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

Costs

Toh & Anor v Wu & Anor [2018] VSC 36 (12 February 2018) Daly AsJ.

The chronology was –

 

2017                            First defendant commences family law proceeding in Federal Magistrates Court
against her husband.  The plaintiffs in the subsequently issued Supreme
Court proceeding are her in-laws and are registered proprietors of a
property.  Application (not yet determined) to join plaintiffs as parties
to the family law proceeding and to restrain sale of property or have proceeds
of sale retained in trust pending determination of
proceeding.   

28 November 2017   Caveat lodged by first defendant over the property, grounds of claim being “court order under the Family Law Act 1975”.

15 January 2018       Plaintiffs notify intention to issue and issue s. 90(3) application. 

16 January 2018       Service of application and material in support.

18 January 2018       Hearing at which caveat ordered to be removed.  Order that net proceeds of sale be held in trust.  Costs reserved.

29 January 2018        Settlement of sale of property due.

Daly AsJ ordered that each party should bear their own costs of the s. 90(3) application.  Her Honour reasoned –

  1. In removing the caveat the court had not considered whether there was a serious question to be tried.  Although the interest claimed in the caveat was not prima facie a recognized proprietary interest the underlying documents tolerably revealed claims pursuant to a resulting or constructive trust, and the suddenness of the application severely compromised the caveator’s ability to respond.  However, the balance of convenience overwhelmingly favoured removal because of settlement and finance difficulties.  The removal was also influenced by the fact that, having regard to the existing Federal Magistrates’ Court proceedings, it was in the parties’ interests for property interests to be determined in one proceeding, not fragmented across jurisdictions.
  2. Special circumstances warranted the plaintiffs not receiving their costs, namely their failure to warn the caveator of the intended application.  While it would often be unnecessary or impractical to warn of an application, the application here was made some 7 weeks after lodgement of the caveat and only 7 business days before settlement of the sale was due.  The caveator was ambushed.
  3. The caveator’s alleged impecuniosity was irrelevant to the costs decision.

 

RECENT SUPREME COURT CASES DEC 2017 – FEB 2018 (2 of 6)

A caveat removed on the balance of convenience to permit refinancing.

Six Bruce Pty Ltd v Milatos and Ors [2017] VSC 784, 19 December 2017, Keogh J. 

The chronology was –

19 February 2016      Plaintiff becomes registered proprietor of a property using funds secured by registered first mortgage. It subsequently defaults under the mortgage.

20 May 2016              VCAT orders that a permit issue allowing construction of a four-storey apartment building on the property.

5 February 2017        Plaintiff contracts to sell the entire property to first defendant.  Deposit paid.   

20 March 2017          Purchaser nominates substitute purchaser.

3 July 2017                 Settlement date extended to 4 August 2017 on the basis that purchaser pay an additional deposit which it (not the nominee) does.   

31 July 2017               Purchaser learns of undisclosed drainage easement
affecting the property.

8 August 2017            Vendor serves rescission notice based on non-payment of balance of price.

14 August 2017          Purchaser services rescission notice based on alleged
non-disclosure of the easement in the vendor’s statement.  Vendor retains
deposit.

September 2017        Vendor enters joint venture agreement to develop the property. 

3 October 2017         Purchaser caveats on ground of lien to secure repayment of money paid under the contract.  Caveat does not name the nominee substitute purchaser.  Two registered mortgages and two previous caveats exist.  There is a subsequent caveat.

10 October 2017        Purchaser sues for return of deposit or declaration re caveat.

12 October 2017        Mortgagee sues vendor for repayment under mortgage. 

20 November 2017    Vendor receives refinance offer from other lenders.

27 November 2017    Vendor files Defence to purchaser’s proceeding substantially disputing the claim. 

The vendor commenced a proceeding under s. 90(3) to remove the purchaser’s caveat to permit refinance.  

Keogh J removed the caveat subject to conditions.  His Honour held –  

1.      There was a prima facie case that the caveator had the interest claimed.  The prospects of the vendor being excused under the Sale of Land Act s. 32K(4) for breach of the law in the section 32 statement were entirely uncertain.

2.      The caveat was not required to name the nominee. The effect of the nomination clause was to empower the purchaser to require the vendor to complete the contract by transfer of the property to the name of the nominee.  After nomination the nominee did not acquire rights as purchaser.

 

3.      However the balance of convenience favoured removal of the caveat because: most of the deposit had been released, presumably by agreement; the trial of the purchaser’s proceeding was distant; without the refinancing a mortgagee’s sale was likely; the vendor undertook not to deal with the property pending determination of the purchaser’s proceeding; the vendor agreed to charge the property to secure the amount of any judgment thus then enabling a further caveat; accordingly the purchaser’s position would probably be improved by the refinancing. 

When does a caveat lapse and can the effect of lapse be avoided?

Tawafi v Weil [2017] VSC 643 (21 August 2017) Digby J.

Section 90(1)(e) of the Transfer of Land Act 1958 provides that, subject to certain exceptions, a caveat lapses as to land affected by a transfer upon the expiration of thirty days after notice by the Registrar that a transfer has been lodged for registration.  If within this period the caveator appears before a court and gives an undertaking or security the court may direct the Registrar to delay registration for a further period, or may make such other order as is just (s. 90(2)).  If the Registrar is of opinion that the doing of any act is necessary or desirable, then, if the act is not done within such time as the Registrar allows, the Registrar may refuse to proceed with any registration (s. 105(a)).

The timeline was –

11 April 2017         Plaintiff enters contract to purchase certain land. 

30 May                  Defendant caveats on the grounds of “part performed oral agreement” et cetera with the registered proprietor. 

26 June                  Settlement of the purchase without the caveat being removed. 

28 June (about)   Lodgment of the instrument of transfer (Transfer) for registration. 

29 June                 Registrar notifies caveator that pursuant to s. 90(1) the caveat would lapse on 31 July unless the caveator obtained an order pursuant to s. 90(2).  No order was obtained. 

2 August               Caveator commences a proceeding against registered proprietor inter alia claiming declarations of a proprietary interest in the land and for other relief in substance supporting the existence of the caveat and preventing registration of the Transfer.  An
agreement with the registered proprietor proprietor in early 2016 is alleged whereby the caveator agreed to lend $86,000 on security of this land, followed by that loan.  The second defendant was the conveyancer acting for both sides and the third defendant was the purchaser.  

3 August               The Registrar accordingly issues a Notice of Action prohibiting registration of further dealings until withdrawal of that notice or further order. 

16 August             Purchaser files Originating Motion seeking order for registration and Summons for dismissal of the caveator’s proceeding. 

 

Digby J ordered the Registrar to register the Transfer and remove the Notice of Action.  His Honour reasoned –

  1. The counting of days under s. 90(1) commenced from 30 June, being the day after the notice, thirty days elapsed on Sunday 30 July, and so the expiry date was 31 July. Accordingly the caveator was out of time.  It was irrelevant that s. 105(1) might have achieved a similar result in suspending the progress of registration. [24]-[25]
  2. The judicial approach to caveat removal applications was analogous to that in applications for injunction, ie the burden of proving the caveatable proprietary interest and maintaining the caveat was upon the caveator who must also establish on the balance of convenience that the caveat should be maintained until the trial of the contested proprietary interest. However, because the caveat had lapsed this case was not the usual caveat removal contest. [17]-[19]
  3. In any event the caveator had not raised a sufficient prima facie case of or arguable triable issue concerning the asserted proprietary interest. Further, the balance of convenience heavily favoured the purchaser because: the asserted triable issue was palpably weak; and the purchaser would be prejudiced by deferral of registration, particularly having entered a building contract to improve the property which could not be financed until the financier could register a mortgage. [28], [35]-[38]
  4. Indemnity costs were awarded against the caveator, particularly because of her very weak case, the purchaser having previously asked the caveator in writing to identify an arguable caveatable interest, without proper response, and given appropriate warning to the caveator. [43] – [59]