Supreme Court New South Wales

• Medium Neutral Citation: Albert Ling v Pan Pac Investment Pty Limited [2013] NSWSC 1481
• Hearing dates: 8 October 2013
• Decision date: 08 October 2013
• Jurisdiction: Equity Division
• Before: Darke J

Decision

1.Upon the plaintiff by his counsel giving the usual undertaking as to damages, order that the operation of caveat number AH133306E be extended until further order of the Court.

2.Order that these proceedings be transferred to the Common Law Division to be heard together with proceedings number 2012/292029.

3.The second defendant's notice of motion filed 5 August 2013 is otherwise dismissed.

4.Order the second defendant to pay the plaintiff's costs of the notice of motion.

5. The proceedings are stood over to 25 October 2013.

• Catchwords: REAL PROPERTY - Torrens title - caveats against dealings - removal - caveator - prima facie holds caveatable interest in form of equitable charge - balance of convenience favours extension of caveat - motion for removal dismissed.
• Legislation Cited: Contracts Review Act 1980; Real Property Act 1900
• Category: Principal judgment
• Parties: Albert Ling (Plaintiff); Pan Pac Investment Pty Ltd (First Defendant); Yan Wu (Second Defendant) (In person)
• Representation: Counsel: H Woods (Plaintiff); Solicitors: Meyer Solomon & Associates (Plaintiff)
• File Number(s): SC: 2013/224583
• Publication restriction: Nil

Ex Tempore Judgment

1 HIS HONOUR: These proceedings concern a caveat which was lodged by the plaintiff in July 2012 in respect of the land contained in Lot 1, Deposited Plan 85957. The property is located in Croydon ("the Croydon Property"). The first defendant company is the registered proprietor of the Croydon property. The second defendant is the sole shareholder in, and sole director and secretary of, the first defendant.

2 The interest claimed by the plaintiff as caveator is that of an equitable chargee on the basis that, in respect of a loan of $65,000 made by the plaintiff to the second defendant, the second defendant declared that in the event of default, the plaintiff could "exercise the power of mortgage sale" in respect of the Croydon property. On 5 July 2013, the plaintiff was served with a notice of proposed lapsing of caveat.

3 By a Summons filed on 24 July 2013, the plaintiff sought an order pursuant to s 74K of the Real Property Act 1900 that the operation of the caveat (being caveat number AH133306E) be extended until further order of the Court.

4 On 25 July 2013, Pembroke J made an order, ex parte, extending the operation of the caveat until further order of the Court, and stood the matter over to the Registrar's list on 14 August 2013. On 5 August 2013, the second defendant filed a Notice of Motion, returnable on 14 August 2013, pursuant to which the second defendant sought an order for the "lapsing" of the caveat, alternatively an order for the transfer of the proceedings so that they would be heard together with certain related proceedings between the plaintiff and the second defendant which are currently pending in the Common Law Division of the Court.

5 The Common Law Division proceedings concern, in addition to the $65,000 loan referred to earlier, a further four loans made by the plaintiff to the second defendant. A total amount of $670,000 was advanced pursuant to the five loans. The second defendant claims that $33,700 has been repaid, leaving a total principal amount outstanding of $636,300. In the Common Law Division proceedings, the second defendant claims that the loans are liable to be set aside on equitable grounds or pursuant to the Contracts Review Act 1980. There is a particular complaint that the rates of interest alleged to have been agreed are exorbitant.

6 The second defendant's Notice of Motion is before the Court today. Mr Woods of counsel appeared for the plaintiff. The second defendant appeared in person. In support of the motion, two affidavits sworn by the second defendant were read by her. These are the affidavits sworn by her on 5 August 2013 and 23 September 2013. The latter affidavit contained various submissions which were elaborated upon by the second defendant orally as to why the caveat should be removed. For the plaintiff, Mr Woods read an affidavit of the plaintiff sworn on 23 July 2013, and an affidavit of his instructing solicitor, Mr Solomon, sworn on 5 October 2013.

7 The second defendant advanced a number of reasons why the caveat should be removed. These were, principally:

(1) that she had previously offered to pay the plaintiff $50,000 to have the caveat removed, but the plaintiff refused the offer; and she remains willing to pay an amount (perhaps as much as $136,300) to have the caveat removed;

(2) that as the plaintiff has the benefit of a mortgage over another property owned by the second defendant, this being a property at Mortdale said to be worth about $500,000, the plaintiff is adequately secured even without the caveat being in existence;

(3) that the plaintiff is demanding an exorbitant rate of interest;

(4) that the caveat was impermissibly lodged in circumstances where an earlier caveat had been lodged by the plaintiff in respect of the Croydon property and had lapsed. In this respect, reference was made to s 74O of the Real Property Act which concerns the lodgement of successive caveats claiming the same interest and based on the same facts;

(5) that the matter is already in the Common Law Division; and

(6) that the existence of the caveat is adversely affecting the second defendant's financial position, including in relation to her ability to secure Government support for her business.

8 In response, Mr Woods submitted, in essence:

(1) that there was no current offer to make any payment to the plaintiff, and any offer of $50,000 was less than the amount of the $65,000 loan. He also pointed to the pleadings in the Common Law Division proceedings which indicated that in respect of further loans of $115,000 and $90,000, the plaintiff was given rights akin to that of an equitable mortgagee over the Croydon property;

(2) that the asserted value of the Mortdale property was largely taken up with the amount of the $350,000 loan which is secured over that property, and interest thereon;

(3) that the rate of interest is an issue to be dealt with in the Common Law Division proceedings, and the plaintiff would be prepared to give undertakings to expeditiously prosecute those proceedings;

(4) that the first caveat which lapsed was based on an earlier loan for $50,000 and a different document;

(5) that the fact that the matter is already in the Common Law Division is only relevant to the alternative order sought by the second defendant for transfer; and

(6) that prima facie, the plaintiff has an interest sufficient to support the caveat, and in all the circumstances the balance of convenience is in favour of the continuation of the caveat.

9 I agree with Mr Woods' submissions as to caveatable interest and also as to balance of convenience.

10 I am satisfied that the plaintiff's claim as caveator has or may have substance within the meaning of s 74K(2) of the Real Property Act. Apart from the point about successive caveats (which I do not think has any substance) the second defendant did not really submit to the contrary. In any event, the plaintiff's affidavit, and in particular annexure G thereto, makes it clear that in connection with the $65,000 loan, the second defendant agreed that in the event of default the plaintiff could "exercise the power of mortgagee sale and auction off" the Croydon property to pay the debts due to him.

11 The point about successive caveats lacks substance because, as pointed out by Mr Woods, the earlier caveat was clearly based on facts different to those said to support the caveat in question here.

12 As to discretionary factors, referred to in submissions as the balance of convenience, it is my opinion that it is appropriate for the caveat to continue. No good reason has been shown as to why the balance of convenience favours a withdrawal of the caveat. It has not been shown that the plaintiff is otherwise adequately secured in respect of the money he has lent and which remains unpaid. There is no evidence of any current offer whereby some alternative means of protecting the plaintiff's position pending the determination of the Common Law Division proceedings may be put in place; and the existence of the caveat over the Croydon property which, according to the second defendant is worth about $2 million and is otherwise unencumbered, does not prevent the second defendant from attempting to formulate an offer of such a character. Neither do I accept, on the material before me, that the existence of the caveat has any adverse effect on the second defendant's business, including by impeding her ability to obtain Government support for her business.

13 The matters raised concerning the exorbitant rate of interest and the fact that the issues are already the subject of the Common Law Division proceedings do not provide any reasons in favour of withdrawal of the caveat.

14 Mr Woods indicated, in answer to a query raised by me, that he had instructions to give, on behalf of the plaintiff, the usual undertaking as to damages in the event that the caveat was extended from today. In these circumstances I will order that, upon the plaintiff by his counsel giving the usual undertaking as to damages, the operation of caveat number AH133306E be extended until further order of the Court.

15 The second defendant seeks in the alternative an order that these proceedings be transferred to the Common Law Division to be heard together with proceedings number 292029 of 2012. That order was not opposed by Mr Woods, and it seems to me that it is appropriate that such an order be made. The second defendant's Notice of Motion is otherwise dismissed.

16 The second defendant, being unsuccessful on the principal issue the subject of her Notice of Motion, should pay the plaintiff's costs of the motion.

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Decision last updated: 09 October 2013