Caveat Number T567264L, Re [1991] QSC 408

1_".'11,~~ ·- ;. TRANSCRIPT OF PROCEEDINGS State Reporting · Bureau, 4th Floor, The Law Courts 'George Street, BRISBANE, 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested. in the Crown. Copies thereof must net be made or sold without the written authority of the Director, State Repor..ing Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BYRNE J OS No 1213 of 1991 r :, ,; - ;_-:: IN THE .MATTER of Section 99 of the Real Property Act 1861-1986 and IN THE MATTER of Caveat Number T567264L BRISBANE .. DATE 20/12/91 ORDER 1 -- 1 of 5 -- 20/12/91 ORDER HIS HONOUR: This is an application for the removal of a caveat. The caveat has been lodged by the lessee of shop premises in Cairns. The caveator had a lease g,ranted by the mortgagor of the property. The lease was for a term of three years from 8 July 1988. The lease contained 10 10 20 30 provision for an option for a further three years. In April this year, there was a purported exercise of the option. The caveator gave notice of it to the real estate agent of the mortgagee of the premises. The mortgagee is the applicant today for removal of J::.~ caveat. It is not suggested on behalf of the applicant that the notice of exercise was misdirected. On 16 April the real estate agent responded on behalf of the mortgagee,which by this time had entered into possession of the rent and profits of the premises. The letter of 16 April 1991 was Exhibit 4 to the affidavit of Mr McDonald, and in it the real estate agent confirms instructions from the mortgagee that the mortgagee accepts the caveators "offer to exercise their option to extend their lease for a further three 30 40 40 50 60 years". However, the consent was expressed to be subject to some conditions, including the payment of all arrears of rent in respect of the premises. That condition was not satisfied because it was expr~ssed- to require payment of all rent and arrears in full by 16 May 1991. However, since then the arrears have been brought up to date. It is in the circumstances doubtful, to say the leas~ that the letter of 16 April can amount to a sufficient consent by the mortgagee, such that the exercise of the option may be Govt. Printer, Qld. 2 50 60 -- 2 of 5 -- 10 30 40 50 60 ' 0/12/91 ORDER said to be binding upon it. The evidence suggests either that the caveator by its conduct rejected the conditions attached to the offer or failed to satisfy them. If that was so, the unsatisfied conditions had the consequence that there was no consent at all. However, there is, as I have said, evidence of subsequent payment and acceptance of rental. This is consistent with the existence of a monthly tenancy, but the payments are also said to give rise to an arguable case that the acceptance of rent by AGC now .. precludes it from denying that the consent was granted unconditionally. The prospects of success of making out such a contention are, on the material before me, slim. But these days,where conduct of the kind involved here is capable of giving rise to a contention that now to assert that the consent was not in fact given would be unconscientious conduct, it is impossible to be completely satisfied that such a case could not be developed with some prospects of success ultimately. In short, on the material before me, there is no reasonable prospect of proving that a consent was granted by the mortgagee to the lease arising fran exercise of the option but there is sane prospect of proving conduct on the part of the mortgagee which est.ops it fr denying that it has consented. There is therefore a serious question to be tried in relation to the caveator's contention that it has the benefit of a lease to which the mortgagee has consented for a term of three years which has not yet expired and which is sought to be protected by the caveat. Nevertheless, in my view, the balance of convenience weighs very heavily against permitting this Govt. Printer, Qlr 3 10 20 30 40 50 60 -- 3 of 5 -- 10 20 30 40 50 60 20/12/91 ORDER caveat to remain. The property forms part of larger premises which the mortgagee is in the course of selling. The sale price exceeds 12 million dollars. That amount is significantly less than the mortgage debt, and interest continues to accrue at the rate of $8,384.32 per day. By the time this action can be heard there will be a very significant additional liability which in all probability the sale of the premises cannot meet. If the sale contract is not completed, there is really no doubt but that, on the material before me,the caveator is without assets to satisfy a claim of any substance. ND undertaking as to damages has been offered by any person with substantial assets ; nor has any other proposal been advanced on behalf of the caveator which might afford to the mortgagee some prospect of recovering any loss which it sustained by the subsistence of the caveat. The caveat, if it rem:tins, will alrrost certainly cause the contract to go off. On the other hand, there is no reason to suppose that, if ultimately the caveator succeeds in its action, the mortgagee will be without the resources to satisfy any liability which is established in such proceedings. I should add that the sale is expressly subject to a monthly tenancy in favour of the caveator. Mr McMurdo has also sought to support a submission that the balance of convenience favours the removal of the caveat by pointing out that the caveator's claim is for a lease of only three years. An unregistered tenancy for three years is protected under the legislation. A subsequent registered proprietor will not take free from Govt Print.0r Olrl 4 10 30 40 50 60 -- 4 of 5 -- 10 20 30 40 50 60 0/12/91 ORDER 'it, but if I am right in thinking that the caveator has no prospect of proving the existence of an unregistered tenancy in fact but only of proving conduct on the part of the mortgagee which may preclude it from denying the existence of such an unregistered tenancy, an interesting question will arise whether the protected provisions of the Real Property Act extend to such a case. It is unnecessary for me to deal with that question at the moment. I hold that the balance of convenience favours removal of the caveat on the footing that there is no undertaking as to damages offered of substance nor any other proposal emanating from the caveator which would justify the continuance of this caveat, having regard to the prospects of success of the caveator in the action against the mortgagee and the very significant damage which the mortgagee will sustain if the ~aveat causes the sale to go off. There will therefore be an order for removal of the caveat. Order as per draft. 5 10 20 30 40 50 60 -- 5 of 5 --