Background
FIFO Capital Corporate Pty Ltd financed Joseph Douglas under a Supply Chain Finance Facility executed in June 2023. Douglas signed as customer, guarantor and grantor. The facility gave FIFO a security interest in each grantor’s present and after-acquired property, expressly including interests in land. FIFO advanced funds under the facility, and the Court found that at least $300,000 remained owing. Douglas disputed his own liability pending receipt of certain information from FIFO, but the Court was not shown any contractual provision making payment conditional on that information.
Douglas later purchased a property at South Windsor, financed principally by a Westpac mortgage. After FIFO lodged a caveat against the title, Douglas filed a lapsing notice and sought to refinance the property. FIFO applied under s 74K of the Real Property Act 1900 (NSW) to extend the caveat. Douglas argued, among other things, that the facility had been presented to him as unsecured, that no equity remained for FIFO after prior secured debts, and that the caveat obstructed refinancing.
The Court’s Holding
Kunc J extended the operation of FIFO’s caveat until further order. The property fell within the facility’s definition of after-acquired collateral, so FIFO’s claim to a security interest had sufficient substance to constitute a caveatable interest. The facility did more than merely authorize the lodging of a caveat: it expressly conferred a security interest extending to real property acquired after execution.
There was also a serious question to be tried concerning FIFO’s rights in the property. Douglas alleged that FIFO’s representative had told him the facility would be unsecured, while the representative denied doing so. That factual dispute could bear on an equitable or statutory defence based on misleading or deceptive conduct, but it did not defeat FIFO’s interlocutory application.
The balance of convenience favored preserving the caveat. The valuation evidence did not establish that the property lacked equity available to FIFO, and the evidence that the caveat prevented refinancing was too thin. FIFO also undertook to withdraw and then re-lodge the caveat if Douglas obtained qualifying refinancing that left FIFO’s security position no worse, and FIFO and a related company provided undertakings as to damages. The Court ordered Douglas to pay FIFO’s costs and directed that the matter proceed by pleadings in the Real Property List.
Key Takeaways
- An express security interest in present and after-acquired property, including land, can support a caveat over real property acquired after the security agreement was executed.
- On an application to extend a caveat, the Court considers whether the claimed interest has substance, whether there is a serious question to be tried, and where the balance of convenience lies.
- Assertions that a caveat prevents refinancing or protects no available equity require persuasive evidence; uncertain valuations and a broker’s preliminary email were insufficient here.
Why It Matters
The decision illustrates the practical strength of broadly drafted after-acquired-property clauses where the security document expressly reaches interests in land. It also distinguishes such clauses from contractual terms that merely permit a creditor to lodge a caveat without independently creating an interest in the land.
For parties seeking removal of a caveat to facilitate refinancing, the ruling underscores the need for concrete valuation and financing evidence. A conditional undertaking allowing refinancing without worsening the caveator’s position may also influence the balance of convenience.