This was an application by a finance company, Esanda seeking an order that a caveat be extended, judgment against a borrower, Barber, for a sum of money with interest, a declaration that certain land of Barber was charged to secure a payment of a sum of money to the plaintiff, and appointment of a receiver.
In 2002, the plaintiff obtained judgment against the defendant and his wife in the District Court for the sum of $160K. In addition to the District Court judgment, the defendant and his wife were indebted to the plaintiff under hire agreements for another $65K
In 2003, the defendant was the proprietor of three lots of rural land. One of those groups of land related to a property known as Bugalugs. There was another property known as Stonehenge, and a further group of land titles referred to as the “Third Property”.
By letter dated 7 March 2003, Kemp Strang, the solicitors for Esanda, wrote to the defendant and his wife. The letter rejected an offer of $185,000. This rejection was on the basis that it did not take into account the two amounts which owed on the hire contracts. The letter stated that Esanda was prepared to accept an amount of $240,000, in 9 installments provided a deed of release be executed which acknowledged the installment schedule and which also “provides for a charge, protected by a caveat, to be granted to Esanda over your property”.
Barber wrote back saying he agreed to pay the $240,000 as per the letter and would give Esanda permission to put a caveat over one of his properties. He then gave the title reference to Bugalugs.
Kemp Strang wrote back, saying that Bugalugs was already heavily encumbered, and that that security was unacceptable to Esanda. The letter said that Esanda required him to charge each of his properties with payment of the outstanding debt. The defendant replied and said he agreed once a current loan being approved had passed as he told the financiers that he had no caveats on his property. Then they could caveat both properties (the third property had been sold by this stage).
The first installment was paid and received and Esanda then sent a deed of release to formalise the settlement agreement. This deed was never registered and there have never been any other installments received by Esanda from the defendant.
On 31 May 2004, the fresh mortgage which had been granted to Banksia Securities over Stonehenge was discharged and a transfer of Stonehenge to someone apparently unconnected with the defendant was registered. That transfer was dated 20 May 2004.
In July 2004, as a result Esanda lodged a caveat over the Bugalugs property which led to these proceedings. A lapsing notice was served on 24 August 2004. That led to these proceedings being commenced on 2 September 2004. The defendant was served, in accordance with the Court’s orders, with the Initiating Process and affidavit.
In September 2004 a Registrar made an order which he pronounced was that the caveat be continued until further order. Through an error in the drawing up of the order, the order sealed by the court actually said that the caveat be continued “until further notice”.
The Court held that the preferable construction of the chain of correspondence between the plaintiff and the defendant was that it amounted to an agreement to give a charge over both Stonehenge and Bugalugs. Now that Stonehenge had been sold, the part of the agreement relating to a charge over Stonehenge could not be given effect to.
The case Troncone v Aliperti was referred to which unanimously held than an agreement to grant a caveat created a caveatable interest in property. It was not necessary to determine what the precise nature of the interest in land created in that case was. An agreement to lodge a caveat would:
“create in favour of the covenantee an interest in the land to the extent at least that an injunction would go to restrain the covenantor from dealing with the land in a manner inconsistent with the covenant”… The interest equals an equitable charge
The Court here held that the context in which the agreement to give a caveat arose was one where the giving of a charge was expressly requested. Even though there was no specific acceptance by the defendant of the requirement of Esanda’s solicitors that there be a “charge, protected by a caveat”, the proper construction of the correspondence was that the defendant was accepting the offer put to him by Esanda.
Not every equitable charge over land is one which the Court will enforce by the appointment of a receiver. However, when there has been a failure to comply with the installment schedule, of reasonably long standing, and when one of the properties over which the charge was agreed to be given was sold, notwithstanding that agreement, it was appropriate to order the appointment of a receiver. If it turns out that there is not enough equity in the property to pay the receiver’s fees, that will be a problem for the plaintiff, not the defendant.
The Court ordered that the caveat be extended until further order, judgment against the defendant to the plaintiff for $55K, interest, the property was charged to secure the payment of $212K to the plaintiff, a Receiver of the Property was appointed without security, with power to collect, get in and receive the Property, and to manage the same and pay and discharge all expenses properly incurred in respect of such management as aforesaid, without prejudice to the rights of any secured creditor of the Defendant to take possession of, appoint a receiver or receiver and manager of, or otherwise deal with the Property of the Defendant over which the creditor has a security, that the tenants of any premises comprised in the Property attorn and pay their rent in arrears to the Receiver, the Receiver be remunerated for his services, that vacant procession of the Property be given to the Receiver within 28 days after the date of these orders and finally, that the Defendant to pay the costs of Plaintiff of these proceedings.