Burman & Chamond Pty Ltd v AGC (Advances) Ltd [1993] QCA 252 [1994] 1 Qd R 123; [see also Re Burman's Caveat]

THE COURT OF APPEAL [1993] QCA 252 SUPREME COURT OF QUEENSLAND Appeal No. 74 of 1993 Brisbane Before Pincus J.A. Davies J.A. McPherson J.A. [Burman v. AGC] BETWEEN NEVILLE JOHN BURMAN and CHAMOND PTY LTD (Respondents) Appellants - and - AGC (ADVANCES) LTD (Applicant) Respondent JUDGMENT - THE COURT Judgment delivered 9 July 1993 This is an appeal from a judgment of a single judge of the Supreme Court ordering the removal of caveats lodged with a view to preventing the sale of mortgaged property by the mortgagee respondent. The primary judge treated the matter before him as dependent upon the tests applicable on an application for an interlocutory injunction; that is, his Honour first considered whether there was a serious question to be tried and then looked at the balance of convenience. The judge said: "The existence of a serious question to be tried as to the setting aside of the mortgages may be assumed, and the question then is whether the balance of convenience favours the removal of these caveats". -- 1 of 10 -- 2 His Honour considered the evidence and concluded that the balance of convenience favoured the sale of the property in question by the mortgagee and that the caveats should therefore be removed. The principal submission advanced by Mr Hampson QC, senior counsel for the appellants, was that the judge fell into error in adopting the test we have mentioned. Counsel urged upon us the view that those authorities which support the approach the primary judge took, that of considering the case as if the caveators were applicants for an interlocutory injunction, are erroneous and should not be followed; the submission is discussed below. The caveats the subject of the proceedings, nos. T650586K and T650585H, were lodged on 8 January 1993 and each of them was lodged by the registered proprietor of the land to which it relates. Each was lodged on the ground that a bill of mortgage registered on the title "is unenforceable at law or in equity due, inter alia, to misleading and deceptive conduct which induced [the caveator] to execute the Mortgage". On 1 February 1993 an action was begun in the Supreme Court relating to the subject matter of the caveats. On 31 March 1993 the mortgagee, the respondent in this appeal, caused an originating summons to be filed seeking removal of the caveats; that was set down for 7 April 1993. On 6 April a -- 2 of 10 -- 3 statement of claim was delivered in the action and the appellant N J Burman swore an affidavit on that day to the effect that the facts in the statement of claim "are true and correct". The summons was disposed of on the return date, 7 April, in the way we have mentioned. The respondent filed no evidence in answer to the affidavit of Mr Burman verifying the statement of claim, apparently being content to accept that there was a question to be tried. No doubt, as Mr Hampson pointed out, the respondent must accept whatever consequences ensued from its not having sought an adjournment, if it needed more time to answer the affidavit. Nevertheless, it is relevant that the task of dealing with the numerous allegations alleged in the statement of claim would not, one would think, have been a light one. The pleading raises numerous separate complaints about the actions, over some years, of the respondent and others for whom it is said to be responsible. The pleading complains of wrongs done to the plaintiffs (the appellants and J E Burman, the wife of N J Burman) in respect of transactions which took place in June 1986, January 1988, November 1988, December 1988, May 1989, October 1989 (2 transactions), October 1990, September 1990, October 1991 and some others. It is unnecessary to attempt to summarise the various groups of allegations made but, as examples, some explanation should be given of the first and -- 3 of 10 -- 4 the last groups. The first, that of June 1986, is as follows. The allegation is that the respondent offered by letter to lend Mr Burman $1.6M for 36 months on the basis of a letter dated 26 June 1986 and certain representations. A mortgage was executed to secure the advance but (para. 21 of the pleading) its scope was not limited to "a liability to repay the sum of $1,600,000 on the terms contained in the June letter of offer...". One possible view, although the complaint is not entirely clear, is that the appellant's case is that the letter said or implied that the mortgage would be confined to the sum of $1.6M and would not cover any other moneys. It is further alleged (para. 26) that there was an offer to advance further moneys in September 1986, that all moneys were repaid in 1987 (para 32), but that a certain deed of June 1986 had never been "released". No relief relating to that matter - i.e. the non-release of the deed - is claimed in the pleading. The last transaction dealt with in the pleading is an agreement of May 1989 between Mr Burman and the respondent. Under that, it is alleged, the respondent agreed to lend him $2M pursuant to an arrangement which contemplated that Mr Burman would receive income generated from "artistic works and projects" created by a certain artist, but that the money was not lent, so that Mr Burman lost the chance to -- 4 of 10 -- 5 conclude a profit-sharing agreement with the artist. In our opinion the primary judge was entitled to notice the general character of the pleading, which sets up the case that the respondent or its agents persistently misled and otherwise wronged the appellants in relation to a whole series of loan transactions over a period of years. Notwithstanding that, the appellants did not refrain from continuing to deal with the respondent; for example the failure to release the 1986 deed, which is the first matter complained about, occurred in 1987, before the transactions presently in issue, which were initiated in 1989. More generally, and although it may be that allegations in the pleading will ultimately be held to have been made out, reading it creates the impression that the instructions were to raise every conceivable question, whether or not from a practical point of view of any real moment. The 1986 deed referred to above is an example of this tactic: no relief relating to it is claimed, nor is it said that any adverse consequences for the respondents flowed from the unlawful conduct complained of. The other example we have chosen, the failure to fund an artistic venture, perhaps needs no comment, other than to say that it is not alleged that the artistic venture would have been profitable. -- 5 of 10 -- 6 As we have mentioned, the judge proceeded on the assumption that there was a serious question to be tried as to the setting aside of the mortgages, but determined the matter against the appellant on the ground that the balance of convenience favoured that course. Mr Hampson invited the Court to follow what he contended to be the established position relating to removal of caveats, relying on authorities such as Queensland Estates Pty Ltd v. Co- Ownership Land Development Pty Ltd (No. 3) (1971) Qd.R. 260, and Porter v. McDonald (1984) W.A.R. 271. It was submitted in effect, that the basis on which the primary judge decided the case derived essentially from an obiter dictum of the Privy Council in Eng Mee Yong v. Letchumanan (1980) A.C. 331. That basis was that the caveator's position should be considered as equivalent to that of an applicant for interlocutory injunction to restrain sale. We agree that what the Privy Council said in Eng Mee Yong was obiter, but there are difficulties in the way of the appellant, in now seeking to have this Court reject the interlocutory injunction analogy. The first is that the approach criticised by Mr Hampson is now well entrenched, at least so far as Queensland is concerned. Mr Morrison QC, who led for the respondent gave us what appeared to be a comprehensive list of the reported cases, apart from which there are no doubt numerous unreported decisions in which the Eng Mee Yong principle has been applied. The most recent of the latter is, perhaps, a -- 6 of 10 -- 7 decision of this Court, reasons for which were delivered on the 1st of June 1993 in Heritage Properties (No. 3) Pty Ltd v. Coles Supermarkets Australia Pty Ltd. That appeal concerned both an application for removal of a caveat lodged by a proposed lessee and an application for an interlocutory injunction to restrain dealing in the land proposed to be leased. The Court applied the same test to each, remarking : "It has come to be accepted that in cases of this sort, the issue with respect to the caveat is akin to that relating to the interlocutory injunction" (p. 12) There was then reference to some of the cases Mr Morrison mentioned. In our view, a substantial reason would ordinarily need to be advanced to justify our departing from such a substantial body of authority, the principal case being Re Jorss' Caveat (1982) Qd.R. 458. The second obstacle is that the practice which has developed appears to work well and produce just results. Its appropriateness is, we think, particularly made manifest by cases such as Heritage Properties (above) in which the claim was two-fold: to uphold a caveat and to obtain an interlocutory injunction. It would be anomalous if the accidental circumstance that the property the subject of the dispute happened not to be Torrens land, rendering the caveating procedure unavailable, should make the task of the party seeking to preserve the status quo harder, or easier. -- 7 of 10 -- 8 In essence, what may be said in favour of the appellant, on this point, is only that the law, as it is currently established, was once thought perhaps to be otherwise; that is not in our view a sufficient reason for overturning authorities such as this Court's recent decision in Heritage Properties (above). It remains to consider whether there was adequate justification for the view come to below, that the balance of convenience favoured the removal of the caveats. The primary judge mentioned a number of factors as being relevant to this question. Among them were that Mr Burman, in 1992, wrote to the respondent explaining the steps he was then taking with a view to selling the properties the subject of this litigation; that there was no proposal emanating from the appellants to pay into Court or otherwise secure any part of the sum due; that the debt alleged to be due substantially exceeded the value of the properties in question. The principal consideration urged upon us by Mr Hampson, against those referred to by the judge, was that the property in dispute is land, which has always been regarded by the law as having a special character beyond mere commercial considerations. While there is substance in that, the submission is substantially weakened by the fact that only last year Mr Burman was himself actively attempting to sell. In our opinion, the evidence as to the state of the -- 8 of 10 -- 9 accounts between the parties was such that the proper course was to remove the caveats. One of the caveats, relating to what was referred to as the "Sheridan Street property" was supported, if at all, by allegations that the respondent claimed, but was not justly entitled, to treat the property as security for advances other than one for $3.5M, made by the respondent to enable the purchase of the property. The other caveat, on the "McLeod Street property", was supported by allegations of a similar kind. The Court was invited by the respondent to consider the case as if those allegations had been made good. The statement of claim, discussed above, alleged an agreement in October 1990 whereby interest on arrears was to cease running and, again, the respondent was prepared for the purposes of the present case to have it assumed that that was correct. Still, on those bases, a substantial debt is due to the respondent, secured by each of the two properties; the total is over $3M. The case does not appear to us to be one in which the appellants have any prospect of having the mortgages completely set aside, so that this considerable sum would become unsecured. Mr Hampson submitted that it should be taken into account in favour of the appellants that the statement of claim seeks damages for alleged wrongs committed by the respondent; the claim relating to the artistic venture is an example. If successful, it was contended, those claims would reduce any judgment given in the action in favour of the respondent, or perhaps produce a positive balance -- 9 of 10 -- 10 against the respondent; see O. 25 r. 18. It appears that there is a substantial sum, in excess of the value of the mortgaged property, due and unpaid on the mortgages, on any view of the matter. The mortgagors do not offer to provide alternative security, for example by paying into Court. In such a case it must ordinarily follow that a caveat intended to prevent exercise of the power of sale cannot stand. The mere existence of claims for unliquidated damages relating, as here, to matters other than the mortgage transactions themselves would not usually be regarded as affecting that position. The judge's decision as to the balance of convenience was of a discretionary character, but we do not rest our decision on that. We are of opinion that his Honour came to a correct conclusion in determining that the balance of convenience favoured removal of the caveats. The appeal must be dismissed with costs. -- 10 of 10 --