Category: Costs – General

6. Three County Court Cases

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.  

 

3. Principles applicable to application to remove caveat under s. 90(3) of TLA

  • Absolute prohibition

  • Circumstances in which entitlement to payment for work on land caveatable

  • Injunction against future caveat

  • Amendment of caveat

  • Costs

  • Interest claimed being “implied, resulting or constructive trust”

  • Commentary

Yamine v Mazloum [2017] VSC 601 (3 October 2017) John Dixon J.

The timeline was –

Undated                         Plaintiff registered proprietor asks caveator to assist him to prepare property for sale.  Caveator subsequently alleges that in substance: the plaintiff asked him to work to finish his house and prepare it for auction; the caveator replied that a tremendous amount of work was involved which he could not even put a figure on, asked how he would be paid, and said that he would not help unless assured he could be paid; the plaintiff replied that he would be paid for his work from the proceeds of sale. 

March – 23 June 2017  Caveator moves into the property and allegedly fixes it for sale. 

8 July                               Property sold, settlement date 6 September, rescission notice served in September. 

26 July                             Caveat lodged, grounds of claim “implied, resulting or constructive trust”, estate or

interest claimed is a “freehold estate”, all dealings prohibited.

18 September                Following provision of information by caveator’s solicitors and inconclusive negotiations plaintiff foreshadows application to remove caveat, caveator offers withdrawal in return for $45,000 to be held in caveator’s solicitor’s trust account pending resolution of the dispute.

The plaintiff applied for removal of the caveat under the Transfer of Land Act 1958 s. 90(3). John Dixon J ordered removal of the caveat with costs. His Honour reasoned –

1. His Honour first recited certain standard principles, namely –

(1) The power under s. 90(3) was discretionary.

(2) Section 90(3) was in the nature of a summary procedure and analogous to the determination of interlocutory injunctions.

(3) The caveator bore the onus of establishing a serious question to be tried that the caveator had the estate or interest claimed. The caveator must show at least some probability on the evidence of being found to have the equitable rights or interest asserted in the caveat.

(4) The caveator must further establish that the balance of convenience favoured maintenance of the caveat until trial.

(5) As to the balance of convenience generally the court should take the course appearing to carry the lower risk of injustice if the court should turn out to have been wrong in the sense of declining to order summary removal where the caveator fails to establish its right at trial or in failing to order summary removal where the registered proprietor succeeds at trial.

(6) The stronger the case that there was a serious question to be tried, the more readily the balance of convenience might be satisfied. It was sufficient that the caveator showed a sufficient likelihood of success that in the circumstances justified the practical effect of the caveat on the registered proprietor’s ability to exercise normal proprietary rights. [15]

2. His Honour also noted authority for the proposition that “a caveat may only be lodged in a form commensurate to the interest it is designed to protect”. [16]

3. The argument that the caveator’s entitlement to be paid for his work on a quantum meruit was enforceable in equity by a constructive trust was invalid. The plaintiff did not accept any intention to charge or secure the land with the obligation to repay the cost of the work or to create any beneficial interest in it. The concept of salvage, deriving from Re Universal Distributing Co Ltd (1933) 48 CLR 171 at 174 – 5 per Dixon J, was inapplicable: the current case concerned property rights, not rights in insolvency and the property was preexisting and not converted into a fund for the benefit of claimants. There was only an oral agreement for services on a quantum meruit. [19], [24], [26] – [32]

4. If the caveator now evinced an intention to lodge a further caveat claiming an interest as chargee, an injunction would likely lie. [33]

5. No application to amend the caveat was made, and the discretion to amend would not have been exercised because:

(1) The application would have been to amend the interest claimed ie to chargee or equitable lienee, an amendment of interest claimed “not usually be[ing] permitted”, not merely to amend the grounds of claim or scope of protection. [35]

(2) The circumstances the grounds or interest claimed were erroneously stated was were relevant: the caveat was lodged not by an unrepresented person but by a solicitor certifying that he had taken reasonable steps to verify the identity of the caveator and had retained the evidence supporting the claim. [36]

(3) The court should not encourage the belief that caveats could be imprecisely formulated and then fixed up later: a caveat was in effect an interlocutory injunction by administrative act with possible serious consequences. Wrongly formulated caveats should not easily be tolerated. Caveats should not be used as bargaining chips. [37]-[38]

(4) The court should have regard to all of the considerations that arise on applying for removal of the caveat in the terms of the amendment sought. If this caveat was amended the caveatable interest claimed would still lack merit because even if the caveator’s version of the oral agreement was proved it would not create a charge or an equitable lien. [39] – [40]

6. His Honour not merely awarded costs but also reserved liberty to the plaintiff to make any application pursuant to r 63.23 as it may be advised against the first defendant’s solicitors. [44]

7. His Honour noted in passing that use of the phrase “implied, resulting or constructive trust”, which identified three different forms of trust, was “usually evidence of a degree of loose thinking”. [20]

Commentary –

1. His Honour deals with the principles applicable to s. 90(3) and amendment of caveats at length and touches on other interesting points now expanded on.

2. The stress on a caveat not imposing an absolute prohibition if inappropriate is expanded on in Lawrence & Hanson Group Pty Ltd v Young [2017] VSCA 172 to be the subject of a future Blog.

3. Other cases related to whether works on land will create a caveatable interest are –

• Walter v Registrar of Titles [2003] VSCA 122 at [18] – mere work and labour done not caveatable;

• Depas Pty Ltd v Dimitriou [2006] VSC 281 – a builder was found to have at most a contractual right to, and perhaps even an equitable interest in, half a joint venture’s net profit, but not a half interest in the land;

• An equitable lien will give rise to a proprietary and so caveatable interest, a foundational statement on equitable liens being that of Deane J in Hewett v Court (1983) 149 CLR 639 at 668. Caveat cases where no lien was established are: Western Pacific Developments Pty Ltd (in liq) v Murray [2000] VSC 436 and HG & R Nominees Pty Ltd v Caulson Pty Ltd [2000] VSC 126;

• In Popescu v A & B Castle Pty Ltd [2016] VSC 175 Ginnane J held that the only Romalpa clause conferring an equitable interest in land was one entitling the holder to enter upon the land to sever and remove the fixtures, and accordingly removed a caveat based on a clause simply providing that all materials used in a contract remained the supplier’s property until paid in full.

4. As to injunctions against future caveats, or the similar order that the Registrar not register any caveat without its leave or further order see also Westpac Banking Corporation v Chilver [2008] VSC 587, Lettieri v Gajic [2008] VSC 378, Marchesi v Vasiliou [2009] VSC 213; Wells v Rouse & Ors [2015] VSC 533.

  1. 5. The reservation of liberty to apply for costs against the solicitors ties in with an increasing judicial tendency to so order, eg Gatto Corporate Solutions Pty Ltd v Mountney [2016] VSC 752.