Esanda Finance v Barber [2004] NSWSC 1139

New South Wales Supreme Court

CITATION : Esanda Finance v Barber [2004] NSWSC 1139 HEARING DATE(S) : 24 November 2004 JUDGMENT DATE : 24 November 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Receiver appointed

CATCHWORDS : MORTGAGES AND CHARGES GENERALLY - agreement to give charge and permit caveat - enforcement by appointment of receiver - no question of principle CASES CITED : Troncone v Aliperti (1994) 6 BPR 13,291 PARTIES : Esanda Finance Corporation Limited - Plaintiff Robert Leonard Barber - Defendant FILE NUMBER(S) : SC 4859/04 COUNSEL : A A Henskens - Plaintiff No appearance - Defendant SOLICITORS : Kemp Strang - Plaintiff No appearance - Defendant

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

CAMPBELL J

WEDNESDAY 24 NOVEMBER 2004

4859/04 ESANDA FINANCE CORPORATION LIMITED v ROBERT LEONARD BARBER JUDGMENT – Ex Tempore 1 HIS HONOUR: This is an application by a finance company, Esanda Finance Corporation Limited ("Esanda"). It seeks an order that a caveat be extended, judgment against a borrower, Mr Barber, for a sum of money with interest, a declaration that certain land of Mr Barber is charged to secure a payment of a sum of money to the plaintiff, and appointment of a receiver. 2 On 20 August 2002, the plaintiff obtained judgment against the defendant and his wife in the District Court for the sum of $160,183.77. In addition to the District Court judgment, the defendant and his wife were indebted to the plaintiff under hire agreements in the sums of $41,224.11 and $26,567.20 respectively. 3 As at March 2003, the defendant was the proprietor of three groups of titles to rural land. One of those groups of land titles was the land in Folio Identifiers 36/753256, and 37/753256, which related to a property known as Bugalugs. There was another property known as Stonehenge, and a further group of land titles which I will refer to as the "Third Property". 4 By letter dated 7 March 2003, Kemp Strang, the solicitors for Esanda, wrote to the defendant and his wife. The letter rejected an offer of $185,000. This rejection was on the basis that it did not take into account the two amounts which were owing on the hire contracts. If the amount of the judgment debt from the District Court, and the amount owing under the two hire contracts were all added together, the total indebtedness would be a little over $234,000. The letter stated that Esanda was prepared to accept an amount of $240,000, in instalments, in final satisfaction of the indebtedness. The instalments proposed were nine instalments at six monthly intervals of $25,000 and a final instalment six months later of $15,000. The letter said if the arrangement was acceptable to the debtors, the first payment would be due on 30 January 2004. The letter stated also that Esanda was prepared to make the offer on the basis that a deed of release be executed which acknowledged the instalment schedule and which also "provides for a charge, protected by a caveat, to be granted to Esanda over your property". 5 By letter dated 17 March 2003, Mr Barber wrote back saying he agreed to pay the $240,000 as per the letter and would give Esanda permission to put a caveat over one of his properties. He then gave the title reference to Bugalugs. 6 On 9 April 2003 Kemp Strang wrote back, saying that Bugalugs was already heavily encumbered, and that that security was unacceptable to Esanda. The letter said that Esanda required him to charge each of his properties with payment of the outstanding debt. A reply was given by the defendant on 26 April 2003. He said: "Currently I am in the process of refinancing my farm. At the time of the loan being approved I said I had no caveats on my property. This finance will allow me to sow all of my crops, which is most important for creating my income. When this finance is finalised, I will agree to a caveat over both my properties to Esanda." 7 That reference to "both my properties" is explained by the fact that, by a transfer dated 28 February 2003, which was registered on 15 April 2003, the Third Property had been sold. 8 On 6 August 2003, an existing mortgage over Stonehenge was repaid, and a fresh mortgage was subsequently granted over Stonehenge to a company called Banksia Securities Limited. 9 On 2 February 2004 the defendant paid a first instalment of $25,000 to Esanda. Esanda takes no point about it being a couple of days late. 10 On 6 February 2004, Kemp Strang wrote to the defendants. It acknowledged receipt of $25,000 "representing the first instalment, due, as agreed". The letter continued: "In accordance [with] the agreement between the parties (ie that Esanda will accept the total sum of $240,000 together with Caveats over your properties), we are now preparing an appropriate Deed of Release to formalise the settlement agreement. Accordingly, we shall forward you the Deed of Release". 11 Such a deed of release was forwarded to the defendants on 25 February 2004. As it happened, that deed has never been executed. Further, there have never been any other instalments received by Esanda from the defendant. 12 On 31 May 2004, the fresh mortgage which had been granted to Banksia Securities over Stonehenge was discharged and a transfer of Stonehenge to someone apparently unconnected with the defendant was registered. That transfer is one dated 20 May 2004. 13 On a date which is probably in July 2004, Esanda lodged a caveat over the Bugalugs property. A lapsing notice was served on 24 August 2004. That led to these proceedings being commenced on 2 September 2004. The defendant was served, in accordance with the Court's orders, with the Initiating Process and affidavit. 14 On 7 September 2004 Master Macready made an order. The order which he pronounced was that the caveat be continued until further order. Through an error in the drawing up of the order, the order sealed by the court actually says that the caveat be continued "until further notice". The defendant appeared in person before the Master on 7 September 2004, even though he had not actually filed an appearance in court, and to this day has not filed an appearance in court. 15 On 24 September 2004 Palmer J made an order fixing the matter for hearing today. He required that notice of the hearing be given to the defendant. That notice has been given. The defendant did not attend today. 16 In my view, the preferable construction of the chain of correspondence between the plaintiff and the defendant is that it amounts to an agreement to give a charge over both Stonehenge and Bugalugs. Now that Stonehenge has been sold, the part of the agreement relating to a charge over Stonehenge cannot be given effect to. 17 In coming to that conclusion, I have relied on the decision of the Court of Appeal in Troncone v Aliperti (1994) 6 BPR 13,291. In that case, the Court unanimously held than an agreement to grant a caveat created a caveatable interest in property. Mahoney JA, with whom Priestly JA agreed, said that it was not necessary to determine what the precise nature of the interest in land created in that case was. He decided that, at the least, an agreement to lodge a caveat would: "create in favour of the covenantee an interest in the land to the extent at least that an injunction would go to restrain the covenantor from dealing with the land in a manner inconsistent with the covenant... The right, by the enforcement of an express or an implied negative covenant, to restrain a dealing with land is in my opinion an interest in land within this branch of the law." (at 13,292-3) 18 Meagher JA, at 13,293, went further and said that: "Once one reaches the conclusion that Mr Aliperti did intend to grant each of his lenders an interest in his land, that interest in the circumstances can only be an equitable charge". 19 In the present case, the context in which the agreement to give a caveat arose was one where the giving of a charge was expressly requested. Even though there was no specific acceptance by the defendant of the requirement of Esanda's solicitors that there be a "charge, protected by a caveat", the proper construction of the correspondence is that the defendant was accepting the offer put to him by Esanda. 20 Not every equitable charge over land is one which the Court will enforce by the appointment of a receiver. However, in my view, when there has been a failure to comply with the instalment schedule, of reasonably long standing, and when one of the properties over which the charge was agreed to be given was sold, notwithstanding that agreement, it is appropriate to order the appointment of a receiver. If it turns out that there is not enough equity in the property to pay the receiver's fees, that will be a problem for the plaintiff, not the defendant. 21 The correspondence between Esanda and the defendant in his agreeing to the total debt of $240,000 being paid by instalments, involved an acceptance on his part that money was indeed owing under the hire contracts. In any event, there is independent evidence to that effect from a recoveries officer of the plaintiff. 22 Since the proceedings were started, there has been a small recovery made by Esanda, pursuant to a garnishee notice. This results in the amount of the indebtedness being slightly less now than was claimed in the summons. 23 Because of the problem in drawing up the order pronounced by Master Macready, it is, I think, preferable to revoke that order after making an order in the same terms as the one that the Master actually pronounced.