Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Mahendran v Chase Enterprises Pty Ltd [2013] NSWCA 280 Hearing dates: 3 July 2013 Decision date: 03 September 2013 Before: Barrett JA (at [1]; Emmett JA (at [59]); Gleeson JA (at [60]) Decision: 1. Appeal allowed in part. 2. Set aside the verdict and judgment ordered against the appellant and in favour of the respondent in the District Court and in lieu thereof order verdict and judgment against the appellant and in favour of the respondent in the sum of $138,833.29. 3. Appeal otherwise dismissed. 4. The respondent pay the appellant's costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: BANKING AND FINANCE - loan facilities - several loans by lender to borrower - proceeds of sales of properties wholly applied towards repayment of loans - action by lender to recover outstanding balances - judgment given - whether interest correctly calculated - whether outstanding balance less than judgment sum - REAL PROPERTY - caveats against dealings - caveat lodged by lender on title to borrower's property over which it held no security - whether that caveat lodged without reasonable cause - whether borrower sustained loss attributable to lodgement of the caveat Legislation Cited: Real Property Act 1900, s 74P Cases Cited: Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd v [2007] WASCA 179; (2007) 35 WAR 27 Natuna Pty Ltd v Cook [2007] NSWSC 121 Category: Principal judgment Parties: Rajiv Kumar Mahendran (Appellant) Chase Enterprises Pty Ltd (Respondent) Representation: Counsel: Self-represented Appellant Mr B Pluznyk (Respondent) Solicitors: Self-represented Appellant GRG Lawyers & Consultants - Respondent File Number(s): CA 2012/299242 Decision under appeal Date of Decision: 2012-08-30 00:00:00 Before: Olsson DCJ File Number(s): DC 2012/31203 Judgment 1BARRETT JA: This is an appeal from a decision of Olsson DCJ awarding a judgment of $167,354.65 against the present appellant, Mr Mahendran, and in favour of the present respondent, Chase Enterprises Pty Ltd ("Chase"). 2Chase sued in the District Court to recover moneys due under two loan agreements made between Chase as lender and Mr Mahendran as borrower. Each loan was secured by a mortgage of land. The loan agreements formed part of the mortgages, in the sense that all the loan terms were set out in the mortgages. The relevant loans 3The first of the two loans was made in June 2007. The sum lent was $105,000. The mortgage was over a property in Lowan Place, Kellyville. It will be convenient to refer to this loan as the "Lowan loan". 4The second loan was made in July 2008. The sum lent was $100,000. The mortgage was over a property in Seymour Way, Kellyville. I refer to this loan as the "Seymour loan". 5In each case, Mr Mahendran, as borrower and mortgagor, covenanted to repay the principal sum on a specified future date and, in the meantime, to pay interest "on the principal sum or on so much thereof as for the time being shall remain unpaid" by monthly payments at the rate of 23 per cent per annum (reducible, upon prompt payment, to 20 per cent in the case of the Lowan loan and 21 per cent in the case of the Seymour loan). 6Mr Mahendran made regular monthly payments from inception of each loan to January 2009. Each monthly payment in respect of the Lowan loan was $2,821.75. Each monthly payment in respect of the Seymour loan was $2,805.04. It is obvious that each monthly payment exceeded interest at the reduced rate of 20 per cent per annum on the principal sum. Interest on $105,000 at 20 per cent per annum would have been $1,750 for a month. Interest on $100,000 at the rate of 20 per cent per annum would have been $1,666.67 for a month. The claims in the District Court 7Chase claimed in the District Court a total of $180,824.13, described as follows: "Shortfall on loan secured over property at 29 Seymour Way, Kellyville NSW $ 77,102.32 Shortfall on loan secured over property at 29 Lowan Place, Kellyville NSW $ 24,797.07 Interest on $101.899.39 at 23% to 1 March 2010 $ 22,581.00 Interest at 23% to 1 March 2011 $ 28,630.48 Interest at 23% (at $2385.87 per month) from 1 March 2011 to 24 January 2012 $ 25,741.26 Filing fees $ 1,150.00 Service fees $ 59.00 Solicitors fees $ 763.00 TOTAL $ 180,824.13" 8The claim in the District Court was sparsely pleaded. The statement of claim alleged, in substance, that: (a) Chase made loans to Mr Mahendran as follows: * $130,000 in July 2006, * $105,000 in July 2007 (being the Lowan loan), * $100,000 in July 2008 (being the Seymour loan); (b) the first and second loans were secured by mortgages of the Lowan Place property and the third by a mortgage of the Seymour Way property; (c) Mr Mahendran sold the Seymour Way property in December 2009 "and the Plaintiff [Chase] suffered a shortfall due upon settlement of $77,102.32"; (d) Mr Mahendran sold the Lowan Place property in February 2010 "and the Plaintiff [Chase] suffered a shortfall in the amount due upon settlement of $24,7997.07"; (e) Mr Mahendran "failed to pay outstanding amounts plus interest due and payable under the terms of each mortgage". 9The loan of $130,000 made in July 2006 has a significance to which it will be necessary to return. I shall refer to that loan as "the July 2006 loan". 10The particulars of the last allegation in the statement of claim ((e) above) referred to a letter of 5 March 2010 to Mr Mahendran from Chase's solicitor demanding $124,480.39. That letter was in evidence. It did indeed demand payment of $124,480.39, described as being "still owing by yourself up to the end of February last". There were no details of the way in which the sum of $124,480.39 was made up. 11The substance of the debt claim seems to be that Mr Mahendran sold the two properties and paid to Chase the whole of the balance of sale proceeds in each case (after satisfaction of, in particular, prior secured debt) but that there remained an unpaid balance of the principal of both the Lowan loan and the Seymour loan for which Mr Mahendran remained liable. 12Mr Mahendran filed a defence and a cross-claim. He was self-represented and these documents were obviously prepared without legal assistance. Mr Mahendran admitted the making of the loans. He did not, however, admit that the claimed amounts were due or, more precisely, he contended that the amounts due were smaller than those claimed. He went on to state matters which, while they did not quantify the smaller amounts he accepted as being due, explained reasons why he considered the true balances to be smaller than those claimed. He made it clear, in particular, that "interest computations are under dispute". 13In his cross-claim, Mr Mahendran concentrated on a caveat lodged by Chase in August 2010 on the title to another property owned by Mr Mahendran, being his family home at Baulkham Hills. He alleged that the presence of the caveat hindered attempts to sell that property with a view to raising further money to clear his debts. In particular, he alleged that, at the time the caveat was lodged, the Baulkham Hills house was on the market and he "had a buyer for $644,000 and another buyer for $650,000"; and "[w]hen the caveat was acknowledged Cross-claimant could not proceed with sales" since "[w]ithout removing caveat sale was not possible". The cross-claim refers to action taken by Mr Mahendran to obtain removal of the caveat through Credit Ombudsman Services Limited and to confirmation of removal through action of that body in November 2011. 14The defence and cross-claim also referred to actions of a Mr McCoy (a financial intermediary through whom Mr Mahendran had obtained finance from Chase) which, Mr Mahendran said, had hindered or delayed his selling of the Lowan Place and Seymour Way properties. There were also allegations that Chase or Mr McCoy coerced Mr Mahendran into selling the properties at "fire sale" prices. The primary judge's decision 15The primary judge began by referring to the July 2006 loan of $130,000 (that is, the earliest of the three loans and distinct from the Lowan loan and the Seymour loan). The July 2006 loan was said to need no further examination "because when the property was ultimately sold that loan was discharged in total". The judge then turned attention to the terms of the mortgages in respect of the Lowan loan and the Seymour loan. 16Her Honour recorded that no payments were made in respect of the Lowan loan after 28 January 2009 and that there was outstanding a total "with interest up to 2010 of $118,229.79". The judge then said: "On 19 February 2010 the property was sold but there was a shortfall. The effect of the shortfall plus interest accruing up to 30 August 2012 at twenty-three per cent, as provided for by the mortgage document, shows that there is a total outstanding as of today's date of $79,870.54." 17In relation to the Seymour loan, her Honour said that the amount outstanding at the time of sale of the property on 9 December 2009 was $83,090.56. 18In her reasons, the primary judge recorded the following figures: (a) $74.190.92 - "shortfall at the time of settlement of the sale on 19 February 2010 for the Lowan Place property"; (b) $ 5,679.67 - interest on that $74,190.92 at the rate of 23 per cent per annum from 19 February 2010 to "today's date", that is, the date of judgment (30 August 2012); (c) $79,870.54 - the aggregate of (a) and (b); (d) $83,090.56 - shortfall on the sale of the Seymour Place property on 9 December 2009; (e) $ 4,393.55 - interest on that $83,090.56 at the rate of 23 per cent per annum from 9 December 2009 to "today's date" (30 August 2012); (f) $87,484,11 - the aggregate of (d) and (e). 19If it is accepted that the principal sums outstanding at 19 February 2010 and 9 December 2009 were $74,190.92 and $83,090.56 respectively, the sums for interest at the rate of 23 per cent per annum to "today's date" (30 August 2012) simply could not have been those the judge recorded. Interest on $74,190.92 at that rate from 19 February 2010 to 30 August 2012 would be of the order of $52,000; and interest on $83,090.56 from 9 December 2009 to 30 August 2012 would be approximately $43,100. If the two figures for principal are accepted, the aggregate of principal and interest for both loans as at 30 August 2012 should thus have been of the order of $252,381. 20Judgment was ordered, however, for $167,354.65. I quote again from the judgment: "It follows that there must be a verdict for the plaintiff in the sums alleged, which are $87,484.11 - somebody please check my mathematics - and $79,870.54, which I make as a total of $167,354.65, is that right? Do you want me to do it again just in case? I'll do it again. $167,354.65?" 21To the question thus asked, counsel for Chase replied, "Yes your Honour". 22The figures on which the judgment was based bore little, if any, resemblance, to those claimed in the statement of claim (see 7 above). There was no explanation of the differences or the source of the figures used in the final calculations made by the judge. 23In relation to allegations of actions of Chase or Mr McCoy contributing to delay in selling the properties and the obtaining of only "fire sale" prices, the judge found that representations attributed to Mr McCoy were not made and that there had been no "deficiency in the conduct of Mr McCoy". 24Turning to the caveat issue raised by the cross-claim, the judge said that this was "something of a red herring" because the Baulkham Hills property appeared to be still owned by Mr Mahendran. In addition, the judge noted that Mr Mahendran had not taken action to challenge the lodgment of the caveat and that, "given the relatively small amounts of moneys [sic] outstanding after the sale of the subject properties I would have thought that he would have been in a position to have negotiated lifting of the caveat on his own home in the event that that was necessary for him to refinance in order to pay out the other loans". Mr Mahendran's appeal 25Mr Mahendran's appeal to this Court is brought on the following grounds: (a) that the several components of the judgment sum of $167,354.65 were not calculated in accordance with the loan terms and the correctly calculated components are of smaller amounts; and (b) that he should have been awarded compensation for "money lost as a result of a caveat that stopped selling" the Baulkham Hills property. 26Other parts of the notice of appeal do not raise any identifiable grounds of appeal. Mr Mahendran did suggest in the course of oral submissions that Chase was not entitled to anything beyond the balance of the proceeds of the two sales and that it had, in effect, agreed to accept the residual sale proceeds in full satisfaction of the debts owed to it and to forego any balance. But that proposition does not seem to be advanced by the notice of appeal; added to which there was no evidence before the primary judge that could have supported a finding of any such departure from or qualification to the written loan terms. The hearing before this Court 27When the matter came before the Court of Appeal, counsel for Chase at once conceded that the components of the judgment sum had not been calculated in accordance with the terms governing the Lowan loan and the Seymour loan. Counsel said that Chase's correct entitlement was $18,933.83 less than the judgment sum. 28This concession by Chase was accompanied by a written schedule which showed, in respect of the Lowan loan and the Seymour loan separately, the initial principal sum ($105,000 in one case and $100,000 in the other), the several payments made month by month from inception to January 2009, the allocation of each monthly payment as between principal and interest and the balance of principal outstanding after each payment. Because monthly payments were made promptly and each was greater than interest at 20 per cent per annum on the outstanding balance of principal, each such monthly payment brought about some reduction in the principal outstanding. 29As submissions continued, however, it became clear that there was a significant unexplored issue as to the calculation of the sum that had been properly payable to discharge the July 2006 loan of $130,000 (the first, in point of time) in respect of which proceeds of the sale of the Lowan Place property were also applied in such a way, the primary judge said, as to cause the outstanding principal and interest to be satisfied in full out of those proceeds. If Chase had obtained judgment in the District Court in respect of the Lowan loan and the Seymour loan on the basis of a miscalculation in its favour of the outstanding balances of those loans, there was obviously a very distinct possibility that the same erroneous method of calculation had been applied to the July 2006 loan, so that the amount which had caused that loan to be regarded by Chase as "discharged in total" (to use the judge's words) may have been greater than that properly payable. 30Counsel for Chase was not in a position to deal with that matter at the hearing. This Court therefore ordered that proceedings be adjourned and made directions with a view to consultation between the parties as to the true state of the account between them, in light of the correct construction and application of the loan terms. Further calculations and resolution of outstanding amounts 31The parties thereafter exchanged calculations and position papers. Surprisingly, one might think, neither could make the necessary calculations without making special arrangements to obtain copies of past bank statements. That being so, one is left to wonder how Chase was able to put forward the claim in its statement of claim dated 27 January 2010 which referred to precise figures owing and was verified by the affidavit of Peter Chase of North Avoca, its managing director. 32It eventually became clear that there was indeed foundation for the suspicion that Chase had, out of the proceeds of the 19 February 2010 sale, applied in purported satisfaction of the July 2006 loan a sum greater than that in fact owing at that time in respect of that loan. On Chase's own calculations, the sum so applied exceeded the principal in truth owing by $16,700.09. 33Chase acknowledged that the amount of $16,700.09 should have been applied in February 2010 in reduction of the principal of the Lowan loan. 34When that and consequential adjustments are made and interest is re-calculated, Chase says that the principal sums outstanding at 19 February 2010 were: * The July 2006 loan - Nil * The Lowan loan - $34,919.07 * The Seymour loan - $42,250.36 35Mr Mahendran accepted these figures as a correct reflection of the principal sums outstanding at 19 February 2010. 36Chase further says that, when interest at the contracted rate to the date of the District Court judgment is added, the total interest due at the date of that judgment (30 August 2012) was $20,287.50 for the Lowan loan and $23,481.52 for the Seymour loan. Mr Mahendran did not accept these interest figures but did not assert different figures. The Chase figures should be accepted. The first of them tallies with the arithmetical calculation. The second is slightly smaller than the arithmetical calculation and, in that sense, advantageous to Mr Mahendran. 37On that basis, the total owing at 30 August 2012 was the aggregate of the two principal balances ($34,919.07 and $42,250.36) and the two interest amounts ($20,287.50 and $23,481.52), that is, $120,938.45. 38It follows that the judgment of $167,354.65 ordered on 30 August 2012 exceeded the debt owing by Mr Mahendran at that time. The judgment must therefore be set aside and this Court should order judgment for Chase and against Mr Mahendran for the aggregate of (a) the balance of the Lowan loan principal outstanding at 29 February 2010; (b) the interest component on that balance from 19 February 2010 to 30 August 2012 as already stated; (c) further interest on that balance from 31 August 2012 to the date of the judgment ordered by the Court (3 September 2013); (d) the balance of the Seymour loan principal outstanding at 19 February 2010; (e) the interest component on that balance from 19 February 2010 to 30 August 2012 as already stated; and (f) further interest on that balance from 31 August 2012 to the date of the judgment ordered by this Court (3 September 2013). 39The components (a), (b), (d) and (e) have already been quantified. They are $34,919.07, $20,287.50, $42,250.36 and $23,481.52. The components (c) and (f) are calculated at $8,097.39 and $9,797.45 respectively. 40The total judgment sum, as at 3 September 2013, is therefore $138,833.29. The caveat issue 41It remains to consider the aspect of the appeal concerning the caveat lodged by Chase on the title to Mr Mahendran's family home at Baulkham Hills. 42I have already referred to the pleading in the cross-claim concerning the caveat. It is pertinent to note, however, that paragraph 5 of the cross-claim consisted of five sentences, of which the first was: "Cross-defendant lodged a caveat in Cross-claimant's property at [Baulkham Hills address] in Aug 2010". 43Paragraph 2 of the defence to cross-claim was: "The Cross-Defendant denies paragraphs 3, 4, 5, 6 and 7 of the Statement of Cross Claim." 44There was thus an explicit denial of the allegation that Chase had lodged a caveat on the title to the Baulkham Hills property in August 2010. The defence to cross-claim was verified by the affidavit of Peter Chase of North Avoca. He deposed that he was the managing director of Chase, that he was duly authorised to make the affidavit and that he believed the allegations of fact contained in the defence to be true. 45Exhibit 2 before the primary judge was a copy of caveat AF715024W dated 3 August 2010 and apparently lodged on 27 August 2010. The land the subject of the caveat is expressed to be the whole of the land in folio identifier 4/560658. It is not in dispute that that is Mr Mahendran's family home at Baulkham Hills. 46The caveat incorporates a statutory declaration by Peter Chase stating that, to the best of his knowledge information and belief, the caveator therein named (Chase Enterprises Pty Ltd) had a good and valid claim to the estate or interest set out in Schedule 1 to the caveat. 47In Schedule 1 to the caveat, under the heading "Nature of estate or interest in the abovementioned land", appears: "Claiming under loan document dated 18 July 2008". Under the heading "By virtue of the instrument referred to below" appears a reference to a "Mortgage" dated 18 July 2008, the parties to which are Mr Mahendran and Chase. 48Two relevant statements were thus made by Peter Chase upon pain of punishment for perjury or a statutory equivalent: first, a statement of 3 August 2010 that he believed Chase to have an estate or interest in the Baulkham Hills property by virtue of a mortgage dated 18 July 2008 given by Mr Mahendran to Chase; and, second, a statement of 14 June 2012 that he believed to be true Chase's denial of the allegation that Chase had lodged a caveat on the title to Mr Mahendran's Baulkham Hills property in August 2010. 49There was in evidence before the judge a mortgage dated 18 July 2008 granted by Mr Mahendran to Chase. The mortgaged property is described therein as the land in folio identifier 201/1048682. It is not in dispute that this is the Seymour Way property. There was no evidence that any mortgage of the Baulkham Hills property had been granted by Mr Mahendran to Chase on 18 July 2008 or any other date. Furthermore, counsel for Chase expressly conceded that no such mortgage of the Baulkham Hills property had ever existed. 50Section 74P of the Real Property Act 1900, so far as relevant, is in these terms: "(1) Any person who, without reasonable cause: (a) lodges a caveat with the Registrar-General under a provision of this Part, ... is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss. (2) Compensation referred to in subsection (1) is recoverable in proceedings taken in a court of competent jurisdiction by the person who claims to have sustained the pecuniary loss". 51Although Mr Mahendran's cross-claim does not, in terms, refer to this statutory provision, his claim is unambiguously based on the wrongful or inappropriate lodgement of a caveat. That claim should have been approached as a s 74P claim made by Mr Mahendran to the District Court as "a court of competent jurisdiction" referred to in s 74P(2). 52Had the matter been approached in that way, the central question would have been whether the lodgment of the caveat by Chase was "without reasonable cause"; and that would have led to an inquiry of the kind suggested by the following passage in the judgment of Biscoe AJ in Natuna Pty Ltd v Cook [2007] NSWSC 121 (at [195]): "'Reasonable cause' for the lodgement of a caveat exists where the caveator has an honest belief, based upon reasonable grounds, that the caveator has a caveatable interest. In order to establish liability under s 74P, the onus is on Mr Cook [the registered proprietor] to prove, first, that Natuna [the caveator] had no caveatable interest and, secondly, that Natuna did not have an honest belief based on reasonable grounds that a caveatable interest existed. As to the second issue, the test is partly subjective and partly objective. It is subjective in that it requires an examination of the caveator's actual belief and whether it was honestly held. It is objective in that it requires that the belief be held on reasonable grounds: see Lee v Ross (No. 2) (2003) 11 BPR 20,991; [2003] NSWSC 507 at [21]-[23]; Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 at 469 - 470 (CA); Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106; Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057 at [61]. A caveator may have reasonable grounds on which to believe that it has a caveatable interest even though it is mistaken and it is ultimately held that it did not: Ceda Nominees Pty Ltd v Registrar of Title [1982] ANZ ConvR 524." 53The Court of Appeal of Western Australia has adopted the "honest belief based upon reasonable grounds" test in relation to the corresponding legislation of that State: Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd v [2007] WASCA 179; (2007) 35 WAR 27 at [81]. 54Relevant evidence before the primary judge was confined to a copy of the caveat and a copy of the mortgage of 18 July 2008. That evidence might well have warranted an inference that there were, in an objective sense, no reasonable grounds for a belief that Chase had in respect of the Baulkham Hills property the interest claimed in the caveat; and that inference might well have been more readily drawn because of absence of evidence from Chase as to the existence of the interest asserted by it in the caveat. But the evidence at the judge's disposal did not permit any examination of the actual belief of the caveator. That may have made problematic establishment of the matters that must be established to activate s 74P(1)(a) according to the "honest belief based upon reasonable grounds" test. 55A claim by Mr Mahendran based on s 74P of the Real Property Act would have failed in any event. While Mr Mahendran referred in submissions to the loss of opportunities to sell the Baulkham Hills property and said that that loss had been occasioned by the presence of the caveat on the title, the evidence was insufficient to justify any finding of loss "attributable to" the lodgment of the caveat. There was evidence that Mr Mahendran had listed the property with an estate agent at Castle Hill in March 2010 and that steps to auction it in August 2010 had produced a buyer who "had given a final offer of $650,000" (these are words in a letter from the agent), but that Mr Mahendran declined that offer. It may be, as Mr Mahendran said, that the lodgment of the caveat on 27 August 2010 played a part in his decision not to accept the offer but, as the primary judge observed, it was not shown that Mr Mahendran sought to negotiate for the withdrawal of the caveat or that he took steps (as he could have) to cause it to lapse. No sufficient causal link between the lodging of the caveat and the failure to sell is demonstrated. Disposition 56Mr Mahendran's contention that the amount owing by him at the date of judgment (30 August 2012) was smaller than the amount for which judgment was given has been made good. 57That is sufficient to warrant orders that the appeal be allowed in part, that there be judgment for the reduced sum (plus interest from 31 August 2012 to the date of this Court's order) and that Chase pay Mr Mahendran's costs. Mr Mahendran has not established a right to any further relief on appeal. 58I propose orders as follows: 1. Appeal allowed in part. 2. Set aside the verdict and judgment ordered against the appellant and in favour of the respondent in the District Court and in lieu thereof order verdict and judgment against the appellant and in favour of the respondent in the sum of $138,833.29. 3. Appeal otherwise dismissed. 4. The respondent pay the appellant's costs of the appeal. 59EMMETT JA: I agree with the orders proposed by Barrett JA and with his Honour's reasons for those orders. 60GLEESON JA: I agree with Barrett JA. ********** 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. Decision last updated: 03 September 2013