A claim for compensation under s. 118
KB Corporate Pty Ltd v Sayfe and Anor  VSC 623, 22 December 2017, Mukhtar AsJ.
A judge had previously ordered the defendant to remove caveats lodged over the plaintiff’s properties. This was a consequential application for compensation under s. 118 of Transfer of Land Act which created liability in any person lodging a caveat without reasonable cause to pay compensation to any person who sustained damage thereby. The plaintiff claimed that the caveats delayed a purchase of a NSW property by a company with the same directorship and shareholding, which purchase was allegedly being funded by a loan from a financier to the plaintiff. His Honour held –
1. The relevant principles under s. 118 were in substance:
- The plaintiff had the onus of proving both lack of caveatable interest and that the defendant lacked an honest belief based on reasonable grounds that the caveatable interest existed. Even this may not suffice if it was established that the caveator was actuated not by the protection of the caveator’s interest but by an ulterior motive;
- The fact that the caveator obtained legal advice to lodge the caveat may be of considerable significance in determining lack of reasonable cause, but the content and accuracy of the legal advice must be evaluated with all other relevant circumstances. However, his Honour noted NSW authority that, where a solicitor had no reasonable basis for advising the caveators to caveat, the caveators had no reasonable grounds for their belief that they were entitled to lodge a caveat.
2. The elements required under s. 118 were established.
3. Because of the caveats the lender to the plaintiff temporarily withheld certain funds, causing increased payments by the plaintiff to the lender for interest and re-scheduled and delayed settlement and legal fees. This claim succeeded.
4. A second claim related to a payment to the vendor of the NSW property as a condition of extension of the settlement date (calculated on the basis of the vendor’s alleged lost interest, refinance fees and re-scheduled and delayed legal fees) because the caveat allegedly delayed receipt of the loan. This claim failed for lack of proof that the inability to obtain the loan disabled or impaired the purchaser from completing the contract.