33. Unsuccessful claim for injunction under TLA s. 90(2) – Caveator merely an unsecured creditor with no caveatable interest.

In EZY Global Ltd v Miller Crescent Pty Ltd & Ors [2019] VSC 815 (11 December 2019) Croucher J. the facts were –

 

  • The plaintiff invested in a project for development of a property of which the first defendant was registered proprietor.   The plaintiff advanced funds pursuant to a loan agreement with the first defendant which included a term that the first defendant “must apply the Loan solely for the purpose of the development of” the property.  The plaintiff asserted that: it had advanced funds in reliance on the representation contained in this term, which was also made in conversations with its director; the effect of the loan agreement and the discussions between the parties was that the first defendant held the land on a common intention constructive trust for itself and the plaintiff in proportion to its indebtedness pursuant to the loan agreement; and the plaintiff’s director had relied on an oral assurance that it would be unnecessary for the plaintiff to take a security interest in writing, creating a lien arising from an estoppel.
  • The plaintiff alleged that there had been breaches of the loan agreement and had commenced a County Court proceeding seeking to enforce this and other loan agreements, also seeking declarations that it had an interest in this and other properties.
  • The plaintiff lodged a caveat.  The interest claimed was a freehold estate on the ground of the loan agreement.  It was also notified that the second defendant had lodged a mortgage for registration.  Within 30 days of notification it applied pursuant to s. 90(2) of the Transfer of Land Act for an order restraining the Registrar of Titles from lodging this mortgage or for similar relief.  Section 90(2) provided –

“If before the expiration of the said period of thirty days … the caveator … appears before a court and gives such undertaking or security or lodges such sum as the court considers sufficient to indemnify every person against any damage that may be sustained by reason of any disposition of the property being delayed, the court may direct the Registrar to delay registering any dealing with the land for a further period specified in the order, or may make such other order (and in either case such order as to costs) as is just”.

The plaintiff offered an undertaking as to damages.

The application failed on the following grounds –

1.   The application under s. 90(2) was to be determined on the following principles –

(a) the plaintiff must establish a prima facie case giving rise to a serious question to be tried as to whether it has a caveatable interest in the land; [4]

(b) the plaintiff must show that the balance of convenience favours the maintenance of the caveat and the prevention of the mortgage being registered (or that there should be such other order as is just). [4]

2.   The plaintiff had not established a prima facie case giving rise to a serious question to be tried that it had a caveatable interest in the land.  The loan agreement contained no charging clause and it was common ground on the evidence that there was to be no written security given for the loan.  The evidence did not support the existence of a constructive trust or lien.  The caveator was merely an unsecured lender. [5], [72]-[80]

Comment.

This was not the typical application by a registered proprietor under s. 90(3) for removal of a caveat but rather an application under s. 90(2) by the caveator to create the same outcome as if its caveat was upheld, to which the same principles applied (see 1 above) with an undertaking as to damages.   It appeared that the caveator took this course because it tacitly acknowledged that its caveat was defective in not claiming any equitable interest in the property ([47]-[48]).  It relied on TL Rentals Pty Ltd v Youth On Call Pty Ltd [2018] VSC 105 where an interlocutory injunction was obtained to protect the priority of an equitable mortgage (Blog 13).  However, unlike that case, it failed because it had no arguable interest in the land.

Philip H. Barton

Owen Dixon Chambers West

27 April 2020

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