Taylor Property Group Pty Limited v Permanent Trustee Australia Limited [2011] NSWSC 318

Supreme Court New South Wales

Medium Neutral Citation: Taylor Property Group Pty Limited v Permanent Trustee Australia Limited [2011] NSWSC 318 Hearing dates: 12 April 2011 Decision date: 12 April 2011 Jurisdiction: Equity Division Before: Ball J Decision: See paragraph 19 of the judgment Catchwords: REAL PROPERTY - removal of caveat - caveatable interest - prior claim of registered first mortgage - whether in those circumstances caveat should be removed. Legislation Cited: Real Property Act 1900 Cases Cited: Lew v Bluescope Distribution Pty Limited [2010] NSWSC 794 Morkaya v Parkinson [2010] NSWSC 596 Category: Procedural and other rulings Parties: Taylor Property Group Pty Limited ABN 47 086 685 (Plaintiff) William James Hamilton & Pino Fiorention (First Defendant) Permanent Trustee Australia Limited & Sydney Wyde Mortgage Management Pty Limited (Second Defendant) Representation: Counsel: M R Pesman (Plaintiff) J T Svehla (First Defendant) S McDougall (Second Defendant) (Solicitor) Solicitors: Martin Legal (Plaintiff) Bray, Jackson & Co Solicitors (Second Defendant) File Number(s): 2011/114050

Judgment - Ex tempore 1HIS HONOUR: This is an application pursuant to s 74MA of the Real Property Act 1900 that a caveat over property situated at Alexandria be removed. The plaintiff is the registered proprietor of that property. 2On or about 12 September 2008, the second defendants lent the plaintiff and Geoffrey Norman Taylor, the sole director of the plaintiff, the sum of $2 million. The loan was subsequently increased to $2.2 million. The loan was secured by a first registered mortgage over the property at Alexandria and Mr Taylor's home at Paddington. 3Mr Taylor is also a director of a company known as FMS Fire Monitoring Services Pty Limited. 4The first defendants were appointed as voluntary administrators of FMS on 13 July 2010. Under the terms of their retainer, Mr Taylor and the plaintiff agreed to indemnify the first defendants for all costs and expenses incurred by them as administrators in carrying on the business of FMS. The retainer also provided that "as security for this indemnity, we (that is Mr Taylor and the plaintiff) consent to the administrators lodging a caveat on all and any realty owned by us". 5In accordance with that agreement, the administrators lodged caveats over the properties at Alexandria and Paddington. Since that time, the first defendants' partnership has been dissolved, and Mr Florentino has resigned as an administrator. He did not participate in these proceedings. 6On 16 September 2010, FMS entered into a deed of company arrangement (DOCA). Under the terms of that deed, Mr Taylor was to provide $300,000 by 22 December 2010 for distribution among FMS' unsecured creditors. That amount was secured by an unregistered mortgage over the property at Paddington, and the first defendants have lodged a caveat in respect of that mortgage. 7The plaintiff and Mr Taylor have defaulted on the loan granted to them by the second defendants, and as a result, the second defendant obtained orders for possession against both properties. The current amount owing to the second defendants is $2,453,681.70 plus legal costs. 8A contract has been entered into for the sale of the property at Alexandria. That contract was due to settle on 8 April 2011. The sale price is approximately $717,000. 9Mr Hamilton, the first named first defendant, has taken the position that he will not provide a withdrawal of caveat required for the completion of the sale of the property at Alexandria unless he is paid the sum of $75,000 in respect of his expenses as administrator of FMS. The second defendants, as first mortgagees, takes the position that Mr Hamilton is not entitled to any of the proceeds of sale of the Alexandria property. However, they offered a sum of $20,000 if Mr Hamilton would agree to the sale proceeding. That offer was rejected. 10Mr Taylor has reached an agreement with the second defendants to stay the order for possession in respect of the Paddington property in return for Mr Taylor agreeing to sell that property by June 2011. The evidence is that the Paddington property is worth between $2.7 and 3 million. 11The question is whether in the circumstances I have described an order should be made requiring the first defendants to remove the caveat over the Alexandria property. 12As Brereton J pointed out in Morkaya v Parkinson [2010] NSWSC 596 at [2], the court approaches that question in exactly the same way as it approaches an application by a caveator for an order extending the operation of the caveat. It follows that each caveator bears the onus of showing that it has a seriously arguable case for final relief and that the balance of convenience favours retention over removal of the caveat. 13In addition, as Pembroke J pointed out in Lew v Bluescope Distribution Pty Limited [2010] NSWSC 794 at [6]: The issue is not whether the caveator has a valid caveatable interest but whether, as against competing interests, there is a serious question that the interest recorded in the caveat would be entitled to the protection of an interlocutory injunction." 14The question, then, is whether there is a serious question to be tried Mr Hamilton would be entitled to an injunction to protect the interest he claims, and whether the balance of convenience is in favour of granting an injunction. 15As to the question whether there is a serious issue to be tried, Mr Hamilton says that there is because he clearly has a caveatable interest. As to the balance of convenience, Mr Hamilton says that the balance of convenience is in favour of granting an injunction because otherwise there is a risk that the unsecured creditors of FMS will be prejudiced. That risk is said to arise because, on one interpretation of the DOCA, at least, Mr Taylor's total liability under the deed, including for administrators' fees, is limited to $300,000. If the administrators' fees are not paid out of the proceeds of the sale of the Alexandria property, they will be paid out of the $300,000, thus reducing the amount available to unsecured creditors. 16I do not accept the submissions made on behalf of Mr Hamilton. As between the second defendants and the first defendants, the second defendants clearly have priority. In my opinion, they are entitled to exercise that priority. For the reasons given by Pembroke J, it follows that there is not a serious question to be tried in relation to Mr Hamilton's claim on the proceeds of sale of the Alexandria property. 17Even if that is wrong, I do not think that the balance of convenience is in favour of granting an injunction. The effect of that injunction would be to prefer the interests of an unregistered chargee over the interests of a prior registered mortgagee. I do not think that the balance of convenience would favour that result. 18There is another problem with Mr Hamilton's argument. The first defendants have security over both properties in respect of the plaintiff's and Mr Taylor's liability under the retainer. There may be a question in the case of Mr Taylor whether that liability is in addition to his liability under the DOCA. However, if it is, it will still be secured against the Paddington property. The evidence suggests that there is sufficient equity in the Paddington property to discharge all liabilities secured against it. Consequently, there is no basis for saying that the first defendant or the unsecured creditors of FMS are worse off if the caveat is removed. 19In those circumstances, I grant the relief as sought in paragraph 1 of the summons. 20Mr Hamilton should pay the plaintiff's and second defendants' costs on an indemnity basis. I say that principally because I think that it was unreasonable of Mr Hamilton to reject the offer of $20,000 made by the second defendants.