New South Wales Supreme Court CITATION : Andrews v Wilcox [2008] NSWSC 280 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 17 March 2008 JUDGMENT OF : Hammerschlag J EX TEMPORE JUDGMENT DATE : 17 March 2008 DECISION : Plaintiff to withdraw caveat AC 49554. Plaintiff to pay 80 percent of the defendant's costs of the cross summons. CATCHWORDS : REAL PROPERTY - Joint tenants - only one grants equitable mortgage to lender - lender caveats whole of property - Caveat impermissible LEGISLATION CITED : Real Property Act 1900 NSW Depsun and Anor v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 CASES CITED : Mason and Porter v Merrett unreported Supreme Court of Western Australia 12/6/1989 Hedley v Roberts [1972] VR 282 Kerabee Park v Daley [1978] 2 NSWLR 222 PARTIES : Susan Marie Andrews Andrew William Wilcox FILE NUMBER(S) : SC 1551/2008 COUNSEL : D.K.L. Raphael (Plaintiff) R.I. Bellamy (Defendant) SOLICITORS : Gibsons Lawyers (Plaintiff) Morgan Lewis Attorneys Pty Limited (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMMERSCHLAG J 18 MARCH 2008 1551/2008 SUSAN MARIE ANDREWS -V- ANDREW WILLIAM WILCOX EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendant, Andrew William Wilcox, and his wife, Kerrie Lesley Wilcox are the owners in fee simple as joint tenants of Lot 273 in Deposited Plan 2147 which is at Penrith, in the State of New South Wales ("the property"). 2 On 2 February 2005, Mr Wilcox entered into a loan deed with the plaintiff, Ms Andrews, under which Ms Andrews as lender advanced $20,000 to Mr Wilcox. It was not put in issue before me that the loan deed conferred on Ms Andrews an interest in the property sufficient to support a caveat. 3 The parties are in disagreement as to whether the loan has been repaid. Mrs Andrews claims over $50,000 is owing. Mr Wilcox claims he has repaid in full. It was common cause that there is a genuine dispute between them whether any monies are owing. 4 I was informed from the Bar table that at some point Ms Andrews sued Mr Wilcox in debt in the Local Court but, for reasons which were not elaborated upon, the proceedings were dismissed. 5 In about July 2005, Ms Andrews lodged a caveat (No. AC 49554) claiming an interest in the property described as follows: "equitable mortgage pursuant to deed of loan between Andrew Wilcox and Susan Andrews dated 2 February 2005." 6 The caveat, which is in standard form, identifies the registered proprietor and the caveator. It describes the land as Torrens title folio identifier 273/ 2147. It describes the registered proprietor as "Andrew William Wilcox" and the caveator as "Susan Andrews". 7 When the caveat was lodged, the property was, and it is now, encumbered by a first mortgage in favour of Perpetual Trustee Company Limited ("Perpetual") (which acquired the mortgage by transfer from GE Mortgage Solutions Limited), securing a loan to Mr and Mrs Wilcox of $656,000. As at 31 January 2008, the amount required to discharge that mortgage was $670,000. 8 The variable rate of interest payable under the mortgage is 11.1% per annum and the default rate is 15.1% per annum. Mr and Mrs Wilcox are in default of their payment obligations under the mortgage. 9 In early February 2008, Mr Wilcox made application for the preparation of a lapsing notice to be directed to Ms Andrews pursuant to section 74J of the Real Property Act 1900 NSW ("the Act"). The notice was served on Ms Andrews on 6 February 2008. 10 By summons issued on 19 February 2008, Ms Andrews as plaintiff moved the Court for an extension of the operation of the caveat. 11 On 22 February 2008, by consent, Windeyer J ordered, upon Ms Andrews giving the usual undertaking as to damages "and without any admission", that the caveat be extended until further order. His Honour further ordered that the summons stand over until 4 March 2008 before the Registrar. On that day it was stood over to 6 March 2008 and on 6 March 2008 stood over until today. It was today referred to me by the Registrar. 12 There is no evidence that Mrs Wilcox was served with copies of the extension application before the hearing of it, and there was no order made dispensing with such service. 13 Perpetual has apparently obtained an order for possession of the property in the Local Court and Mr and Mrs Wilcox have received notice to vacate from the Sheriff's Office. 14 Mr and Mrs Wilcox have sought to refinance their loan through St George Bank. They have an offer from that institution for a loan of $664,000. 15 On 10 March 2008, Mr Wilcox's solicitors requested Ms Andrews (via her solicitors) to consent to the registration of a first mortgage in favour of St George in place of the Perpetual mortgage. They foreshadowed an application for relief under s 74MA of the Act if such consent was not forthcoming. They offered to pay Ms Andrews' reasonable costs of obtaining advice and effecting consent, in a sum, "not up to $1,000" (sic). 16 That request was declined in a letter from Ms Andrews' solicitors dated 11 March 2008. She took the position that the request should be refused because it came too late (the caveat having been lodged in 2005) and because Mr Wilcox (who is a mortgage broker) must be taken to be well aware of the difficulties of refinancing when a caveat has been lodged. The letter went on to say that the problem had been exacerbated, so far as Ms Andrews was concerned, because she had been forced at substantial cost to institute proceedings in the Court to protect her interests under the caveat. Accordingly, it was said, Ms Andrews would not consent to the registration of the proposed new first mortgage. 17 By cross summons filed in Court today, Mr Wilcox sought a declaration that Ms Andrews does not have a caveatable interest in the property; alternatively that no money is owing under the loan. That relief is final and was not persisted in before me today. 18 However, also sought were orders in the following terms: "3. An order pursuant to section 74MA of the Real Property Act 1900 that the plaintiff withdraw caveat AC 49554 within three days of the date of this order. 4. Further, and in the alternative to order 3, an order pursuant to section 74MA of the Real Property Act 1900 that the plaintiff do all things required to consent to the registration of a mortgage to be granted by the defendant and Ms Kerrie Leslie Wilcox (collectively "Wilcox") to St George Bank Limited ABN 92055513070 ("proposed mortgage"), and to the discharge of the registered mortgage number AA852126 granted by Wilcox to GE Mortgage Solutions Limited (which mortgage was transferred to Perpetual Trustee Company Limited ("Perpetual") by dealing number AC 502859 ("current mortgage") within 48 hours of being given notice to do so, provided that: (a) the proposed mortgage secures a liability not exceeding $670,000; and (b) the proposed mortgage secures the liability which bears an interest rate no greater than the interest rate currently payable by Wilcox pursuant to the loan agreement secured by the current mortgage." 19 Order 4 in the form sought had inherent in it the difficulty that it left open for dispute whether the St George loan would bear an interest rate no greater than the Perpetual loan or GE loan as the case may be. For that reason alone, I would have declined to make it. 20 Section 74MA of the Act provides as follows: "(1) Any person who is or claims to be entitled to an estate or interest in the land described in a caveat lodged under section 74B or 74F may apply to the Supreme Court for an order that the caveat be withdrawn by the caveator or another person who by virtue of section 74M is authorised to withdraw the caveat. (2) After being satisfied that a copy of the application has been served on the person who would be required to withdraw the caveat if the order sought were made or after having made an order dispensing with service, the Supreme Court may: (a) order the caveator or another person, who by virtue of section 74M is authorised to withdraw the caveat to which the proceedings relate, to withdraw the caveat within a specified time, and (b) make such other or further orders as it thinks fit. (3) If an order for the withdrawal of a caveat is made under subsection (2) and a withdrawal of the caveat is not, within the time limited by the order, lodged with the Registrar-General, the caveat lapses when an office copy of the order is lodged with the Registrar-General after that time expires." 21 Counsel for Mr Wilcox, Mr R I Bellamy, put that the caveat was unsustainable because it mis-defined the interest claimed in that: a it claimed that the deed of loan gave rise to an interest in the whole of the land, whereas the party who is said to have conferred that interest had an interest only as a joint tenant; b the other joint tenant, Mrs Wilcox, was not party to the deed of loan relied upon by Ms Andrews as giving rise to the interest claimed. 22 It was put that the Court could not, under s 74MA, amend the provisions of the caveat defining the interest claimed. Reliance was placed on Depsun and Anor v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 in which at 11,320 McClelland J said this: "The Court has power under s74 MA (2) to order withdrawal of a caveat and to 'make such other or further orders as it thinks fit'. I would construe this provision as conferring on the Court power to make such other order as it thinks fit as an alternative to an order for withdrawal of the caveat, as well as power to make such further order as it thinks fit in addition to an order for withdrawal of the caveat. The second ground of the claim in the present case might arguably have justified an alternative order for amendment of the caveat so as to limit its prohibition to the registration of dealings by way of mortgage or transfer of the subject property to any person from or by whom execution of a deed corresponding to the deed of 1 July 1988 had not been procured. In my opinion the Court is empowered to make an order for amendment of the prohibitory provisions of a caveat (see Re The Victorian Farmers Loan and Agency Co (1987) 22 VLR 629; Queensland Estates Pty Ltd v Co-Ownership Land Development [1969] St R Qd 150), although not of the provisions defining the interest claimed (see Re Spencer (1904) 4 SR (NSW) 471; Midwarren Estates Pty Ltd v Retek [1975] VR 575)." 22 I was also referred to Mason and Porter v Merrett unreported Supreme Court of Western Australia 12/6/1989 in which Franklyn J ordered removal of a caveat which applied to an interest of a party to which it was not directed. 23 The caveat describes "the registered proprietor" as Mr Wilcox without reference to Mrs Wilcox or to the fact that Mr Wilcox's interest is as joint tenant. This is undoubtedly the origin of the difficulty. 24 A title search of the property is in evidence. The first schedule refers to Andrew William Wilcox and Kerrie Leslie Wilcox as joint tenants. The second schedule contains the following items: 1. Reservations and conditions in the Crown grant (S); 2. The mortgage to GE Solutions Limited and its transfer to Perpetual Trustee Company Limited; 3. A caveat by Instant Loan Solutions Pty Ltd; 4. A caveat by Circuit Finance Pty Ltd; and 5. The caveat in this case described as "caveat by Susan Andrews as regards the interest of Susan Andrews". 25 The caveat on its face extends, and is recorded as extending, to affecting a dealing by Mrs Wilcox with her interest. 26 Mr D K L Raphael of counsel, who appeared for Ms Andrews, put that the caveat was in terms directed only to the interest of Mr Wilcox because he alone was described as the registered proprietor. That proposition is unsustainable. The effect of the caveat, as appears from the title search, is to apply to the interests of both joint tenants. 27 A joint tenant, or a tenant in common, may encumber his interest in land so as to compel his co-owner to submit to the encumbrance if that encumbrance does not interfere with the right of his co-owner to his possession of the land and his other rights with respect to the land: Hedley v Roberts [1972] VR 282 at 288. 28 Here the caveat interferes with Mrs Wilcox's rights with respect to the property and in those circumstances the caveat cannot stand. 29 There is before the Court no formal application by Ms Andrews to amend the caveat but even if there were, I would not permit it on the basis that to do so would be an amendment to the provisions defining the interest claimed, a course which on established authority is not open. 30 It was put that relief should be refused as there is no evidence of any knowledge of these proceedings on the part of Mrs Wilcox or any application by her. 31 I do not consider that this application should founder because of the absence of Mrs Wilcox. She was not a party to the original proceedings. There will be no injustice done to her by the removal of the caveat. Her position can only be improved by its removal. 32 It was also put relief should be refused because of the "course of conduct" the defendant had engaged in, namely by consenting to the earlier extensions of the caveat. 33 This point is unsustainable. The consent order not only made it clear that it was without admission, it also embodied liberty to apply. Nothing was put as to any forensic course which the plaintiff took or did not take and in respect of which she otherwise might have acted differently but for the terms of the consent order. The lapsing notice was only received in February 2008 and it should be remembered that the plaintiff's proceedings in the Local Court were dismissed. 34 A submission about delay was properly abandoned. 35 The caveat is substantially defective and must be removed. The defect is not merely a formal one. 36 In the circumstances it is not necessary to deal with the application under section 74MA to allow registration of the mortgage to St George. 37 Notwithstanding the conclusion I have reached, I consider it appropriate to deal with it. 38 If the defendant had failed with respect to its primary application for removal of the caveat, I would nevertheless have exercised my discretion to grant relief to the defendant so as to permit registration of the St George mortgage. 39 The appropriate approach to such an application is that the Court is to consider whether the particular circumstances justify the caveator in insisting in maintaining the caveat in the circumstances which have arisen. 40 In Kerabee Park v Daley [1978] 2 NSWLR 222, Holland J considered the approach to be taken in such cases. At 228 His Honour said: "a caveator should have no right to prohibit registration of the dealing to which his alleged interest in the land would not entitle him to object, if he were to invoke the assistance of the Court. A subsequent encumbrancer, either registered or unregistered, has no right to interfere in or object to a proper exercise by a mortgagee of the mortgagee's power of sale and would have no ground on which to seek the intervention of the Court, notwithstanding the fact that registration of the transfer would discharge or defeat all of the mortgage interest in the land whether registered or not." 41 At 229, his Honour held that the power of the Court to "make such other or further orders as it thinks fit" enables the Court to consider whether the circumstances justified the caveator lodging the caveat and keeping it there. 42 The appropriate approach is to examine whether the particular dealing which the caveat would otherwise prohibit would have been restrained at the suit of the caveator. 43 The following was put on behalf of Ms Andrews why the St George mortgage should not be permitted: a firstly, there was no undertaking or offer to pay the monies into Court which are the subject of the disputed claim between Ms Andrews and Mr Wilcox; b secondly, there are two other caveats (which are referred to above) and there was no evidence what money, if any, is owed to those caveators. It was put that neither the plaintiff nor the Court knows whether there will be sufficient from the proposed new mortgage "to discharge those two caveats"; c thirdly, there was no evidence as to what the monthly payments under "the two loans" were; d fourthly, there was no explanation of where money is to be found to enable Mr and Mrs Wilcox to discharge the Perpetual mortgage, given that there is a shortfall of $7,000 between the amount owed to Perpetual and the proposed refinanced amount; e fifthly, there is no evidence of any special circumstances which would prevent Mr Wilcox from making satisfactory arrangements to meet the obligations secured by the equitable mortgage; f finally, there was no evidence of the value of the property to be mortgaged to St George. 44 In my view, none of the matters put assist Ms Andrews. The evidence establishes that the interest to be paid under the St George mortgage is more advantageous to Mr Wilcox and Mrs Wilcox than that which is payable under the Perpetual mortgage. The amount being borrowed is less. There is no basis, so far as I can determine, under which Ms Andrews could reasonably put that the caveat be maintained so as to prevent the substitution of an earlier mortgage on title for one not on less favourable terms. The existence of the other two caveats does not appear to me to affect the position as between the present parties. It is correct that there is no information about those caveats. That further diminishes the force of the submission. 45 There would be nothing to prevent Mr and Mrs Wilcox borrowing more money from Perpetual in any event. That is, if a further loan were entered into between Perpetual and the plaintiff, there is nothing to suggest that such a loan would in any event not be secured by the terms of the mortgage. 46 The value of the property which is to be mortgaged to St George, is to my mind, irrelevant. Whatever value there was before the registration of the new mortgage will be there after it. There was no suggestion, nor could there have been, that the value of the property is being eroded in any event. 47 I should also say that none of the matters which were put in the letter from the plaintiff's solicitors to the defendant's solicitors as justifying the refusal to consent, was a matter which amounted to justification. 48 In those circumstances, even had I not come to the conclusion that the caveat should be removed, I would have exercised my discretion in favour of the defendant to allow registration of the St George mortgage in place of the Perpetual mortgage. 49 The orders of the Court will be that the plaintiff is to withdraw caveat AC 49554 within three days of the date of this order. 50 As framed, part of the cross summons was bound to fail. The defendant, although having been successful, should for that reason nevertheless be not entitled to all of his costs. The plaintiff is to pay 80 percent of the defendant's costs of the cross summons. 30/04/2008 - paragraph 21(c) becomes paragraph 22 - Paragraph(s) 21 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.