New South Wales Supreme Court CITATION : Coast Reo Pty Ltd v O'Brien & Ors [2006] NSWSC 613 HEARING DATE(S) : 15 June 2006 JUDGMENT DATE : 15 June 2006 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 06/15/2006 DECISION : Leave to lodge further caveats granted. CATCHWORDS : CAVEATS – whether caveatable interest created by Credit Agreement – whether caveat bad in form – whether leave should be granted to lodge further caveat under s.74O(2) of the Real Property Act. LEGISLATION CITED : Real Property Act 1900 (NSW) – S.74O(2) Coast Reo Pty Ltd – Plaintiff PARTIES : Robert O'Brien – First Defendant Joanne Therese O'Brien – Second Defendant Ricki Craig O'Brien – Third Defendant FILE NUMBER(S) : SC 3179/06 COUNSEL : D.J. Durston – Plaintiff M.W. Young – Defendants SOLICITORS : Peninsula Law – Plaintiff Streeter Commercial Lawyers – Defendants JUDGMENT – Ex tempore 15 June, 2006 1 This is an application by the Plaintiff to extend the operation of two caveats lodged over real estate owned by the First Defendant, Mr Robert O'Brien. The caveats were lodged pursuant to a charging clause contained in a Commercial Credit Facility and Supply Agreement between the Plaintiff and Allcoast Linings Pty Limited, of which company Mr O'Brien is, or was, a director. The relevant provisions of the Agreement are as follows. 2 The Agreement is described as being made between the Plaintiff and a company or other entity to be named. Clause 2 of the document describes the "company or corporation" as Allcoast Linings Pty Limited. Clause 4 provides as follows: "Particulars of all parties to this Facility are required below. Full Names of Addresses of the Directors / Partners / Sole Traders." Then appears Mr O'Brien's name and residential address. Paragraph (o) of the Agreement provides as follows: The Company and/or individual person(s) referred to in Section (2), (3) and/or (4) of this application hereby Charge all their Right, Title, Interest (if any) in the property or properties referred to in Section (2), (3) and (4) of this application and also any property or properties that they own currently or may acquire in the future solely or jointly or have or become to have a beneficial interest in, in favour of "COAST REO & MIDCOAST", with the due and punctual observance and performance of all of the obligations of the Buyer. Such person(s) acknowledge that " COAST REO & MIDCOAST" may at its discretion register and lodge a Caveat(s) on such property or properties in respect of the interests conferred on it under this clause. Such registration of a Caveat by "COAST REO & MIDCOAST" over the Customer(s) property(ies) shall not be challenged by the Buyer in any way whatsoever, and the Buyer agrees not to take any steps in filing a "Lapsing Notice" via the Land Titles Office to have the Caveat removed, until such time the Buyer has paid all monies owing by it to "COAST REO & MIDCOAST" as claimed from time to time." Immediately below paragraph (o) appears the following: "7. Name of the Person Authorised to Sign: Signature: Contact Number:" Under the words "name of person authorised to sign" is the name of Mr O'Brien. Under the word "signature" appears Mr O'Brien's signature. Then there appears a box in the document headed "Authority Under Privacy Act 1988 (As amended)" . That section deals with the relevant notice of disclosures to be made under the Act. Immediately following that box there appears: "Buyer Signature" and Mr O'Brien's signature appears there. Beside this signature appears the word "Title" and there is written "Director". Mr O'Brien's name is written immediately under the last mentioned signature. Then follows a page of trading terms and conditions of the credit facility. The next section is headed "Guarantee and Indemnity" . There are one and a half pages setting out the terms of the guarantee and indemnity which is to be given by any person providing a guarantee of the obligations of the buyer under the Supply Agreement. 3 Amongst the terms of the guarantee and indemnity is a clause providing for the guarantors to charge their interests in real estate as further security in support of the guarantee. The space provided for the signatures of any guarantors in this section is left blank. 4 Mr M Young of Counsel, who appears for the Defendants, asserts that the Plaintiff has no caveatable interest on two grounds and that even if there is a caveatable interest, the caveat is bad in form and, for that reason, its operation should not be extended. 5 First, Mr Young submits that paragraph (o) of the Supply Agreement does not on its true construction contain a charge other than by Allcoast Linings Pty Limited itself. He says that this follows from the fact that in the second half of the clause, it is provided that the registration of a caveat pursuant to the clause cannot be challenged by the "buyer". The buyer as defined, says Mr Young, does not include any person or entity referred to in paragraph 4 of the Supply Agreement. It is clear, says Mr Young, that the inability to challenge a caveat lodged pursuant to the clause must be intended to encompass all those against whose property caveats may be lodged, so that one may properly construe the clause as applying to a charge to be given only by the buyer, that is, Allcoast Linings Pty Limited, and not any one else. 6 I do not need to decide this question as a matter of finality at this stage. What I need to determine is whether or not there is a sufficiently arguable case, or serious question, in other words, as to whether or not this clause on its true construction is capable of creating the charge for which the Plaintiff contends. 7 In my opinion, it is highly arguable that the clause does create a charge to be given by Mr O'Brien. The wording in the first half of the clause is quite clear that not only is it the company, i.e. the buyer, which is to give the charge but also the persons referred to in a number of sections, including section 4 where Mr O'Brien's name clearly appears. 8 Further, the acknowledgment of an entitlement to caveat is given by "such persons", intending, at least as a matter of first impression, to refer not only to the buyer but to the other persons who may be named in section 4 amongst other sections. As I say, the construction of this clause is arguable but it seems to me that it is certainly capable of creating a charge to be given by the persons included in section 4, that is, including Mr O'Brien. 9 I should add that if the second half of the clause is given the plain meaning of the words, the clause thereby produces no absurd or meaningless result. 10 The second point raised by Mr Young is that the Agreement, if it is construed as an agreement between three parties, namely, the Plaintiff, Allcoast Linings Pty Limited and Mr O'Brien personally, has not been executed by Mr O'Brien in his personal capacity. Mr Young submits that the two signatures of Mr O'Brien which appear on the document are signatures by Mr O'Brien only in his capacity as a director of Allcoast Linings and not in his own capacity. 11 Again, I do not need on this application to determine this issue as a matter of finality. I need only say that in my opinion it is highly arguable that Mr O'Brien's signature is appended not only for the purpose of attesting execution by the company of which he is director, but also for the purpose of attesting his own assent to the document as a "party to this facility" as described in section 4. 12 Mr Young's third point is that if the charging clause is capable of creating a charge and has, in effect, created a charge nevertheless the caveats which have been lodged over land owned by Mr O'Brien jointly with others, is bad. 13 The caveats are over two parcels of land. One of those parcels is owned by Mr O'Brien and "Joanne Therese O'Brien". The other of them is owned by Mr O'Brien and two other persons, namely, Joanne Therese O'Brien and Ricki Craig O'Brien. 14 The charging clause in paragraph (o) of the Agreement purports to create a charge only over the interest of Mr O'Brien in any current or future real estate. The clause would be, of course, ineffective to create a charge over the interest of any other person in land co-owned by Mr O'Brien. 15 The caveats simply refer to the whole of the relevant parcels of land co-owned by Mr O'Brien and describe the interest claimed as follows: "SCHEDULE 1 Estate or Interest Claimed Commercial Credit Facility Application and Supply Agreement granting a charge over real estate by Caveator By virtue of the instrument referred to below Nature of Instrument Date Parties Agreement 10/8/2003 Coast Reo Pty Ltd, Midcoast Reinforcements Pty Ltd, Allcoast Linings Pty Ltd and Robert Ian O'Brian By virtue of the facts stated below This Agreement contains an agreement by Robert Ian O'Brian and to charge any real estate owned or partly owned by him and consents to the lodgement of a Caveat and to its continuance until the Credit Facility is repaid in full." 16 It is certainly open on one reading of Schedule 1 that the Plaintiff claims a charge over the whole of the land described in the caveat form rather than over such interest in that land as Mr O'Brien alone has. The matter is open to some debate, as Mr Durston of Counsel, who appears for the Defendants, has pointed out because there is stated in the first schedule the following: "This Agreement contains an agreement by Robert Ian O'Brien and (sic) to charge any real estate owned or partly owned by him and consents to lodgement of a Caveat and to its continuance until the Credit Facility is repaid in full." 17 On one view of the matter, it is arguable that that statement intends to indicate that the charge created is a charge only over such interest in real estate as is owned by Mr O'Brien and not by other persons. However, in the section headed "nature of the estate or interest in the land", all that is said is "commercial credit facility application and supply agreement granting a charge over real estate by caveator". This is not, in my view, an accurate or proper description of the interest which the charge created by paragraph (o) of the Supply Agreement is alleged to give. 18 However, it seems to me that this is a case in which possible invalidity of the caveats occasioned by infelicity of expression ought to be relieved by the application of s.74O(2) of the Real Property Act 1900 (NSW). Accordingly, I think the proper course is to let the present caveats lapse but to grant leave to the Plaintiff immediately to lodge substitute caveats in proper form. – oOo – 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.