall refers to the parties' entry into a Heads of Agreement ("HoA") as to the subdivision of the property, and to the making of several payments by Stonebark to Disage in respect of the arrangement. There appears to be no substantial dispute that several payments were made, although the question whether they were, as Mr McDougall says in his evidence (admitted subject to a limiting order under s 136 of the Evidence Act 1995 (NSW) as submission only), in accordance with the HoA is a matter of greater controversy. 2. Mr McDougall also refers to the making of an application by Stonebark to Hunter Water in respect of the property and a payment in relation to that application, to the engagement of a surveyor to prepare a plan for the subdivision of the property, and to Disage having given Stonebark authority to deal with Cessnock Council and other authorities with respect to the subdivision of the property in February 2022. Mr McDougall does not explain what occurred after that point, in respect of any further steps to complete the acquisition of the property. He refers to Stonebark's lodgement of a caveat, on 18 January 2022, to which I will refer below, and to a lapsing notice issued by Disage under s 74J of the Real Property Act, which has prompted this application. 3. That affidavit in turn annexes the HoA, which was admitted subject to the usual undertaking under s 304 of the Duties Act 1997 (NSW) and Uniform Civil Procedure Rules 2005 (NSW) r 13.13 to ensure that it will properly be stamped. Clause 1 provides that Disage agrees to sell and Stonebark agrees to buy the eastern part of the subject property (9 to 10 hectares) in five relatively equal size development lots, for a price of $400,000 per hectare. It will immediately be noted that what was contemplated was a substantial transaction, involving a purchase of land for consideration of between $3.6 and $4 million, of which some $150,000 has been paid by Stonebark to date. Clause 2 provided for the payment of $50,000 by Stonebark as part payment for the first lot to Disage in advance, and the HoA also referred to a proposed subdivision plan, options agreement and sale contracts, and to payment of an additional $200,000 of option deposits for the five development lots, to be released to Disage unconditionally, which there is no evidence has occurred. There were further provisions as to what would occur in the event of delay in the subdivision and as to other matters. A provision added to the point at which the agreement was dated and was made subject to the laws of New South Wales provided that there "is a caveatable interest", although that does not bind the Court in that respect. 4. The annexures to that affidavit also included some evidence of payment of funds by Stonebark to Disage, totalling $150,000 as noted above, and evidence of correspondence with Hunter Water and of the survey plan and authority granted by Disage to Stonebark to which reference was made in Mr McDougall's affidavit. 5. The caveat, to which I referred above, was in turn dated 18 January 2022 and identified the land which was the subject of the caveat as the whole of the relevant parcel, as distinct from that part of the parcel which appears to have been the subject of the HoA, which may have reflected the fact that no subdivision had yet occurred. The estate or interest claimed was identified as follows: "Estate in Fee Simple By virtue of: Beneficial Interest in Trust Details supporting the claim: Pursuant to representations made by the registered proprietor on or about 24 April 2021 to the caveator where the caveator has, relying on such representations by the registered proprietor acted to its detriment giving rise to proprietary estoppel in favour of the caveator." 1. It will immediately be noted that there is a lack of clarity in the statement of that interest, which commences by referring to an estate in fee simple; then appears to claim a beneficial interest arising from a trust, without identifying the nature of the relevant trust; then shifts to an interest arising from representations made by Disage, on the date of the HoA, but without express reference to the HoA, which are said to give rise to a proprietary estoppel in favour of Stonebark. The annexures to that affidavit also include the lapsing notice given by Disage under s 74J of the Real Property Act. 2. Correspondence between the solicitors followed, which highlighted one issue which is significant in this application. By a letter dated 27 April 2022, the solicitors acting for Disage raised questions as to the construction of the HoA and advanced the proposition, now not contested, that the statement in the HoA that the HoA gave rise to a caveatable interest was not in itself sufficient to support the lodgement of a caveat. By a further letter dated 15 July 2022, the solicitors acting for Disage referred to the Summons filed by Stonebark, and contended that Stonebark could not (as it now does) seek, as the sole substantive relief, a declaration that it had a caveatable interest. By an email dated 20 July 2022, the solicitors acting for Stonebark disagreed with that position, sought the authorities on which it was based, to which reference has subsequently been made in submissions, and indicated that it was Stonebark's intention to provide further material on its director's return from New Zealand and to amend the final relief sought. That email advanced the proposition, which is regrettably not correct, that the final relief sought by Stonebark was irrelevant to this application. 3. I pause to note that Stonebark could have then taken the steps that were necessary to amend the Summons, so as to identify any final relief which it sought, whether by reference to a vaguely described purchaser's equity to which it referred in submissions, or by way of a proprietary estoppel or constructive trust. It could also have sought an adjournment of the application, before the substantive argument commenced, in order to address the lack of a claim to final relief in the Summons. Finally, it could have sought an adjournment, when that question was raised in the course of its closing submissions, although that adjournment would likely then only have been given on terms that Stonebark pay the costs thrown away by the lengthy substantive argument that had occurred, if that argument was to be wasted by an adjournment. Stonebark chose not to adjourn the application on any of those bases. 4. In those circumstances, the Court has no real alternative, in fairness to Disage, than to determine the application as it stands, rather than the application as it might have stood had Stonebark taken the sensible course of seeking substantive relief in the proceedings before this application was heard. The parties' submissions 1. I turn now to the parties' submissions, before returning to the applicable authorities. Mr Collins, who appears for Stonebark, refers to the terms of the HoA, to which I have referred above, and identifies the form of interests that are claimed to support the caveat. The first is described as an equitable interest in the property as a purchaser which has paid part of the purchase monies in accordance with the HoA. That formulation leaves open the question of the extent to which a purchaser, who has paid $150,000, which may or may not be referable to the payments under the HoA, against an anticipated purchase price of $3.6 million or $4 million, has an equitable interest in the land arising from the uncompleted purchase. It is not necessary to determine that question for the purposes of this application. 2. Second, Mr Collins identifies a proprietary estoppel by reference to the applicable principles noted in Delaforce v Simpson‑Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 at [21], in the nature of an estoppel by encouragement, on the basis that Disage had encouraged Stonebark to alter its position in the expectation of obtaining a proprietary interest in the land. Again, questions might arise, which do not need to be determined in this application, as to the extent to which the proprietary estoppel could be established, from the payment of $150,000, or the other matters to which Mr Collins referred in submissions which did not appear to be addressed by Mr McDougall's evidence. 3. Third, Mr Collins identified a constructive trust as the basis of the equitable interest claimed, on the basis that the subdivision of the property in accordance with the HoA had been a joint enterprise of Stonebark and Disage, of the kind referred to in Muschinski v Dodds (1985) 160 CLR 583 at 620. That might have in turn raised the difficult question whether a constructive trust, so far as it is a form of relief that is imposed by the Court in determining a matter, can support a caveat at an earlier point, as to which somewhat different approaches were taken in my judgment in Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd [2011] NSWSC 871 and the judgment of Rein J in Mayrin DM v Deng [2019] NSWSC 1552. It is again not necessary to resolve that controversy for the purposes of this application. 4. Mr Collins in turn referred to the circumstances in which the Court will extend the operation of a caveat in accordance with s 74K(2) of the Real Property Act, and identified the test as whether Stonebark's claims have or may have substance, referring to the formulation of that test in Peters v Lithgow Forge Pty Ltd [2010] NSWSC 283 at [35]. He referred, uncontroversially, to the fact that the Court will apply a test which is similar to that which applies to an interlocutory injunction, with the question being whether there is a serious question to be tried on the existence of an equitable interest in the property, and characterised that test, again by reference to authority, as "not a very demanding test", which could be satisfied if the caveator can show an arguable case for final relief although the claim may not be without difficulties. 5. Mr Collins in turn referred to s 74L of the Real Property Act which relevantly provides that the Court shall disregard any failure of the caveator to comply strictly with the requirements of the Part, with respect to the form of the caveat, and referred to Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158; [1999] NSWSC 1129 at [26]-[27], where the Court took a relatively liberal view of the operation of that section. As I will note below, subsequent cases have emphasised the fact that that section has its limits. Mr Collins in turn sought, in the alternative, an order under s 74O of the Real Property Act, to permit the lodgement of a further caveat, if the Court was not satisfied that the description of the caveatable interest in the caveat reflected an arguable interest. 6. Mr Vernier, who appeared for Disage, in turn referred to difficulties with the description of the interest in the caveat, and to the absence of a claim in the Summons for final relief that would quell the controversy between Stonebark and Disage, referring to the decisions of Brereton J in Wu v Dardaneliotou [2008] NSWSC 1319, White J in Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260 and to my decision in Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd above at [3]. Mr Vernier also addressed aspects of the evidence that supported the claim, although it is ultimately not necessary to address that question in order to determine this application, and pointed to the limits to the operation of s 74L of the Real Property Act in that respect. Determination 1. It seems to me that the Court cannot grant the relief that is sought by Stonebark, whether by extending the operation of the caveat or, more precisely, permitting the existing extension of the operation of the caveat to continue, or by granting leave under s 74O of the Real Property Act to lodge a further caveat on the property, as matters stand. That, of course, is not a final determination of the proceedings, and would not necessarily prevent Stonebark seeking such leave, in respect of a properly formulated caveat, if it properly identified the final relief that it sought in the proceedings, at some time in the future. It is, as I have noted above, regrettable that that did not occur today. 2. I accept that, as Mr Collins points out, the threshold for the extension of a caveat under s 74K of the Real Property Act is a relatively low one, and similar to that which is applied for application for an interlocutory injunction. I will assume, without deciding, that that standard could be satisfied, at least in respect of the claim for a proprietary estoppel, although a difficulty arises, to which Mr Collins referred in identifying the possibility of alternative relief in the course of submissions, that it may be challenging for Stonebark to establish a proprietary estoppel, arising from the payment of $150,000 against a purchase price of some $3.6 or $4 million dollars, rather than to establish the lesser relief of, for example, an equitable charge for the amount that it paid. I put that aside, for present purposes, because it is not necessary to determine it. 3. The real difficulty here is first, the form of the description of the caveat and, second, the absence of any mechanism under the Summons to finally determine the issues between the parties. Mr Vernier rightly draws attention to the decision in Circuit Finance Pty Ltd v Crown and Gleeson Securities Pty Ltd [2005] NSWSC997, where Brereton J referred to several decisions, including the earlier decisions in Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd [2002] ANZ Conv R 85, Depsun Pty Ltd v Tahore Pty Ltd (1990) ANZ Conv R 334 and Jones v Baker [2002] NSWSC 89, where in emphasising that the characterisation and description of the nature of the estate, interest or right claimed by the caveator went to the heart and substance of the operation of the provisions. His Honour there observed that, without the estate, interest or right claim being described, neither the Registrar General nor a person reading the caveat can know, for the purposes of s 74H(1)(b) of the Real Property Act, whether a dealing would affect the estate claimed, nor can the Court know, for the purposes of s 74K(2), whether the caveator's claim has, or may have, substance. It seems to me that, here, the description of the caveated interest claimed is deficient, and deficient to an extent that s 74L cannot save it. 4. In particular, the reference to a "beneficial interest in a trust" does not make clear that what is sought, now, may possibly be an interest arising from a constructive trust, said in turn to arise from a joint venture in respect of the land; and the reference to representations made by the registered proprietor giving rise to a proprietary estoppel, presented as details supporting the claim, does not support the claim for a beneficial interest in a trust, but raises the alternative of a claim by way of proprietary estoppel, apparently arising from the HoA, or unidentified representations and an unidentified detriment suffered by Stonebark. It seems to me that, here, there is no sufficiently precise description of the interest claimed to allow any third party who may contemplate a dealing with the land to determine what dealing is permitted, and what dealing is not, and that is a matter of particular importance where the HoA related to part of the land, and only a small part of the contemplated purchase price has been paid. It seems to me s 74L of the Real Property Act cannot save the description in that situation, because that is a fundamental failure with the need to disclose the relevant interest, and not a mere failure to comply strictly with the requirements of the Part. 5. The second fundamental difficulty with the application is that, as I noted above, the Summons claims only a declaration that Stonebark has a caveatable interest in the property. Mr Collins applied considerable ingenuity to seek to defend that approach, but it does not seem to me that that claim, advanced in that way, is capable of bringing about a vindication of Stonebark's interests, or its rights, or allowing certainty to Disage or anyone dealing with it in respect of the issues in dispute. As I noted in Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd above at [3], the Court has in several cases emphasised that an application to extend the operation of a caveat must include a claim for final relief, reflecting the principle that a caveat should only remain on the title pending an application by a person claiming an equitable or other interest to vindicate that interest. I there referred to, and need not repeat the reference to, several cases that had adopted that approach. 6. The relief that is here sought, namely a declaration that Stonebark has a caveatable interest in the property, purportedly seeks as final relief something that is to be determined, in the ordinary course, by an interlocutory standard, namely the standard of whether the claim is genuinely arguable in the sense that I noted above. It is not to the point that, as Mr Collins pointed out, the Court may extend a caveat where the caveator's claim has or may have substance, so that the caveator may support such an extension by establishing that it has, rather than that it may have, substance, because the extension of the caveat is sought now, and will have already been determined by the time any claim for final relief is determined. 7. I bear in mind that Mr Collins refers to one decision, GE Capital Finance Pty Ltd v Sunset Investments Pty Ltd [2005] NSWSC 1205, where Lloyd AJ made a declaration that a party had a caveatable interest in respect of certain land. That decision does not assist me, because it is not apparent whether the plaintiff in that case had also sought substantive relief, as well as that declaratory relief. If that decision stood for a proposition that all that is required to support a claim for an extension of a caveat is that there be determined that a caveatable interest exists, in the sense of a seriously arguable claim to an interest in the land, then I would not follow it. There are obvious reasons why that approach should not be taken, either generally or in this case. It would have the consequence that the Plaintiff, Stonebark, which has paid some $150,000 of the substantially larger amount provided by the HoA, could maintain a caveat over the land into the indefinite future, without ever establishing on a final basis that it in fact has the interest it claims as a purchaser, which has not paid the large part of the purchase price; also without establishing on a final basis the interest that it claims by way of proprietary estoppel; and without establishing on a final basis that it is entitled to a constructive trust as a joint venturer. The detriment to Disage from that course is manifest where, in practical terms, it would be prevented from dealing with the land for the indefinite future, while the caveat remained in place, without any determination of the underlying dispute in the proceedings brought by Stonebark. It seems to me that that is wholly inconsistent with the proposition recognised in the authorities, that an extension of time should only be granted where there are proceedings on foot where relief is sought, that will bring about a determination of the parties' rights on a final basis. 8. I have noted above that it is most unfortunate, and was avoidable, that the matter is determined on this basis. Its determination on this basis does not prevent Stonebark from now seeking to amend its Summons in a proper way, and, having done so, potentially applying for an order under s 74O of the Real Property Act, that will allow it to lodge a properly formulated caveat. It is not entitled to that order now, where it has not amended its Summons in that way. If it takes that course, that will not undo the consequence that the Defendant has been put to the wasted costs of today, and the community has been put to the wasted of time of today, where the determination of these matters would not have been necessary had Stonebark addressed those issues before, rather than after, the hearing of the application in the Duty List today. 9. For these reasons, I make the following orders: 1. The order made by Slattery J on 13 July 2022 extending caveat AR807166 until further order of the Court cease to have effect; with effect from 21 July 2022. 2. The Plaintiff, Stonebark Pty Ltd, pay the costs of the Defendant of and incidental to the hearing today, as agreed or as assessed. 3. The matter be listed for a determination of whether and on what basis it will proceed in respect of any remaining relief, in the Equity Registrar's List on 28 July 2022. ********** 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: 31 July 2022