Category: Abuse of Process – s 90(3)

Blog 84. A freehold estate?

The Victorian government publication “Guide to grounds of claim for caveats” lists “Freehold Estate” in certain circumstances under “Estate or interest claimed”.  In Alliance Developments Pty Ltd v Arbab & Anor [2019] VSC 832 (Blog 34) Garde J. stated at footnote [15] –

“At common law, there are three kinds of freehold estates – a fee simple, a fee tail and a life estate.  The most common freehold estate encountered in Victoria is the fee simple estate.”  Because it has been impossible to create a fee tail in Victoria for a long time (see Property Law Act  1958 Part VI) the field is reduced to fee simple and life estate.  In Marchmont v Keeshan [2023] VCC 2138 Judge Marks considered: caveats claiming a freehold estate; issue estoppel, Anshun estoppel or abuse of process arising from a previous caveat removal proceeding; and whether a stay should be granted pending an appeal from orders removing caveats, in the course of which her Honour considered the nature of a caveat.

The facts were –

  • In March 2017 the plaintiffs lent the defendant $50,000 pursuant to a written agreement.  On about 20 September 2017 the plaintiffs and the defendant entered a second agreement relating to the original $50,000 loan and to a further loan of $185,000.  Clause 8.1(b) of the Second Agreement in substance provided that if there was a default by the Borrower the Lender (i) ‘may call on the Borrower to provide a mortgage over real property determined by the Lender on such terms and conditions as are determined by the Lender, at any time prior to the Repayment Date’ and (ii) ‘At any time prior to the Repayment Date the Lender may, pursuant to this clause, lodge a caveat over any such real property it may determine as appropriate to provide security pursuant to sub-clause (a) hereof.
  • The defendant repaid part of the debt, the extent of repayment being disputed.
  • On 6 July 2020, the plaintiffs lodged caveats over properties owned by the defendant stating the ‘Estate or interest claimed’ as ‘Freehold Estate’ and the ‘Grounds of claim’ as ‘Agreement with [the Registered Proprietor(s)] dated 20/09/17’.
  • February 2023 the defendant, in the context of seeking a particular refinancing facility, applied to the Supreme Court to remove the caveats, resulting in a consent order dismissing the proceeding with no order as to costs.  Under “Other Matters” McDonald J. noted –

“The parties have agreed to resolve the matter with the First and Second Defendant consenting to a registration of first ranking mortgages over the properties the subject of the proceeding.  The First and Second defendants undertake to provide all relevant consents in writing for the registration of first ranking mortgages in relation to the facility referred to at paragraph 17 of the affidavit of Clinton Keeshan …”.

  • That refinancing did not proceed and the defendant now applied to the County Court under the Transfer of Land Act s. 90(3) for removal of the caveats.

Judge Marks removed the caveats, holding –

  1. The reference to ‘sub-clause (a)’ at the end of sub-clause (b)(ii) was to be construed as a reference to sub-clause (b)(i). [27]
  2. There was no serious question to be tried that the plaintiffs had the estate or interest claimed, because –
    1. Each caveat “overclaimed”, in that cl. 8.1 gave no sort of freehold estate interest but at most a charge or something akin to a chargeable interest.   This case was distinguishable from 187 Settlement Road v Kennards Storage Management [2022] VSC 771 (Blog 69) where a ‘freehold estate’ was claimed in circumstances involving a right which might later turn into holding the freehold estate, in that that caveator had a conditional right to purchase that land.  The highest interest ever available to the plaintiffs under cl. 8.1(b) was the right to call on the defendant to provide a mortgage. [21], [24], [25], [28], [31]
    2. Clause 8.1(b) did not entitle the plaintiffs to restrain any dealing with the freehold estate.  An unregistered charge, unregistered mortgage, or even a registered mortgage, did not prevent the registered proprietor of the land from granting further charges or mortgages.  The principal vice in a caveat which overclaimed in the manner of these caveats was that they could achieve that unjustified effect.  This was a key reason underpinning the requirement for a caveator to establish a serious question to be tried of the estate or interest claimed and not some other interest.  This case was analogous to those in which a creditor claimed ‘an estate in fee simple’. [29], [30]
  3. Further, on the proper construction of the second agreement, a ‘call’ under cl. 8.1(b)(i) was likely necessary before a caveatable interest arose (and there had not been one). [35]
  4. The balance of convenience also favoured removal of the caveats over some of the properties, because, having regard to amount arguably secured, the plaintiffs would have been protected by maintaining caveats on the other properties.  There was no identifiable prejudice to the caveators from this removal, but the registered proprietor needed to avoid the consequences of the first mortgage being in default. [36], [37], [39]
  5. None of the doctrines of issue estoppel, Anshun estoppel or abuse of process, founded on the existence of the Supreme Court order, barred this application.  In particular –
    1. although an issue estoppel could arise where a final order was made, including by consent, the estoppel could only exist in respect of matters necessarily resolved by the earlier order and where the decision was ‘final and conclusive on the merits’.  Nothing as to the validity of the caveats was necessarily resolved as a step in reaching the ‘determination’ made in the Supreme Court order; [49]-[51]
    2. An Anshun estoppel precluded the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable for the claim not to have been made or the issue not to have been raised in that proceeding.  There was no hearing on the merits in the Supreme Court: it was not arguable that it was unreasonable for claims or arguments as to the validity of the caveats (and the overclaim) to have been made in circumstances where the first proceeding was settled at an early stage without any submissions being made. [52]-[53]
    3. An abuse of process existed where in an earlier proceeding a claim was made or an issue raised and determined, or where it ought reasonably to have been so made or raised for determination. It was not the case that arguments about the validity of the caveats ought reasonably have been made in the Supreme Court proceeding in circumstances where it was settled at an early stage without submissions being made.   The circumstances underlying this application and the earlier one were different – the consent orders in the Supreme Court proceeding were tied to a particular refinancing facility being sought. [55]-[56]
  6. An application for a stay to allow time to appeal was refused.   The consequence of the orders removing the caveats did not have the effect of extinguishing whatever security the plaintiffs were entitled to over the land.  A caveat did no more than provide notice of an asserted security interest.  It did not create, nor did its removal extinguish, rights over the land.  The only effects of removing the caveats would be: to enable the defendant to refinance, involving discharge of old and registration of new mortgages; (at worst for the plaintiffs) if the properties were ultimately sold, potentially prejudice the priority of their asserted equitable rights as chargee against (hypothetical) equitable claimants to the proceeds of sale.  There was no risk of the defendant dissipating the properties. [63], [65]
  7. Section 91(4) of the Transfer of Land Act, which provides that a “caveat that has lapsed or been removed by an order of a court shall not be renewed by or on behalf of the same person in respect of the same interest” did not prevent lodgement of a fresh caveat where a caveat was removed for claiming the wrong interest (as had occurred here). [65]

Philip H. Barton

Owen Dixon Chambers West

Wednesday, October 23, 2024

Blog 74. Leave to appeal against Blog 65 refused

Dolan v Dolan [2023] VSCA 136, Court of Appeal.

In this case the Court of Appeal refused leave to appeal from the decision of Ierodiaconou AsJ ([2022] VSC 543) the subject of Blog 65.   The Court of Appeal decision is particularly helpful because the court summarises a number of basic caveat litigation points arising under the TLA s. 90(3), namely:

  1. An application under s. 90(3) is interlocutory in nature, requiring application of the two-stage test of serious question to be tried and balance of convenience, not ordinarily requiring final determination of disputed factual issues or claims, and not giving rise to an issue estoppel or res judicata (although an application under s. 90(3) may amount to an abuse of process).
  2. Where an arguable case is established the caveator is generally required to commence a proceeding with a Writ and pleadings.
  3. As to admissibility of evidence.
  4. That an order removing a caveat to permit sale, with part of the sale proceeds being held on trust pending final determination of the dispute, may be appropriate where the caveator was not in possession or where the claimed interest conferred no possessory right, but may be inappropriate where the claimed interest, of which there was a serious question to be tried, conferred possessory rights or represented the whole or a substantial proportion of the beneficial proprietary interest.

It is helpful first to set out the original decision, commencing with the facts particularly relevant to the appeal –

  • In about 1998 the first defendant (Christine) and other persons purchased land at Lorne (the parent title) for $105,000 with Christine being registered as to a half interest.   They agreed to subdivide it into two blocks, with her taking one.  She deposed that she contributed $52,500 towards the purchase.  The plaintiff (Shannan), who was Christine’s daughter, deposed that she (Shannan) contributed $20,000 towards the purchase.
  • Due to her age and income Christine could not obtain a loan to fund construction of a house.   However, a Bendigo Bank employee advised that if she transferred her interest in the parent title to Shannan an acceptable loan could be secured in Shannan’s name.  Christine deposed that Shannan accepted her proposal to make this transfer so that Shannan could obtain a loan on Christine’s behalf, but that both before and after subdivision she (Christine) would continue as beneficial owner, and that Shannan also accepted other proposed terms relating to the transfer.  Shannan denied accepting this proposal.
  • In 2001 Christine transferred her moiety in the parent title to Shannan, the consideration stated in the Transfer being as “An Agreement to Transfer”.   Following subdivision, one block (the property) was transferred to Shannan, the consideration in that Transfer being stated as “In pursuance of an Agreement between the Transferors for partition of the said land …”, and Shannan in 2003 became registered proprietor of this block.  The bank established a loan account in Shannan’s name with an overdraft limit of $140,000 secured by a mortgage.
  • Christine deposed that the costs for acquisition of the parent title and construction and fit‑out of the house were funded primarily from her personal resources and from the loan account, Shannan only contributing about 7% of overall build costs.   Christine also deposed to making mortgage repayments and that she paid all outgoings including council rates, home insurance, and for maintenance and improvement.  Shannan deposed that the overall build costs were largely drawn down from the loan account, that from 2004 to 2006 she made loan payments, and that Christine did not use her personal resources to fund overall build costs.
  • Upon completion of the house in 2003/2004 Christine, Shannan, and another family member took up residence.  Shannan left in 2006.  In 2021 Christine caveated on the ground of ‘implied, resulting or constructive trust’.  Shannan applied under the Transfer of Land Act s. 90(3) for removal of the caveat.

Ierodiaconou AsJ dismissed the application, holding –

  1. There was a serious question to be tried that Christine was the beneficiary of a common intention constructive trust (she alleged as to 93% of the equitable title). This was supported by: her deposing to the required common intention or agreement; reference to an agreement in the Transfer (her Honour appears to state in the Transfer to Shannan of the subdivided block, but quaere this is a slip for the Transfer to Shannan from Christine); and Christine’s contribution to loan repayments.  Moreover, it appeared to be common ground that Christine contributed most of the purchase price of the parent title and that for many years she made payments into the mortgage loan account and resided on the property.
  2. There was a serious question to be tried that Christine was the beneficiary of a resulting trust (she alleged as to 65% of the equitable title) arising from her contributions to the purchase price of the parent title and to construction and fit-out.
  3. The balance of convenience favoured maintenance of the caveat because of: Christine’s long residence; her age being elderly; evidence of her investing her life savings into the property; the fact that Shannan proposed to sell the property with vacant possession with only $20,000 from the net proceeds being distributed to Christine pending resolution of the dispute; Christine’s claim of a substantial interest in the property; and Christine’s inability to buy another property or rent one in Lorne.  Any hardship for Shannan could be met by Christine’s undertaking to maintain mortgage and property expense payments, which would maintain the status quo of many years, and Christine being required within 7 days to commence a proceeding to establish her interest in the property.

The Court of Appeal refused leave to appeal, holding –

  1. The decision at first instance was discretionary and to impugn it the applicant must establish an error of a kind explained in House v The King (1936) 55 CLR 499. [83]
  2. The proposed ground of appeal that the Associate Judge had conducted a “trial” of the Originating Motion (without the applicant being aware of it) and had not just heard the Summons, whereby the final orders created an issue estoppel or res judicata that Christine had a caveatable interest, was misguided and a distraction. The true issue was that the nature of the order made, ie to refuse to order removal of the caveat, reflected in the conclusion in the order dismissing the summons, was interlocutory in nature, in the sense that it did not finally determine any rights in the property.  It was interlocutory because the relief sought was under the Transfer of Land Act s. 90(3) requiring the caveator to establish a serious question to be tried of an estate or interest in the land and that the balance of convenience favoured the maintenance of the caveat until trial.   An application for removal of a caveat did not ordinarily present an occasion for the final determination of disputed factual issues or claims.  Not only was it usual for an application under s. 90(3) to be by Summons or Originating Motion, and for it to be determined by the two-stage test, but where an arguable case was established the caveator was generally required to commence a proceeding to have the claim to an interest in the land determined in a properly constituted suit with a Writ and pleadings.  An Originating Motion was ill-suited to such a dispute and there may be no utility in keeping it on foot. [47]-[55]
  3. The Associate Judge had applied these principles. She had not determined whether the applicant had any equitable interest in the property, but done no more than dismiss the Summons.  No issue estoppel or res judicata [56], [57], [60], [61]
  4. However, in the absence of a relevant change in circumstances, an application to remove the caveat may be an abuse of process. [62]
  5. The submission that the Associate Judge was not entitled to rely on matters stated in a draft Statement of Claim exhibited to and repeated in a paragraph of an affidavit, and in particular the pleading of an agreement between Christine and Shannan, was rejected. The fact that a paragraph in an affidavit was in the same form as a pleading was inconsequential.  Admissibility of the paragraph was determined by reference to the Evidence Act 2008.  Although the form of the paragraph was open to the criticism that it was conclusionary it was admissible because the evidence was relevant and on its face came from the deponent’s personal knowledge.  The evidence was capable of reasonably bearing upon whether there was a triable issue of an agreement or understanding reflecting a common intention as to the beneficial ownership of the property.  The other evidence of an agreement included the change in title, the payment by Christine of part of the purchase price of the parent title and construction costs, and the fact that she continued to occupy the property without paying rent.  In any event, counsel had conceded before the Associate Judge that he was ‘not going to argue that there isn’t a prima facie case here in relation to the caveat’. [65], [71]-[75]
  6. The proposed ground of appeal that the Associate Justice should have determined that at best Christine was entitled to a lesser equitable remedy, ie an order requiring Shannan to hold some of the sale proceeds on trust pending final determination of the dispute, was not established. The Associate Justice was correct in concluding that Christine had raised a serious question to be tried that she held a beneficial interest in the property.  As to the balance of convenience, the caveat itself did not confer any rights on Christine to occupy the property for the purpose of the caveat nor (although likely to affect the ability to sell and price) prevent sale. [42], [84]-[89]
  7. In considering whether the balance of convenience favoured the retention of the caveat, it was necessary to consider the nature of the claimed interest and what the caveat was designed to protect. In cases where the caveator was not in possession or where the claimed interest conferred no possessory right, the claimed proprietary interest may be adequately protected by removing the caveat, allowing the property to be sold and, by orders or undertakings, for the proceeds or part of them to be secured until the respective interests in the property can be determined.  Conversely, where the claimed interest conferred possessory rights or represents the whole or a substantial proportion of the beneficial proprietary interest, it may be appropriate to maintain the caveat and so not alter the registered title pending trial.   In this context two points required examination –
    1. Did the interest claimed by Christine give her a possessory right to the property? On her primary case, she claimed to own 93% of the beneficial interest based on a common intention constructive trust. She had also been in possession since the construction of the house.  In those circumstances it was arguable that the equitable interest would follow the legal interest and give her a right to possession. Alternatively, establishment of her right to equitable relief may arguably also found an order restraining Shannan from evicting her.
    2. In her draft pleading and in her submissions at first instance Christine accepted that the property should be sold but only after determination of the respective equitable interests. Shannan’s submission that, in circumstances where both parties sought sale and distribution of proceeds, it was (necessarily) wrong for the caveat to remain was invalid.  It was open to the Associate Judge to conclude that the caveat should not be removed before the determination of equitable interests because the practical effect this would be a sale and transfer of title with the real risk of an order for possession against Christine.  Christine’s ability to secure alternative accommodation was heavily dependent on her knowing the extent of, and being able to realise, any interest she may have in the property, accordingly the status quo plainly favoured retention of the caveat.  And if Christine was successful on her primary claim and Shannan has no more than a 7% beneficial interest Shannan’s interest may possibly be satisfied without sale.  [90]-[93], [96]-[99]
  2. The Associate Judge was alive to possible prejudice to Shannan from maintenance of the caveat including exposure to mortgage repayments. She correctly decided that the undertakings proffered by Christine to pay certain amounts were adequate to meet any prejudice.  An application to lead fresh evidence to the effect that the mortgage had been in arrears was refused. [100], [102], [103]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, July 25, 2023

 

Blog 59. Mother and Son.

Fazal v Fazal [2022] VSC 165, Gorton J. (4 April 2022).

Fazal v Madappilly [2022] VSC 227, Gorton J. (9 May 2022).

These cases concern the same piece of land.  The first case deals with the uncommon points of an application under the Transfer of Land Act s. 90(3) being brought by Summons in an existing proceeding, rather than by Originating Motion and Summons, and with abuse of process.  The second case is more routine, there being a dubious caveatable interest but the balance of convenience favouring removal of the caveat, nonetheless raising two interesting points not explicitly touched on by Gorton J.  First, the solicitors lodging the caveat could not decline to accept service: Transfer of Land Act ss. 89(4) and 113(3) (Blog 49).  Second, in weighing the balance of convenience his Honour could have considered whether, as there was also a purchaser, the caveator was able to give the undertaking as to damages (Blog 56).

Fazal v Fazal [2022] VSC 165, Gorton J. (4 April 2022).

The facts were –

  • The plaintiff was the mother of the defendant.
  • In August 2018 the son purchased a property for $650,000 after obtaining a bank loan secured by a mortgage guaranteed by his mother. Work started to construct townhouses on the property.
  • Loan repayments fell into default, the bank took steps to enforce the mortgage, and with its agreement the son in November 2021 entered into a contract for sale for $865,000, with a 10% deposit that was paid, with settlement due on 21 January 2022.
  • On 17 January 2022 the mother lodged a caveat. The son applied for its removal under s. 90(3) of the Transfer of Land Act.  The mother produced a 2018 declaration of trust to the court which she alleged, and he denied, was signed by him.
  • On 17 February after an opposed hearing a judge ordered removal of the caveat.
  • On 21 February the mother commenced a proceeding seeking, inter alia, a declaration that the proceeds of the sale were held on trust for her and equitable compensation.  She made an interlocutory application to restrain the distribution of the proceeds of sale.  The selling agent deposed that the value of the property was $850,000 – $900,000 and that the sale was for market value.   The mother produced a valuation that the underlying unencumbered value of the property was $760,000 but that it was worth $1 m. with the planning permit and settlement of sale of three dwellings before the end of 2022.   She also produced an affidavit in which the deponent swore that he would lend money to her and otherwise assist her completing the development, and lend money to her ‘to repay any outstanding home loans’.
  • The hearing of the interlocutory application on 25 February (the caveat not yet being removed) expanded from one seeking restraint of distribution of the proceeds of sale to one seeking restraint of the sale until trial. The judge however only ordered that the net proceeds of sale to be held in the son’s solicitor’s trust account until trial or further order.
  • On 27 February the mother lodged another caveat asserting the same interest as the previous one. The son made a further application under s. 90(3), by Summons in the proceeding commenced by his mother.

The mother among other things: stated that the property was hers and that she intended to appeal against the decision of 17 February; relied on material which had been before the court on 25 February; and referred to her recent proposal to the bank to repay the arrears, finish the development, and sell the property, not yet eliciting the bank’s substantive response.

Gorton J. held –

  1. Although an application under s. 90(3) was normally made by Originating Motion and Summons it could be made by Summons in an existing proceeding. The filing of the Summons amounted to the bringing of ‘proceedings in a court against the caveator for the removal of the caveat’ as those words in s. 90(3) were to be understood.  This outcome was supported by s. 8(1) of the Civil Procedure Act 2010.  It was significant that the Summons was brought in a proceeding between the two relevant parties relating to their rights. [5]
  2. A second interlocutory application for the same relief was an abuse of process if it would be unjustifiably oppressive to the other party, or would bring the administration of justice into disrepute. Ordinarily, an abuse of process was associated with commencement of a proceeding or application, rather than its defence.  However although an application under s. 90(3) was not commenced by the caveator, the caveator was treated as if the caveator were the moving party seeking an interlocutory injunction.  Accordingly, in substance, it was the caveator who was potentially abusing the process of the court by supporting a second caveat identical to a removed caveat.  The maintenance of this caveat was an abuse of process. [13]-[15]

Fazal v Madappilly [2022] VSC 227, Gorton J. (9 May 2022).

Another caveat was lodged on 13 April 2022, ie nine days after the previous decision, by the first defendant Madappilly claiming a freehold estate based on an agreement with the son dated 5 August 2020.  Further –

  • On lodgment of the caveat Madappilly’s solicitors wrote to the son’s solicitors stating their instructions that the son was attempting to sell the property in breach of the Constructive Trust Agreement and Construction Contract both dated 5 August 2020, under which agreements approximately $300,000 was owed to Madappilly.
  • They provided copies of these documents. The ‘Construction Contract’ was undated and purportedly signed on 5 August 2020.  It was a contract between the son, one of two other alleged joint venturers (see further below), and a company associated with Madappilly, in which the son and one of the other parties declared that they intended to enter a contract to build townhouses on the property and appointed the company as building supervisor.  It provided that the company would be paid a deposit of $300,000 upon execution of the agreement, and that it could charge for services at an hourly rate left blank.  It then stated that the son and the joint venturer would ‘permit’ the company ‘to have equitable and beneficial interest in the land, pending making the deposit of $300,000’ and would when requested transfer the land “to [the company] to [the company’s] interest”.
  • In the ‘Constructive Trust Agreement’, dated and purportedly signed on 5 August 2020, the son declared that he intended to enter into a contract to purchase the property and that he confirmed that he held Madappilly’s interest in the property and/or benefits accrued or to accrue in respect of that interest upon trust for Madappilly absolutely subject to the terms and conditions set out in this deed. Madappilly’s interest was defined to mean ‘full interest in the… Property as tenants-in-common’.
  • The son’s solicitors stated that he denied having signed these documents and that ‘[t]he builder who actually was doing the construction on the property is not aware of your client’.
  • The son sought an order under the s. 90(3) for removal of the caveat. Madappilly’s solicitors advised that they were not instructed to accept service and did not hold instructions to continue to act.
  • Madappilly, who described himself as building supervisor, deposed that –
    • In around mid-2019 he entered into an oral joint venture agreement with the son and two others; and the son undertook and represented to them that the son would pay the mortgage and other outgoings, would provide $150,000 towards the completion of the joint-venture, and that when the development was completed it would be sold;
    • In reliance on those promises, he and the other two people jointly invested ‘around $500,000’ in the joint-venture in work and materials, and implicitly that the four persons were to share the net profits of sale.
  • The son identified the builder he had dealt with, deposed that he did not know who Madappilly was, and denied entering any joint venture agreement.
  • Madappilly produced to the court a valuation that the property was in its current state worth approximately $1 m. and that if $209,500 was spent completing the project the property could be sold for $1.635 m.
  • The net sale proceeds were under $140,000.

Gorton J. held –

  1. The interest asserted by the caveator in his affidavit sat uneasily with any interest based on the agreements purportedly signed on 5 August 2020. The arrangements contained in the Construction Contract were entirely inconsistent with the affidavit evidence and at best gave a caveatable interest to the company not Madappilly.  The Constructive Trust Agreement was unusually worded, and read strictly did not give Madappilly an equitable interest but confirmed that the son held Madappilly’s interest on trust for Madappilly.  It was difficult to reconcile the two documents.  Madappilly could not explain caveating asserting an interest based on an agreement reached on 5 August 2020 but now relying on an oral joint venture arrangement entered into the previous year.  Turning to Madappilly’s evidence: he did not identify to what extent he contributed to the ‘around $500,000’, and so, even if his evidence was accepted did not establish the extent of his beneficial interest; and he produced no documents supporting provision of work and materials.  Because of the inconsistency between what had been advanced by his solicitors and what was now advanced in court there was   reason to doubt his version of events. [8]-[10], [15]-[17]
  2. The court inferred that Madappilly either through his previous solicitors or now advanced arrangements known by him to be incorrect. However, in light of the affidavit material filed there was an issue to be tried that Madappilly had an equitable interest in the property, albeit one difficult to establish. [5], [17]
  3. The balance of convenience favoured removal of the caveat ([25]) –
    1. The alleged sum required to complete the project was said to be pursuant to the unproduced Building Contract and was unclear whether inclusive of landscaping expenses. [18]
    2. It the contract of sale was completed the son could discharge the mortgage and stop interest running. [18], [24]
    3. The contract of sale was on its face unimpeachable (note that his Honour states that the contract price was $850,000, but this seems to be a slip). [19]
    4. The property was not the residence of either party and if the caveat was removed and the sale completed Madappilly would retain a cause of action against the son for damages. [20]
    5. There was no evidence that the purchaser was other than bona fide for value without notice of the caveator’s alleged interest, the contract of sale being apparently specifically enforceable giving the purchaser an equitable interest and giving a claim for damages against the son if the sale did not proceed. Madappilly had not offered to indemnify the purchaser or the son against any liability in damages if the caveat remained.  In one sense, the same issues arose as in a priority dispute between Madappilly and the purchaser, it being relevant that Madappilly had not caveated until after the contract of sale. [19], [22], [23]
    6. There was no evidence that Madappilly or the other alleged joint venturers had the means to complete the development. [21]

       Philip H. Barton

       Owen Dixon Chambers West

       Friday, October 13, 2022

 

11. RECENT SUPREME COURT CASES DEC 2017 – FEB 2018 (5 of 6)

Whether related VCAT proceedings rendered an application under s. 90(3) an abuse of process. 

Van Klaveren v Otelta Pty Ltd and Ors [2018] VSC 10 (23 January 2018) Daly AsJ.

Save for several interesting ancillary points this was a simple case of a caveat being removed under s. 90(3) because of no serious question to be tried that the caveator still had a leasehold interest claimed in the caveat, nor did the balance of convenience favour relief.  The ancillary points were –

  1. A reminder that the application was interlocutory. Accordingly objections to the admissibility of a solicitor’s affidavits were rejected.  Under Rules of Court evidence in an interlocutory application may be given on information and belief and it “would be unusual, albeit not unheard of, for cross-examination to be permitted on what is really a summary procedure”.
  2. The judge grappled with the argument that the application under s. 90(3) was an abuse of process because there was a proceeding on foot elsewhere. This argument was based on Yuksels Nominees Pty Ltd v Nguyen & Anor [2015] VSC 663 where T. Forrest J had stated that if there is already a proceeding on foot to substantiate the caveat an application to remove the caveat is prima facie vexatious and will likely be stayed.  In that case the caveator had commenced a County Court proceeding not to establish a proprietary interest but for damages and accordingly that application was not stayed.  In this case the lessee while still in possession had commenced a VCAT proceeding in 2016, not yet heard, disputing the right of the landlord to terminate the lease and prematurely claiming relief against forfeiture.  In 2017 the lessor re-entered but the lessee did not seek a hearing for relief against forfeiture although this relief remained in the Points of Claim.  At interlocutory hearings, in one of which an application for an injunction to restrain sale of the property was refused, VCAT members treated the claim as being only for damages and refused leave to amend to assert the lease was still on foot.   Her Honour held that the VCAT proceeding was not one to substantiate the interest claimed in the caveat, noted that T Forrest J only used the expression prima facie, and that unlike the County Court VCAT had no jurisdiction under s. 90(3). 

Finally, insofar as the caveator argued that the caveat should remain as security for payment of any damages ordered by VCAT, this amounted to the impermissible use of the caveat as a bargaining chip.

Commentary: Yuksels must be read with authority that it is permissible for a registered proprietor both to take the procedure for caveat removal under the Transfer of Land Act s. 89A and also to commence an application under s. 90(3): eg Nineteenth Jandina Pty Ltd v Hijim Pty Ltd [2004] VSC 298 at [21] per Osborn J –“The fact that proceedings by a caveator are on foot to enforce the interest which the caveat has been lodged to protect, is not a bar to the exercise of the Court’s discretion under s. 90(3)”.