I do not normally deal with NSW cases, but a veteran Victorian lawyer has drawn my attention to an interesting NSW case which I first consider briefly. Then I offer the light relief found in the most recent Victorian caveat case, replete with pseudo-law.
Cui v Salas-Photiadis [2024] NSWSC 1280, Hmelnitsky J. Briefly the facts were –
- The second defendant (Simpo) was the registered proprietor of land (the Land). On 27 February 2024 it as borrower entered into a Loan Agreement with the first defendant as lender. Clause 17.1(a) provided:
‘[Simpo] grant[s] a security interest in the collateral to [the first defendant] to secure payment of the secured money.
This security interest is a mortgage of the land, … and a charge over the other collateral.
This security interest is also an encumbrance.’
‘Collateral’ was defined in the agreement as including ‘the land’, which itself was described as:
‘each on [sic] or more of the following that the context allows:
(a) the real property described in the [Finance Offer Schedule];
…’
The Finance Offer Schedule stated that the security included a ‘Mortgage by [Simpo] over the land detailed below’. Underneath was a description of the Land and the words ‘2nd Registered Mortgage’.
- Part of the secured money was amounts outstanding under construction contracts between a company associated with the lender and Simpo.
- A form of mortgage to give effect to the security arrangement was executed but not registered.
- On 12 April the plaintiff entered into a contract to purchase the land, which was improved by a home.
- On 20 May the first defendant caveated claiming an interest as a ‘charge’ granted under the loan agreement.
- Settlement ‘occurred’ on 28 June. However, in the words of the judge –
‘Bafflingly, no participant in the PEXA workspace noticed that the first defendant’s caveat had been lodged. If they did, they did not appreciate the significance of it. Instead, the parties blindly proceeded towards settlement in the usual way.’
- The following day the incoming mortgagee received a requisition from Land Registry Services stating that the caveat prevented registration of the transfer and mortgage.
- The plaintiff sought an order under s. 74MA of the Real Property Act 1900 (NSW) that the caveat be withdrawn.
Hmelnitsky J. declined to order that the caveat be withdrawn, holding –
- The caveat was not invalid for failure to specify the nature of the equitable estate or interest claimed sufficiently. His Honour referred to NSW authority which had itself quoted English authority which stated –
‘An equitable charge may, it is said, take the form either of an equitable mortgage or of an equitable charge not by way of mortgage. An equitable mortgage is created when the legal owner of the property constituting the security enters into some instrument or does some act which, though insufficient to confer a legal estate or title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words evidences a contract to do so: … An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale: …’
His Honour said that these references acknowledged that an equitable charge may or may not take the form of an equitable mortgage. [33], [34]
- Like Victoria, NSW has legislation (the Home Building Act 1989) s. 7D of which prohibits an agreement which, in substance, purports to give a person a legal estate in land to secure the performance of (ie payments under) a residential building contract. This agreement was unenforceable by reason of s. 7D to the extent it purported to secure the payment for residential building work. [40], [46], [47]
- However, as the loan agreement and mortgage created a valid and enforceable equitable mortgage in favour of the defendant to secure the repayment of loans other than the amounts due and payable under the construction contracts, to this extent the caveat was valid. The description in the caveat of the first defendant’s purported equitable estate or interest in the land remained correct (or sufficiently correct). [52], [54]
Comment:
Holding 1, appears to this blogger to be lenient to the caveator, but arguably a charge was created under the Loan Agreement. The Victorian reader should stick to the options contained in the Victorian government publication ‘Guide to grounds of claim for caveats’. But it is noted that, apart from various discrete ‘mortgage’ claims, in Victoria one can claim an interest as chargee based on a ‘charge contained in mortgage’.
As to holding 2, the similar Victorian legislation is s. 18 of the Domestic Building Contracts Act 1995.
Nelson v Greenman & Anor [2024] VSC 704, Gobbo AsJ. (15 November 2024)
The facts were:
- Stephen Douglas was the registered proprietor of land at Koo Wee Rup. He was bankrupted in 2019. On the making of the sequestration order his interest in the land vested in the plaintiff under the Bankruptcy Act and in 2021 the plaintiff became its registered proprietor. Between then and March 2024 were many legal twists and turns involving the Federal Court, the Sheriff, VCAT, the Supreme Court, and the police executing a warrant of possession on the third attempt.
- In the course of the foregoing the first defendant caveated on the ground of an implied, resulting or constructive trust. The plaintiff sought removal of the caveat under the Transfer of Land Act s. 90(3).
In the course of removing the caveat with indemnity costs Gobbo AsJ. grappled with documents and concepts relied on by the caveator including: the argument that the property was Christian ministry headquarters involving the DOUGLAS Stephen Ross Estate Trust of which the first defendant was the Special Trustee, and the Koo Wee Rup Ministry Trust; that the Special Trustee was formalised by trust deed which included the property; that the DOUGLAS Stephen Ross Estate Trust was a Life Estate in Fee Simple; that under the Trusts (Hague Convention) Act 1991 (Cth) whoever held a title to the property held it on behalf of the trust; accordingly the property was exempt property held in a trust by the bankrupt for someone else, ie the Koo Wee Rup Ministry, as described in the Bankruptcy Act s. 116; as to certain public figures described as the ‘Living Man’ or ‘Living Woman’; and many others.
Her Honour described the caveator’s affidavit as ‘34 pages of nonsensical quasi‑legal concepts and phrases, Bible quotes and references to organisations and entities with unconventional titles or descriptions’. Her Honour rejected an application by the caveator to remove the case to ‘the People’s Court of Terra Australis’. The blogger also learnt that there is now a body of literature on the rise of ‘pseudo-law’ being ‘a collection of legal-sounding but false rules that purport to be law’, being ‘integrated and separate legal apparatus’ with its own confounding legal theories, constituting an ‘alternative legal universe’. Her Honour lists exotic varieties of this ‘doctrine’.
The legal points of value in this case were as follows. Her Honour stated that at its highest, the first defendant’s case appeared to be that the plaintiff had no entitlement to possession as legal owner because the land was legally transferred to a trust. However, in Douglas v Nelson [2024] VSC 116 Quigley J held it not to have been established that the bankrupt had made a valid transfer of the legal ownership of the title to the land to any trust entity, referring to the law on when equity would recognise the assignment of property without consideration. Gobbo AsJ also dealt with: the circumstances in which silence could constitute acceptance of an offer sufficient to establish a contract, and; the jurisdictional basis of the office of Associate Justice.
Merry Christmas
Philip H. Barton
Owen Dixon Chambers West
Tuesday, December 10, 2024