Circuit Finance P/L v Crown & Gleeson Securities P/L [2005] NSWSC 997

Reported Decision : (2006) NSW ConvR 56-143

New South Wales Supreme Court

CITATION : Circuit Finance P/L v Crown & Gleeson Securities P/L [2005] NSWSC 997

HEARING DATE(S) : 1 September 2005

JUDGMENT DATE : 1 September 2005

JUDGMENT OF : Brereton J

CATCHWORDS : CONVEYANCING - LAND TITLES UNDER THE TORRENS SYSTEM - Caveats against dealings - adequacy of caveat which claims an "equitable interest"

Real Property Act 1900 LEGISLATION CITED : Real Property Regulation 2003

Depsun Pty Limited v Tahore Pty Limited [1990] ANZConvR 334 Hanson Construction Materials Pty Ltd v. Vimwise Civil Engineering Pty Limited [2005] NSWSC 880 CASES CITED : Jones v Baker [2002] NSWSC 89 Multi-Span Constructions No 1 Pty Limited v 14 Portland Street Pty Limited [2002] ANZ ConvR 85 Vandyke v Vandyke (1976) 12 ALR 621

Circuit Finance Pty Limited PARTIES : Crown & Gleeson Securities Pty Limited

FILE NUMBER(S) : SC 4670/05

COUNSEL : J P Redmond (plaintiff)

SOLICITORS : Leonard Deane (plaintiff)

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRERETON J

Thursday 1 September 2005

4670/05 Circuit Finance Pty Limited v Crown & Gleeson Securities Pty Limited JUDGMENT (ex tempore - revised 21 October 2005) 1 HIS HONOUR: On 25 August 2005 the plaintiff Circuit Finance Pty Ltd filed a summons and a notice of motion, pursuant to leave granted by McDougall J, time for service of which summons and motion was abridged to 5 p.m. that day. The summons claims a declaration that Circuit Finance has an estate or interest in certain land and an order extending caveat AB566324 in respect of that land. The notice of motion claims an order that the caveat be extended up to and including the return of the summons, and "such further or other order as the court deems fit." 2 The summons and motion first came before me on Tuesday 30 August 2005 in the Duty Judge list, upon which date they were adjourned to today, to permit consideration of the effect of the recent decision of Campbell J in Hanson Construction Materials Pty Ltd v. Vimwise Civil Engineering Pty Limited [2005] NSWSC 880. 3 Circuit Finance lodged the caveat, in respect of the land comprised in folio 20/W/12958 at Erowal Bay Shoalhaven, on or about 22 June 2005. The registered proprietors of the land are Jason David Campbell and Jody-Lee Campbell as joint tenants. The certificate of title records that the land is subject to a mortgage to First Mortgage Company Home Loans Pty Ltd and a prior caveat by the defendant, Crown & Gleeson Securities Pty Ltd, A902448, as well as the plaintiff's caveat. 4 On 20 July 2005 Leonard Deane Lawyers, who act for Circuit Finance, sent a facsimile letter to Crown & Gleeson (apparently in response to a facsimile from Crown & Gleeson), asserting that Circuit Finance had a valid caveatable interest. A further facsimile letter was forwarded to Crown & Gleeson on 14 August 2005, maintaining the same assertion and enclosing a copy of a lease agreement and guarantee said to support it. On or about 18 August 2005, Leonard Deane received a lapsing notice, issued at the request of Crown & Gleeson, that mortgage AB540591 or possibly AB240591, each number being used in the lapsing notice, had been lodged for registration and that a recording would be made in the register of the lapsing of the caveat as regards that dealing unless within 21 days an order was obtained from the court and lodged with the Registrar General. That 21 day period will expire on 8 September 2005. 5 Since the proceedings were instituted, the defendants have been served. On 29 August 2005 Crown & Gleeson sent a facsimile to Leonard Deane, enclosing a copy facsimile sent to the Land Titles Office and confirming that they would not be attending the hearing of the motion then listed for 30 August 2005 at 9.30. The accompanying facsimile to the Land Titles Office was captioned "Withdrawal of application of lapsing caveat number AB566324," and stated: We, Crown & Gleeson Securities, the lodging party, hereby formally withdraw our Application of Lapsing Caveat numbered AB566324 as regards to folio 20/W/12958. Please remove any recording made in the Register relating to this matter. 6 As I have had occasion to observe more than once this week, in the light of the mandatory terms of the Real Property Act 1900, s 74R(5), if evidence of service of the lapsing notice has been lodged with the Registrar-General, then I do not see that there is scope for a lapsing notice to be withdrawn: to the contrary, the Registrar General is bound to make a recording in the register to the effect that the caveat has lapsed to the extent that it would prohibit the recording of the dealing in question. 7 Real Property Act 1900, s 74K(1) authorises an application by a caveator to be brought when served with a notice prepared under s 74I(1), which is what has happened here. Section 74K(2) provides that, on the hearing of such application, the court may "if satisfied that the caveator's claim has, or may have, substance" make an order extending the operation of the caveat for such period as is specified in the order or until further order of the court, but "if it is not so satisfied must dismiss the application." 8 Accordingly, even if there were affirmative consent to the order sought on the part of Crown & Gleeson, it would still be necessary that I be satisfied that the caveator's claim has, or may have, substance. And the evidence falls short of proving affirmative consent on the part of Crown & Gleeson: rather, it shows merely that Crown & Gleeson does not propose to attend the hearing and has purported, however ineffectively, to withdraw their application for lapsing. 9 It is in those circumstances that Mr Redmond, who appears for Circuit Finance, pressed for an order extending the operation of the caveat. 10 The caveat claims an estate or interest described as "an equitable interest" by virtue of "lease agreement" dated 2 June 2004 between Circuit Finance, Jason Campbell and Jody-Lee Campbell, and by virtue of: The charging clause in clause 17 of the lease agreement and the charging clause in guarantee of lessee's obligation. 11 The lease agreement, which is between Circuit Finance as lessor and Jason Campbell as lessee, of a Mitsubishi Pajero wagon and accessories, contains, amongst its terms, cl 17 which provides that: As security for the due and punctual payment of the rent and/or the moneys owing and the due and punctual performance and observance of the terms of the lease the Lessee as beneficial owner hereby charges in favour of the Lessor all of his rights, title and interest in and to the charged property and all property here after to be held or acquired by the Lessee in addition to the charged property and consents to a Caveat or other registrable instrument being lodged to register such charge. 12 That part of the lease agreement schedule which provides for identification of the charged property is left blank, so the operation of clause 17 is limited, therefore, to the words: All property hereafter to be held or acquired by the lessee in addition to the charged property. 13 Accompanying the lease is a guarantee of lessee's obligations signed by Jody-Lee Campbell, which contains a provision that, as security for the performance of the terms of the guarantee by the guarantor, she charges in favour of Circuit Finance all of her interest in any freehold land in Australia and agrees that: …the Lessor shall have in respect of such land those powers given to a mortgagee by the Property Law Act 1958 (Victoria) where the mortgage is by deed. 14 As the land was, as at 15 August 2005 and presumably also on 22 June 2005 when the caveat was lodged, held by Jason Campbell and Jody-Lee Campbell as tenants in common, it falls within the definition of charged property (so far as Jason Campbell is concerned), within the terms of clause 17 to which I have referred, and (so far as Jody-Lee Campbell is concerned) it is freehold land in Australia the subject of the charge in the guarantee given by her. In those circumstances, it is plain enough that the effect of the documentation is to give Circuit Finance an interest by way of charge or encumbrance securing the obligations of Mr Campbell as lessee and Ms Campbell as guarantor under the lease and guarantee. Such an interest is manifestly capable of supporting a caveat. 15 However, the caveat, as I have said, describes the nature of the interest claimed merely as "an equitable interest." In Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Limited [2005] NSWSC 880, Campbell J considered caveats in substantially the same form, each of which claimed merely "an equitable interest", said to arise by virtue, in that case, of a document entitled "Application for Commercial Mortgage dated 14 December 2004" between the registered proprietor and the caveator and, in the case of one caveat, relying on the additional facts "Pursuant to the provisions of the guarantee and the indemnity of the application for commercial credit."