Mango Media Pty Ltd v Garner Transport & Haulage Pty Ltd [2007] NSWSC 712

New South Wales Supreme Court

CITATION : Mango Media Pty Ltd v Garner Transport & Haulage Pty Ltd [2007] NSWSC 712

HEARING DATE(S) : 25/06/07 JUDGMENT OF : Gzell J

EX TEMPORE JUDGMENT DATE : 25 June 2007

DECISION : Declaration of equitable charge over land. Refusal to vacate interlocutory order extending caveat until further order.

CATCHWORDS : MORTGAGES - Mortgages and Charges generally - Equitable charge - Proper construction of loan agreement - Whether charge covered legal fees and expenses of recovering fees and expenses as defined

LEGISLATION CITED : Real Property Act 1900

CASES CITED : Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 Project Research Pty Ltd v Permanent Trustee of Aust Ltd (1990) 5 BPR 11225

PARTIES : Mango Media Pty Ltd - Plaintiff Garner Transport & Haulage Pty Ltd - Defendant

FILE NUMBER(S) : SC 5845/06

COUNSEL : Mr M W Young - Plaintiff Mr D E Baran - Defendant

SOLICITORS : WKA Legal Pty Ltd - Plaintiff Braye Cragg Solicitors - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

MONDAY 25 JUNE 2007

5845/06 MANGO MEDIA PTY LTD v GARNER TRANSPORT & HAULAGE PTY LTD EX TEMPORE JUDGMENT 1 The plaintiff offered to lend $55,000.00 to the defendant. The terms of the loan were set out in a letter of offer. The cash available to the borrower was $40,000.00. The offer was accepted by signature on behalf of the defendant on the letter of offer. 2 One of the terms of the proposed loan was that the maximum ratio of loan to value of real estate was not to exceed 63%. It was common ground that the loan did not eventuate because the properties offered as security had a value that meant that the maximum loan to value of real estate ratio was exceeded. 3 The loan was structured on the basis that a caveat be lodged over the properties offered as security. The term was as follows: "To secure our above fees and charges and interest thereon until such amounts are paid to us in full you consent to us lodging a caveat on the title to the proposed security property/ies or any other real property in which you have an interest or may at any time in the future acquire an interest." 4 The matter came before Justice Barrett on 6 December 2006 when his Honour took the view that there was a serious question to be determined as to whether the terms of the offer of loan created an equitable charge over the property. I agree with his Honour's view and, in this final hearing, I am of the view that an equitable charge was created by the combination of the clause to which I have referred together with another provision as follows: "That our fees and expenses, if any, together with interest at the rate prescribed by the rules of the Supreme Court of NSW, will create a caveatable and equitable interest and charge in the proposed security property/ies." 5 What is sought by the plaintiff is an order pursuant to the Real Property Act 1900, s 74K that its caveat numbered AB578541 lodged on the properties contained in folio identifiers 10/1012116 and 11/1012116 be extended until further order and it be declared that the plaintiff has an equitable interest in and charge over those lands. 6 Barrett J made an order that the caveat be extended until further order. The only issues that remain alive are whether that order should be vacated and whether the declaration should be made. 7 It is accepted on behalf of the defendant, correctly in my view, that there is an equitable charge over the lands. I propose to make the declaration in those terms. 8 The defendant submits that in the exercise of my discretion as to whether the interlocutory order of Barrett J should be made final, I should vacate the order his Honour made. 9 Fees and expenses were itemised in the letter of offer. There was a brokerage finance warehouse amount of $700.00 and an establishment amount of $1,539.00. There was an estimate of legal fees and other amounts irrelevant for present purposes. 10 Four tax invoices with respect to fees were rendered totalling $4,609.05. The defendant submits that this is a low amount and a caveat should not be used as a form of blackmail, reference being made to Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987. The submission is that, upon payment into court of the amount of $4,609.05, I should vacate the interlocutory order extending the caveat until further order. 11 By letter of 18 May 2007, the plaintiff indicated that the amount of its costs and expenses to that date was $22,391.75 and an estimate of $8,000.00 was made for future costs. The total was rounded down to $30,000.00. The plaintiff indicated that was the amount that ought to be paid into court as an alternative security to the caveat. Some of the costs set out in that letter were incurred subsequently to the settlement date of the proposed loan. 12 The defendant argues that those costs, together with costs incurred subsequently to the letter of 18 May 2007, do not fall within the terms of the equitable charge. 13 The terms and conditions of the loan stated that immediately after a signed copy of the letter of offer was received the plaintiff would incur or pay legal fees and other expenses, including the fees and expenses referred to in the letter itself. The terms and conditions defined those incurrences as "our fees and expenses." 14 The terms of the loan contained an undertaking to pay all of "our fees and expenses" from monies to be advanced at settlement of the loan. The terms also provided that, in the event that the loan did not proceed, the defendant agreed to, immediately upon demand, pay all of "our fees and expenses", estimated at $3,000.00. 15 Two further clauses provided as follows: "To pay all of our legal fees and expenses on a solicitor and client basis incurred in lodging any caveat or in respect to the recovery of any of our fees and expenses and interest thereon. That we are under no obligation to provide a withdrawal of any caveat lodged pursuant to this agreement until such time as all of our fees and expenses and interest thereon and any legal fees and expenses in relation thereto were paid in full. 16 The defendant submitted that the definition of "our fees and expenses" must be limited to incurrences up to the time of the settlement because the agreement envisaged they were to be paid from the moneys advanced at settlement. Thus only fees and expenses incurred before the proposed settlement date fall within the equitable charge. I do not agree. The clauses set out above make it clear that the security was to cover not only "our fees and expenses" as defined but also any legal fees and expenses in relation to the recovery of "our fees and expenses" and interest thereon. 17 In Project Research Pty Ltd v Permanent Trustee of Aust Ltd (1990) 5 BPR 11,225, Hodgson J was concerned with a proposed discharge of a registered mortgage under protest, in circumstances where the mortgagor intended to bring further proceedings disputing the quantum of money secured. His Honour took the view that in order to obtain the discharge, the mortgagor was obliged, not only to tender all moneys then claimed by the mortgagee, but also to provide a security for the mortgagee's costs of the future proceedings by tendering further moneys sufficient to cover the mortgagee's estimate of those further costs. His Honour said that that estimate might be a very generous one. 18 It was submitted by the defendant that this was a different situation. True it is that the security in that case was a registered mortgage, but I see no reason why similar principles ought not to apply to an equitable charge. 19 In the circumstances, and in the exercise of my discretion, I decline to vacate the order made by Barrett J. 20 As I have indicated, I make a declaration that the plaintiff has an equitable charge over the properties I have described. I order the defendant to pay the plaintiff's costs. 21 The plaintiff seeks an order for costs on an indemnity basis. The defenant argues that there was an arguable case as to the exercise of my discretion by reason of the submitted construction of the terms of the offer for loan. I agree with that proposition. It does not seem to me to have been unreasonable for the defendant to continue the proceedings. Indeed, Barrett J had some doubt about the proper construction of the loan agreement. His Honour indicated that he was not at all satisfied that the costs of proceedings would be covered by the loan agreement. 22 In those circumstances, I decline to order that costs be paid on an indemnity basis. There will be an order that the defendant pay the plaintiff's costs.