Equitiloan Securities Pty Ltd v Atlantic-3 Financing (Aust) Pty Ltd [2000] QSC 494

t0<i1 e 00·+0~ S . ·R· ■ B Queensland Government tate . e po rt Ing ~ rea u OepartmentofJustlceandAttorney~eneral Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. ·- - . SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION WILSON J No 10236 of 2000 EQUITILOAN SECURITIES PTY LTD ACN 051 165 587 and ATLANTIC-3 FINANCING (AUST) PTY LTD ACN 056 262 723 BRISBANE .. DATE 11/12/2000 JUDGMENT 1 REVISED COPIES ISSUED State Reporting Bureau Date 3 I I lo { (Applicant) (Respondent) ' Floor, The Law Courts, George Street, Brisbane, a. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 -- 1 of 9 -- 11122000 T5/JAP22 M/T 8887/2000 (Wilson J) HER HONOUR: This is an application by Equitiloan Securities Pty Ltd to remove a caveat lodged by Atlantic-3 Financial (Aust) Pty Ltd. ,The cav2at w~lodged on 11 October 2000. The interest claimed by the respondent is described as "estate in fee simple as mortgagee" and the grounds of claim are expressed as "to prevent improper exercise of power of sale by the first registered mortgagee Equitiloan Securities Pty Ltd ACN 051 165 587. 11 The property consists of 1.223 hectares of vacant land in Racecourse Drive, Bundall adjoining the Gold Coast Turf Club. The registered proprietor of the land is Stranti Investments Pty Ltd, a company which was ordered to be wound up on 30 March 2000. It acquired the property in June 1997 for $1 .4 million. The applicant advanced $1 .35 million on the assumption that an application for development as a motel would be approved. That application was ultimately refused as the result of an appeal to the Planning and Environment Court by Gold Coast Turf Club. The applicant holds the first registered mortgage over the property. It was registered on 12 June 1997. 2 JUDGMENT 1 10 20 30 40 50 60 -- 2 of 9 -- 11122000 T5/JAP22 M/T 8887/2000 (Wilson J) On 25 June 1997 Natalie Carol-Ann Alderton lodged a caveat claiming an interest "as an owner of a half share interest in an estate in fee simple." "The g:c_ounds at-her claim were described as follows: "As trustee for the Alderton Famil--y Trust being~ 50 per cent unit holder of the H.O.T.E.L. Unit Trust pursuant to a deed of 1 10 trust dated 22 June 1995 whereupon Stranti Investments Pty Ltd 20 is the trustee appointed under the said deed and is entitled to be registered as the registered owner of the above land by transfer lodged on 12/6/97 (dealing number 70203020). 11 A mortgage in favour of the respondent was registered on 1 July 1997. The registered proprietor defaulted in payments due under the mortgage to the applicant. On 31 March 2000 the applicant served a notice of exercise of power of sale. On 29 September 2000 the applicant, as mortgagee exercising power of sale, entered into a contract to sell the land to Turf Club Australia Pty Ltd for $1.85 million. That contract is due for completion on 29 December 2000. I note that Mr Peter Voss, a director of Stranti Investments Pty Ltd, is also a director of the purchaser company. As at 19 September 2000 the amount owing to the applicant was approximately $1.95 million. After selling costs and 3 JUDGMENT 30 40 so 60 -- 3 of 9 -- 11122000 T5/JAP22 M/T 8887/2000 (Wilson J) adjustments for rates, et cetera, the applicant expects to receive approximately $1.775 million from the sale. A shortfall of approximately $200,000 has been deposed to. ~The r~s~ondeITt-is owed approximately $250,000. I refer to the transcript of proceedings on +.-December 2000, page 37, line 40 and following. Mr G N Alderton appeared before me. He is the father of Natalie Carol-Ann Alderton. He told me from the Bar table that he has replaced her as trustee of the Alderton Family Trust. It was as trustee of that trust that she lodged the caveat on 25 June 1997. The respondent caveator has the onus of showing there is a serious question to be tried which would justify leaving the caveat undisturbed. See Re Jorss' Caveat 1982, Queensland reports 458 Re McKean's Caveat 1988 1 Queensland reports 524. The respondent alleges that the sale is at an undervalue. I will turn to the evidence relating to value shortly. Where a mortgagee sells at an undervalue, the.mortgagor has no caveatable interest unless there has been fraud or impropriety of the type discussed in Forsyth v Blundell 1973, 129 CLR 477 at 495-6. See Sinclair v Hope Investments Pty Ltd (1982) 2 New South Wales Law Reports 870 at 878 and Re McKean's caveat. A subsequent mortgagee is in no better position. 4 JUDGMENT::•, l 10 20 30 40 50 60 -- 4 of 9 -- 11122000 T5/JAP22 M/T 8887/2000 (Wilson J) Here the respondent conceded that the caveat ought to be removed - see transcript 7 December 2000 page 39, lines 25 and following - but sought the imposition of conditions akin to a Mareva injunction on the ground that there is evidence of ~reckles~ness-on the part of the applicant. Mr Alderton did not seek to prevent the sale being completed. Rather he sought to ventilate certain unresolved matters relating to the circumstances in which Stranti Investments Pty Ltd acquired title to the property in 1997. In particular, he sought disclosure by the applicant of documents relating to Stranti Investments Pty Ltd's finance application in June 1997. These are not matters pertinent to the application to remove the caveat, and even if I were minded so to do, I could not grant him the relief he seeks in the present proceeding. The property is vacant land zoned "Special Facilities." On 19 May 2000 the Gold Coast City Council approved an application for a development permit for a material change of use for a motel, shops, commercial premises and commercial services only where the shops, commercial premises and commercial services are servicing equestrian needs. There is an appeal against that decision pending in the Planning and Environment Court. 5 JUDGMENT l 10 20 30 40 50 60 -- 5 of 9 -- 11122000 T06-7/LZG14 M/T 8887/2000 (Wilson J) The applicant relied on two valuations as at 16 October 2000: one by Landmark White Valuers in the sum of $1,000,000 with 1 the benefit of the permit, and the other by Herron Todd White 10 in the sum of $1 .75 million. The latter is accompanied by the 'obser.Yation that the "hope value" pertaining to the proposed development permit may result-in a higher worth on the basis such development is permissible and financially viable. Both firms had previously valued the property. Landmark White Valuers hadbvalued it as at 30 December 1996 in an amount of $2.2 million and had recommended that marketing take place over a period of three to six months. Herron Todd White had valued it on 10 July 1998 in an amount of $1 .715 million and gone on to say that if a development proposal which was then current were viable it would be worth $2.14 million. That development proposal was similar, although not identical, to the town planning consent recently given. The respondent submitted that there were indicia of recklessness: (1) The property had not been marketed for three to six months; (2) There was no explanation for the drop in valuation by Landmark White Valuers from $2.2 million to $1,000,000; and 6 JUDGMENT 20 30 40 50 60 -- 6 of 9 -- 11122000 T06-7/LZG14 M/T 8887/2000 (Wilson J) (3) There was also the question of failure to make provision for GST in the contract. However, ultimately the GST point seemed not to be pursued. ~The res:ponderrt-submitted that the following condition ought to be attached to an order for ta-e removal of the caveat: that the applicant pay $250,000 into Court on condition that the respondent commence a proceeding in the District Court for breach of duty in exercise of power of sale within 28 days of the payment into Court. The respondent proffered an undertaking as to any damages resulting from the imposition of such a condition. It was submitted that such a condition should be imposed to avoid the need for a further application by it for a Mareva injunction freezing $250,000 on the ground that the applicant is a trustee with no independent assets and no ability to meet a judgment for damages for breach of duty in exercising power of sale. I note that the applicant is a trustee for investors, most of whom are retirees. The imposition of such a condition was opposed by the applicant. The applicant's counsel submitted that the respondent's undertaking as to damages was, in the circumstances, worthless and that his client would be 7 JUDGMENT ~, 1 10 20 30 40 50 60 -- 7 of 9 -- 11122000 T06-7/LZG14 M/T 8887/2000 (Wilson J) prejudiced if it could not complete the sale and have the sale proceeds available to it. The respondent has conceded that the caveat should be removed. ~rn my_view it-has not established that there is a serious question to be tried as to reeklessness. At most there may be an arguable case of negligence which would sound in damages under section 85 of the Property Law Act. Accordingly, the issue of the balance of convenience does not arise. I refuse to impose the condition sought. I order that the caveat be removed. I will hear from counsel on the form of the order and of costs. HER HONOUR: The orders I make are these: (1) that caveat number 704360992, lodged by the respondent on 11 October 2000 be removed from the property having title reference 18660224, being lot 2 on registered plan 817782 in the County of Ward, Parish of Nerang; (2) that the respondent, Atlantic-3 Financial (Aust) Pty Ltd pay the applicant's costs of and incidental to the application, such costs to be assessed on the standard basis and not to include the costs of the hearing on 30 November 2000; 8 JUDGMENT 1 10 20 30 40 50 60 -- 8 of 9 -- 11122000 T06-7/LZG14 M/T 8887/2000 (Wilson J) (3) that there be no order as to the costs of the hearing on 30 November 2000. 9 JUDGMENT 1 10 20 30 40 50 60 -- 9 of 9 --