Blog 51. Promise to make will in favour of caveator – Whether creating interest in land – But constructive trust based on proprietary estoppel.

Goldberg v Campbell and Shaw & Anor [2021] VSC 647 (8 October 2021), Matthews AsJ.  is the third round in the legal bout between Mr Mathers and the late Mr McColley.  The first two rounds were at VCAT under Part IV of the Property Law Act (ie co-ownership disputes): [2017] VCAT 1529, Mathers v McColley [2019] VCAT 1230.  See generally on Co-ownership Disputes the author’s paper on Foley’s site in June 2020.  The facts were –

  • The second defendant (Mathers) and Alexander McColley were registered proprietors as tenants in common in equal shares of a residential property.  Mathers deposed that they had on 29 March 2005 entered into a deed of arrangement whereby McColley could live there rent-free for life, or until he permanently vacated the property, on the proviso that he execute a will devising his share in the property to Mathers.
  • McColley lived there until August 2016 when he went into a nursing home.  He never made the contemplated will.
  • On 10 March 2017 Mathers caveated claiming a freehold estate on the grounds of an agreement with McColley dated 5 August 2016.
  • McColley died in 2019 leaving a will made in 2008.  The plaintiff, who was his executor and beneficiary, obtained probate of this will.  This half interest was the main asset of the estate.  In 2021 McColley’s daughter commenced a proceeding under Part IV of the Administration and Probate Act against the estate for testator’s family maintenance.

The plaintiff sought orders under s. 90(3) of the Transfer of Land Act for removal of the caveat and under Part IV of the Property Law Act for sale of the property and division of the proceeds.  The first defendant, a firm, were Mathers’ solicitors.

Matthews AsJ ordered removal of the caveat but granted a stay pending any application to amend the caveat, holding –

  1. There was no evidence of an agreement dated 5 August 2016. In any event an application to amend the caveat would have been futile because, assuming the deed was valid and enforceable, Mathers only had a contractual right to its performance sounding in damages.   Further, even a will of McColley devising his moiety would not have given Mathers a proprietary interest in that moiety, but merely a right to an order for due administration of the estate.   And even if there had been such a devise, the moiety would have been part of the estate subject to the claim for testator’s family maintenance. [34]-[40], [43]
  1. However, it was highly likely that Mathers had a prima facie case of a freehold estate in the moiety on the grounds of a constructive trust arising from the doctrine of proprietary estoppel. McColley had made a promise as to the future acquisition of ownership of his moiety by Mathers on which Mathers had been induced to rely to his detriment.  This trust came into existence at the time of reliance: while it was for a court to determine whether to declare the trust, the equitable interest arose from the date when the detrimental reliance rendered it unconscionable to depart from the promise.  There was a credible argument that the constructive trust came into existence when McColley commenced living at the property rent‑free after entering into the deed.  It was also possible that the trust came into existence when McColley made his will. [44]-[53]
  1. The balance of convenience favoured maintenance of the caveat provided it was amended to assert this trust. This supported a possible future order for transfer of McColley’s moiety to Mathers. [61]
  1. For identical reasons to those concerning the balance of convenience, any application for an order for sale under the Property Law Act Part IV was premature. [69]

      

Philip H. Barton

Owen Dixon Chambers West

     Tuesday, October 19, 2021

Blog 50. My Papers and Articles since 1981.

This is not a Blog about caveats but is a list of what I have written over 40 years, some of which I had lost track of.

Over the Summer of 1979–80 I did the Monash LLM subject “Company Liquidations” for which I wrote an essay.  Professor Baxt called me to his office and asked if it could be published, hence: “The law relating to disputed indebtedness where the winding–up of a company is sought on the ground of inability to pay debts”: Australian Business Law Review Volume 9 p. 94 (1981).

Then in 1984 I saw a notice on the Bar Notice Board that the University of Melbourne was offering $2,500 for someone to write a paper on property law.  This was the Pinkerton Scholarship.  No one at the University seemed to know the origin of this scholarship but I gathered that someone of that surname in Ballarat had left a capital sum to establish the scholarship a long time ago – I think I have since seen art in the Ballarat Art Gallery donated by someone of that surname.  And in preparing this Blog I have googled “Pinkerton Ballarat” and see this was Frank Pinkerton born 1858.  I asked my old College Tutor Ross Sundberg for a good topic, he supplied it, I got the scholarship, wrote the paper, and, I am sure through Ross’ good offices, it was published in the Australian Law Journal: “The applicability of Section 62 of the Property Law Act  1958 (Vic.) to the transfer of Torrens System land”: (1987) 61 ALJ 215.

Next was “Compensation for loss due to town planning restriction under Part 5 of the Planning and Environment Act 1987”: The Valuer and Land Economist Volume 33 p. 239 (1994).   Then from 1995 were Law Institute Journal articles.  Then compulsory CPD arrived for legal profession giving further opportunities.  This list will be updated from time to time.

1995

Recent decisions on Mortgagee/Lessee disputes.  LIJ March.

1998

Testator’s family maintenance – the new regime.  LIJ February.

Town planning: social and economic considerations.  LIJ May.

Town planning – the medium density maelstrom (with David Whitney).  LIJ October.

2002

Urgent injunctions.  LIJ March.

Injunctions & Interlocutory Relief in Proceedings related to Property.  LAAMS Seminar Paper

2003

Which court? Choices in Victorian civil litigation (with Alan Vassie). LIJ June.

2004

Defeating Testator’s Family Maintenance claims.  LIJ January – February.

2005

Modifying and Extinguishing Restrictive Covenants in Victoria. Television Education Network Seminar Paper, October.

2006

Modifying and discharging restrictive covenants in Victoria.  LIJ January – February.

2007

Amendment and Cancellation of Planning Permits.  Victorian Bar Seminar Paper, May.

2008

Rolling out the plans – Amendment and Cancellation of Planning Permits.  LIJ January – February.

The Rule in Saunders v Vautier.  Wills and Probate Bulletin, February.

Land protection – Caveats related to Unit Trusts.  LIJ July.

2009

Lease Terminations, Repairs and Make Good.  Television Education Network Seminar Paper, February.

Be aware – Caveats related to Constructive Trusts.  LIJ April.

Caveats and Trusts.  Southern Solicitors Group Seminar Paper, July.

2011

Costs Orders in Testator’s Family Maintenance proceedings.  LIJ December.

2012

Caveats – When and when not to lodge and recent developments.  Leo Cussen Seminar Paper, June.

Modifying and discharging restrictive covenants: an update.  LIJ December.

2013

The effect of Pre-Contractual Representations.  Legalwise Seminar Paper, March.

Wills and Probate Refresher.  CPDS Seminar Paper, March.

The effect of Pre-Contractual Representations.  Business Law Study Group Paper, May.

Interpretation of restrictive covenants.  LIJ October.

2014

Property Law Case Updates.  Legalwise Seminar Paper, March.

Sale of Land – Enforcing Rights and Remedies.  Foleys List Seminar Paper, July.

Sale of Land – Enforcing Rights and Remedies.  Foleys List Seminar Paper, November.

Testator’s Family Maintenance Legislative Changes and Update.  Foleys List Seminar Paper, November.

2015

New form of contract for sale of land and its impact on your practice.  Legalwise Seminar Paper, March.

Restrictive covenants and section 173 agreements.  Television Education Network Seminar Paper, May.

Malleability of a doctrine (proprietary estoppel).  LIJ May.

Proprietary estoppel – An oasis without palm trees or even water? (with Jim Mellas). Television Education Network Seminar Paper, August.

2016

Testator’s Family Maintenance Cases over the last two years – The rise of ancillary matters.  Foleys List Seminar Paper, February.

The Contract of Sale: Getting it right from the beginning.  Legalwise Seminar Paper, March.

Residential Tenancy Eviction.  Foleys List Seminar Paper, June.

2017

Issues arising at the end of a Retail Lease (Victoria).  Television Education Network Seminar Paper, March.

Property Law Case Law Update. Legalwise Seminar Paper, March.

Property Law Recent Developments. Leo Cussen Paper, April.

Ancillary issues in testator’s family maintenance litigation.  LIJ June.

Questionable Caveats – to lodge or not to lodge?  Leo Cussen Seminar Paper, July

VCAT Property Case Update.  Leo Cussen Seminar Paper, August.

Lease termination: where do disputes arise? – Legalwise Seminar Paper, November.

2018

Restrictive Covenants: Interpretation and Removal – Legalwise Seminar Paper, March 2018

Caveats (with Mark McKillop).  Foleys List Seminar Paper, March.

Electronic transactions involving property – signing on the digital line (with Emma Duke). Television Education Network Seminar Paper and Webinar, March.

Informal Wills. LIJ May.

Caveats – An Update.  UNSW Law Continuing Legal Seminar Paper, July.

Co-ownership disputes. LIJ August.

Electronic Contracts in Victoria (with Emma Duke). LIJ September.

Leases – Damages and Compensation.  Legalwise Seminar Paper, November.

2019

Co-ownership Disputes.  Legalwise Seminar Paper, March.

Lease Termination – Where do Disputes Arise? Legalwise Seminar Paper, June.

Eviction Notice!  Terminating the Commercial Lease – Leo Cussen Seminar Paper, August.

Sale of Land Amendment Act 2019.  Law Institute of Victoria (LIV) Seminar Paper, October.

Caveats and Contracts of Sale.  LIJ November.

2020

Caveats under the Transfer of Land Act.  Foleys List Podcast (February) and Paper (April).

Co-ownership Disputes.  Foleys List Podcast (May) and Paper (July).

Exclusion Clauses (with Sahrah Hogan).  Leo Cussen Seminar Powerpoint, June.

Concealment and Sale of Land.  LIJ October.

Recent Cases on Formation of Contracts of Sale of Land.  Foleys List Paper and Podcast, November.

2021

Non-Disclosure, Sale of Land and Litigation.  Leo Cussen Seminar Paper, February.

Recent Cases on Performance and Breach of Contracts of Sale of Land.  Foleys List Paper and Podcast, March.

Co-ownership Disputes – Update.  LIJ April.

Insights into Co-ownership Disputes.  LIV Seminar Paper, August.

The Odd Couple: Caveat Update & Exclusion Clauses.  Commercial Litigation Specialist Study Group Powerpoint, September.

 

       Philip H. Barton

          Owen Dixon Chambers West

        Tuesday, October 19, 2021

Blog 49. Service on the lodger with filthy hands who caveated – Caveat removed “pronto”.

In Sokolovska v Galea & Anor [2021] VSC 435 (23 July 2021), Croucher J.  the facts were –

  • Ms Sokolovska and Mr Galea had a turbulent friendship.  After various vicissitudes she in 2019 allowed him to live in her property at Yarraville.  She subsequently deposed that they were not intimate partners and that he (said by the Judge to have “such filthy hands”): contributed nothing to their living expenses; was only a “property damaging squatter”; commenced renovations but left the kitchen in “a ripped-up state”; filled the premises with hoarded furniture and rubbish; refused to leave; left nails in the walls, drug paraphernalia in nooks and crannies and rubbish about the place; damaged plaster; caused her to lose rental income; failed to repay loans of thousands of dollars; threw glass bottles at her; lunged at her with a metal rod; fought with others; barricaded himself inside the house; and changed the locks and installed security cameras without her consent.
  • Finally a firm of solicitors lodged a caveat on behalf of Galea, without providing his address, with notices to that firm at its address, claiming a freehold estate on the grounds of an “implied, resulting or constructive trust”.
  • The plaintiff applied for an order under the Transfer of Land Act s. 90(3).  She emailed the firm of solicitors the necessary documents.  They replied that they were not instructed to accept service on behalf of Galea and no longer acted for him.  She then emailed the necessary documents to Galea personally.

Section 89(1) is the basic caveat provision and s. 89(4) provides: “(4) Every notice relating to any such caveat and any proceedings in respect thereof if served at the address specified in the caveat shall be deemed to be duly served”.  Further, s. 113(3) provides: “The address appointed in a caveat as the place at which notices relating to the caveat may be served shall be the address for service of the caveator”.

His Honour held that the caveator, who did not appear, was properly served by reason of s. 89(4).  The caveat was removed “pronto” [60].

 

       Philip H. Barton

          Owen Dixon Chambers West

        Tuesday, October 5, 2021

 

Blog 48. On being charged $11,828 for the “experience” of applying for a loan.

Skymation Pty Ltd v ALS342 Pty Ltd& Anor [2021] VSC 386 (20 July 2021), Daly AsJ. concerns a caveat based on a term in a contract constituted by a letter of offer of a loan.  The loan never proceeded but to the surprise of the registered proprietor the caveator claimed certain preliminary expenses, a solicitor asserting “your client cannot decide not to lend the money then charge our client $11,828.00 for the experience”.  Reading this case stirred my memory of reading a Victorian decision about 15 years ago in which a financier was attempting to recover its “up front” funds for another abortive loan.  I remembered the name of counsel, David Robertson QC, and he said it was Gippsreal Ltd v Kurek Investments Pty Ltd [2006] VSC 115 at first instance and Gippsreal Ltd v Registrar of Titles (2007) 20 V.R. 157, [2007] VSCA 279 on appeal.  He said that the successful argument for the “borrower” in that case was that the contract contained so many possible let-outs for the financier that the consideration provided by it was illusory.

Skymation also concerns whether a nominee “lender becomes a party to the contract of loan.  By contrast Blogs 8 and 28 concern caveats lodged by a purchaser who had nominated a substitute purchaser.

The facts were –

  • The plaintiff (Skymation) was the registered proprietor of a property in Toorak.   Its director (Negri) had a long-running dispute with his son Richard about control of Skymation and beneficial ownership of the property.   Richard had been a director and secretary of Skymation, then resigned, then in 2019 clandestinely removed his parents and appointed himself director and secretary.   This was rectified but in the words of Daly AsJ he did not “resign”.  Richard also caveated over the property in February 2020, which caveat a judge on 15 September 2020 directed him to remove.
  • Negri enquired of a company (Assetline) about Skymation borrowing $400,000 secured by the property.  On 18 September 2020 he received a letter of offer from Assetline.  Later that day he executed and returned the Borrower Declaration included in the letter of offer with a non-refundable payment of $2,860.   The letter of offer was executed by directors of the first defendant (ALS342) and by Negri as the director of Skymation and as guarantor.
  • The letter of offer included:
    • “Assetline Investments Pty Ltd and/or its designated nominee (Assetline or Lender) are pleased to advise you that your application for finance has been approved on the terms detailed within this Offer Sheet and the attached Offer Terms.”;
    • Under the heading “Parties”: “Lender(s) Assetline Investments Pty Ltd and/or its designated nominee”;
    • Under the heading “Security”: “Other Security Such agreements, certificates and acknowledgements, securities and other documents as we or our solicitors may reasonably require”;
    • In the Offer Terms: “Any reference to “we”, “us” and “our” means the Lender”. The rest of the Offer Terms used the first person plural to describe the Lender;
    • That the Lender would instruct the solicitor to prepare and issue loan documents after the valuation and due diligence were completed;
    • That the Lender could withdraw from the proposed loan without liability;
    • Under cl. 25, that if Skymation withdrew from the proposed loan it was liable to pay what is referred to below as the ‘secured sum’, a charging clause attaching to this. The Lender was permitted to lodge a caveat to secure its interest as chargee over any real property owned by Skymation or Negri.
  • A director of ALS342 deposed that upon receipt of the executed letter of offer he instructed solicitors to prepare the loan and security documents.  On 25 September the solicitors provided a letter and these documents.  This letter described the lender as ALS342.
  • This letter also enclosed a “Checklist of required settlement documents” which included: a statutory declaration from Richard enclosing a certified copy of the executed company minutes of meeting resolving that he had resigned from Skymation and a resignation letter executed and dated by him.
  • On 30 September ALS342 lodged a caveat imposing an absolute prohibition on dealings and claiming an interest as chargee pursuant to an agreement dated 18 September 2020.
  • Negri could not obtain the resignation letter from Richard, no money was lent and the security documents were not executed.
  • In November ALS342’s solicitors wrote claiming $11,828.00 (‘secured sum’) comprising a legal fee, a 50% establishment fee and a costs of fund fee.  Skymation’s solicitors replied that:
    • ALS342 had not advised Skymation that documentation was required from Richard after completing its due diligence, and it should not have instructed preparation of loan documentation if unsatisfied with the due diligence;
    • Skymation had not withdrawn from the loan, rather ALS342 had decided not to provide it because of its insistence on documentation from Richard.  It could not do this and then “charge our client $11,828 for the experience”.

Skymation commenced this proceeding under the Transfer of Land Act s. 90(3) to remove the caveat.  ALS342’s director deposed that the proposed loan did not proceed because of the matters referred to in solicitors’ correspondence and because the security documents were unexecuted.  Negri deposed that Skymation desired to sell the property.  Skymation argued that it had no contract with a caveator and if there was a contract it did not owe the caveator anything.

ALS342 applied for leave to amend the caveat: to state the date of its interest as being 25 September 2020, and; if the court held that it had no rights, but Assetline did, to name Assetline as caveator.

Her Honour removed the caveat, holding –

  1. Where a contract permitted a party to nominate another party in substitution for the original contracting party, the substituted party did not acquire the rights and obligations of the original contracting party absent “compelling language” in the relevant agreement. Thus on the one hand in one previous case reference to “and/or nominee” in a contract of sale of shares was construed not to permit the substitution of another person as a purchaser, but on the other hand in another case a nomination clause in a contract of sale of land was construed as rendering the nominee as the purchaser, ie to effect a novation of the agreement, the vendor having known of the intended nominee before the contract was made.  [31]-[35]
  2. There was a prima facie case that the caveator was a party to the loan contract, by reason of the nomination clause in the letter of offer, and as such had assumed the rights and obligations of Assetline under the Offer Terms, because –
    • although the letter of offer referred to Assetline in the singular tense, there was a reference to Assetline’s “designated nominee” and repeated references to the lender’s obligations and rights using the first person plural;
    • of general commercial practice in the finance industry and the nature of the transaction;
    • of evidence that Skymation consented to this. [28], [43], [44]
  1. It was doubtful whether Skymation was indebted to ALS342 because –
    • the instructions to the solicitors to prepare the security documents may well have been premature because the checklist included documents which might ordinarily be required as part of a due diligence process (but, that said, cl. 14.1 of the Offer Terms may amount to Skymation’s agreement to immediately authorise ALS342 to instruct its solicitors to prepare the security documents before completion of due diligence);
    • it was at least arguable that ALS342 withdrew from the proposed loan. [28], [45]-[48]
  1. The balance of convenience favoured removal of the caveat.   In favour of the caveator was no sale being imminent and reduction in its ability to recover the alleged debt.  This was, however, outweighed by: Negri’s intention to sell; the impact of the caveat on prospective purchasers; the guarantor (ie Negri) being a man of substance; real doubt about the existence of the debt, and; because the charging clause permitted ALS342 to caveat over other property of Skymation or Negri. [28], [49]-[51].
  1. If it had been necessary to decide the matter leave would only have been granted to amend the caveat to substitute 25 September 2020 as the agreement date. [28], [52]

 

     Philip H. Barton

     Owen Dixon Chambers West

     Tuesday, September 28, 2021

Blog 47.  No contract of sale – No caveatable interest

In Hazelwood v Mercurio & Ors [2021] VSC 362 (22 June 2021) Daly AsJ –

  • primarily deals with an agent lacking authority to conclude a binding contract on behalf of a vendor (similar to the lack of authority of a solicitor: Leahy v Javni [2020] VSC 680 at [122]);
  • notes that, if a document existed whereby the vendor expressly authorised the agent to execute the contract on her behalf, it would be a breach of the Civil Procedure Act not to disclose it;
  • distinguishes English authority on whether an exchange of emails can comply with the Statute of Frauds;
  • held that if the caveators had established a binding contract the balance of convenience would have favoured them;
  • stayed the removal of caveat for 7 days to enable the caveators to apply for an injunction restraining completion of a further sale based on an alleged estoppel.

The facts were –

  • The plaintiff vendor gave an Exclusive Sale Authority to an agent (whose employee was Campbell) to market an apartment and two separately titled car parking spaces in the Melbourne CBD.  The Authority provided that the agent would advertise, market and sell the property and that “sold” meant (in normal circumstances) “the result of obtaining a binding offer”.  Clause 13 also authorised the agent to –
    • instruct a legal practitioner or conveyancer to prepare a section 32 statement, contract of sale, agree the content of either document and advise and agree on other amendments or additions to either document;
    • fill-up a standard form contract or contract to record the sale as permitted by statute;
    • negotiate and, with the vendor’s approval, agree and record, or have the legal practitioner or conveyancer record, the final terms of, and obtain signatures to, the contract;
    • attend to contract exchange; receive the price and certain advice or notices; and make public certain information.
  • The caveators deposed that on about 11 February they made an unconditional offer to purchase the apartment and one car space for $750,000, with settlement within seven days. Campbell deposed that caveators imposed a very short deadline on the offer and that he conveyed it to the vendor.
  • The caveators deposed that on 16 February Campbell said that he had found a purchaser for the other space and that the vendor had accepted their offer.  Campbell disputed this, deposing that although he could not remember his exact words he had no intention of conveying that a sale had been completed until signing of a written agreement. 
  • The vendor deposed that Campbell told her that he had located a potential purchaser of the apartment and one car space and another purchaser of the second space, and that she instructed him to amend the documents accordingly.    
  • On 18 February Campbell emailed the caveators: stating that if they could “confirm the below points for me” he would start the paperwork.  The points were: whether they had a conveyancer; their full names and address; price $750,000 with a 10% deposit; as to time for settlement; solicitors’ details.  The email concluded: “New paperwork is getting drawn up at our end so nothing for you to do at this stage”.
  • The caveators provided full names, address, lawyer’s details, and stated that settlement would be on 12 March.  
  • On 24 February Campbell emailed an unsigned section 32 statement and contract.  His email stated that he had just received these documents and not yet reviewed them “so let me know any questions you have and I’ll work through them”.   The unsigned contract named the vendor, referred to the apartment and to particulars of title of one space, but omitted purchasers’ names, price and settlement date.  When a caveator queried this Campbell replied that he had “just hit send as soon as I received and so you could have your people quickly review it before signing”.
  • On being informed by Campbell that someone else had purchased the apartment and both spaces the defendants on 2 March caveated on the grounds of a “part performed oral agreement” with the plaintiff.   On 4 March this contract was executed.  The vendor issued a notice under s. 89A of the Transfer of Land Act (TLA), leading to the caveators issuing a Proceeding with a Statement of Claim.  The vendor issued this proceeding under s. 90(3).  Campbell deposed that on average more than ten apartments in the building would be marketed and sold in any year.

The Victorian Statute of Frauds provision, contained in the Instruments Act s. 126, provides that –

“An action must not be brought to charge a person … upon a contract for the sale … of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note”.

In their Statement of Claim the caveators alleged, in the alternative to breach of contract, that the vendor represented that she would sell the apartment to them, such that she was estopped from resiling from that representation. 

Daly AsJ held –

 

Philip H. Barton

Owen Dixon Chambers West

Friday, September 17, 2021

Blog 46. Mere domestic relationship – No caveatable interest – Indemnity costs.

Burghley Pty Ltd v Soames & Anor [2021] VSC 236, McMillan J, 5 May 2021.

The facts were –

  • In 2016 the plaintiff became registered proprietor of a property at Red Hill.   The purchase price had been paid or lent by its sole director (Mr Cecil).  The plaintiff paid stamp duty and other expenses using funds borrowed from the first defendant (Ms Soames).
  • Mr Cecil and Ms Soames cohabited at the property, according to him from about 4 January 2017 to 29 November 2018, according to her from about 20 December 2016 to 24 December 2018.
  • On 11 June 2018 the loan by Ms Soames was repaid with interest.
  • On 8 November 2020 the plaintiff entered a contract of sale with settlement due on 8 February 2021.
  • On 17 November 2020 Ms Soames caused a caveat to be lodged over the property, naming the caveator as her then solicitor.  This caveat was withdrawn on 10 December. 
  • On 24 December Ms Soames issued a Federal Circuit Court (FCC) proceeding seeking relief including a declaration that she had been in a de facto relationship with Mr Cecil. 
  • On 14 January 2021 Ms Soames by her solicitors lodged a caveat claiming an implied, resulting or constructive trust.   On 25 January her solicitors stated as to the basis of the caveat that: Ms Soames instructed that a trust relationship existed between “her, your client and the vendor of the property”, the merits of which would be determined by the FCC; they believed the interest would be deemed to be a constructive trust; until the FCC determined this she legitimately sought to protect her interest in the property, and; she would lift the caveat to permit settlement of the sale if the plaintiff’s solicitors undertook to retain the proceeds in trust pending the FCC decision.  

The plaintiff applied under the Transfer of Land Act s. 90(3) for removal of the caveat.  The solicitor for Ms Soames filed an affidavit in which no basis for lodging the caveat was identified.  At the hearing Ms Soames offered to withdraw the caveat in return for $300,000 from the sale proceeds being held in trust pending determination of the FCC proceeding. 

McMillan J. held –

  1. Neither a mere relationship, nor the existence of the FCC proceeding, created a caveatable interest. [20]
  2. Claims by Ms Soames that a caveatable interest arose from the following alleged circumstances were rejected: her working for nominal wages in a restaurant owned by a company of which Mr Cecil was director or shareholder; her assisting in renovations, absent a joint endeavour in relation to purchase of the property; matters concerning companies and the loan.  The caveator accordingly had no arguable caveatable interest and the balance of convenience favoured the plaintiff. [23]-[29] 
  3. The caveat was lodged for a collateral advantage or to bring pressure on the plaintiff – a serious misuse of the caveat procedure for an ulterior or collateral purpose.  No proper attempt to articulate the basis of the caveat was given.  By inference the caveat was lodged as a bargaining chip in the FCC proceeding.   The caveator was ordered to pay indemnity costs. [21], [32]-[34]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, July 6, 2021

Blog 45. Getting your priorities straight.

This Blog deals with two recent caveat cases also involving priorities between interests in land, one simple, one complex. 

In Capital One Securities Pty Ltd v Lesic & Anor [2020] VSC 781, Ginnane J, 13 November 2020, the facts were –

  • Vongsa and Suzana Soch were registered proprietors of a property subject to a first mortgage to a bank and a second mortgage to the plaintiff securing a claimed debt of about $149,000.
  • A mortgagee’s auction had occurred.  The sale was not yet completed.
  • On 27 March 2020 the first defendant lodged a caveat claiming an implied resulting or resulting trust.  On 29 October 2020 he obtained a County Court judgment for $349,163.62 against Vongsa Soch for default in making discovery and in not attending a mediation, including a declaration that he had an equitable interest in the property and was entitled to maintain a caveat over the title. 

The plaintiff applied under the Transfer of Land Act s. 90(3) to remove the caveat.  Its director deposed to loan advances and that it would suffer a shortfall at settlement of the sale.   Ginnane J. removed the caveat and ordered the first defendant to pay costs on a standard basis.  Although there was a prima facie case that the first defendant had an equitable interest in the land, the plaintiff’s interest as second mortgagee had priority and the balance of convenience favoured removal of the caveat because it was impeding settlement of the mortgagee’s sale.

Roberts Gray Pty Ltd v Brunner & Ors [2021] VSC 76, Daly AsJ, 9 March 2021.

The facts were –

  • The first defendant (Brunner) owned a disused mining site at Yandoit Creek Road Franklinford worth about $320,000 (‘the land’). 
  • In 2016 a company (‘Vesterdix’) entered a rental agreement with TL Rentals Pty Ltd (‘TL Rentals’).   Brunner guaranteed Vesterdix’s obligations and as security agreed to mortgage the land to TL Rentals.  On 30 March 2017 TL Rentals caveated over the land based on this mortgage.  Vesterdix subsequently defaulted and TL Rentals eventually claimed a debt of about $96,000. 
  • On 11 April 2017 the fourth defendant (‘PG Walton’) registered a mortgage over the land to secure a short term advance. 
  • On 23 June 2017 it was agreed between the third defendant (Kellam) and Brunne that Kellam lend Brunner $30,000 and Brunner charge any freehold land he owned in favour of Kellam (‘June 2017 agreement’).  A copy of this document was in evidence but there was no direct or documentary evidence of the actual advance of monies.
  • Kellam also alleged that in August 2017 he acquired the debt (then standing at $188,065.50) and first mortgage held by PG Walton and made a further advance to Brunner.  There was, however, no direct or documentary evidence of payment to PG Walton.   However, PG Walton’s solicitors subsequently sent to Kellam’s solicitors the certificate of title and a discharge of its mortgage.  Kellam did not lodge these documents for registration. 
  • On 26 September 2017 Brunner executed a mortgage in favour of Kellam (‘Kellam mortgage’) under which Brunner promised to pay the mortgagee on demand all moneys owing by the mortgagor to the mortgagee including the moneys under a loan agreement between the parties executed that day.  However, no loan agreement was in evidence other than the June 2017 agreement.   There was no direct evidence of the sums secured and conflicting evidence about the size of the mortgage debt. 
  • From 2016 to 2018 the plaintiff (Roberts Gray), whose principal was Roberts, acted for Brunner including in a Family Court proceeding fixed for trial on 6 July 2018.  Brunner was non-compliant with financial disclosure orders and had not put Roberts Gray in funds.    
  • On 11 May 2018 Brunner emailed a draft financial statement to Roberts, prepared with the assistance of an accountant (‘the accountant’), which included: under the heading ‘Other mortgage payments’ that Kellam was the lender, that the address of the property was Yandoit Creek Road Franklinford and that the average weekly amount was $360; under the heading ‘Other mortgages’ that Brunner was the borrower, that ‘your share’ was 100% and ‘amount of your share’ was $200,000 (without specifying any security property).  However, the section headed ‘Liabilities’ did not list Kellam as a creditor.
  • On 5 July 2018 Brunner executed a document charging in favour of Roberts Gray ‘all land owned by me … now or in future as security for the payment of all professional fees and disbursements now owing or at any time may be owing by me to Roberts Gray Pty Ltd for legal services provided to me’.  (Roberts Gray subsequently conceded that the charge was ineffective to the extent that it sought an equitable interest in properties not legally and beneficially owned by Brunner, ie any property other than the land).
  • The Family Court trial date of 6 July was vacated.  On 20 July Brunner’s financial statement, in substantially similar form to the draft, was filed.  The reference to the payment of $360 per week to Mr Kellam remained.  However, under the heading ‘other mortgages’, appeared: ‘Jon Brunner borrowed against Yandoit and 308/6 Victoria Street the sum of $600,000’.
  • The plaintiff ceased acting for Brunner, claimed a debt of about $85,000 with interest, and on 30 August 2018 caveated over the land claiming an interest as chargee pursuant to an agreement with Brunner, J. B. & F. Investments Pty Ltd, and Vesterdix.  Brunner was the sole director of both companies and deposed that there was no agreement between Roberts Gray and either company.
  • On 10 December 2018 the Kellam mortgage was lodged for registration.
  • Following notice of this lodgment Roberts Gray commenced a proceeding seeking relief, including: an order under s. 90(2) that the Registrar of Titles delay registering the Kellam mortgage; an order that it have leave to amend the grounds of claim in its caveat by deleting all parties to the agreement with Brunner except itself; a declaration that it held an equitable charge; and an order for sale of the land.
  • Registration of Kellam’s mortgage was ordered to be delayed, eventually until the trial and determination of the proceeding.    
  • On 20 February 2020 Brunner was declared bankrupt.
  • Roberts deposed or gave evidence:
    • that on 25 August 2017 the solicitors for the other party in the Family Court proceeding, Lander & Rogers, sent a copy of the June 2017 agreement to his firm;
    • that on 2 November 2017 Lander & Rogers wrote referring to the June 2017 agreement and to a loan from PG Walton to Vesterdix of $165,000 secured by a mortgage over the land and another property.
    • that on receipt of the draft financial statement on 11 May 2018 he knew of the $30,000 loan by Kellam to Brunner;
    • that when the charge was executed (on 5 July 2018) he believed that this loan had been paid off or (he also deposed) significantly reduced but had not contacted Kellam about this;
    • denying that before execution of the charge he was aware that Kellam had an interest in the land or that Brunner (who deposed to the contrary) had so instructed him, or that the Kellam mortgage existed, and stating that before taking the charge he did not do a title search or attempt to ascertain what interest if any PG Walton or TL Rentals had in the land;
    • denying that Brunner told him, immediately before filing the financial statement on 20 July, of the Kellam mortgage;
    • stating that on 20 July 2018 the accountant told him that the loan of $30,000 had been repaid and had not told him of a mortgage securing $250,000 plus interest.  He denied (contrary to evidence of the accountant) that the accountant had told him that the ‘private client mortgage’ over Yandoit secured $250,000 plus interest and denied that the accountant had met him before 20 July;
    • that he had never seen any document evidencing a loan by Kellam in any amount other than $30,000;
    • that he believed that the sworn financial statement “loaded up” the land to defeat the interests of the other party.
  • Brunner gave evidence that: Roberts did not ask him how much equity he had in the land; and he did not tell Roberts that he had no equity in the land, as there was no need because, having prepared Brunner’s financial statements, Roberts knew this.

Kellam submitted that he held two distinct security interests over the land: a subrogated right to the PG Walton mortgage; and an equitable interest by reason of his possession of the unregistered Kellam mortgage, the discharge of PG Walton mortgage and the certificate of title.  It was common ground that the interest in the land of TL Rentals had priority over any interest of Roberts Gray’s.  TL Rentals abided the outcome of the proceeding.

Daly AsJ held –

  1. On the balance of probabilities Kellam paid out the PG Walton mortgage.  While there was no evidence of the time and amount of funds transferred, the PG Walton loan was by inference discharged before October 2017, when the certificate of title and discharge of mortgage were delivered to Kellam’s solicitors.  The timing of the execution of the epitome of the Kellam mortgage was also consistent with this. [125]-[127]  
  2. Ordinarily, absent evidence that the epitome of mortgage was either a forgery or a sham, its very existence was compelling evidence of the evidence and validity of an equitable mortgage. [129], [133]
  3. The authorities were divided on whether a party claiming to be subrogated to the rights of a prior mortgagee was entitled to the benefit of the terms of the underlying loan contract.  The better view was that the subrogated party did not automatically acquire identical contractual rights to the original interest holder, such as, for example the interest rate payable by the mortgagor to the original lender. [123]
  4. Kellam had discharged the onus of establishing his entitlement to be subrogated to the rights of PG Walton under the PG Walton mortgage to the extent of the sum paid by him to it to discharge its loan to Brunner secured by the mortgage, plus interest. [83], [118], [131] 
  5. As Kellam was entitled to be subrogated to the rights of PG Walton under its mortgage, and this mortgage was registered, Kellam had priority over TL Rentals and Roberts Gray with respect to the amounts paid by him or on his behalf to PG Walton. [131]
  6. Any sums secured by the Kellam mortgage which were not referable to the PG Walton mortgage were thus secured only by an equitable mortgage, which ranked behind the interest of TL Rentals. [131]
  7. As to whether Kellam’s interest as the holder of an equitable mortgage should prevail over Roberts Gray’s later interest as chargee –

    (a)    Where merits were equal, the general principle applying to competing equi­table interests was that priority in time of creation gave the better equity. [118], [141], [160]

    (b)   Where merits were unequal and favoured the later interest, as for instance where the owner of the later interest was led by conduct of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, the later interest would have priority.   It was always necessary to characterise the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct was such that in fairness and in justice the earlier interest should be postponed to the later. [141], [143], [144]

    (c)   The mere failure of the holder of a prior equitable interest in land to lodge a caveat did not in itself involve the loss of priority which the time of the creation would otherwise give. [144] (d)    A person taking an interest with actual, imputed, or constructive notice of an earlier interest took subject to that interest, unless the earlier interest holder had engaged in conduct to induce the belief in the later interest holder that the earlier interest no longer existed. [156], [157], [161]

    (d)     A person taking an interest with actual, imputed, or constructive notice of an earlier interest took subject to that interest, unless the earlier interest holder had engaged in conduct to induce the belief in the later interest holder that the earlier interest no longer existed. [156], [157], [161]

    (e)    The onus rested on the holder of a later interest to show that the earlier should be postponed. [84]

    (f)    The evidence was inconclusive on whether Roberts Gray had actual notice of the Kellam mortgage.  However, it would have been open to Roberts Gray (and prudent) to conduct a title search before taking the charge.  This was inexcusable in the context of a priority dispute.  Although a title search at the time the charge was taken would not have disclosed Kellam’s interest in the land the PG Walton mortgage and the TL Rentals caveat would have been revealed.  Upon such a discovery, Roberts Gray would have been in a position to make more fulsome inquiries of PG Walton and/or TL Rentals and Brunner.  Accordingly Roberts Gray had at least constructive notice of Kellam’s interest. [118], [162], [165], [167]-[169]

    (g)     However, even if this finding of constructive interest was incorrect, there was no basis for postponing Kellam’s equitable interest to Roberts Gray’s interest.  Kellam had not so conducted himself as to induce a party in the position of Roberts Gray into believing there was no prior interest holder.  The agreement by Brunner and Kellam to keep their arrangements private did not misrepresent the position to third parties. [118], [170], [171] 

  8. The application to amend the caveat by deleting J. B & F Investments Pty Ltd and Vesterdix would be granted because:

    (a)    it would not alter the estate or interest claimed in the caveat, but amend the grounds of the claim, with no prejudice to anyone; [178]

    (b)    Roberts Gray undoubtedly had an interest in the land as chargee.  The ques­tion of the validity of the charge has fallen away and the only dispute was over priority, which should be determined on the merits; [179]

    (c)    although less latitude was affordable to a caveat lodged by a solicitor, as op­posed to one prepared by a lay person, the prejudice to Roberts Gray of not being able to amend the caveat outweighed this consideration. [118], [180]

  9. Given that Kellam stood in the shoes of the holder of a registered mortgage, he had a prima facie entitlement to take possession of and sell the land, provided the requirements of s. 77 of the TLA had been fulfilled, and subject to his obligations to account to TL Rentals and Roberts Gray.  However, there was no evidence that the threshold requirements of s. 77 had been met, and given that the parties all agreed on sale, the court would appoint the trustee in bankruptcy to do this and account to the interest holders. [118], [183]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, 29 June 2021

Blog 43. Claim for constructive trust based on derivative company proceeding.

AAGG Developments Pty Ltd v Saafin Constructions Pty Ltd & Ors [2020] VSC 768, Derham AsJ., 17 November 2020, was one of several Supreme Court cases between the same or related parties arising from the same transactions.  It is necessary to set out some factual background outside the judgment the subject of this Blog.

  • Hassan, Mohamed and Wael El-Saafin (‘the Saafin Parties’) were directors of and/or shareholders in the first defendant (‘the Company’). In 2015 the Company entered a contract with a builder to develop land owned by the Company in North Melbourne (‘the Land’).
  • On 28 October 2016 the Company entered agreements with a financier (‘Balanced Securities’) to finance this development in part secured by registered mortgage over the Land.
  • Building works were performed, a dispute arose between the Company and builder, and in April 2018 the Company terminated the building contract with the development partially completed.
  • On 9 April 2018 a Mr Franek purported to appoint receivers to the Company pursuant to an agreement securing a loan by him to Wael El-Saafin. On 18 April 2018 Balanced Securities assigned its rights to Franek, recording that about $3m was owed to it.  Subsequently, Franek nominated another company (‘MAG’) as the assignee.  Franek also assigned his personal rights to MAG.  The receivers resigned but were reappointed by MAG.
  • On 20 June 2018 various debts allegedly owing by the Company were assigned to MAG, with the purpose of turning unsecured into secured debt.  MAG then claimed that the debt owed to it was about $8.2m. by reason of the Balanced Securities loan, the Franek loan, interest, costs, and the debt assigned on 20 June.
  • Between 27 June and early August 2018: Hassan and Mohamed El-Saafin (‘the Saafins’) offered to pay approximately $4.4m. being what they considered was the sum required to obtain a discharge of the mortgage; MAG and the receivers disputed this amount; and the Supreme Court made restraining orders which were dissolved on undertakings by the receivers to the same effect.
  • On 9 July 2018, MAG as mortgagee entered into a contract to sell the Land to the plaintiff (‘AAGG’) by private sale for $4.5m. The shareholders in AAGG were persons associated with parties already involved in the above transaction, including the builder.  The sale was settled on 20 July 2018 and AAGG became registered proprietor.  The Saafins continued to offer to pay out the mortgage until advised of this sale.
  • On 26 July 2018 the Company and the Saafin Parties lodged a caveat over the Land, claiming an implied, resulting or constructive trust in their favour.
  • On 7 August 2018 the Supreme Court made interlocutory orders including restraining AAGG from dealing with the Land. The judge found a serious question to be tried as to whether: the 20 June debts were validly the subject of MAG’s security interest, and; the sale to AAGG should be set aside.
  • The Company subsequently went into liquidation.
  • In El-Saafin & Anor v Franek & Ors (No 4) [2020] VSC 389 (‘El-Saafin (No. 4)’) Lyons J. gave leave for the Saafin Parties to make a derivative claim on behalf of and in the name of the Company for relief including for a declaration that AAGG held the Land on constructive trust for the Company and orders that AAGG be restrained from disposing of the Land and re-convey it to the Company. His Honour found that a solid foundation existed for this relief.  However, this decision was subject to an appeal which had been heard with judgment reserved.  Nonetheless, pursuant to El-Saafin (No. 4) a proceeding (‘the Derivative Proceeding’) was commenced by the Company and the Saafin Parties as plaintiffs against AAGG and others.  This was fixed for trial in February 2021.

AAGG applied under s. 90(3) of the Transfer of Land Act for removal of the caveat and to restrain the Saafin Parties from lodging any further caveat.

Derham AsJ refused the application, holding –

  1. To the extent necessary, the plaintiff had leave pursuant to s. 471B of the Corporations Act 2001 to proceed with the current applications against the Company. [20]
  2. Notwithstanding appointment of Receivers and Managers to a company, its directors retained, generally speaking, residual powers enabling them to authorise the lodging of a caveat in the name of the company to protect its proprietary interest in land pending the determination of litigation to establish that interest. The Saafin Parties who were directors of the Company were in that position when the caveat was lodged.  The contrary view was not open without a thorough examination of the terms of appointment of the Receivers and Managers (there being no material in evidence enabling this examination). [13]-[14]
  3. The existence of the Derivative Proceeding and the claims for relief made in it established a prima facie basis for the interest claimed in the caveat by the Company, through the Saafin Parties, derivatively. The analysis of facts and law by Lyons J in El-Saafin (No 4) was the prima facie case.  The formulation of the interest claimed in the caveat was to be viewed having regard to the claims by the Saafin Parties ‘on behalf of and in the name of the Company’ in the Derivative Proceeding.   [15]-[17]
  4. By reason of the impending trial of the Derivative Proceeding, but subject to the outcome of the appeal in El-Saafin (No 4), the balance of convenience favoured the maintenance of the caveat to await the outcome of the appeal, or, if the appeal failed, of the Derivative Proceeding. [19]
  5. If the Court of Appeal reversed or varied the orders in El-Saafin (No 4) the underlying basis for the caveat may be destroyed and it then may be appropriate that the current application be revisited. Accordingly although the application under s. 90(3) would be refused there would be liberty to re-apply. [12]

Philip. H. Barton
Owen Dixon Chambers West
Tuesday, May 18, 2021

Blog 44. Indemnity costs and injunction against caveating.

BCA Asset Management Group Pty Ltd v Sand Solutions (Vic) Pty Ltd & Ors [2021] VSC 177, Derham AsJ, 13 April 2021.

Before 2009 William Attwood, married to Jane Attwood, became sole registered proprietor of approximately 29 ha. at Devenish (the AustLII report says this occurred on 17 April 2013 but this seems incorrect).  The subsequent chronology was –

16 February 2009        Broken Creek Developments Pty Ltd  (‘BCD’)  incorporated with the second defendant (‘Colling’) its sole director and member.

20 August 2009              223 Coopers Road Devenish (‘the Land’) now comprised the 29 ha. plus land in Certificates of Title Volume 11153 Folios 541 and 542.

1 February 2010           Colling and BCD lodge caveats over the Land claiming an interest as a beneficiary under a constructive trust of which the Attwoods were the constructive trustees (‘First Caveats’).

25 June 2010                 Sand Extraction Agreement between Jane Attwood and Devenish Sands Pty Ltd.  This agreement: was conditional on the grant of an Extractive Industry Work Authority and approval of the company’s Work Plan within 180 days (clause 2.1); had an initial term of 10 years (clause 11.1); and could be terminated by Ms Attwood on the happening of a Default Event, which was defined to include an Insolvency Event (clauses 12.1 and 13.1).  It was unclear whether Ms Attwood waived compliance with the conditions precedent or when this agreement commenced.

12 January 2011              First Caveats withdrawn.

26 May 2011                   Ms Attwood registered as the sole proprietor of the Land.

29 July 2011                    Work Authority issued to Devenish Sands Pty Ltd.

23 November 2011       Colling lodges caveat over the Land claiming an interest as beneficiary under a constructive trust between himself and Ms Attwood (‘Second Caveat’).

14 January 2013             First defendant (‘Sand Solutions’) incorporated.

9 July 2014                  Work Authority transferred from Devenish Sands Pty Ltd to Sand Sol­utions.

8 August 2014               Devenish Sands Pty Ltd wound up in insolvency.

17 April 2015                Devenish Sands Pty Ltd by its liquidator disclaims any interest in the Land under the Sand Extraction Agreement.

13/14 September 2016     Second Caveat withdrawn. 

July 2017 on                    Sand Solutions seeks access to the Land for the purposes of remediation. At all times, Sand Solutions proceeds on the basis it had no right of access.

10 November 2017       Contract of sale whereby Ms Attwood agrees to sell the Land to BCA Civil Pty Ltd.

20 March 2018            Caveat by Sand Solutions over the land in Certificates of Title Volume 11153 Folios 541 and 542 claiming an interest as the grantee of a profit à prendre pursuant to an agreement entered into 16 June 2010 (‘Third Caveat’).  Sand Solutions was not at this time in existence and the only agreement known that might support a profit à prendre was the Sand Extraction Agreement with Devenish Sands Pty Ltd.

23 March 2018              Ms Attwood commences proceeding seeking an order for the removal of the Third Caveat.  

Undated                            Caveat withdrawn before hearing.

28 March 2018              Zammit J. orders Sand Solutions to pay Ms Attwood’s standard costs and otherwise dismisses the proceeding stating that the Court would take a ‘very dim view’ if Sand Solutions again caveated.

4 May 2018                      Plaintiff registered as the sole proprietor of the Land.

1 August 2020                  Colling appointed sole director of Sand Solutions.

26 February 2021          Sand Solutions, by a solicitor, lodges caveat (‘Fourth Caveat’) claiming an interest as grantee of an easement pursuant to the Sand Extraction Agreement.

18 March                          Plaintiff writes requesting withdrawal of caveat. 

22 March                          Plaintiff email foreshadowing urgent application for caveat removal.

24 March                      Email by caveator’s solicitor saying he was to confer with his client.  No further response. 

31 March                          Plaintiff commences proceeding under Transfer of Land Act s. 90(3) returnable on 13 April.

6 April                        Email from caveator’s solicitor stating: his client maintained that it had rights to go upon the land and extract the sand, in accordance with a (cancelled) planning permit and a Licence granted by Earth Resources; it was anticipated that VCAT would reinstate the permit; if his client succeeded at VCAT then his client would, if necessary, commence court proceedings seeking a declaration that it had the rights it claimed; but to avoid costs the caveat would be withdrawn.

8 April                            Caveat not yet withdrawn, plaintiff’s solicitor writes with draft order for caveat removal and payment of indemnity costs. 

Undated                            Caveat withdrawn after service of Originating Motion and Summons. 

13 April                            Hearing.


An affidavit was filed on behalf of the plaintiff deposing that: no grant of easement by Ms Attwood to Sand Solutions had ever been drafted; the plaintiff intended to use the Land as a commercial water park with caravan facilities; to undertake this development other investors were required, one of whom withdrew on learning of the possible easement, others of whom would not proceed until the caveat issue was resolved, and one of whom was seeking return of her investment unless the caveat was removed within 30 days but would also seek immediate refund of her investment if Sand Solutions and Colling further caveated; delay put at risk necessary support by the Benalla Rural City. 

Derham AsJ ordered –

1.     Sand Solutions and Colling to pay indemnity costs because –

(a)      the claim to an easement (or to any other proprietary interest) lacked any basis;

(b)     the plaintiff sought withdrawal of the caveat before the proceeding was commenced, which did not occur;

(c)   before the proceeding was commenced Sand Solutions was warned that the plaintiffs would suffer damage from the Fourth Caveat, and after commencement of the proceeding an award of indemnity costs against Sand Solutions and Colling was foreshadowed;

(d)     the caveat was lodged as a bargaining chip;

(e)   it was impermissible for the innocent registered proprietor to bear any differ­ential between standard and indemnity costs, occasioned by the delinquent conduct of Sand Solutions and Colling. [27]-[28]

2.   That Sand Solutions and Colling be restrained, until further order, from lodging for regis­tration any caveat in reliance on a profit à prendre or an easement.  As to the power to grant an injunction –

(a)   Normally the injunction would be in the nature of a final or permanent injunction: as an injunction restraining Sand Solutions and Colling from lodging any further caveat on the basis of the Sand Extraction Agreement, or on the basis of an alleged profit à prendre or easement, would be an order in aid of the plaintiff’s proprietary right to quiet and peaceful enjoyment of the Land as registered proprietor; [15]

(b)  However because Sand Solutions and Colling had not appeared in court, and there may be some other basis for their belief that a subsisting proprietary right existed surviving the indefeasibility provisions of the Transfer of Land Act, it was appropriate to apply principles applicable to the grant of interlocutory injunctions by analogy; [16]

(c)         An interlocutory injunction would go because –

(i)    The plaintiff had demonstrated a prima facie case that there was a high proba­bility, approaching a certainty, on the evidence, that its proprietary interest in the Land was free from any proprietary interest of the kind claimed in the Third and Fourth Caveats.   There was also a prima facie case that if not restrained Sand Solutions and Colling would continue to lodge caveats as bargaining chips in pursuit of asserted rights under the Sand Extraction Agreement; [29]-[30]

(ii)      The injury which the plaintiff was likely to suffer was one for which dam­ages would not provide an adequate remedy.  In cases concerning the ‘quieting of title’, meaning the seeking of the assistance of the Court to protect and preserve the title to land against unwarranted challenges or claims, damages were not considered an adequate remedy; [31]

(iii)  The balance of convenience favoured the plaintiff.  The strength of the plaintiff’s claim, the weakness of the claims raised by the Third and Fourth Caveats, and the evidence of actual and potential injury to the plaintiff occasioned by the caveat entailed that the course carrying the lower risk of injustice (if it should turn out to have been wrong) was to restrain Sand Solutions and Colling, but, because they had not appeared, to give them liberty to apply to discharge the injunction. [32]

                                                                                     Philip. H. Barton
Owen Dixon Chambers West
Tuesday, May 25, 2021

42. Claim for compensation under TLA s. 118.

Long Forest Estate Pty Ltd v Singh & Anor [2020] VSC 604 (23 September 2020), John Dixon J., is a very long case only part of which involves a caveat.  It is also an interesting decision on whether a vendor’s statement is required to disclose declarations or decisions by a Minister or Department of the Commonwealth.  Briefly the facts were –

  • The plaintiff (Long Forest) owned farmland adjacent to a Nature Conservation Reserve.  It had acquired the land for residential development but without any active planning approvals in place.
  • The land was subject to –
    • three declarations of the Commonwealth Minister for the Environment and Heritage under the Environment Protection and Biodiversity Act 1999 (Cth) as to threatened species, ecological communities and key threatening processes;
    • two decisions of the Minister under that Act which related to Long Forest’s proposal for residential development.  The former decision, in 2014, described the proposed construction of a particular residential development as a controlled action, stating that the project would require assessment and approval under the Act before it could proceed.  The latter decision, in 2015, informed the plaintiff that its proposal to construct the residential development would be approved subject to conditions.

The declarations, applications for approval for projects constituting controlled action and any final approval by the Minister were publicly available documents. 

  • However, by 2016 the plaintiff no longer intended to develop the land.  It was listed for sale without a planning permit. 
  • Negotiations occurred between representatives of Long Forest and the first defendant (Singh).  The Sale of Land Act s. 32D(a) required the vendor to disclose –

“[P]articulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal directly and currently affecting the land, …”

The vendor’s statement did not disclose the Minister’s declarations or decisions. 

  • Singh signed the contract of sale after being given a copy of the vendor’s statement.  He subsequently nominated the second defendant as purchaser. 
  • The purchaser did not pay the balance of the purchase price.  On 13 June 2017 the vendor served a rescission notice.  On 21 June 2017 a caveat was lodged on behalf of the nominee purchaser claiming a freehold estate with an absolute prohibition on dealing on the grounds that the caveator was a purchaser under an uncompleted contract of sale.  On 27 June the vendor’s solicitors wrote to the purchaser’s solicitors stating that as the rescission notice had not been complied with the contract was terminated and the deposit was forfeited.   In the meantime the defendants contended that they had validly rescinded the contract for non-compliance with s. 32D.
  • Long Forest applied to the Registrar of Titles under the Transfer of Land Act (TLA) s. 89A for service of a notice on the caveator.   In response the caveat was withdrawn and two replacement caveats were lodged on behalf of Mr Singh and the second defendant, each claiming a purchaser’s lien to secure repayment of the deposit of $400,000.
  • Long Forest’s solicitors wrote demanding that these caveats be removed, foreshadowing proceedings under s. 90(3), notifying that the caveat was preventing refinancing at a lower interest rate, and foreshadowing a claim for compensation under the TLA s. 118 for loss suffered by the refinancing delay.
  • Proceedings under s. 90(3) were issued but by agreement, reflected in a consent order, the caveats were withdrawn on the undertaking of Long Forest’s solicitors to hold $400,000 in trust not to be withdrawn without agreement or further order.

Long Forest made a number of claims against the defendants including under s. 118 for compensation for the delay in refinancing from 22 November 2017 to 11 April 2018.

John Dixon J. relevantly held –

  1. The plaintiff had validly rescinded the contract for non-payment of the residue of the price and was entitled to forfeit the deposit.  The defendants’ argument that the plaintiff had breached s. 32D by not disclosing the Minister’s declarations or decisions failed.  Neither the Minister nor the Department was a public authority or a government department as those terms were used in the Sale of Land Act – the Victorian Parliament never contemplated that information issued by Commonwealth agencies or departments would need to be attached to a vendor’s statement.  Further, none of the declarations or notices directly and currently affected the land at the relevant time, as Long Forest had already abandoned its application for ministerial approval of the controlled action constituted by the subdivision of the land.   Under the federal statutory regime, any approval of a proposed action and the conditions attached was affixed to the designated proponent and the project constituting the controlled action, rather than the land that constituted the relevant habitat or environment. [8]-[10], [13], [117], [141], [157], [158], [169], [174]-[176], [179], [181], [182]
  2. His Honour stated the law under s. 118 in conventional terms, in particular referring to KB Corporate Pty Ltd v Sayfe & Anor.  (KB is dealt with in Blog 9 but its summary of six relevant propositions is set out in Blog 24, Lanciana v Alderuccio per Moore J., paragraph 2). [339]-[341]
  3. Mr Singh had an honest belief, based on reasonable grounds, that he was entitled to the interest claimed in the caveat on the grounds identified.  Where a caveat is lodged by solicitors on behalf of a caveator, it would usually be inferred that those solicitors received instructions, gave advice and were then further instructed to lodge the caveat.  Ordinarily, such inferences will be drawn in the absence of specific evidence demonstrating departure from expected conveyancing practice.  Long Forest had not discharged the onus of proving that the solicitors lodging the caveats either never genuinely advised Singh that there was a proper basis to contend for breach of s 32D, entitling him to return of the deposit, or were not his lawyers at the relevant time.  His Honour was not persuaded that there was not a genuine dispute between the parties about the termination of the contract and the entitlement to the deposit, a dispute that has only been quelled by this Judgment. [11], [342], [343], [351], [352], 354]-[356]

Philip H. Barton

Owen Dixon Chambers West

27 October 2020