Ron Medich Properties v McGurk [2010] NSWSC 552

This was an application by the plaintiff (“RMP”) to extend a caveat lodged against land owned by Mrs McGurk, or alternatively an order pursuant to s 74O of the Real Property Act granting leave to RMP to lodge a further caveat in relation to the property, as well as an order restraining McGurk from discharging a mortgage registered against the title to the property.

The caveat described the interest in the land as:

equitable interest pursuant to a constructive trust

The caveat described the facts said to give rise to the interest as:

use of the caveator’s funds to acquire an interest in the property.

RMP relied on the equitable doctrine of subrogation. It argued that it provided $3.8 million to Mrs McGurk or to a company controlled by her husband, Mr McGurk, in order to enable Mrs McGurk to discharge a mortgage over the property in that amount to BankWest, and that that money was subsequently applied for that purpose. Accordingly, RMP said it was entitled in equity to the benefit of the bank’s mortgage.

Since the interest described in the caveat was different to the interest claimed, the caveat did not comply with  74F(5)(b) of the Real Property Act, by failing to specify the “prescribed particulars” of the interest to which the caveator claimed to be entitled.

Justice Palmer stated:

A defect in the terms of a caveat describing the interest claimed is fatal. It cannot be cured by amendment: Depsun Pty Ltd v Tahore Holdings Pty Ltd(1990) 5 BPR 11,314; Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd (2005) 12 BPR 23,355; Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2005) 12 BPR 23,403.

The defect in the description of the interest was fatal to its validity and his Honour refused to extend the caveat.   

Justice Palmer would not grant an order under s 74O to lodge a new caveat as he was not convinced the use of the caveat was not an abuse of the caveat procedure, for the following reasons:

If the loan was made for the purpose of discharging the mortgage to BankWest the presumption would apply that the new lender will have the same security as the mortgagee whose debt is being discharged: Ghana Commercial Bank v Chandiram [1960] AC 732, at 745; Butler v Rice[1910] 2 Ch 277.

However, there was no evidence that the loan was made for that purpose. There was contrary evidence from Mr Medich that the loan was in fact the payment of a commission for Mr McGurk’s assistance in recovering money owed to Mr Medich. There was also evidence given in other proceedings that RMP had advanced a sum of $4.4 million to Mr McGurk secured of a different property.

As a result there were two separate statements of Mr Medich which contradicted his claim that $3.8 million had been lent to discharge the BankWest mortgage. 

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