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Supreme Court 8 December 2000

Global Minerals v Valerica

[2000] NSWSC 1143

Other
CONVEYANCING CAVEAT AGAINST DEALINGS NO CAVEATABLE INTEREST

Citation: Global Minerals Australia Pty Limited v Valerica Pty Limited [2000] NSWSC 1143
Court: Supreme Court of New South Wales, Equity Division
Date: 8 December 2000
Judge(s): Windeyer J

Background

The dispute concerned five parcels of land at Penrose in the Southern Highlands of New South Wales. In 1995, the registered proprietor (AMES) sold the land to a company called Ostabridge under five contracts of sale. Ostabridge paid for the land but could not immediately register the transfers because prior encumbrances remained on title. Ostabridge lodged a caveat to protect its unregistered equitable interest as purchaser.

A floating and fixed charge had been granted by Ostabridge to Standard Chartered Bank in 1989 over Ostabridge's assets and undertakings, including any freehold land it owned or held an interest in. That charge was later assigned to Valerica for consideration. Because Ostabridge's equitable interest as purchaser of the Penrose Land fell within the scope of the charge, Valerica claimed to hold a charge over that interest as well.

The Penrose Land was subsequently transferred to Global Minerals Australia, the plaintiff, in December 1999. Valerica alleged those transfers were effected fraudulently, without proper corporate authority, and with Global's knowledge. Valerica lodged caveats against the title to protect its claimed interest as equitable chargee. The central question in these proceedings was whether Valerica's claimed interest was capable of supporting a caveat under the Torrens title system.

  • Whether Valerica, as equitable chargee of Ostabridge's unregistered interest as purchaser, held a caveatable interest in the Penrose Land after that land had been transferred (allegedly fraudulently) to a third party and registered in that party's name
  • Whether a mere equity, specifically the right to seek to have a fraudulently obtained registered transfer set aside, constitutes an equitable interest in land capable of protection by caveat
  • Whether a chargee of an equitable interest can stand in a better position than the chargor for the purposes of asserting an interest in land against the registered title

Decision

Windeyer J found that Valerica's claim did not disclose a caveatable interest in the land. Once Global was registered as proprietor, Global held an indefeasible title under the Torrens system unless and until a court set aside that registration on the ground of fraud. Ostabridge's prior unregistered equitable interest as purchaser was defeated by Global's registration, subject only to any personal equity arising from fraud.

The court reasoned that Valerica's position as chargee could be no better than that of Ostabridge as chargor. Because Ostabridge itself had no current interest in the land following registration of the transfer to Global, the charge over Ostabridge's former equitable interest gave Valerica nothing more than a right to pursue an action to set aside the fraudulent transfer. That right is a "mere equity," not an equitable interest in land.

Windeyer J emphasised the distinction between a mere equity and an equitable interest. A mere equity is the right to seek equitable relief, such as having a transaction set aside, whereas an equitable interest in land is a proprietary right already existing in the land. Only equitable interests, and not mere equities, are capable of protection by caveat under the Torrens system. This is consistent with the principle that notice relevant to priorities concerns prior interests, not prior equities.

The court also dismissed Valerica's argument that the charge, operating as a fixed charge over freehold land on default, attached to the land directly. That argument failed because at the time of default, Ostabridge held no freehold estate or registered interest. The charge could only attach to whatever interest Ostabridge actually had, which had been defeated by registration.

Orders Made

In action 3905/00 (Global Minerals v Valerica):
- Valerica ordered to withdraw caveat 6943800 within seven days
- Valerica ordered to pay Global's costs of the summons

In action 2764/00 (Valerica v Global Minerals):
- Valerica's notice of motion dismissed
- Valerica's application for leave to lodge caveat 6943800 or a caveat in the same terms dismissed
- Valerica ordered to pay Global's costs of the notice of motion and application
- Action directed to proceed on pleadings, with Valerica to file and serve a statement of claim by 15 January 2001

Key Takeaways

  • A chargee of an unregistered equitable interest in land can hold no greater interest in that land than the chargor itself holds. Where the chargor's equitable interest has been defeated by a subsequent registered dealing, the chargee is left with nothing more than a claim to have that dealing set aside.
  • The distinction between a mere equity and an equitable interest in land is determinative in caveat proceedings. A mere equity, including the right to seek rescission or to have a fraudulent transfer set aside, does not constitute a caveatable interest under the Torrens system.
  • Under Torrens title, registration confers indefeasibility. A registered proprietor's title is not displaced by a prior unregistered interest unless fraud is established in proceedings brought for that purpose. Until such proceedings succeed, no proprietary interest in the land exists to support a caveat.
  • A floating or fixed charge over "freehold land" held by a chargor attaches only to such interest as the chargor actually holds. The charge cannot operate over land in which the chargor's interest has already been extinguished by registration of a transfer to another party.
  • The purpose of the caveat system is to protect existing interests in land and to prevent registrations that would extinguish those interests. It is not a mechanism for preserving a mere equity or a future claim to relief that depends on successfully setting aside a registered dealing.

Legislation and Cases Referenced

Legislation:
- Real Property Act 1900 (NSW), ss 74J, 74MA, 74O

Cases:
- Andel Pty Ltd v Century Car Care Pty Ltd [1989] ANZConvR 252
- Composite Buyers Ltd v Soong (1995) 38 NSWLR 286
- Forsyth v Blundell (1973) 129 CLR 477
- Naismith v Smith [1954] VLR 567
- Re McKean's Caveat [1988] 1 QdR 524
- Re Pile's Caveat [1981] QdR 81
- Shaw v Foster (1872) LR 5 HL 321
- Tanzone Pty Ltd v Westpac Banking Corporation [1999] NSWSC 478