Reported Decision : (2005) NSW ConvR 56-118 New South Wales Supreme Court CITATION : Business Australia Capital Mortgage Pty Ltd v Randwick Nominees Pty Ltd [2004] NSWSC 643 HEARING DATE(S) : 14/07/04 JUDGMENT DATE : 14 July 2004 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Proceedings dismissed with costs. CATCHWORDS : CONVEYANCING [184]- Caveats- Second mortgagee- A caveat by a second mortgagee will be removed if it purports to restrict first mortgagee's rights. LEGISLATION CITED : Real Property Act 1900, s 74K Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 CASES CITED : Dunecar Pty Ltd v Colbron (2001) 40 ACSR 342 70 Pitt Street Sydney Pty Ltd v McGurk [2004] NSWSC 413 Business Australia Capital Mortgage Pty Limited (P) PARTIES : Randwick Nominees Pty Limited (Receivers and Managers Appointed) (D1) GE Capital Security Agent Pty Limited (D2) FILE NUMBER(S) : SC 3927/04 COUNSEL : M F Holmes QC and E C Muston (P) R G Forster SC and P Dowdy (D) SOLICITORS : Aitken McLachlan Thorpe (P) Henry Davis York (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Wednesday 14 July 2004 3927/04 – BUSINESS AUSTRALIA CAPITAL MORTGAGE PTY LTD v RANDWICK NOMINEES PTY LTD JUDGMENT 1 HIS HONOUR: This is an application under s 74K of the Real Property Act 1900 to extend the operation of a caveat. The caveat concerned is number AA557292SX which was lodged by the plaintiff against the title of the registered proprietor, which is the first defendant, it would seem, on 8 April 2004, even though a statutory declaration was made by the director of the caveator as long ago as 9 December 2003. 2 The second defendant is the first mortgagee. The second defendant has marketed the property, the marketing period being between 1 June and 8 July, but there is no evidence that a sale has been agreed to or that it is imminent, from which I might infer that the negotiations and marketing are continuing. 3 On 17 June 2004, the Registrar General, on the application of the first mortgagee, issued a lapsing notice which expires at 4 pm today. 4 Yesterday, an application was made to me to put the matter of extending the caveat into the list today, the last day. I asked why it was that the matter was left so late and the person representing the plaintiff at the time was unable to give me any answer. However, so that the subject matter would be preserved, I did put the matter in the list. The defendants were served, I am told, at about 5.30 last night and the matter was in the list at 10 am this morning. The parties negotiated through until 2.45 pm and, unfortunately, as not infrequently happens in Duty Judge matters, it was not resolved and I had to hear what appeared to be a very complex matter in something like fifty minutes. Luckily for me and for the parties, the matter is very simple when one strips aside irrelevancies. 5 The caveat states an interest in the land as under an equitable mortgage dated 9 December 2003 for an amount of $2.7 million and all moneys becoming payable under the terms of the loan agreement dated 9 December 2003, an agreement made between the plaintiff and the first defendant. The action prohibited by the caveat under schedule 2 was the recording in the register of any dealing with certain irrelevant exceptions. It is, of course, completely incompetent for a person claiming an interest as subsequent mortgagee to claim that he or she has the right to effect a superior mortgage. The caveat, accordingly, in its present form, is something that just cannot stand. 6 There was then application for me to amend the caveat. There is no time to delve into the rights of the Court to amend caveats. There is no explicit authority in the Act that gives the Court power to do this. McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 at 11,320 held that the Court was empowered to amend defects in schedule 2 of caveats, that is, the action prohibited by the caveat. From this I assume that I do have that power. 7 Mr Holmes QC, who appeared for the plaintiff, asked me to amend the caveat in a way that the caveat would not prevent any sale by the first mortgagee pursuant to its powers under the first mortgage. Mr Forster SC, who appeared for the first mortgagee, said even that would be insufficient and that there were various leases that required registration in order for the first mortgagee to get a proper price. He also challenged the power of the Court to grant leave to amend. 8 I would have been, at least in the short term, prepared to amend the schedule if I had thought that, in the ultimate, it would have done much good, but it seems to me that there are other matters which are fatal to the caveat. 9 In Dunecar Pty Ltd v Colbron (2001) 40 ACSR 342 at 345 I said, on the authorities, that even though a caveator has an interest in land, if the evidence shows that interest in land is overridden by a superior interest in the land, then the caveat should almost always be removed. I then said: "So if the caveat protects a third mortgage, or the first two mortgages account for the whole of the value of the land, and there is no dispute as to what that value is, then almost always the caveat would be removed". 10 In 70 Pitt Street Sydney Pty Ltd v McGurk [2004] NSWSC 413, Campbell J, without referring to that case at all but referring to other authorities, said at [15]: "Where land which is subject to a mortgage has been sold for a price which will be completely payable to a first mortgagee, a subsequent mortgagee is not entitled to maintain a caveat which will prevent completion of that sale ... . A caveat can be removed in that situation under section 74MA even if ... the caveat is a valid one and the initial lodgment of the caveat was something the caveator was entitled to do". 11 The evidence before me is that the relevant document on which the first mortgagee relies in cl 13.10 says: "A statement by the security agent on any matter relating to this document (including any amount owing by any caveator) is conclusive evidence of its contents". 12 There is a document in evidence which purports to be a statement by a security agent that $156-odd million is owing. Mr Holmes fairly says he has not had time to check that document which was only generated this afternoon, but part of that problem was caused by his client making a very belated application to extend the caveat yesterday afternoon and so running out of time to be able to consider the evidence thoroughly. 13 Mr Holmes also says that the amount is disputed. However, when one looks at the evidence of his witness, all he really says is he has had insufficient time to consider the matter. 14 In any event, there is evidence from the first mortgagee that, in the marketplace, the presence of such a caveat causes a depression of the market and, although this may be overstated, that factor is one that would need to be taken into account were one to get to the stage of balancing convenience; the convenience which the other side says is "protection" (to use Mr Holmes' terminology) would be lost for the alleged second equitable mortgagee but that is, to my mind, a relatively minor matter especially when we do not know what enquiries were made at the time of making the loan as to the amount owing under the first mortgage. 15 It seems to me that on the material before me the whole of the first mortgagee's activities are likely to be slowed up by the caveat. Further, the evidence is that the sale is unlikely to produce more than $100 million. 16 Accordingly, whichever way one looks at it, the caveat should not be permitted to remain. 17 Thus, these proceedings should be dismissed with costs. The exhibits may be returned. ******************* Last Modified: 07/26/2004 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.