Today’s blog looks at three County Court cases from 2017, one on whether a contractual right to caveat created a charge/caveatable interest, one on whether a contract of sale existed so giving rise to an equitable and thus caveatable interest, the third on costs.
- A mere contractual right to caveat, insufficient in this case: Tannous and Anor v Abdo [2017] VCC 304 (31 March 2017) Judge Macnamara.
The plaintiffs alleged that they agreed with Mr Abdo to purchase an interest in a bakery and paid money towards this, which went into the purchase of land by Mrs Abdo. At one point in the litigation to recover the sum paid towards the bakery the parties entered a document which included an undertaking by the Abdos not to sell this land and to permit the plaintiffs to lodge a caveat over it. They caveated claiming “an equitable interest as chargee”. His Honour held that whether, absent an express charging clause, an equitable interest in the nature of a charge was created by a contractual entitlement to lodge a caveat depended on the interpretation of the particular contractual provision: there was no principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money. No charge was created here: for the plaintiff to succeed here there must be implied not just a charge but also a guarantee by Mrs Abdo of Mr Abdo’s alleged debt. The contractual language did not support creation of a charge. The agreement created at best a negative covenant not the deal with the property, creating no caveatable interest.
- No contract, no caveatable interest: Matthews v Knight & Anor [2017] VCC 1537 (27 October 2017) Judge Anderson.
The facts of this case could be used in a University Exam Paper on whether or not a contract existed. The facts broadly were: delivery by an agent of three contracts (one for each of three properties) to a prospective purchaser; receipt by the agent of $1,000 partial deposit for each contract; the creation of three further contracts, partially reusing the former contracts, signed by the parties, requiring payment of a full 10% deposit by 15 September 2017, if necessary enforceable by reason of part performance; the solicitors acted as though there were enforceable contracts; the purchaser caveated; the balance of deposit was not paid; the vendor’s solicitors rejected a proposal to vary the contract and issued a rescission notice which was not complied with; the erstwhile purchaser engaged in an “opportunistic ploy” to suggest that contracts were still on foot; a further caveat.
The caveats were removed under TLA s. 90(3). The purchaser failed to satisfy the onus of demonstrating a serious issue to be tried that a contract and so an equitable interest in the land existed. There was no contract following the second contracts because: the second contracts were not intended as offers but if they had they were revoked or had lapsed; the purchaser’s purported acceptance of an alleged offer constituted by the delivery of the second contracts (ie the “opportunistic ploy”) did not accept the terms offered but proposed variation which variation the vendor never accepted.
- Indemnity costs: Hooi & Anor v Lim & Anor [2017] VCC 949 (13 July 2017) Judge Cosgrave.
The first defendant caveated over land of which the plaintiffs were registered proprietors. He alleged a constructive trust. He subsequently stated that the basis of the caveat was wrongful diversion of monies and work from a partnership, but also acknowledged that he had no evidence that these monies (or what monies) had been used to purchase the land. The plaintiffs requested removal of the caveat, asserted that the caveator had no caveatable interest, and foreshadowed indemnity costs. Subsequently they applied for removal under the TLA s. 90(3). The first defendant removed the caveat on day before hearing.
Judge Cosgrave reiterated the legal principles for caveatable removal in conventional terms (roughly as set out in Blog 1) and noted that there was never any serious question to be tried that the defendant had the interest in land claimed. As to costs his Honour held:
1. Awarding costs involved a discretionary exercise of the court’s powers. The relevant factors to consider in this context included: :
· whether the caveat was maintained in circumstances where the defendant, properly advised, should have known there was no chance of success;
· whether the caveat was being used as a bargaining chip;
· whether the party lodging the caveat was a lawyer.
2. Indemnity costs would be awarded for several reasons:
· The first defendant had lodged the caveat without any proper basis, and knew or should have known this;
· Unjustified allegations of fraud, in this case that land had been purchased with allegedly misappropriated funds, attracted liability for indemnity costs. One solicitor should not make such an allegation against another without proper basis, exacerbated here because the defendant believed that the plaintiffs had to consent to the lodgment yet had lodged unilaterally. This increased the likelihood that lodgment was for a collateral or improper purpose;
· The first defendant had ignored warnings to remove the caveat;
· The interest claimed in the caveat was exaggerated.
Excellent summary of 3 cases illuminating caveat principles and the costs consequences for lodging caveats without a proper basis.