Surfers Paradise Coaches (Qld) Pty Ltd v Tsu Chan Lin [2007] NSWSC 475

New South Wales Supreme Court

CITATION : Surfers Paradise Coaches (Qld) Pty Ltd v Tsu Chan Lin [2007] NSWSC 475 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 03/05/07

JUDGMENT DATE : 3 May 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 3 May 2007

DECISION : See paragraphs 23-25 of judgment.

CATCHWORDS : TORRENS SYSTEM – Caveat – Caveatable interest – Application to extend caveats – Interest pursuant to a deed of personal guarantee not a proprietary interest in subject properties – Held that terms of deed rebut any implication that agreement to allow lodgement of a caveat creates a proprietary interest by way of charge. - (NSW) Real Property Act 1900, s74O

LEGISLATION CITED : Real Property Act 1900 (NSW)

Troncone v Aliperti (1994) 6 BPR 13,291 CASES CITED : Coleman v Bone (1996) 9 BPR 16,235 Nudd v The Official Trustee in Bankruptcy (2002) 11 BPR 20,163 Express Loans and Finance Pty Limited v Hunter [2004] NSWSC 142

Surfers Paradise Coaches (Qld) Pty Ltd PARTIES : v Tsu Chan Lin

FILE NUMBER(S) : SC 2397/07

COUNSEL : Plaintiff: D Ash Defendant: H Insall SC

SOLICITORS : Plaintiff: Quinn & Quinn Defendant: Hugh & Associates Lawyers

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

WHITE J

Thursday, 3 May 2007

2397/07 Surfers Paradise Coaches (Qld) Pty Ltd v Tsu Chan Lin JUDGMENT 1 HIS HONOUR : This is an application to extend two caveats lodged in respect of three folios or, alternatively, for an order pursuant to s 74O of the Real Property Act 1900 (NSW) that the plaintiff have leave to lodge further caveats in respect to the land comprised in the three folios claiming an interest as chargee pursuant to a deed between the defendant and the plaintiff dated 6 June 2002. The existing caveats have been extended until 5.00pm today. 2 The existing caveats are plainly defective and the plaintiff has not pressed the application for their extension. The plaintiff has pressed its application for orders pursuant to s 74O. 3 The plaintiff claims that it and the defendant are parties to a deed dated 6 June 2002. The deed includes the following provisions. In those provisions, the reference to "the Creditor" is a reference to the plaintiff and the reference to the "Proprietor" is a reference to the defendant. 1 - 6 - " THIS DEED dated 6 June, 2002 between PARTIES SURFERS PARADISE COACHES (QLD) PTY LIMITED ACN 069 382 449 of Level 8, Gateway Building, 50 Appel Street, Surfers Paradise in the state of Queensland trading as SURFERS PARADISE COACHES BN 4874985 (hereinafter called 'the Creditor') of the first part AND TSU CHAN LIN of 35 Stanley Street, Burwood in the state of New South Wales (hereinafter called 'Proprietor') of the second part INTRODUCTION (a) The Creditor has had a business trading relationship with Zealsun Group Pty Limited (in liquidation) ACN 003 575 648 trading as Victory Travel (hereinafter called 'the Debtor'), wherein the Creditor would provide coach and travel facilities to the Debtor on a credit basis. (b) The Proprietor is a director and shareholder of the Debtor. (c) The Debtor is indebted to the Creditor in the sum of $213,386.75 with interest accumulating at the rate of 10.00% per annum on a compounding basis as and from 29 December, 1999 (hereinafter called 'the Debt'). (d) The Proprietor is the joint registered proprietor of property situated at and known as 35 Stanley Street, Burwood in the state of New South Wales, being the whole of the land comprised in Folio Identifier 5/67285 (hereinafter called 'the Burwood property'). (e) The Proprietor is the sole registered proprietor of a property situated at and known as 26A Chamberlain Street, Campbelltown in the state of New South Wales being the whole of the land comprised in Folio Identifier 1/418648, and a property situated at and known as 106 Beverley Road, Campbelltown in the state of New South Wales being the whole of the land comprised in Folio Identifier 2/418648 (hereinafter respectively called 'the Campbelltown properties'). (f) On 8 September, 1999 the Proprietor personally guaranteed the repayment of the Debt due by the Debtor to the Creditor in full upon the sale of or the financing of the Burwood property and the Campbelltown properties, whichever shall happen first in time. (g) The Proprietor is desirous of exhibiting good faith with the Creditor that the Proprietor will adhere to the promises contained in (f) hereof. IT IS AGREED: 1. The Proprietor consents to the Creditor registering two caveats in the form annexed hereto and marked with the letters 'A' and 'B' respectively against the Proprietor's interest in the Burwood property and the Campbelltown properties within seven (7) days of the dated hereof. 2. Upon the Debtor discharging the promises as described in (f) hereof, the Creditor shall forthwith cause to be executed forms of withdrawal of caveat, and deliver same to the Proprietor within seven (7) days of such discharge. 3. The costs of the preparation of this deed, registration fees and all other legal fees shall be payable by the Proprietor to the Creditor's solicitors upon the making of this deed. EXECUTED AS A DEED " 4 The two annexures to the deed contain draft caveats. They were relevantly in the same terms. Schedule 1 of the draft caveats stated that the nature of the estate or interest in the land claimed was " an interest pursuant to deed dated ... 2002 between the caveator and the caveatee by virtue of the instrument referred to below ". That instrument was described as an undated deed between plaintiff and the defendant. 5 In the caveats as lodged, the date of the deed was inserted. 6 The defendant denied that he signed the deed or that he signed any caveat. There is an issue as to whether what purports to be his signature is a forgery. There is clearly a serious question to be tried about that. For present purposes, I will proceed on the basis that he is a party to the document which, on its face, appears to have been signed by him. 7 There is an obvious difficulty in identifying what caveatable interest is created by the deed. It contains no express words of charge. It recites that the defendant has given a personal guarantee of the stated debt and also recites that the guarantee is to repay the debt upon the sale or the financing of the subject properties. 8 It is doubtful whether the recital evidences an agreement to pay the debt out of the proceeds of the sale or financing of the properties. But even if it did, such a promise would not create an interest in the properties themselves. 9 The plaintiff says that clause 1, read with the draft caveats which are annexures A and B to the deed, contains an agreement by the defendant to confer on the plaintiff a sufficient proprietary interest in the subject properties to sustain the caveat. 10 There is no doubt that in some cases an agreement that another party has authority to lodge a caveat in respect of property of the first party, carries with it, by implication, an agreement to confer such an interest in the land as will sustain a caveat. That is to apply the principle that whoever grants the thing is deemed to grant that without which the grant itself would be of no effect ( Troncone v Aliperti (1994) 6 BPR 13,291 at 13,292; Coleman v Bone (1996) 9 BPR 16,235 at 16,239; Nudd v The Official Trustee in Bankruptcy (2002) 11 BPR 20,163 at 20,167, 20,169-20,170). 11 However, the question is always one of construction of the particular instrument. In this case, the defendant did not agree simply to the plaintiff having authority to lodge caveats over properties owned by him or in which he had an interest, from which it might be implied that he thereby agreed to grant a charge over the property in favour of the plaintiff. 12 His agreement was more specific. It was to the registering of the caveats in the form attached to the deed. Those caveats did not identify any estate or interest in the land. They described the alleged interest as being an " interest pursuant to deed ". But unless the deed created an interest, such an interest was not impliedly created by the form of caveat. 13 I cannot discern from the deed any express or implied agreement to create a charge. 14 Rather, recital (g) to the deed is consistent with the parties having agreed that the caveats would be able to be lodged on the title to the defendants land, not because the defendant had agreed to charge the land, but simply as an expression of good faith. 15 It is entirely consistent with the expression of good faith that the parties did not intend to enter into an agreement to create a charge. That is particularly so as it appears from the recitals that it could not be suggested that any such agreement had been made prior to the date of the deed. 16 In Express Loans and Finance Pty Limited v Hunter [2004] NSWSC 142, Bryson J, (as his Honour then was), pointed out (at [13]) that an agreement that A is authorised to lodge a caveat over the land of B is not necessarily futile and ineffective if there is no implication that a charge is created. His Honour said that an impediment is put in the way of the registered proprietor if a caveat is lodged, whether or not it is effective. Its lodgement confronts the registered proprietor with problems and difficulties, whether or not they can be removed. 17 It was submitted for the plaintiff that the defendant's consent to the caveats being lodged " against the proprietor's interest " in the properties showed that an interest was created by the deed which could properly be said to be "against" the interest of the defendant as owner or joint owner. In my view, that submission places more weight on the word "against" than the word can fairly bear. In my view, that phrase is simply an expression of the defendant's consent that caveats can be lodged in respect of, and in that sense, against, the subject properties. 18 The difficulty in identifying how the deed creates an interest by a way of charge, or any proprietary interest, was implicitly acknowledged in the submissions for the plaintiff. Counsel submitted that the agreement in question was one to create an interest, that is, some form of proprietary interest, in the land, and that the Court should articulate and protect the assertion of such an interest by nominating a charge as being a sufficient description for the interest so created. 19 In my view, that submission only highlights the fact that it is impossible to identify from the terms of deed that any interest, and if so what, is created by the document. 20 A question was raised during the course of submissions as to whether a promise to allow the plaintiff to lodge caveats over the subject properties, albeit that they do not disclose a caveatable interest, and albeit that the deed itself does not create a caveatable interest, might nonetheless be enforceable as a negative covenant, so that the defendant should be restrained from causing the caveats to lapse. It certainly would appear that the service of a lapsing notice is inconsistent with the terms of the clause 1 of the deed, assuming of course as I do for present purposes, that the defendant is a party to the deed. 21 However, all of the cases in this area proceed on the basis that the Court will not enforce by injunction such a promise to not disturb caveats which are improperly lodged. That must be so as the statute only permits the lodgement of a caveat by a person claiming to be entitled to a legal or equitable interest or interest in the land. It would be destructive of that scheme for the courts to enforce promises which allows the lodgement of caveats by a person who does not claim or cannot properly claim to be entitled to such an equitable interest. It is for this reason, it seems to me, that an agreement to allow a lodgement of a caveat over the parties' land can, as a matter of construction, imply an agreement to create an interest by way of charge. In this case, the terms of the deed rebut any such implication. 22 Accordingly, it is unnecessary to consider further questions in relation to the balance of convenience, and as to the adequacy of the plaintiff's undertaking as to damages. 23 For these reasons, I order that the notice of motion filed on 24 April 2007 be dismissed with costs. 24 The exhibits may be returned 25 I stand over the proceedings to 24 May 2007 at 9.30am before the Registrar. ******