Profke v Quaresmini[2004] QSC 406

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

HELMAN J

No BS8107 of 2004

BRISBANE

DATE 03/11/2004

JUDGMENT

HIS HONOUR: This is an application by the mortgagees under a registered bill of mortgage over seven lots of land comprising approximately 620 hectares, the description of which is given in the application. The applicants seek a declaration that a caveat, no. 708048295 lodged by the respondent, a plant operator, on 10 September 2004 forbidding the registration of any instrument affecting the land until the caveat is withdrawn by the respondent, does not disclose a caveatable interest and an order that the respondent remove the caveat forthwith, and other, ancillary orders.

The respondent, the registered proprietor of an estate in fee simple in each of the lots is mortgagor. The interest being claimed in the caveat is shown as “AN ESTATE IN FEE SIMPLE AS REGISTERED PROPRIETOR AND MORTGAGOR”. The grounds of claim shown are:

The land in question, which is in England Creek Road, England Creek via Fernvale, was sold by the applicants to the respondent on or about 14 June 2001 for $425,000. Under the contract of sale $200,000 of the purchase price was to be paid by the respondent to the applicants by two instalments: half with interest of seven per cent, per annum on or before 31 July 2002, and the other half with interest at the same rate on or before 31 July 2003. The mortgage secured the loan. The respondent failed to repay the $200,000, and on 18 June 2004 Holmes, J. made orders, sought by the applicants, that pursuant to s. 78(2)(c) of the Land Title Act 1994 the applicants recover possession of the land from the respondent and be at liberty to sell it. Her Honour further ordered that those orders be stayed until 4 p.m. on 19 July 2004 or earlier discharge of the mortgage.

The respondent failed to discharge his debt to the applicants by 19 July 2004 and still has not done so. On Saturday 21 August 2004 the land was put up for sale by the applicants at an auction in the Fernvale Community Hall and was knocked down to the respondent's brother, Harvey, for $785,000. The respondent's brother signed a contract to purchase the land, which was also signed by the applicants, and tendered a personal cheque for the required deposit of $78,500 after the auction. On Monday 23 August 2004 Mr Harvey Quaresmini's cheque was however dishonoured on presentation, and the applicants, relying on their rights under the contract, elected to terminate it. No issue was raised before me concerning the termination. The applicants then, still on 23 August 2004, entered into a contract to sell the land for $770,000 to the next highest bidder at the auction, a Mr Bachmann. Settlement of that contract is due to take place on 12 November 2004.

On behalf of the applicants it was submitted that any claim the respondent may have against the applicants will be restricted to one of damages. Reliance was placed upon the observation of Wilson, J. in Cameron v Brisbane Fleet Sales Pty Ltd [2002] 1 Qd.R. 463 at p. 470 that the duty imposed on a mortgagee exercising the power of sale by s. 85(1) of the Property Law Act 1974 “to take reasonable care to ensure that the property is sold at the market value” was “the more onerous duty, but it has restricted the remedy to damages” - more onerous than the formulation of the duty as not to act wilfully or recklessly thereby sacrificing the mortgagor's interest. Wilson, J. continued, however, to note concessions by counsel for the mortgagee in that case: first that s. 85 “does not deal with fraud in the sense of genuine impropriety or moral turpitude (deliberately setting out to defeat the interests of another) in which the purchaser was complicit” in which case “fraud would unravel all” and the sale could be set aside; and secondly, that the case before her “was not put forward as a case of such genuine impropriety or moral turpitude that s. 85 would not apply”. Allegations of misconduct in the latter category were, however, made before Ryan, J. in McKean's Caveat [1988] 1 Qd.R. 524. In that case an application by a registered mortgagee to remove a caveat lodged by the registered proprietor and mortgagor relying on the improper exercise of the power of sale under the mortgage was refused. His Honour considered that there was evidence before him which, if accepted, “could lead to a conclusion that there was improper conduct which went beyond mere negligence in carrying out the sale. I refer particularly in this regard to the evidence of the alleged statement by the vendor's real estate agent that the vendor only wished to clear the debt of $38,000 on sale.” (p. 526). His Honour dismissed the application, but ordered that the caveat be removed without further order unless the caveator complied with certain conditions.

Wilson J.'s reference to the concessions made in the case before her and Ryan J.'s analysis of the issues before him show that a caveator-mortgagor has a caveatable interest in a case such as this and is not restricted to the remedy of damages - in an appropriate case. But the question that must be answered in this case is whether the respondent's allegations reveal a sufficiently strong triable issue to warrant leaving the caveat in place, on suitable conditions of course.

The allegations upon which the respondent's claim rests include negligence in the conduct of the auction, but go beyond mere negligence and proceed to assertions of impropriety in deliberately setting out to defeat his interests. The respondent relies upon the cumulative effect of the evidence - as yet untested of course - of a number of witnesses present at the auction: Ms Louisa Ittensohn, Mr Ian Lake, Mr Stewart Wilson, Mr Ronald Baldwin, Mrs Dianne Baldwin, the respondent's brother, and the respondent himself.

I shall now give a brief summary of the respondent's allegations. The land was first knocked down to Mr Bachmann for $781,000 too quickly and with unreasonable haste, allowing insufficient time for other apparently interested people to bid against Mr Bachmann. Following a protest by the respondent and his brother, there was a delay during which a number of people including, it is suggested, some interested in purchasing the land, left the hall. The auctioneer invited further bids and Mr Harvey Quaresmini's bid of $785,000 then succeeded. It is not alleged that there was any undue haste in accepting that bid. The allegations concerning the auction itself (the haste in accepting Mr Bachmann's bid and the departure of people interested in purchasing the property) although clearly of some substance, could be regarded as matters of impression and even as speculative, but in addition there is evidence that, prior to the auction, on Sunday 15 August 2004, Mr Profke denigrated the respondent to Mr and Mrs Baldwin who were inspecting the land, and strongly suggested that it would be sold in the range of $350,000 to $400,000, adding words to the effect that, once the bidding reached $350,000, the land would be sold and that that was all that was needed to meet the mortgage debt. The latter evidence came from Mr Baldwin and was corroborated in important respects by the evidence of his wife. Mr Baldwin, who does not claim to be a valuer, but who has engaged in property development for the past eleven years and who has been buying and selling properties for the last thirty years, estimates the land is worth at least $840,000 and swears that if it went to auction again he would bid $800,000 to $850,000 to acquire it. He had bid $450,000 in the first round of bidding. He explains his failure to bid when he had the opportunity to do so when the land was submitted to auction again after the delay by saying he had been upset “at the process” and was discouraged from making a further bid. There is some evidence also that, before the auction, the applicant's real estate agent was dismissive of enquiries and that he said that he thought that around $350,000 would be the sale price, adding however that after the debt was cleared it would be “open slather”.

There is clearly evidence which, if accepted, could lead to the conclusion that the applicant Mr Profke, had acted to defeat the respondent's interests by denigrating him, revealing the sum the respondent owed him, and strongly suggesting that the land would be sold in the range of $350,000 to $400,000 when - it may be accepted for the purposes of this application, from what happened at the auction - a sale in that range would have been at well below the market price. But the difficulty with asserting that the pre-auction behaviour of Mr Profke, and perhaps the real estate agent, gives rise to a serious question to be tried is that it did not prevent the bids reaching figures in a range of approximately double the range Mr Profke suggested. The contrast between the result of this auction and that in the case before Ryan J. is striking: the bids at that auction were below the $38,000 and “amounted to $32,000 and $34,000”. If the respondent has a case against the applicants it must be shown that there is a serious issue that the actions of Mr Profke, and perhaps the real estate agent, resulted in the sale of the land at a figure well below the market value. The evidence does not, on my assessment, show a strong enough case on that issue to warrant interfering with the applicants' right to proceed with the contract of sale due for settlement on 12 November 2004. Mr Baldwin's evidence is that the sale was at a figure substantially below the value he contends for, but it must be remembered he is not a valuer and he did have ample opportunity to bid after the auctioneer invited further bids following the delay but did not do so. Furthermore, it is not without significance in this context that the respondent made no complaint when the land was knocked down to his brother for $785,000; and in fact in his affidavit he swears to efforts he made on 23 August 2004 “to arrange the necessary bank cheque for the deposit” for his brother, the land to be registered in his brother's name. It was only after the termination of the contract of sale to his brother that he sought to challenge the result of the auction in a letter dated 3 September 2004 from his solicitors to the applicants' solicitors. Those considerations lead me to conclude that the respondent's allegation of a sale at a price below the market value is, on examination, not a strong one.

The apparent weakness of a caveator's claim may be taken into account in some instances by a court when it is deciding whether to order that a caveat be removed: Heritage Properties (No. 3) Pty Ltd & Anor v Coles Supermarkets Australia Pty Ltd [1993] Q.Conv.R. 54-448. In my view, this is such a case.

The fact that the respondent appears to have been content that the land was to be registered in his brother's name also weakens any suggestion that the land had a special value for the respondent.

In the circumstances, I conclude that if the respondent has a claim against the applicants damages will be an adequate remedy. I shall therefore order that the caveat be removed forthwith.

…

HIS HONOUR: I order that the caveat referred to in the originating application, No. 708048295 be removed forthwith by the respondent.

I order that the respondent pay to the applicants their costs of and incidental to the application to be taxed.

There will be liberty to apply on three days notice.