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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Wei Pimpama Pty Ltd & Anor v Pollux Trading 39Pty Ltd & Anor  QDC 172
WEI PIMPAMA PTY LTD
ACN 621 563 353
POLLUX TRADING PTY LTD
ACN 161 161 253
JUST INVEST AUSTRALIA PTY LTD
ACN 169 840 635
District Court of Queensland
16 September 2019
20 August 2019
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - REMOVAL - where borrower in default - where borrower has commenced proceedings - where borrower claims lender made misrepresentations as to interest rates and costs - where lender has given notice of exercise of power of sale - where lender has entered contract of sale - where caveat lodged by borrower to prevent sale by lender - where lender applies for removal of caveat - where parties acknowledge principal sum plus interest remains due and payable to lender - where borrower does not offer any alternative security - whether balance of convenience favours removal of caveat - whether removal of caveat will derogate from borrower’s claim
Land Title Act 1994 (Qld) s 127
District Court of Queensland Act 1967 (Qld) ss 68, 69
Property Law Act 1974 (Qld) s 84
Maguire v Makaronis (1997) 188 CLR 449
Mavaddat v HSBC Bank Australia Limited (No. 2)  WASCA 94
Re Burman’s Caveat  1 Qd R 123
Re Jorss’ Caveat  1 Qd R 458
Ross Cook and Brett Cook Pty Ltd v Bli Bli #1  QSC 300
Queensland Estates Pty Ltd v Co. Ownership Land Development Pty Ltd  Qd R 150
R Kipps for the first defendant
H Clift for the first and second plaintiffs
Summer Lawyers for the first defendant
Stolar Law for the first and second plaintiffs
- The first defendant (“the lender”) seeks, by way of an application filed in this court on 7 August 2019, the removal of a caveat registered over a property by the first plaintiff (“the borrower”) pursuant to s 127 of the Land Title Act. This court has the power to deal with an application in a proceeding to remove a caveat, provided the proceeding on foot is within the civil jurisdiction of the court.
- The borrower is the registered proprietor of land at Lot 6, White Avenue, Pimpama, Queensland, Title Reference 51107545 (“the property”). The lender advanced money to the borrower on or about 15 September 2017 so that the borrower could purchase the property. It was a term of the loan that it be repaid by the 15th of September 2018. The lender says that the borrower failed to repay the loan by the repayment date, and that only $27,170.04 had been received by the end of the loan. The principal amount borrowed was $220,000, and accordingly, the plaintiff failed to repay at least $192,829.96 of the loan, exclusive of interest and costs, by the repayment date of 15 September 2018. The borrower having committed an act of default, the lender exercised its statutory power of sale in respect of the mortgage and gave notice of such exercise on 21 September 2018. The lender took possession of the property on 22 November 2018.
- On 20 February 2019, the borrower lodged a caveat over the property. The lender has entered into a contract to sell the property for $347,000. The lender had received a property valuation of between $345,000 and $350,000. The borrower had originally purchased the property for the sum of $425,000. The lender seeks removal of the caveat so that the sale of the property can proceed in accordance with the contract of sale.
- The borrower argues that the caveat should not be removed on the basis that there is a serious question to be tried.
- In support of its application, the lender submits that, ordinarily, a caveat lodged by a registered proprietor of land to prevent the sale by a mortgagee exercising its statutory power of sale should be removed in circumstances where there is a substantial sum in excess of the value of the land due and unpaid, and where the caveator does not offer any alternative security.
- In determining the application, the mortgagor’s position is to be considered as equivalent to an application for an interlocutory injunction to restrain sale. The mortgagor bears the onus of establishing that there is a serious question to be tried to justify leaving the caveat undisturbed.
- Counsel for the lender noted that no material had been filed by the mortgagor other than what is pleaded in the statement of claim.
- He further noted that the borrower’s statement of claim pleads three allegations which could conceivably support the caveat being maintained over the property, namely that:
- the s 84 notice relied on by the lender is improper, such that any contract to sell the property is liable to be set aside;
- the lender has breached a duty to the mortgagor in purporting to exercise its power of sale; and
- the mortgage is liable to be set aside or varied as a consequence of breaches of ss 18 and 20 of the Australian Consumer Law, or for unconscionable conduct.
- It was not strongly contended by counsel for the borrower that the matters alleged in 1 and 2 above were seriously disputed. It is clear from the borrower’s counsel’s submissions that the matters relied on primarily in the statement of claim of the borrower are that misrepresentations were made to the borrower in respect of the questions of interest rates and costs. It is alleged in the statement of claim that these representations were made primarily by Qianqian Tang, who was in the employ of the second defendant, acting as a broker. Mr Clift acknowledged that the only two issues that could possibly be in issue in respect of the transaction were representations that might have been made by Ms Tang in respect of interest and costs. It was acknowledged that the principal sum plus interest payable at 9.95 per cent, which is not in dispute, is due and payable to the lender.
- In this regard, I note in particular the submission by the lender’s counsel, Mr Kipps, where he referred to the High Court decision of Maguire v Makaronis (1997) 188 CLR 449 at  per Brennan CJ, Gaudron, McHugh and Gummow JJ:
“To set aside the mortgage purely in its operation as a security, without conditioning that upon repayment, would be to reform the transaction in an impermissible fashion. It would be to strike down the security interest without ensuring repayment of that which was paid in return for it. The respondents would be left with the fruits of the transaction of which they complain, whereas their equity was to have the whole transaction rescinded and, so far as possible, the parties remitted to their original position.”
- Counsel further referred to the following passage from the decision of the Court of Appeal of Western Australia in Mavaddat v HSBC Bank Australia Limited (No.2)  WASCA 94 at :
“…before equity would set aside the loan agreement and mortgage it would require her to repay the outstanding balance of the home loan. She would not be able to secure the setting aside of the home loan and Mortgage while retaining the Property which represents the fruit of the impugned transaction. The equitable relief which Mrs Mavaddat might obtain, if successful, would not substantively alter her position. She would still need to repay the outstanding balance of the loan as a condition of retaining ownership and possession of the property. In circumstances where equity would require repayment as a condition of allowing Mrs Mavaddat to retain the Property it is not arguably unconscionable for HSBC to take the same approach.” (counsel’s emphasis)
- Counsel for the lender therefore submitted that, on the authority of Maguire as recently applied in Mavaddat:
“…if the Mortgagor was successful in setting aside the loans/mortgages, he would be required to repay the outstanding balances (including interest) as a condition of the loans/mortgages being set aside – less costs and expenses related to the default.”
- To summarise his written argument, the lender’s counsel argued the following:
- there is uncontroverted evidence that the plaintiff has not even repaid the principal sum back. It is admitted that the loan term has expired;
- on the lender’s case, the mortgage presently secures over $347,000, which is the value of the property. This is significant because, if the property is not sold now, the sum owing under the loan agreement will continue to increase and there is no evidence that the plaintiffs have any other assets in the jurisdiction from which any shortfall to the lender will be met. Damages are therefore not an adequate remedy for the lender;
- even if the plaintiff’s case is made good, the plaintiffs will not secure the fruit of the impugned transaction without accounting to the lender for the sums it advanced by having the mortgage set aside, and the plaintiffs should expect to repay the sum advanced plus interest continuing to accrue at 9.95 per cent per annum, such that the plaintiff’s equity is limited to approximately $115, 337.40 and will continue to reduce given no payments are being made on the loan;
- the plaintiff’s case of reliance upon verbal representations is very likely to be contradicted by legal advice taken by the plaintiffs about the transaction. There is every reason the court should find that the plaintiffs received independent legal advice and would not have relied upon any misrepresentations in circumstances where:
- (a)the allegation that the plaintiff took such advice is pleaded;
- (b)the plaintiffs do not admit taking legal advice; and
- (c)the certificates of independent advice signed by the plaintiffs and their solicitors are in evidence.
- the plaintiffs do not live in the property, and the lender has been in possession of the property since 22 November 2018.
- In oral submissions, Mr Kipps further argued:
“…the plaintiffs are only identifying and articulating representations made by the broker, the second defendant. There’s simply nothing on pleading which evidences any form of agency by which the broker could be said to have been cloaked with a form of agency, such that the broker would be making representation which would bind the lender at law. In circumstances where there are extensive, independent, legal advice certificates and an allegation pleaded that your Honour’s seen in the counter-claim, which is – with a simple – do not admit, we didn’t take advice about – we don’t know whether or not we took legal advice about this line.
Your Honour should be satisfied that advice was taken and if that advice was given, usual matters that the legal practitioner would have advised the borrower about like interest and costs, would have been covered.” 
- The borrower’s counsel, Mr Clift, outlined the considerations to be taken into account when considering the question of balance of convenience, and referred in particular to the decision of Ross Cook and Brett Cook Pty Ltd v Bli Bli #1  QSC 300, where his Honour Justice Martin observed at  that those factors include:
- amount claimed as a proportion of value of land the subject of the caveat: Re Burman’s Caveat  1 Qd R 123;
- whether the caveat is too wide – that is whether it goes beyond what is necessary to protect the caveator’s interest: Queensland Estates Pty Ltd v Co. Ownership Land Development Pty Ltd  Qd R 150 at 155-156;
- whether the party applying for removal of the caveat has an interest in the land superior to that of the caveator, and in particular, whether that party is being prevented by the caveat from a legitimate exercise of its rights: Buchanan …
- whether the removal of the caveat will derogate from the caveator’s claim: Buchanan at 465.
This last consideration was given particular emphasis in Buchanan, and it was stated that “it is a rare case where a valid caveat will be removed for reasons of the balance of convenience”.
- In respect of each of these factors, Counsel submitted that:
- (a)the amount claimed by the first defendant is disputed by the plaintiff. Depending on the outcome of any trial, the amount will either be about $230,000 or in excess of $357,000, which is the amount for which the first defendant seeks to sell the property [and which is less than that for which the property was bought];
- (b)the caveat in this case is not too wide – it concerns only the real property that is subject to the dispute between the parties;
- (c)it is the case that the caveat prevents the first defendant from exercising its rights under the mortgage in relation to the property. But the existence and legitimate exercise of those rights is in dispute between the parties; and
- (d)the removal of the caveat will derogate from the caveator’s claim because the removal will allow the first defendant to exercise its power of sale, relief from which is what the plaintiffs claim.
- It was noted that in those circumstances a balance of convenience favours the caveat not being removed. Mr Clift also argued that the present case was distinguishable from the decision of Re Burman’s Caveat relied on by Mr Kipps in that the amount outstanding in this case is less than the value of the property, whereas in Re Burman’s Caveat the amount outstanding was well in excess of the value of the property. In oral submissions, Mr Clift argued that, if the caveat were to be removed, then some money should be quarantined after payment of the principal and some interest totalling approximately $230,000. Any balance after that should be held in trust by the first defendant’s solicitors or payment to court. He also conceded, “There’s nothing I can point to to say that it [the lender] wasn’t entitled to the principal, no. And I accept my learned friend’s submissions to that respect with respect to… Maguire v Makaronis, for example.”
Discussion and decision
- There is nothing to suggest that the transaction between the parties was not an arm’s length commercial transaction. The borrower sought from the lender a loan to enable the borrower to secure the property. The loan was made and the property was purchased. The loan for a principal sum of $220,000 was for a term of one year with an interest rate at 9.95 per cent.
- Documentation was produced by the solicitors for the lender and provided to the solicitors for the borrower. This documentation included certificates requiring the lender to obtain independent legal advice in respect of the terms and conditions of the loan. This apparently was done, as certificates are held by the lender which record that such advice was given. The sole director of the borrower resides in Beijing, China and there was some suggestion that documents had not been translated into Chinese and that the borrower may not have understood the totality of the transaction as a result. I was led to believe during submissions that the independent solicitor who gave legal advice to the borrower spoke Chinese and was able to interpret the documentation.
- It is clear from the statement of claim that the borrower says that he relied on representations by Ms Tang, an employee of the second defendant who is a broker and was apparently engaged by the borrower to secure the loan. There is no suggestion that either Ms Tang or the second defendant are agents for the lender or in any way had the legal capacity to bind the lender. Nor did she or they have authority to make representations on behalf of the lender.
- It is acknowledged that the primary issue is the borrower’s interpretation of what the interest rate and effect of costs were to be in relation to the loan. There is no dispute as to the base interest rate of 9.95 per cent that was being paid in respect of the loan.
- I make these observations to establish the context of the application and acknowledge that a number of the issues that I have raised will be the subject of evidence and determination at trial in relation to the allegations made by the borrower in respect of the terms of the transaction. In making a determination in respect of the removal of the caveat to allow the lender to sell the property, it seems necessary for me to contextualise these issues, particularly where the respondents argue that there remains a serious question all be it limited, to be tried.
- I note that, in the case of Re Burman’s Caveat, the amount of the debt owed was significantly higher than the value of the property, and accordingly the balance of convenience favoured the removal of the caveat and sale of the land. Nonetheless, in my view the principles are very similar in relation to this case insofar as it is accepted that the principal and interest at 9.95 per cent should be repaid and that a dispute has only arisen in respect of any additional interest or costs. I am satisfied that for the reasons stated in this case the balance of convenience is in favour of a sale of the property now. This will enable the principal and interest to be repaid now thereby limiting further interest. I am satisfied that the lender has the legal right to sell the property pursuant to the terms of the mortgage and its statutory power of sale. The borrower remains in default under the terms of the mortgage and has not made any attempt to repay either the monies outstanding or the principal sum.
- I note that the original value of the property was $425,000, and that appears now to have reduced on valuation to between $345,000 and $350,000, with a contract of sale for $347,000.
- It is possible that the property may increase in value between now and when the issues in dispute are finally determined by the court. It is equally possible that it may not increase in value. This is the risk assumed when one borrows money and defaults. In those circumstances, it seems prudent that the property be allowed to be sold on the basis of the current contract, and that any balance of the proceeds of sale after the repayment to the borrower of the principal and interest at 9.95 per cent less amounts repaid, being $231,394.70, plus sale costs of $7,624.00 for a net total of $239,018.70, be deducted from the sale price of $347,000. That is, $107,981.30 is to be held in the trust account of the solicitor for the first defendant pending agreement between the parties or determination by the court, and that such monies be invested by agreement between the parties until such determination.
- In those circumstances, I make the following orders:
- Pursuant to s 127 of the Land Title Act 1994 (Qld), caveat no. 719272971 lodged by the second plaintiff on 21 February 2019 over the title lot 6 on survey plan 284580 title reference 51107545 be removed.
- The balance of the proceeds of sale, after deducting principal and interest, less repayments, plus sale costs, being $107,981.30, be held in the trust account of the solicitors for the first defendant until agreement by the parties or further order from this court.
- By 7 October 2019, the parties file and serve lists of documents.
- By 21 October 2019, the parties complete disclosure.
- By 28 October 2019, the parties exchange correspondence as to any matters which need to be undertaken prior to the service of a request for trial date.
- The first and second plaintiffs pay the first defendant’s costs of the application on the indemnity basis.
 Land Title Act 1994 (Qld) s 127.
 District Court of Queensland Act 1967 (Qld) s 69(1).
 As defined in District Court of Queensland Act 1967 (Qld) s 68.
 As required under Property Law Act 1974 (Qld) s 84.
 First Defendant’s Submissions filed 20 August 2019 at  citing Re Burman’s Caveat  1 Qd R 123 at 129.
 First Defendant’s Submissions filed 20 August 2019 at  citing Re Jorss’ Caveat  1 Qd R 458 at 464-465.
 First Defendant’s Submissions filed 20 August 2019 at (a)-(c).
 First Defendant’s Submissions filed 20 August 2019 at .
 First Defendant’s Submissions filed 20 August 2019 at .
 First Defendant’s Submissions filed 20 August 2019 at .
 First Defendant’s Submissions filed 20 August 2019 at  – .
 Transcript 1-5 lines 36 – 47.
 Plaintiff Respondents’ Submissions filed 20 August 2019 at  citing Ross Cook and Brett Cook Pty Ltd v Bli Bli #1  QSC 300 at  –  per Martin J.
 Plaintiff Respondents’ Submissions filed 20 August 2019 at .
 Transcript 1-12 lines 26 - 28.
- Published Case Name:
Wei Pimpama Pty Ltd and Tao Wei v Pollux Trading Pty Ltd and Just Invest Australia Pty Ltd
- Shortened Case Name:
Wei Pimpama Pty Ltd v Pollux Trading Pty Ltd
 QDC 172
16 Sep 2019