Toma Services Pty Ltd v Kusido Hospitality & Property Group Pty Ltd [2008] NSWSC 492

New South Wales Supreme Court

CITATION : Toma Services Pty Ltd v Kusido Hospitality & Property Group Pty Ltd [2008] NSWSC 492

HEARING DATE(S) : 16/05/08 JURISDICTION : Equity Division

JUDGMENT OF : Young CJ in Eq

EX TEMPORE JUDGMENT DATE : 16 May 2008

DECISION : Order that the defendant remove caveats AD564122 and AD920455 affecting the land in Folio Identifier 24/SP76099 by 9am on 22 May 2008.

CATCHWORDS : CONVEYANCING [189]- Caveats by equitable mortgagee- Prior registered mortgage- Proceeds of sale insufficient to satisfy all obligations- Whether caveats should be ordered to be withdrawn.

LEGISLATION CITED : Real Property Act 1900, s 74MA

Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 CASES CITED : Wildschut v Borg Warner Acceptance Corporation (Australia) Limited (1987) 4 BPR 9453 Wright v Bridge Wholesale Acceptance Corporation (Australia) Limited [1993] 1 VR 502

PARTIES : Toma Services Pty Ltd (P) Kusido Hospitality & Property Group Pty Ltd (D)

FILE NUMBER(S) : SC 2498/08

COUNSEL : D Cook (P) G A Moore (D)

SOLICITORS : McCabe Terrill Lawyers Pty Ltd (P) Bruce Stewart Dimarco (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Friday 16 May 2008

2498/08 – TOMA SERVICES PTY LTD v KUSIDO HOSPITALITY & PROPERTY GROUP PTY LTD JUDGMENT 1 HIS HONOUR: This is an application under section 74MA of the Real Property Act 1900. The plaintiff is the registered proprietor of land over which there is a first registered mortgage to the Commonwealth Bank of Australia and there is a caveat lodged by the defendant to secure money lent on the promise to give a mortgage, that is, an equitable mortgage. 2 When the defendant made its loan, it was told by a responsible officer of the plaintiff that the mortgage to the Commonwealth Bank only secured a six figure amount which would make anyone understand that there was sufficient equity to cover the defendant's equitable mortgage. In actual fact, it would seem that the Commonwealth Bank's mortgage was an all monies mortgage, though whether the responsible officer realised this is unclear. 3 It would also seem that the plaintiff has been involved in a series of dealings, both in this State and Queensland, and that it owes the Commonwealth Bank over $7 million. 4 The bank's mortgage bears date 13 October 2006 and is an all monies mortgage. The defendant's equitable mortgage is dated 9 November 2007. The evidence in the bank statements shows that the amount owed by the plaintiff to the bank as at 9 November 2007 was well in excess of $7 million. Accordingly, it would seem that the interest of the first defendant in the property is virtually worthless. 5 Mr Cook of counsel for the plaintiff says that the caveat should be removed. There is evidence that the property has been sold and that the caveat of the defendant is holding up the settlement and it is intended that the whole of the proceeds be paid to the Commonwealth Bank. Up until a few moments ago it was, I thought, common ground that the price in the sale was a proper price, however, Mr Moore, who appears for the defendant, has informed me that his client does not concede that. 6 Mr Cook says that the caveat serves no useful purpose. He says that even though in its amended form the caveat may be valid, it should go. He acknowledges that there is a line of cases, of which the usual illustration given to the courts is my decision in Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987, that is, a caveat that is a proper caveat may be removed if appropriate alternative security is provided because the courts are not going to allow caveats to be used to put illegitimate pressure on people where the purpose of the caveat can be equally well met by an alternative form of security. 7 In the instant case Mr Cook freely acknowledges that the plaintiff is unable to provide alternative security. 8 However, there is a second line of cases, of which probably the best example is Wright v Bridge Wholesale Acceptance Corporation (Australia) Limited [1993] 1 VR 502 and Wildschut v Borg Warner Acceptance Corporation (Australia) Limited (1987) 4 BPR 9453 per Needham J, which are to the effect that where there is a substantial first mortgage and, in the case of Wright, first mortgage to a bank, and the caveator claims to have a subsequent mortgage and the evidence points to the fact that the first mortgagee will get the whole proceeds of the sale in any event, then the caveat by the second mortgagee should be removed. 9 Mr Moore does not quarrel with the ratio of those cases. However, he says that there are a whole series of dealings between the plaintiff and the bank involving in many instances Queensland land where the bank has other securities and under the doctrine of marshalling the bank should resort to those securities without choosing to resort to the current security. 10 I think there are three answers to that proposition. The first is that if the caveat remains then there will be a contest between the bank and the defendant as to the removal of the caveat at that point. I put to Mr Moore that he really couldn't avoid that contest. He said that it may be that he could come to some agreement with the bank, and so he might, but, subject to that, the contest cannot be avoided. 11 Secondly, it would be possible at the moment for the defendant to make an application with the Commonwealth Bank as a defendant for declarations as to what would be the effect of the doctrine of marshalling. 12 Thirdly, as Tadgell J says in Wright's case, if all that is really being argued about is money, the Commonwealth Bank has plenty of money and so there is no reason why the dispute between the defendant and the bank as to who has priority should not be dealt with in the ordinary way. 13 Despite Mr Moore putting forward everything that could be said on the part of the defendant, I think that the authorities show that this caveat should go. However, I am prepared to leave it on the register until, say, Thursday morning so that the defendant, if so advised, can take the appropriate action or conduct the appropriate negotiations with the Commonwealth Bank. 14 I order that the defendant remove caveats AD564122 and AD920455 affecting the land in Folio Identifier 24/SP76099 by 9am on 22 May 2008. 15 There should be no order for costs.