Commonwealth Bank of Australia Ltd v Maksacheff

1. [1]

   By a notice of motion dated 2 May 2016, the plaintiff in these proceedings seeks an order that in accordance with s 74MA of the Real Property Act 1900 (NSW), that the second defendant be required to withdraw the caveat, dealing number AM103090 lodged on the land contained in folio identifier 2/1135174 located at 59 Lawson Rd, Panuara, New South Wales (“the Property”).

2. [2]

   The motion came before me as Duty Judge on 2 May 2017, initially for leave to file the motion in court as well as abridging time for service of the motion and supporting affidavits, and for leave to be given for the second defendant to appear by telephone.

3. [3]

   An order was also sought for the listing of the matter the following day before me as Duty Judge on 3 May at 10:00 am, but I declined to make that order, listing it instead for 4 May 2017 at 10:00 am.

4. [4]

   I made orders regarding abridging time for service and permitting service to be completed by email to the email addresses provided to this court in prior proceedings relating to the Property. Notice of the hearing was served by both the plaintiff’s solicitor and the Court.

Factual background

1. [5]

   The background to the motion was deposed to in the affidavit of Richard Lewin, affirmed 2 May 2017. Default Judgment for possession of the property was entered in favour of the plaintiff bank in July 2015, as well as monetary judgment in the sum of $607,523.10. After judgment, the defendants have sought to challenge the banks title to possession in various ways.

2. [6]

   An auction for the sale of the property by the plaintiff as mortgagee exercising power of sale was scheduled for 23 July 2016. The defendant sought injunctive relief to prevent the auction proceeding. The property was passed in at auction but was sold by private treaty with contracts for sale exchanged on 13 September 2016, with a completion date of 25 October 2016. In the interim, there were complicating factors, including the defendants re-entering the property in October 2016, the bank filing a notice of motion for injunctive relief concerning the re-occupation of the property, and a further writ of restitution. In January 2017, the first defendant filed a notice of motion seeking orders staying enforcement of the writ of restitution and a stay of execution of the writ by the sheriff. These proceedings failed. Arrangements were made by the bank to clear the property of goods and animals remaining at the property.

3. [7]

   On 14 March 2017, the first and second defendants filed a further notice of motion in the proceedings seeking, among other things, a stay of enforcement proceedings. This was determined by His Honour Acting Justice of Appeal Sackville on 27 March 2017. He dismissed the notice of motion.

4. [8]

   On 31 March 2017, the property successfully had the last camel removed and repairs were undertaken. On 6 April 2017, a letter was sent to the purchaser’s solicitors confirming that the bank was in a position to proceed to settlement of the sale. There was further correspondence from the purchaser’s solicitor requesting further works be undertaken, and in preparation for settlement of the sale of the property, an updated title search was conducted which disclosed that the second defendant had lodged a caveat dated 8 February 2017.

The alleged caveatable interest

1. [9]

   The estate or interest claimed by the caveat appears in Schedule 1 of the caveat, and is described as follows under the heading ‘Particulars of the Estate or Interest in the Land/Registered Dealing’:

2. [10]

   Annexure A is headed ‘Lodging Party Requisition’ and sets out three bases for the assertion of a caveatable interest:

   1. (1)

      That there is copyright in the marks of the proprietors (the signatures) and that the mortgage has been securitised or onsold by the bank without their consent and thus has a breach of the Copyright Amendment (Moral Rights) Act 2000 (Cth) Pt IX.

   2. (2)

      The original contract is a promissory note under the Bills of Exchange Act 1909, which has a face value in Australian Dollars of $597,313.00, and that remains the intellectual property of the defendants; and that the mortgage created the title/conveyance which constitutes the title being the property of the defendants.

   3. (3)

      That the Commonwealth Bank is indebted to the defendant’s estate in the total sum of $700,000.00 by virtue of an instrument DJM23012017, which appears to be a reference to the bank account relating to the unpaid mortgage.

3. [11]

   By letter of 1 May 2017, the plaintiff wrote to the defendants pointing out that the caveat was without merit, that it was not clear as to the nature of the estate or interest claimed, and requesting copies of the instruments referred to in Schedule 1 of the caveat, which were, on the caveat document, described as ‘Original Works Originality of Copyright Signatures’. The plaintiff’s letter also stated that completion of the contract for the sale of the property was overdue and at that time was arranged for Wednesday 3 May 2017, and pointing out that there was already shortfall on the bank’s mortgage debt. The letter requested that the defendants remove the caveat, providing a certain timeframe for that to occur and providing a withdrawal of caveat form for use.

4. [12]

   A response was received from the first defendant by email on 2 May 2017.

5. [13]

   The response, headed ‘Caveat AM103090’ appears to provide direct reply to the arguments raised by the plaintiff in its 1 May letter. The reply references the Copyright Act 1968 (Cth), and complains that the plaintiff bank did not have the defendant’s consent to trade, securitise, monetise, or sell the mortgage, and therefore the caveat has a proper legal basis. It comments that the sale of the property is invalid and that the bank or the proposed purchasers of the property do not retain any “moral rights under the Moral Rights Act 2000” (seemingly a reference to the Copyright Amendment (Moral Rights) Act 2000 (Cth)). It also refers to a damages claim apparently being made or having been made against the bank for the “fraudulent attainment of judgment by the bank”.

6. [14]

   The response very clearly rejects the offer to remove the caveat on any grounds “until [the defendants’] intellectual copyrighted property is remitted, proof of claim is provided, and [the bank] compensates the aggrieved parties for damages in breach of contract”.

7. [15]

   Evidence before me indicates that the notice of motion and affidavit was duly served on the evening of 2 May 2017.

8. [16]

   When I commenced the hearing of the matter on 4 May, there was no appearance for the defendants. I caused phone calls to be made to the known phone numbers of the first and second defendants, but only to be met with a recorded message. Court staff made a number of further attempts to contact the defendants on those numbers during the progress of the hearing of the application. The plaintiff’s staff made calls during the luncheon adjournment. Those phone calls remained unanswered. I proceeded with the hearing of the application.

9. [17]

   At the completion of submissions on 4 May, I reserved my decision for delivery on Monday 8 May 2017. I did not deliver my reasons on that day because at 11:34 pm on 7 May, I received an email from the first defendant that amounted to a complaint that the defendants had not had sufficient time to respond to the notice of motion and affidavit, and that short service and service by email in expectation to be “ready and willing to defend the matter” was not acceptable to the defendants. Despite the assertion contained in the email that it was “not an application for an adjournment”, the clear message from the email was a complaint that the short service disadvantaged the defendants. Accordingly, I adjourned the hearing for three clear working days to Friday 12 May 2017 to allow the defendants to make oral submissions and/or to file further evidence.

10. [18]

    I ordered that communication be provided to the defendants advising of the adjourned fixture.

11. [19]

    On 12 May, the first defendant appeared by phone and a friend, Glen Jeffrey, appeared by phone and in person and oral submissions were made. The first defendant made the following relevant submissions:

    1. (1)

       He did not believe that anything in the affidavits served by the plaintiff set out reasons for the caveat being rejected.

    2. (2)

       He argued that the Copyright Act 1968 (Cth) protects original works that resulted from the defendants’ skill and labour. It was asserted that the bank has not disclosed any proof that they had not on sold the defendants’ copyright of assets (i.e. their signatures on the mortgage documents) and that those signatures created the funds to purchase the property but the original contract was not retained at the Land Titles Office but instead went back to the bank and that broke the chain of title.

    3. (3)

       A certified forensic loan auditor retained to assist the defendants has provided a 42 page report which it is asserted showed that the mortgage had been securitised. In this regard, the first defendant stated he understood this report was before Justice Campbell in the proceedings determined by him last year.

    4. (4)

       The signatures on the mortgage document were in effect creative skill and labour and the signatures have a value and so the bank has wrongly retained that copyrighted skill and creative skill and labour. The only way that the bank could legitimately make profit on that skill and labour (alleging that the mortgage had been securitised) is if the defendants were employees of the bank. They are not, and therefore the bank had no right to securitise the mortgage.

    5. (5)

       The decisions regarding the property need to be taken to the High Court where Mr Carrington will testify and explain that the sort of profits made by the Bank by using the defendants’ instrument for monetary gain;

    6. (6)

       Breaches of the Copyright Amendment (Moral Rights) Act 2000 (Cth) Trademarks Act 1995 (Cth), Designs Act 1906 (Cth) and Trade Practices Act 1974 (Cth) protected copyright and the right for authors (the defendants) not to have their rights of authorship forcibly attributed for other usages against the moral rights protection provided by Part IX of the Copyright Act;

    7. (7)

       The Bank was not complying with the Code of Banking Practice p 10 which says that banks will consult with small businesses and others to improve the services of the banking industry, complaining that the plaintiff bank has failed to disclose how they used the instrument signed by the defendants;

    8. (8)

       In summary, the caveat was protecting the copyright on the original instrument (the mortgage).

12. [20]

    The defendants were then represented by a friend, Mr Jeffrey, who made the following points on behalf of the defendants:

    1. (1)

       The defendants wanted full disclosure of the contract in the matter and the bank had failed to do that;

    2. (2)

       The defendants, in particular the first defendant, were exercising their Commonwealth right and the plaintiff was an agent of the Reserve Bank and s 77 of the Reserve Bank Act 1959 (Cth) means that certain rights follow;

    3. (3)

       The first defendant tried to make payment by way of promissory note pursuant to the Bills of Exchange Act 1909 (Cth) and the bank took 3 weeks to get back to him. In effect, this was an appropriate way to set off the debt pursuant to rights the first defendant has under Commonwealth Legislation and only the Commonwealth can create notes for legal tender;

    4. (4)

       The dealings by the defendants with the bank were administrative matters and completed in disregard of the defendants’ Commonwealth rights;

    5. (5)

       The first defendant had tried discovery to find out if the money was in place or whether the bank was working on a guarantee and that the instrument had been securitised but not disclosed to the first defendant;

    6. (6)

       The defendants believe was that the bank’s title was defective;

    7. (7)

       A Federal member of parliament had provided advice to the effect that the defendants should re-access the property;

    8. (8)

       The defendants are of the view that the caveat should stay in place because there is Federal or High Court jurisdiction that should be invoked because the land is part of the Commonwealth and the defendants are being excluded from being able to prove ownership of the property at a Commonwealth level;

    9. (9)

       The defendant has a right to own his own home as part of being a citizen of the Commonwealth. His value as owner of the home is intrinsic and a higher value than the right that the plaintiff bank asserts;

    10. (10)

        The Commonwealth, being the owner of all the banks, should be able to set off the debt owed by the defendants;

    11. (11)

        The defendants are being denied their Commonwealth rights pursuant to the Bill of Exchange Act 1909 (Cth) to be able to rely on the promissory note as evidence that the defendants are not trying to evade their debt.

    12. (12)

        The first defendant wanted the property for his family to live in.

13. [21]

    In reply, Mr Lewin argued that none of the statutory points raised regarding Commonwealth legislation were relevant to creating a caveatable interest in the land:

    1. (1)

       The Designs Act 2003 (Cth) protects designs that are registered and there is no evidence that the signatures of the defendants have been registered as a design.

    2. (2)

       There is no evidence that the defendants’ signatures were registered as a trademark(s).

    3. (3)

       There is no identification as to what aspects the Trade Practices Act 1974 (Cth) were invoked to create a caveatable interest in the land.

    4. (4)

       The Copyright Act 1968 (Cth) Pt IX, s 189 defines work as “a literary work, a dramatic work, a musical work, an artistic work or a cinematographic film”. The signatures of the defendants therefore did not fit within the description work and thus did not attract the rights within Pt IX of the Copyright Act.

14. [22]

    Mr Lewin submitted that the issue regarding the role of the promissory note was dealt with finally and comprehensively by Justice Campbell in his judgment of August 2016.

Legislation regarding removal of caveats

1. [23]

   Section 74MA of the Real Property Act 1900 (NSW) provides for the basis and machinery for withdrawal of caveat. Section 74MA provides as follows:

2. [24]

   Subsection (1) provides for the plaintiff in these circumstances to apply to this court for an order that the caveat be withdrawn by the caveator or by another person who, by virtue of s 74M, is authorised to withdraw the caveat.

3. [25]

   As set out in Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 at [52], the effect of lodging a caveat is expressly stated in s 74H of the Real Property Act. Whilst the caveat is in force, the Registrar-General is prohibited, except with the consent of the caveator, from registering a dealing which affects the estate or interest of the caveator. If an inconsistent dealing is lodged for registration or a lapsing notice is served, the caveator must seek an order continuing the operation of the caveat or the caveat lapses. An order extending the caveat ensures that the caveator’s unregistered estate or interest cannot be extinguished by the registration of an inconsistent dealing.

4. [26]

   The decision then goes on to examine different views of the courts regarding whether lodging a caveat has significance for purposes other than preventing the registration of an inconsistent dealing. I do not need to express an opinion on the conflict of judicial opinion about the nature and purpose of a caveat as what this notice of motion raises is argument that the asserted caveatable interest is entirely absent and the articulation of the asserted caveatable interest has no merit at all.

5. [27]

   The decision of the Court of Appeal in Hanson Construction Materials comments on the broadness of the powers provided to this court pursuant to s 74MA. Under the heading ‘The scope of the statutory power’, Sackville JA with whom Beazley P and Payne JA agreed, outlines the power in context:

6. [28]

   It was clear that the first defendant, in his email of 2 May on behalf of both himself and his wife, the second defendant, would not agree to withdraw the caveat. He states after setting out his arguments, “We reject your offer to remove the caveat on any grounds until our intellectual copyrighted property is provided and your client compensate the aggrieved parties for damages for breach of contract…”. In those circumstances, it was submitted by the plaintiff that I have the power pursuant to s 74MA to order the caveator to withdraw the caveat within a specified time. By virtue of sub-s (3), if that is not done, the caveat will lapse when an office copy of the order is lodged with the Registrar-General after that time expires.

Determination

1. [29]

   The caveatable interest claimed has no merit. It is based, amongst other things, upon misreadings and misapplications of other unrelated rights conferred by various Commonwealth statutes, namely the Copyright Act 1968 (Cth), the Copyright Amendment (Moral Rights) Act 2000 (Cth), the Trade Marks Act 1995 (Cth), and the Bills of Exchange Act 1909 (Cth).

2. [30]

   As discussed in Hanson (at [77]), courts have approached applications for the removal of caveats pursuant to s 74MA by applying principles analogous to those appropriate to applications for interlocutory injunctions since the caveator is seeking to maintain a statutory injunction preventing registration of inconsistent dealings pending resolution of any dispute. He or she bears the onus of showing that there is a serious issue to be tried as to the existence of the interest claimed in the caveat.

3. [31]

   The defendants have been given opportunity to meet their onus by the first defendant’s written material and oral submissions made to the Court by the first defendant and his friend, Mr Jeffrey, on 12 May 2017.

4. [32]

   Nothing said by or on behalf of the defendants in their written material or oral submissions support a caveatable interest in the property.

Orders

1. [33]

   I make the following orders:

   1. (1)

      Pursuant to s 74MA of the Real Property Act 1900 (NSW), the second defendant be required to withdraw the caveat having dealing number AM1031090 lodged on the property with folio identifier 2/1135174 and located at 59 Lawson Rd, Panuara NSW by 10:00 am on Tuesday 16 May 2017.

   2. (2)

      The second defendant is to pay the plaintiff’s costs of this notice of motion.