Fortune Development Group Pty Ltd & Anor v Pink Investments Pty Ltd & Ors [2007] NSWSC 714

New South Wales Supreme Court

CITATION : Fortune Development Group Pty Ltd & Anor v Pink Investments Pty Ltd & Ors [2007] NSWSC 714

HEARING DATE(S) : 26 June 2007

JUDGMENT DATE : 26 June 2007

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

EX TEMPORE JUDGMENT DATE : 26 June 2007

DECISION : Summons for removal of caveats dismissed.

CATCHWORDS : CAVEAT – REMOVAL – whether balance of convenience justifies order removing caveat so that sale can proceed – secured liability exceeds proceeds of sale – whether effect of removal of caveat is to require caveator to surrender the security.

Fortune Development Group Pty Ltd - First Plaintiff Meldeep No 3 Pty Ltd - Second Plaintiff PARTIES : Pink Investments Pty Ltd } Studholme Pty Ltd } First Defendants Bresaste Pty Ltd } Perpetual Trustee Company Ltd - Second Defendant

FILE NUMBER(S) : SC 3315/07

J.S. Mendel – Plaintiffs COUNSEL : J.F. Kildea – First Defendants M.A. Ashhurst – Second Defendant

Diamond Conway – Plaintiffs SOLICITORS : Lyons & Lyons – First Defendants Kemp Strang – Second Defendant

3315/07 Fortune Development Group Pty Ltd & Anor v Pink Investments Pty Ltd & Ors

JUDGMENT – Ex tempore 26 June, 2007

1 The Plaintiffs seek orders for the removal of two caveats placed by the Defendants – Pink Investments Pty Ltd, Studholme Pty Ltd, Bresaste Pty Ltd and Perpetual Trustee Company Limited – on the title to a property which has been jointly developed by the Plaintiffs. 2 The Defendants claim to have securities over the interest in the property of the Second Plaintiff, Meldeep No 3 Pty Ltd, pursuant to equitable mortgages. 3 The First Plaintiff says that the Second Plaintiff granted those security interests in breach of the joint venture agreement between itself and the Second Plaintiff. The Plaintiffs say that the mortgages are therefore invalid and of no effect, upon grounds which have not been articulated in the pleadings. With great respect to Mr Mendel of Counsel, who appears for the Plaintiffs, they have not been clearly articulated in submission. 4 Obviously the validity of the mortgages granted to the Defendants is in contest and that contest may well have to be resolved by litigation. However, the pressing problem is that the Plaintiffs have entered into a contract for the sale of the subject property, which is to be completed very shortly. The Plaintiffs seek orders for the removal of the Defendants' caveats in order to enable that settlement to proceed. 5 The Plaintiffs concede that the balance of proceeds of sale available upon the settlement of the contract will be insufficient to discharge the secured debts claimed by the Defendants. It will therefore not be possible to provide a solution on an interim basis that the caveats be lifted and the balance of proceeds of sale be paid into a controlled money account to await the determination of the dispute between the parties. If that were to happen in the circumstances as they now exist, the Defendants will be compelled to surrender their securities and litigate a money claim in respect of possible proceeds which will be inadequate to discharge the liabilities to them. This is not the sort of situation in which the Court will order the removal of a caveat, despite the apparent validity of the caveatable interest, on the grounds of the balance of convenience. 6 Accordingly, it seems to me that no basis has been demonstrated upon which the Court can order the Defendants to remove their caveats. It may be, as Mr Mendel says, that this causes problems in the settlement of the sale, but that is not a reason for requiring the Defendants, in effect, to surrender their security interests in the subject property, particularly in an application of this kind when the merits of the parties' respective claims have not been debated. 7 I decline to make at this stage any order as sought in the Plaintiffs' Summons. 8 I order that the Plaintiffs pay the Defendants' costs of the Summons to date. There should be no distinction between the Plaintiffs as to liability for those costs. The Summons is filed by both Plaintiffs who join together in seeking relief, even though it appears from what Mr Mendel has said that the Second Plaintiff says that, by virtue of its own breach of covenant with the First Plaintiff, its own mortgage to the Defendants is invalid. 9 The matter will stand into the Registrar's list for further directions on Friday 29 June. 10 I direct that the matter proceed by way of pleadings. 11 Grant liberty to apply on 24 hours' notice. – oOo –