Supreme Court New South Wales Medium Neutral Citation: Sanna v Wyse and Young International Pty Limited & Others (No.2) [2015] NSWSC 581 Hearing dates: 14 May 2015 Date of orders: 18 May 2015 Decision date: 18 May 2015 Jurisdiction: Equity Division - Duty List Before: Darke J Decision: Orders made for removal of caveats. Catchwords: REAL PROPERTY – caveats – removal of caveats – whether caveators would succeed in obtaining interlocutory injunction to protect claimed interest – no prima facie case or serious question established – caveats ordered to be removed – Real Property Act 1900 (NSW) s 74MA REAL PROPERTY – caveats – successive caveats – whether second caveat in respect of same estate or interest and purporting to be based on the same facts as earlier lapsed caveat – particulars of caveat not the same but both caveats based on the same transaction – Real Property Act 1900 (NSW) s 74O Legislation Cited: Conveyancing Act 1919 (NSW) s 23C Real Property Act 1900 (NSW) ss 74F(5), 74MA, 74O Real Property Regulation 2014 (NSW) Schedule 3, cl 7 Cases Cited: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39; [2011] 15 BPR 29,055 Bellissimo v J C L Investments Pty Limited [2009] NSWSC 1260 Circuit Finance Pty Limited v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997 Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880 Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880 Taleb v National Australia Bank Ltd [2011] NSWSC 1562; (2011) 82 NSWLR 489 Taylor v Commonwealth Development Bank of Australia (1991) 11 BPR 21,033 Category: Principal judgment Parties: Corrada Sanna (plaintiff) Wyse & Young International Pty Ltd t/as Wyse & Young Accounting (first defendant) Defined Properties Investment Pty Ltd (second defendant) Wolgan Consulting Pty Ltd (third defendant) Representation: Counsel: D Allen (plaintiff) Solicitors: Kekatos Lawyers (plaintiff) M Foley, Foleys Lawyers (defendants) File Number(s): 2015/134669 Publication restriction: Nil. Judgment 1. The plaintiff is the registered proprietor of Lot 33 in Deposited Plan 718953 at Copacabana. He became the registered proprietor pursuant to a transfer from his wife in May 2013. 2. By Summons filed on 6 May 2015, the plaintiff seeks orders under s 74MA of the Real Property Act 1900 (NSW) ("the Act") requiring that each of the three defendants withdraw caveats they have lodged in respect of the property. 3. The three defendants are companies associated with Mr George Dimitriou. The plaintiff accepts that, until about February 2014, the first defendant provided accountancy services to the plaintiff and companies associated with the plaintiff. 4. The property is mortgaged to Westpac Banking Corporation. The plaintiff says that the mortgage debt is about $818,000. He believes that the property is currently valued at about $1,200,000. A recent automated valuation by R P Data Pty Limited suggests a value in the range of about $1 million to $1.7 million. The plaintiff is a judgment debtor to Boral Limited in the sum of $100,000. Enforcement of the judgment was stayed until 15 May 2015. It appears that the plaintiff wants to borrow further money on the security of the property in order to pay the judgment debt. The plaintiff denies that he owes any money to any of the defendants. 5. The first defendant, Wyse and Young International Pty Limited, lodged a caveat over the property on 18 July 2013. That was caveat AH882653. The estate or interest claimed was an "equitable interest" by virtue of an Appointment Letter and Costs Agreement dated 21 October 2011. Also on 18 July 2013, the second defendant, Defined Properties Investment Pty Limited, lodged a caveat over the property. That was caveat AH882652. The estate or interest claimed was an "equitable interest" by virtue of a Deed of Loan dated 26 July 2012. On about 23 January 2015, lapsing notices were served in respect of each of the caveats. They lapsed on about 23 February 2015. 6. The three caveats the subject of these proceedings were lodged on 25 February 2015. The first defendant's caveat (AJ286647) claims "an interest in the land whilst professional costs are owed and unpaid by the registered proprietor to the caveator". The interest is claimed by virtue of a Retainer/Costs Agreement dated 16 May 2012. It seems that reliance was no longer placed on the Costs Agreement of 21 October 2011. The second defendant's caveat (AJ286649) claims an "equitable interest" by virtue of a Deed of Loan dated 26 July 2012 and General Security Agreement dated 26 July 2012. The third defendant's caveat (AJ286657) claims "an interest in the land pursuant to the Saving Fee Agreement. Saving fees charged remain unpaid by registered proprietor to the caveator". The interest is claimed by virtue of a Saving Fee Agreement dated 15 December 2011. 7. The principles that govern applications under s 74MA were described by Campbell JA (with whom Tobias and Macfarlan JJA agreed) in Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39; [2011] 15 BPR 29,055 at [20] in the following terms: "The primary judge correctly proceeded on the basis that on an application for an order to remove a caveat it is not necessary for the court to make a final determination as to the interest claimed by the caveator, or a final determination as to the priority that the caveator may or may not have over competing interests. Rather, the court should enquire whether the caveator would have been granted an interlocutory injunction to protect the interest that the caveator claimed in the caveat. If no such interlocutory injunction would have been granted, the caveat should be ordered to be withdrawn […]." 1. The focus of the inquiry is thus the interest claimed by the caveator in the caveat, and whether the caveator would have been granted an interlocutory injunction to protect such interest. I will deal with the three caveats in turn. 2. As noted earlier, the first defendant's caveat claims "an interest in the land whilst professional costs are owed and unpaid by the registered proprietor to the caveator". The caveat is itself defective because it fails to give particulars of the nature of the estate or interest in land that is claimed by the caveator, as required by s 74F(5) of the Act and clause 7 of Schedule 3 of the Real Property Regulation 2014 (NSW). To merely claim "an interest" in the land whilst a certain state of affairs exists is insufficient (c.f. the decisions of this Court concerning caveats that claim an "equitable interest", including Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880 and Circuit Finance Pty Limited v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997). 3. The interest claimed is said to arise by virtue of a Retainer/Costs Agreement dated 16 May 2012. Mr Dimitriou gave evidence that from and after 21 October 2011, when the first costs agreement was entered into with the plaintiff and the plaintiff's wife, the first defendant undertook accounting work in accordance with a continuing retainer. Mr Dimitriou said that from time to time the first defendant forwarded tax invoices to the plaintiff (and others associated with the plaintiff) in respect of such work and on about 16 May 2012, a further costs agreement was sent to the plaintiff in the post. 4. A copy of an Appointment Letter and Costs Agreement dated 16 May 2012 is exhibited to Mr Dimitriou's affidavit. It is addressed to the plaintiff and the plaintiff's wife, and three companies apparently associated with them. The letter describes the work to be performed by reference to the particular recipients. As far as the plaintiff is concerned "in his own right", the work was the preparation and lodgement of tax returns in 2012 and 2013. The letter contains language apt for the immediate grant by the recipients of charges over their real property as security for their indebtedness to the first defendant (see page 8). The letter further requests that the recipients confirm their agreement to the terms of engagement described in the letter by signing and returning the letter "or by providing us with your further instructions". 5. There is no evidence that the letter was ever signed by the plaintiff or indeed by any of the other intended recipients. No evidence was adduced of any further instructions given by the plaintiff (or his wife) that might signify agreement to the terms of the letter. 6. The plaintiff denies ever seeing the letter of 16 May 2012. On 9 March 2015, solicitors acting for the plaintiff stated in a letter sent to the defendants that they did not have the costs agreement dated 16 May 2012, and sought a copy of it. It seems that it was not provided before the hearing. I note that neither the first defendant's initial caveat, nor a caveat prepared by the first defendant on 26 July 2012 in respect of a property in Green Valley owned by the plaintiff and his wife, made any mention of the costs agreement dated 16 May 2012. 7. The letter from the plaintiff's solicitor of 9 March 2015 also sought copies of any invoices issued to the plaintiff pursuant to the costs agreement of 16 May 2012. Again, it seems that no such invoices were provided before the hearing. Mr Foley, solicitor, who appeared for the defendants, tendered various copy invoices of the first defendant at the hearing. I admitted the copy invoices into evidence over the objection of Mr Allen of Counsel, who appeared for the plaintiff. 8. It appears that the only copy invoice of the first defendant that is addressed to the plaintiff personally is one dated 15 November 2013 in the sum of $4,235. It concerns work performed (at some time prior to 15 November 2013) in relation to the plaintiff's dispute with Boral Limited. It makes no reference to the costs agreement of 16 May 2012. A copy statement addressed to the plaintiff dated 11 May 2015 suggests that the amount of $4,235 is the only amount outstanding on the account between the plaintiff and the defendant. The costs agreement of 16 May 2012 makes no reference to any work for the plaintiff other than the preparation of the tax returns, although it contemplates that additional work may be required "as a result of later events or a variation of your instructions". Other copy statements suggest that other amounts are outstanding on the accounts of Mrs Sanna and companies associated with the family. These amounts are quite considerable, but the evidence makes it difficult to discern the extent to which the amounts may concern fees the subject of the costs agreement of 16 May 2012. None of the invoices appear to refer to the costs agreement of 16 May 2012. 9. Mr Allen pointed to the lack of evidence of signing the letter, and referred to s 23C of the Conveyancing Act 1919 (NSW). Mr Foley made no submission to the effect that s 23C was not in the circumstances able to be relied upon by the plaintiff. It seems to me that in circumstances where there is no evidence that the plaintiff (or any of the other recipients of the costs agreement of 16 May 2012) signed the letter of 16 May 2012, and no firm evidence of some other means of acceptance of the terms of the letter, I do not think that there is a prima facie case, or serious question, that the letter gives rise to an interest in the property in favour of the first defendant. As to the requirements of a prima facie case in this context, see Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 at [65] per Gummow and Hayne JJ. 10. Even if there was a serious question as to the existence of an interest in the property, the state of the evidence concerning the amounts of fees unpaid was so unsatisfactory that it would be very difficult to assess the extent of any charge over the land, and hence frame an injunction in appropriate terms, assuming of course that the balance of convenience could be said to favour the first defendant. 11. I do not think that the first defendant would be granted an interlocutory injunction against the plaintiff to protect the interest it claims. The first defendant's caveat should be removed. No leave is given to the first defendant under s 74O of the Act to lodge a further caveat. 12. The second defendant's caveat claims an "equitable interest" by virtue of a Deed of Loan dated 26 July 2012 and General Security Agreement dated 26 July 2012. It is also defective in that it fails to give particulars of the nature of the estate or interest in land that is claimed. 13. In my opinion, it is also a caveat that is of no effect because it is a further caveat, lodged in respect of the same estate or interest and purporting to be based on the same facts as the second defendant's earlier caveat which lapsed on about 23 February 2015 (see s 74O of the Act). Although the caveat includes a reference, not included in the particulars of the earlier caveat, to the General Security Agreement dated 26 July 2012, that agreement, which largely relates to personal property, was part of the same transaction of which the Deed of Loan dated 26 July 2012 formed part. In those circumstances, the alteration to the particulars specified in the caveat does not have the effect that the second caveat avoids the reach of s 74O (see Taylor v Commonwealth Development Bank of Australia (1991) 11 BPR 21,033 per Young J). 14. The Deed of Loan provides in clause 7.1: "7.1 As further and better security to the Lender for the due performance and observance of all liabilities and obligations of the Borrower and all other persons thereto bound as set out in this Deed or in the Securities, the Borrower will, at the cost and expense of the Borrower, cause the Current Securities to be duly executed, stamped, registered and put into effect. Further the Borrower and the Guarantor hereby grant the Lender a caveatable interest over any and all real property that they may hold or own while any money is owed under this Loan." 1. Clause 11.1 provides: "11.1 The Borrower and where there are more than one each of the Borrowers hereby grant to the Lender a right to lodge a Caveat on any and all property that Borrower or any of the Borrowers may be registered as a proprietor." 1. The second defendant is the Lender. The Borrower consists of four companies associated with the plaintiff. The Guarantor consists of the plaintiff and his wife. The plaintiff appears to have signed the Deed of Loan. The Current Securities are defined to include first registered mortgages over the property (then owned by Mr Sanna) and the other property at Green Valley owned by Mr and Mrs Sanna. 2. It appears that such mortgages were given. It further appears that the second defendant advanced $1.2 million, approximately $913,000 of which was used to discharge a mortgage over the property held by Australian Executor Trustees Limited. 3. The second defendant's mortgage over the property was itself discharged in May 2013 as part of a refinancing transaction whereby Westpac became the mortgagee. The plaintiff became the registered proprietor of the property as part of the same transaction (or series of transactions). The second defendant claims, and there is evidence to suggest, that its debt remained partly unsatisfied following the refinancing, and remains so today. 4. The second defendant's caveat refers to clause 11.1 but not clause 7.1 of the Deed of Loan. Nevertheless, and despite the fact that Mr Foley did not specifically address the provisions of the Deed of Loan (or the General Security Agreement) in his submissions, I will consider both. 5. The final sentence of clause 7.1 provides for the Guarantor (the plaintiff and his wife) to hereby grant a caveatable interest over any and all real property they may hold whilst any money is owed under the loan. That provision is in my view too uncertain to give rise to the creation of any particular proprietary interest in the subject property (which was owned by Mrs Sanna when the Deed of Loan was entered into, and by the plaintiff from May 2013). The notion of a caveatable interest could relate to a variety of types of interest, and the type of interest is neither expressly identified, nor able to be discerned by implication. At best, the provision might be construed as involving an authority to the Lender to maintain a caveat whilst any money is owed under the loan. However, a contractual right such as that does not create an interest in land (see Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; Bellissimo v J C L Investments Pty Limited [2009] NSWSC 1260 at [18]; Taleb v National Australia Bank Ltd [2011] NSWSC 1562; (2011) 82 NSWLR 489 at [64]). A caveat must be supported by a legal or equitable estate or interest in land. 6. Clause 11.1 of the Deed of Loan does not assist the second defendant. In terms it concerns a grant by the Borrower (which does not include either Mr or Mrs Sanna) not the Guarantor (which does include them). 7. The caveat refers also to certain provisions of the General Security Agreement, namely clauses 10(k) and 12(i), (k) and (l). As noted earlier, this agreement is largely concerned with personal property (but note clause 4(c) which provides for the Grantor, which does not include the plaintiff, to grant charges over "other property"). As to clause 10(k), the first sentence seems to me to be merely a reference to the Deed of Loan executed on the same day and referred to in the Summary contained in clause 1. It does not itself purport to create any interest in property, and neither does the balance of clause 10(k). As to clauses 12(i), (k) and (l), such provisions contain promises made by the Grantor, which does not include the plaintiff. Moreover, clauses 12(i) and (k) do not concern any real property, and clause 12(l) is in the nature of a further assurance provision which does not itself purport to create any interest in property. 8. For these reasons, I do not think that there is a prima facie case or serious question that the Deed of Loan or the General Security Agreement (or the two together) give rise to an interest in the property in favour of the second defendant. It is not necessary to consider the balance of convenience and matters going to discretion, such as the impermissible lodgement of a caveat substantially the same as the one that lapsed in February 2015. 9. I do not think that the second defendant would be granted an interlocutory injunction against the plaintiff to protect the interest it claims, whatever type of equitable interest it is. The second defendant's caveat should be removed. No leave is given to the second defendant under s 74O of the Act to lodge a further caveat. 10. The third defendant's caveat claims "an interest in the land" pursuant to the Saving Fee Agreement dated 15 December 2011 where "saving fees" remain unpaid by the plaintiff. For reasons similar to those applicable in relation to the first defendant's caveat, the third defendant's caveat is defective in that it fails to give the required particulars of the nature of the estate or interest in land that is claimed by the caveator. It is not sufficient to merely claim "an interest" in the land pursuant to an agreement (that forms no part of the Register) whilst a certain state of affairs exists. 11. The Saving Fee Agreement was entered into between the third defendant and Mrs Sanna (as the "Client"). The plaintiff was named as part of the Guarantor, and he appears to have signed the agreement. 12. Mr Foley referred me to clause 3 of the Agreement. Clause 3.1 provides: "3.1 The Client and Guarantor acknowledge and consent to the granting of a Security Interest over any asset of the Client and Guarantor including the Property to secure the Client's and Guarantor's obligation to pay the Fees." 1. The Property is the property the subject of these proceedings. Fees is defined to mean "the fees listed in clause 2.1(a) and the Costs". There are no fees listed in clause 2.1(a) or indeed in clause 2 at all. There is a description of a Saving Fee in Item 7 of the Details section of the agreement, but this reference does not seem to be picked up elsewhere in the agreement. Costs is defined to mean any expenses incurred by CMT. CMT itself seems to be a reference to Mrs Sanna, not the third defendant. There are clearly numerous difficulties inherent in the expression of the agreement. In addition, Security Interest is defined to mean "a mortgage, pledge, lien or charge or any security or preferential interest or arrangement of any kind". 2. I do not think that clause 3.1 can be construed as providing for an immediate grant of a particular interest in the property. Having regard to the breadth of the defined expression Security Interest, in order for clause 3.1 to have any certainty it would, I think, have to be construed as providing that the Client and Guarantor would in future consent to the granting of an interest of such character over the property. There is no suggestion in the evidence that any such consent has been sought. In any event, the concept of Fees is so inadequately identified in the agreement that the underlying obligation must be regarded as too uncertain. 3. Clause 3.2 provides: "3.2 The Client and Guarantor covenant to charge the Property to satisfy and [sic] judgment or order from a Court for the payment of the Fees together with costs." 1. This provision runs into the difficulty that the concept of Fees is not adequately identified in the agreement, even if the clause was construed as providing for an immediate grant. 2. Clause 3.3 can be put to one side as it does not relate to the property the subject of these proceedings. 3. Clause 3.4 provides, inter alia, for the Client and Guarantor to consent to the third defendant lodging a caveat against the title of the property and preventing any dealings on the title until the Fees, interest and expenses have been paid. I would construe this provision as merely an authority to the third defendant to maintain a caveat over the property whilst such monies remain unpaid. No interest in land is thereby created. Moreover, this provision also suffers from the difficulty involving the concept of Fees (and interest, which appears to be interest charged on outstanding Fees – see clause 2.4). Finally, it is not clear what expenses are, aside from expenses incurred by CMT. 4. For these reasons, I do not think that there is a prima facie case or serious question that the Saving Fee Agreement gives rise to an interest in the property in favour of the third defendant. I should also note that the evidence concerning the amount of outstanding savings fee was less than satisfactory. A copy invoice from the third defendant to Mrs Sanna dated 24 July 2012 was the only evidence adduced on the question. The invoice is well out of date. The invoice refers to a Saving Fee of $227,223.39 (including GST). A copy invoice from the first defendant to Mrs Sanna, also dated 24 July 2012, refers to a Saving Fee in exactly the same amount. The reliability of the copy invoice on its own to establish an outstanding amount must be regarded as somewhat doubtful. 5. I do not think that the third defendant would be granted an interlocutory injunction against the plaintiff to protect the interest it claims. The third defendant's caveat should also be removed. No leave is given to the third defendant under s 74O of the Act to lodge a further caveat. 6. Finally, I note, in relation to each of the defendants, that had I come to a different conclusion as to the existence of a prima facie case, a substantial matter to consider on the balance of convenience would have been the adequacy of any undertaking as to damages. The evidence disclosed that each of the defendants has a paid up share capital of $2. There was no evidence of any substantial assets owned by any of the defendants. 7. The Court orders, pursuant to s 74MA of the Real Property Act, that: 1. The first defendant withdraw caveat AJ286647 in relation to the land contained in Folio Identifier 33/718953 by 4pm on 19 May 2015; 2. The second defendant withdraw caveat AJ286649 in relation to the land contained in Folio Identifier 33/718953 by 4pm on 19 May 2015; 3. The third defendant withdraw caveat AJ286657 in relation to the land contained in Folio Identifier 33/718953 by 4pm on 19 May 2015. 1. The Court further orders that the defendants pay the plaintiff's costs of the proceedings. ********** 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: 18 May 2015