Consolidated Credit Network v Zuck 1 [2004] NSWSC 132

These were proceedings to extend a caveat lodged by the plaintiff over the title of the defendant to some land at Campsie.

The plaintiff traded as trustee of a trading trust. It acquired residential properties and residential development land then marketed the completed units through a network of estate agents and alliances that it dealt with. It earned income for the trust by making a commission. If the present transaction is anything to go by, that commission was the difference between the price which it paid the registered proprietor of the land in a contract for purchase and the total of the moneys received from the on-sale of the units in due course.

The defendant was a company which was developing land in Campsie.

An arrangement was made that the defendant would pay the plaintiff almost $7 million for the land. It seems to have been contemplated that the defendant would continue with the development ie. 24 units and one cottage, which would be on-sold.

A letter of intent and a letter of offer, were signed by the various individuals about 24 July 2003, contained some “strange clauses”.The caveat was lodged 16 January 2004.

The transaction was strange in that on one version of the documentation it appeared that the plaintiff was never ever to purchase the property, but was to be some sort of conduit so that the defendant would be compelled to sign a transfer by direction to the ultimate purchaser after the on-sale, and that the only interest that would flow to the plaintiff would be the commission. Indeed, when one looks at the correspondence between the solicitors leading up to the stymie on the Put and Call Option that appeared very clearly.

If that were the arrangement between the parties, then it was held it would seem more probable than not that that arrangement is not one which gives the plaintiff an interest in land to support a caveat. It was the same position of a person who had an interest, for instance, in the proceeds of land when sold, rather than a person who has an interest in the land itself; see eg Shepherd v Houston [1927] SASR 144.

However, there was other evidence to suggest that the plaintiff was a real purchaser and may have a specifically enforceable contract. The material to date did not convince the Court on the balance of probabilities that that was so, but it did seem that there was sufficient to show an arguable case that that was so.

Section 74K of the Real Property Act 1900 gives power to the court to extend a caveat if the caveat has, or may have, substance. There was quoted a decision in Jensen v Giugni (1994) 6 BPR 13,667, to justify the proposition that there is a very slight onus on the caveator to show an arguable case. The proposition was held, correct, but Jensen v Giugni was not an authority the court would have cited for that proposition.
One has to consider all the circumstances of a case when making a decision as to whether a caveat may have substance under s 74K. There will be many situations where the application is made at a time when the majority of the facts have not yet been resolved. In such a situation the court may, if it is only considering an extension for a little while, accept very little material before it holds the status quo. However, the present case was not in that situation.

The Court also considered that the caveat as framed was too wide in that, it operated even to stop a strata plan being registered. Held, the caveat, if it was to be extended, should be modified to allow that plan to be registered, as it was in everyone’s interest that it be registered.

Also held, in view of the inaccuracy of s 74P of the Real Property Act, there must be an undertaking as to damages. The Court was offered an undertaking by two other companies in the plaintiff’s group, to join in the undertaking as to damages. The court does not accept undertakings as to damages from non parties, but if persons who claim no relief are joined in the proceedings, in order to give the undertaking as to damages, that is acceptable (see Select Personnel Pty Ltd v Morgan & Banks Pty Ltd (1988) 12 IPR 167, 172).

Accordingly, it was held the only way to keep the balance of convenience was by ordering a bank guarantee for $30K.

In order to accommodate that, the caveat was extended until further order, and the defendant was given liberty to move under s 74MA of the Real Property Act, in 30 days in which case the caveat would be lifted, unless the bank guarantee was increased.

The Court adhered to McCosker v Lovett (1995) 7 BPR 14,507, that once the caveat is extended then it was necessary for the lapsing process to be recommenced, and it is really not necessary to make further orders of extension. That is why ordinarily these days the court extends the caveat until further order and takes an undertaking to the court from the plaintiff that it will remove the caveat if the court is of the view that the caveat should no longer be in force.

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