New South Wales Supreme Court CITATION : Raptis & Ors v Wija Investments Development Pty Ltd [2007] NSWSC 870 HEARING DATE(S) : 27 July 2007 JUDGMENT DATE : 27 July 2007 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 27 July 2007 DECISION : Application dismissed. CATCHWORDS : CAVEATS – FORM – Application to extend caveat – whether "caveatable interest" sufficiently describes interest claimed. - EQUITABLE CHARGE – Whether words of agreement created present equitable charge. LEGISLATION CITED : Real Property Act 1900 (NSW) – s.74L, s.74O Real Property Regulation 2003 (NSW) – Schedule 3 - Cradock v Scottish Provident Institution (1893) 69 LT 380 - Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) 12 BPR 23,403 CASES CITED : - Hanson Construction Material Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) 12 BPR 23,355 - Montagu v Earl of Sandwich (1886) 32 Ch D 525 - Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2 - Fisher & Lightwood's Law of Mortgage (2nd Australian edition), para 2.6 Betty Raptis – First Plaintiff PARTIES : Dimitra Raptis – Second Plaintiff B & D Eastern Pty Ltd – Third Plaintiff Wija Investments Development Pty Ltd - Defendant FILE NUMBER(S) : SC 3750/07 COUNSEL : I.M. Davidson, Ms E. Ito – Plaintiffs M.L.D. Einfeld QC, P. Bolster – Defendant SOLICITORS : McDonell Vertzayias – Plaintiffs Ma & Company – Defendant 3750/07 Raptis & Ors v Wija Investments Development Pty Ltd JUDGMENT – Ex tempore 27 July, 2007 1 The Plaintiffs filed a Summons on 23 July 2007 seeking that the operation of a caveat be extended until further order. Short service was effected in accordance with the Court's directions. The matter has come back today for argument on an interlocutory basis. I say interlocutory because, if the Court extends the operation of a caveat in the circumstances where the registered proprietor of the land disputes the existence of the interest, the Court requires the caveator to proceed with the utmost expedition to claim relief establishing that interest. 2 The Summons in the present case does not claim declaratory or other relief but, if the caveat were to be extended, I would only do so on terms which required the Plaintiffs to file and prosecute diligently a Statement of Claim to establish the interest which they claim. 3 The circumstances of the present application may be relatively briefly recounted. 4 The Plaintiffs have control over a company called B&D Eastern Pty Limited ("B&D Eastern"). That company had the right to dispose of all the shares in a company called Joynton Pty Limited ("Joynton"). Joynton was the grantee of a call option to acquire a property known as 114 Joynton Ave, Zetland. The Defendant wished to acquire the Zetland property for the purpose of development. By agreement dated 23 June 2005, B&D Eastern agreed to sell to the Defendant all of the shares in Joynton ("the Share Sale Agreement"). The effect of such an arrangement was to place the Defendant in a position to procure Joynton to exercise the option to acquire the Zetland property for development purposes. 5 The Plaintiffs have placed a caveat on the title to the Zetland property claiming an interest in the following terms. Under the heading "Nature of the estate or interest in the land" the words "Equitable interest" appear. There is no other entry or description under the heading "Nature of the estate or interest in the land". Under the heading "By virtue of the instrument referred to below" there appears the following: "Nature of Instrument Date Parties Share Sale Agreement 23 June 2005 B&D Eastern Pty Ltd (Caveator) as vendor and WIJA Investments Development Pty Ltd as purchaser. and Deed 4 August 2005 B&D Eastern Pty Ltd, Betty Raptis, Dimitra Raptis & WIJA Investment Development Pty Ltd." 6 Under the heading "By virtue of the facts stated below", appears the following: "The Deed dated 4 August 2005 granted the caveator a caveatable interest in the property as security for the purchaser's/registered proprietor's performance of the obligations in the said Deed." The remainder of the contents of that box is not presently relevant. 7 The Deed referred to in the caveat is dated 4 August 2005 and is between the parties described in the caveat. Relevantly, the Deed provides as follows: "WHEREAS A. Raptis are the trustees of Eastern which is the owner of shares in Joynton Pty Ltd ACN 103 126 227 (hereinafter called 'Joynton'), such Company being the grantee of a Call Option pursuant to a Deed of Put & Call Option in respect of a property known as 114 Joynton Avenue Zetland (hereinafter called 'Zetland'). B. Raptis and Eastern have agreed to sell their interest in Joynton to Wija. C. Wija will exercise the Call Option above to purchase and thereafter develop the site at Zetland by constructing residential apartments and shops thereat. … 1. On the completion of the development and construction of apartments and shops at Zetland WIJA will grant to Raptis 2 x two bedroom apartments of Raptis' choice each valued at not less than AUD $500,000.00 each or in the alternative pay Raptis not less than the sum of AUD $1,000,000.00 on or before 31 December 2007 .. 2 . The parties agree that if Wija chooses to make a cash payment in lieu of the apartments referred to in Clause (1) above then the amount payable to Raptis shall be the value of two x two bedroom apartments based on a valuation to be undertaken at that time but in any event shall not be less than $1,000,000.00 . 3 Each party hereto agrees that it has legal capacity and authority to enter into this deed and perform the obligations herein and the parties hereto acknowledge and agree that Wija's failure to perform its obligations hereunder will give rise to Raptis having the benefit of a caveatable interest in Zetland to secure the performance of the terms of this Deed." I will explain the significance of the words struck out shortly. 8 The Deed is signed by Betty Raptis and Dimitra Raptis and their signatures are witnessed by their father, Con Raptis. It is also executed for B&D Eastern by Ms Betty Raptis. The Deed describes that it has been signed, sealed and delivered by the Defendant and a signature appears there which, there is no dispute, is the signature of a director of the Defendant. 9 The Defendant resists the extension of the caveat essentially on two grounds. First, that the caveat on its face is incurably bad in form and cannot be rectified by recourse to s.74L of the Real Property Act 1900 (NSW). The second ground is that the Deed upon which the Plaintiffs rely as creating the caveatable interest in the property does not in fact give rise to a caveatable interest. 10 I should observe that the first ground is founded upon the terms of the caveat form itself and upon the law relating to what a caveat form must disclose in order to be valid. The second ground concerns mixed questions of fact and law. The issue to be determined on the second ground, namely, that the Deed relied upon does not create any sort of interest in the land, must be dealt with at this stage of proceedings on the same basis as all the contested issues of fact and law are dealt with in interlocutory proceedings. One does not proceed to make final findings of fact. One must determine whether or not the evidence put forward by the Plaintiffs in order to support the existence of an interest as claimed demonstrates a serious question to be tried. It is necessary to bear that distinction in mind in dealing with the submissions that have been advanced in the present case. 11 I deal first with the question of whether or not the caveat is incurably bad in form, as the Defendant contends. Mr Einfeld QC, who appears with Mr Bolster of Counsel for the Defendant, relies heavily on the fact that the caveat describes the interest claimed merely as "equitable interest". Mr Einfeld refers to a number of decisions of this Court which have considered whether such a description is sufficient to comply with the requirement of Real Property Regulation 2003 (NSW), Schedule 3, that the caveat state: "Particulars of the nature of the estate or interest in land claimed by the caveator." 12 Mr Einfeld relies upon cases such as Hanson Construction Material Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) 12 BPR 23,355; Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) 12 BPR 23,403; Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2. Those decisions make it clear that the description of the estate or interest in land merely as 'equitable interest' does not comply with the requirement to state with sufficient particularity the nature of the estate or interest in the land claimed. I respectfully agree with those decisions. 13 It seems to me, therefore, that the present caveat is indeed incurably bad in form. However, the matter does not end there. It would be open, of course, to the Plaintiffs to seek the leave of the Court under s.74O Real Property Act to lodge a further caveat properly describing the estate or interest in the land which they claim, even though that estate or interest claimed is founded upon the same facts. The question is whether the Court would grant such leave. 14 Mr Einfeld points out that no such leave has been sought. However, he has advanced a substantial argument as to why such leave would have been refused, even if it had been sought. That argument forms the second ground upon which he says that the caveat ought not to be extended. 15 Even though I might dispose of the case on the first of Mr Einfeld's points, I shall proceed to consider the ground upon which Mr Einfeld says no interest of any sort sufficient to support a caveat could arise in the present case. The interests of justice require that the parties not be put to the expense of having to argue the same matters all over again, if the Plaintiffs seek to protect the interest which they claim by one means or another. For the reasons referred to earlier, I deal with these arguments as on an interlocutory application. The question is whether the Plaintiffs' case raises a serious question to be tried, not whether I am satisfied on a final basis that the Plaintiffs' contentions would be upheld. 16 The first objection to any interest arising under the 4 August Deed is that the document purporting to be a copy of that Deed which has been tendered in evidence is not stamped. Mr Einfeld says the Court cannot accept the document into evidence. Mr Davidson of Counsel, who appears with Ms E. Ito for the Plaintiffs, is prepared to offer the usual undertaking as to stamping the document. I do not think that the present want of stamping of the document will necessarily put an end to the enforcement of the Plaintiffs' claim. 17 The second reason that Mr Einfeld advances for the proposition that no interest arises under the Deed is more substantial. He says that the Deed does not evidence a contract between the parties. He says, correctly, that the evidence shows that the Plaintiffs signed the document in a form which included the words in clause 1 and clause 2, set out above and shown as struck out. The Plaintiffs' father, Mr Con Raptis, took the document, executed in its original form, to the Defendant's office in order to procure execution of it by the Defendant. 18 There was a discussion between Mr Raptis and the Defendant's director, Mr William Chan, through an interpreter known as "Jally" (Mr Lin). Mr Raptis' evidence is: "24. During these exchanges Jally came in to the room and Vince proceeded to explain the Deed to Jally as well. William Chan was talking about something in the Deed to Vince and Jally. Jally then said to me words to the effect:– 'William does not like the clause that we have to pay $1,000,000.00 before the 31 December, 2007'. 25. I said: 'That is what we agreed upon when we negotiated the 'Sale Agreement' why are you going back on what was agreed? I am not happy'. 26. Jally then translated to William what I had said and there was an interchange between the two men. Jally said: 'Look, you want two apartments, don't you, not the money and you know how long these things take to finish … we are going to build it, you can be certain of that and you will get your two apartments … please sign and let's finalise the deal'. 27. After further discussions along the above lines I finally agreed and Jally deleted the words 'each valued at not less than AUD $500,000.00 each or in the alternative pay Raptis not less than the sum of AUD $1,000,000.00 on or before 31 December, 2007' from clause 1 and clause 2 in its entirety. After the aforesaid deletions Vince then translated the Deed in great detail to William. William then indicated that he was happy and told Jally to sign. I asked Jally to get William to sign. Jally (after speaking to William) said to me: 'I am the managing director. I sign all documents for us'. Jally then signed and initialled the changes and I also initialled the changes on two original copies and we each kept one." This evidence was corroborated by an affidavit from Mr Lin. The Defendant elected to file no evidence and did not seek to cross examine Mr Raptis or Mr Lin. 19 Mr Einfeld submits that this evidence clearly demonstrates that, after the Plaintiffs had executed their counterpart of the Deed, there was a material alteration to its terms insisted upon by the Defendant and the Defendant executed a document in its amended form, so that the counterpart executed by the Plaintiffs does not conform to the counterpart executed by the Defendant. Mr Einfeld submits, therefore, that there has been no consensus ad idem in the terms of the transaction. Thus, there no contract has been made and no caveatable interest could arise by virtue of the document referred to as the 4 August Deed. 20 I am constrained to observe at the outset that, while the argument which Mr Einfeld advances, no doubt on instructions, is an available argument, it is one entirely lacking in merit. The evidence of the Plaintiffs is unchallenged. It is to the effect that the change to the Deed was required by Mr Chan, the Defendant's director, not because he refused to give the substantial consideration promised under the Deed but because he regarded the Defendant's option to pay $1M in substitution for transfer of the units as impractical, and suggested that the consideration be limited to the transfer of the units. 21 Having represented to Mr Raptis "you want two apartments don't you … we are going to build [the development] you can be certain of that and you will get your two apartments", Mr Chan apparently now takes the position that the Defendant is entitled to retain the benefit of the Share Sale Agreement whereby the Defendant has acquired the land but is now under no obligation to pay to the Plaintiffs the very substantial consideration for the transaction promised by the Deed. If that is indeed the position of the Defendant – and I would be sorry to think that it is – then it is highly unmeritorious position and one to which the Court would be loath to lend its aid. 22 It seems to me that an inference may readily be drawn from the Plaintiffs' evidence that the Plaintiffs entrusted to their father, Mr Con Raptis, the task of obtaining execution of a counterpart of the Deed by the Defendant and that Mr Raptis, in the course of discussing execution with the Defendant, agreed, on behalf of the Plaintiffs, to an amendment in the terms sought by the Defendant, and agreed that the final form of the Deed, as amended, would be the Deed which would be operative between the parties. It may be that Mr Raptis had the actual authority of the Plaintiffs to make that new agreement. It may be that, if he did not have actual authority, he at least, at that stage, had ostensible authority. 23 Whatever be the case, after execution of the Deed in its present form by the Defendant, the Plaintiffs lodged the caveat and commenced these proceedings, relying upon the Deed in the form it was executed by the Defendant. In those circumstances, it is open to infer that the Plaintiffs have ratified and accepted the agreement made on their behalf by their father as to the new terms of the Deed. Ratification of an agent's act, unauthorised at the time it was done, can operate retrospectively. Accordingly, it seems to me that there is a serious question to be tried that the Deed, in its amended form, does indeed evidence an agreement binding on the parties. 24 Mr Einfeld then submits that, even if the Deed represents a concluded agreement between the parties, its terms are so vague as to be unenforceable. He refers to the obligation on the part of the Defendant to grant to the Plaintiffs two apartments "on the completion of the development and construction of apartments and shops at Zetland". 25 Mr Einfeld emphasises that there is no particularity in this Deed, or any other contractual document contemporaneous with this Deed, which identifies with any precision what particular building is to be constructed on the property at Zetland, and what particular units the Plaintiffs are to have pursuant to their rights under this clause. 26 Again, the Defendant's position seems to be that the Plaintiffs' promises in the Share Sale Agreement are certain enough to require the Plaintiffs to perform their obligations to procure transfer of the land to the Defendant, but the Defendant's promises in the Deed to pay the consideration for the transfer are so vague as to be unenforceable, which is too bad for the Plaintiffs. If this is indeed the Defendant's position, it is a highly unmeritorious one. 27 It seems to me clear enough from the evidence which has been filed on behalf of the Plaintiffs that there was an agreement between the parties that the Defendant would either by itself, or by some other body, procure the construction of a development on the subject land, and that there would be residential apartments within that new construction. 28 The precise subject matter of the consideration payable to the Plaintiffs under the Deed may be ascertained if and when the property is actually developed. I do not think that the consideration is so incapable of future ascertainment as to render the whole of the Deed not binding and effective in law. It is well established that the subject matter of a contract does not always have to be immediately identifiable at the time the contract is made. It is sufficient if the subject matter will become reasonably identifiable, or can become reasonably identifiable at a future time. 29 The third major contention of Mr Einfeld is that there is no sufficient definition of the interest in the subject land which is given by the Deed which is said to support the caveat. He says that clause 3 of the Deed simply refers to the Plaintiffs having the benefit of "a caveatable interest" in the land, and that interest is said to arise only if and when the Defendant fails to perform its obligations under the Deed. 30 Mr Einfeld says, firstly, that it is impossible to know what sort of interest the Plaintiffs would have, whatever circumstances occurred, and, secondly, that the interest, whatever it is, is not going to arise in any event unless and until the Defendant fails to perform its obligations under the Deed, and he says that has not yet occurred. 31 Clause 3 of the Deed is reasonably capable of being construed so as to confer upon the Plaintiffs an equitable charge on the whole of the land for the purpose of securing the performance of the terms of the Deed. The words "to secure the performance of the terms of this Deed" are embedded in clause 3. It does not require a great feat of construction to divine that the sort of interest required to secure performance of the terms of the Deed is an equitable charge. An agreement that a person may place a caveat on another's title can amount to an equitable charge: Fisher & Lightwood's Law of Mortgage (2nd Australian edition), para 2.6. 32 As was said in the leading case of Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382, per Romer J: "To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security." 33 It is true, as far as the evidence presently reveals, that there has not yet been a breach of the Defendant's obligation to transfer to the Plaintiffs two units in an apartment building because that building is yet to be constructed. However, it may well be arguable that the Defendant has already committed an anticipatory breach of its obligations under the Deed by asserting that the Deed is unenforceable for the reasons advanced by Mr Einfeld, so that the equitable charge has already arisen under Clause 3. 34 Another argument available to the Plaintiffs is that Clause 3, on its proper construction, is an agreement to grant a present charge, realisable upon the occurrence of a future event, viz, the Defendant's failure to comply with its obligations. An agreement for consideration to grant security over specific real estate upon the occurrence of a future event can constitute a present equitable charge – certainly one that will be given force in equity for the purposes of creating a caveatable interest in the land: see Montagu v Earl of Sandwich (1886) 32 Ch D 525, at 538-539, 545-546. 35 The result in the case is that the form of caveat, in its present terms, cannot be sustained and the caveat will not be extended. However, I find that the Plaintiffs have made out a case which would afford them protection against the Defendant disposing of the subject property without recognition of, or provision for, the interest in the land which has been created by the Deed of 4 August 2005. This finding is, of course, I hardly need repeat, a finding made on an interlocutory basis, that is, there is a serious question to be tried as to the Plaintiffs' relief in that regard. 36 As noted above, the Plaintiffs have not sought in their Summons any relief other than extension of a caveat which I have held to be bad in form. Mr Einfeld has submitted that because the only relief sought has been denied, the costs of the proceedings to date ought to be paid by the Plaintiffs. 37 It commonly occurs that when a caveat is sought to be extended, it is found that the plaintiff has demonstrated a seriously arguable case as to the existence of a caveatable interest, but has not complied with what is a technical requirement – nevertheless a very important technical requirement – of the Real Property Act, that the nature of the interest in the land claimed is stated clearly in the caveat form. The misdescription of the estate or interest claimed in the caveat form very rarely ends the contest between the parties and it has not done so in this case. The Plaintiffs will have to amend their Summons to claim substantive relief. 38 It seems to me that, in a case such as this, costs should await the final determination of the substantial issue between the parties which has given rise to the dispute, that is, whether or not the Plaintiffs do have an enforceable interest in the subject land as they claim. 39 The application is dismissed. Costs are reserved. The matter will stand into the Duty Judge's list at 10am on 1 August 2007. – 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. 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