41. Indemnity costs – Injunction against caveating – Mercury Draught Cider drinking caveator attracts both injunction and indemnity costs.

The two cases in this Blog are, but for one point, mundane cases of removal of hopeless caveats, indemnity costs and in the second case an injunction against caveating.  The one point is that in the second case the case for an injunction was so strong that the Associate Justice did not require an undertaking as to damages.  The mundaneness of the cases is also enlivened by some remarks by the caveator in the second case.

In Devine v Bernstone [2020] VSC 507, (17 August 2020), Croucher J, the facts were –
  • The plaintiff and defendant were involved in litigation pending before the County Court relating to monies which the defendant alleged were owed to him by a company of which the plaintiff is or was a director.
  • In 2018 the defendant caveated over a property owned by the plaintiff to protect his alleged interest under the agreements the subject of the County Court proceedings. His solicitors advised him that he had no caveatable interest and the caveat was withdrawn.
  • The plaintiff subsequently entered a contract to sell this property. Settlement was due on 28 November 2019 but was postponed because the defendant caveated again, this time on the ground of an alleged agreement dated 18 November 2019.
  • The plaintiff’s solicitors wrote to the defendant seeking details regarding the alleged agreement without response. They also requested that he remove the caveat to which he responded that he would do so in exchange for payment of $240,000.
  • The plaintiff commenced proceedings under the Transfer of Land Act s. 90(3) to remove the caveat. At the hearing in December 2019 the defendant (who was self-represented) said that the reference in the caveat to an agreement dated 18 November 2019 was erroneous, stated that he instead relied on an alleged conversation with the plaintiff and on a term in a loan agreement, but ultimately accepted that the caveat had no proper basis and withdrew his opposition to removal.

His Honour ordered the defendant to pay costs on an indemnity basis because of special circumstances, being –

  1. The ground stated in the caveat did not exist. [31]
  2. The alternative justifications for the caveat raised at the hearing were unmeritorious and the alleged conversation with the plaintiff was unsupported by evidence. [32]-[34]
  3. The caveat was lodged in wilful disregard of repeated advice to the defendant (including from his solicitors) that he had no caveatable interest. [35]
  4. The caveat was lodged with the ulterior motive of exerting pressure on the plaintiff to repay monies allegedly owed. [36]
  5. Because the defendant refused to withdraw the caveat the plaintiff had to commence this proceeding and so incur costs. [37]
  6. The plaintiff’s solicitors warned that indemnity costs would be sought. [38]

Royal Melbourne Institute of Technology v Galloway & Anor [2020] VSC 575, (9 September 2020), Derham AsJ.

RMIT owned the Oxford Scholar Hotel.  It entered a contract with Schiavello Construction (Vic) Pty Ltd (Schiavello) to redevelop and refurbish the hotel.  Schiavello engaged the first defendant as a subcontractor for the works.  He claimed that Schiavello owed him money.  RMIT called for expressions of interest, closing on 26 August, for the purchase of other land (“the land”) owned by it.  After this call the first defendant on 18 August lodged a caveat on the title to the land claiming a freehold estate pursuant to an agreement with the registered proprietor dated 3 August 2020.  Various expressions of interest were lodged and RMIT desired to advance the sale.

The first defendant had no legal relationship with RMIT, whose solicitors wrote to him twice seeking withdrawal of the caveat and warning that failing this proceedings would be issued and indemnity costs and compensation for loss suffered by RMIT would be sought.  He replied derisively including inviting the writer to “feel free to drop a slab around sometime”, stating that he drank Mercury Draught Cider, stating “see you in Court honey”, and accusing RMIT of behaving like foolish little children.

He also emailed RMIT: threatening to dump a truckload of rubbish outside the hotel and to put up posters at RMIT making allegations against RMIT; making personal threats against RMIT personnel; and demonstrating that he was aware of the baseless nature of the caveat and that he intended by it to inflict legal cost and media attention on RMIT.

RMIT applied for removal of the caveat under the Transfer of Land Act s. 90(3).  The first defendant acknowledged that the caveat was a desperate attempt to induce RMIT to intervene in his dispute with Schiavello.  Derham AsJ:

  • stated the criteria for caveat removal under s. 90(3) in conventional terms (eg see Blogs under Category “Caveat – Test for maintenance on s. 90(3) application”); [16]-[18]
  • removed the caveat on the ground of no prima facie interest in the land and (if necessary) balance of convenience; [20]-[22]
  • enjoined the first defendant against further caveating on the title of any land of which RMIT was registered proprietor.  Although an undertaking as to damages was offered by RMIT his Honour stated that the legal right to an injunction was so clear and the balance of convenience so weighted that an undertaking was neither necessary nor appropriate [24]; and
  • as the caveat was lodged for an ulterior motive and being used as a bargaining chip, ordered him to pay indemnity costs. [23], [25]

Philip H. Barton

Owen Dixon Chambers West

29 September 2020

35. Costs – Judge busts caveator poker player – Colakoglu v Ozcelik [2020] VSC 139 (25 March 2020), John Dixon J; Diep v Tran & Ors (Costs) 2020 VSC 171 (9 April 2020), John Dixon J; Wegner & Anor v Mayberry [2020] VSC 239 (1 May 2020), Kennedy J.

Comment.   Colakoglu is a mundane caveat removal case in which a caveator, who removed the caveat after service of a s. 90(3) application, was ordered to pay costs on a standard basis – it was unclear whether there had been reasonable cause to lodge the caveat but clear that, in negotiations immediately before its withdrawal, he maintained it inappropriately as a bargaining chip to extract funds to cover his costs.  Diep and Wegner are the latest manifestations of the practice of judges visiting hopeless caveats with indemnity costs.  The caveator in Diep did not help his case by stating that he would not remove the caveat until there was “an offer on the table” and that he “plays poker and was happy to spend a couple of hundred thousand dollars to make a point”.   From the time of the decision of Dodds–Streeton J. in Goldstraw v Goldstraw [2002] VSC 491 at [42] judges have repeated that caveats are not to be used as “bargaining chips”, which the caveator in Diep literally did.  From the blogger’s dim recollection, in vernacular terms the caveator “went bust”, and indeed Google confirms that to “bust” a player in poker (as John Dixon J. did) means you are relieving them of all their chips.

In Colakoglu v Ozcelik [2020] VSC 139 the facts were –

  • The plaintiff and first defendant were married, had purchased a unit then placed in the plaintiff’s name but to which the first defendant claimed he had contributed giving rise to a trust, and proceedings were on foot between them in the Federal Circuit Court in which the beneficial interest of the parties could be adjusted under the Family Law Act.
  • The plaintiff listed the property for sale with the first defendant’s consent, his solicitors advising that he had foregone his interest in the property and had no interest in the proceeds of sale.
  • A contract of sale was accordingly entered into with settlement scheduled for 19 March.  However, on 3 March, notwithstanding their earlier advice, the first defendant’s solicitors lodged a caveat claiming a resulting and/or constructive trust.
  • The plaintiff sought consent to withdrawal of the caveat, on the basis that the sale proceeds would be held by her solicitors in a solicitor’s controlled money account for the benefit of both parties pending resolution of the family law issues.  Before the time for settlement of the contract arrived the parties were not in dispute that the contract ought to settle with the balance of proceeds of sale being paid into trust.
  • However, the first defendant did not remove the caveat, delaying settlement.  But after the plaintiff commenced a proceeding under the TLA s. 90(3) the first defendant withdrew the caveat and the contract settled

John Dixon J. ordered that the costs of the application be paid by the first defendant on a standard basis, dismissed an application for costs against his solicitors, and referred an application for compensation under s. 118 for case management.  His Honour held –

  1. As to whether there was a serious question to be tried, as the unit was to be converted into a fund to be held in trust pending resolution of the family law dispute, the beneficial interest of either party was unaffected, and accordingly whether the first defendant disclaimed any interest in a trust as the plaintiff submitted, or whether he ever had such interest as the first defendant now contended, was a matter for trial. [7]
  2. The balance of convenience favoured removal of the caveat. [16]
  3. The evidence on whether the first defendant had reasonable cause to lodge the caveat was unclear, because he did not engage with the plaintiff’s allegation that he disclaimed any interest in the unit when consenting to its sale.  However, in the negotiations immediately before the withdrawal the caveat continued to be maintained inappropriately as a bargaining chip to extract funds to cover his costs. [13], [22]

In Diep v Tran & Ors (Costs) [2020] VSC 171

  • The first defendant lodged a caveat asserting a caveatable interest on the basis of an agreement dated 1 May 2019.   He ignored requests for a copy of this agreement: it was never sighted.
  • The plaintiff’s solicitors requested withdrawal of the caveat, being met with the response that it would not be removed until there was “an offer on the table” and that he “plays poker and was happy to spend a couple of hundred thousand dollars to make a point”.
  • The plaintiff’s solicitors suggested that the caveat be withdrawn, the settlement proceed and the net proceeds of the sale be placed in a trust account pending resolution of the dispute.  The caveator responded in substance: “you said you were going to make an offer, there’s no offer of money.  Why would I remove my caveat if you are not going to give me money?”
  • After caveat removal proceedings were issued the caveat was withdrawn.

His Honour ordered that the caveator pay indemnity costs because: he provided no justification for the interest claimed by his caveat; before issuing the proceeding the plaintiff’s solicitor made a reasonable proposal for retention of the net proceeds of sale; the caveat was used as a bargaining chip to extract a monetary offer – a serious misuse of statutory provisions for an improper or ulterior purpose.

In Wegner & Anor v Mayberry [2020] VSC 239 –

  • The first defendant lodged a caveat on the ground of an implied, resulting or constructive trust over land of which the first plaintiff, his former wife, was a registered proprietor as tenant in common with the second plaintiff.  The purchase of the land had been funded by bank finance secured by mortgage.
  • In April 2019 this caveat was removed by court order with indemnity costs.
  • In July 2019 the first defendant became bankrupt.
  • In January 2020 the first defendant lodged a second caveat on the same ground as the first.   On being requested to remove it he refused until the plaintiffs refinanced and released him from his obligations as a co-borrower.  He was given notice that unless the caveat was withdrawn indemnity costs would be sought.
  • In February 2020 the plaintiffs entered a contract to sell the land for a price below the mortgage debt, the solicitors for the first defendant’s trustee in bankruptcy consented to the sale, and caveat removal proceedings were commenced.

Kennedy J ordered removal of the caveat because the caveator had not established any arguable right or interest in the land (and any interest would now be vested in his trustee in bankruptcy) and the balance of convenience favoured removal: the caveat would adversely affect the sale; it was in everyone’s interests that the mortgage debt be reduced; there was evidence that market may be falling; and the trustee in bankruptcy had consented to the sale.

Indemnity costs were awarded because the caveat had been lodged for a collateral purpose and in disregard of known facts.

Philip H. Barton

Owen Dixon Chambers West

12 May 2020

 

34. Costs – Whether indemnity costs against unsuccessful caveator – Whether solicitor should bear costs.

Alliance Developments Pty Ltd v Arbab & Anor [2019] VSC 832 (20 December 2019), Garde J; Alliance Developments Pty Ltd v Arbab & Ors (No 2) [2020] VSC 37 (14 February 2020).

Comment.   In the first Alliance Developments case Garde J comprehensively examines the law on award of indemnity costs against a caveator and a solicitor and on the importance of adhering to proper conduct in caveating.  The second Alliance Developments case is a brief further application of these principles to later costs. 

Alliance Developments Pty Ltd v Arbab & Anor [2019] VSC 832. 

The facts were –

·   The plaintiff (Alliance) initially had three shareholders including Mr Abela (Abela) and the first defendant Mr Arbab (Arbab) they being the the sole directors.  

·   In 2013 Alliance purchased and became registered proprietor of land at California Gully with the intention of subdividing it and erecting homes on it.  Arbab claimed he contributed funds to the purchase.

·  In 2014 Alliance, on the nomination of the purchaser Abela, became registered proprietor of land at Laverton North.

·     By August 2015 Arbab was no longer a director of Alliance and his shareholding had been reduced from 50% to 8%.  He disputed this, claiming he did not agree to it. 

·    Arbab retained a firm (“the firm”) with a sole principal (“the solicitor”) for advice.  The firm sought advice from counsel.  In October 2015 counsel advised on the dispute concerning the company, and advised that, if, as to which counsel stated he had not been instructed, the funds supplied by Arbab bore a certain complexion that it should lodge a caveat over the California Gully property.  Counsel did not refer to the Laverton North property.

·  In 2015 Arbab commenced proceedings under the Corporations Act which were subsequently amended. 

·   In March 2016 the firm sent a letter of demand to the third shareholder and his company concerning a partnership or profit sharing dispute. 

·      Later in 2016 the solicitor lodged a caveat over the Laverton North property on behalf of Arbab.  The estate or interest claimed was a freehold estate and the prohibition was absolute.  The ground of the claim was “Implied, Resulting, Constructive Trust”.

·   In March 2018 the solicitor lodged a caveat over the California Gully property on behalf of Arbab.  The estate or interest claimed was a freehold estate and the prohibition was absolute. The ground relied upon was: “Registered proprietor(s), being entitled to possession of the Certificate of Title for the land and to prevent improper dealing”.

·   Later in 2018 on the application of Alliance the Registrar gave a notice under the Transfer of Land Act s. 89A(1) that both caveats would lapse unless the application was abandoned or notice was given to the Registrar that proceedings were on foot to substantiate the claim of the caveator.  In response the firm gave notice that such proceedings were on foot.  In particular: the firm advised that the Corporations Act proceeding was on foot and was set down for trial; the solicitor certified in substance that she had retained the evidence supporting the caveats and had taken reasonable steps to ensure that they were correct; the letter attached a notice signed by the solicitor falsely to the effect that proceedings were on foot in a court of competent jurisdiction to substantiate Arbab’s claims.  The Registrar accordingly took no further action. 

·    On 23 August 2019 Alliance’s solicitors wrote to the firm stating that Arbab did not have a caveatable interest, that application would be made under the TLA s. 90(3) unless the caveats were withdrawn, that, referring to the Supreme Court decisions, they had instructions that may give rise to Arbab’s advisers being liable, and that they were concerned at the certification to the Registrar and the solicitor’s failure to produce any documentation substantiating the caveatable interests claimed.  This letter drew a combatative response from the solicitor on 25 August. 

·    In September Alliance commenced a proceeding seeking relief under s. 90(3).  The necessary court documents were served on Arbab and on the firm.  Between 16 and 30 September:

o   the solicitor said she did not have instructions to accept service and incorrectly disputed that there had been valid service on the Arbab (served at the address stated in the caveat);

o   the solicitor said that both she and client were overseas and she could not get instructions and did not act for the caveator;

o     the solicitor emailed the Court advising that she did not have instructions to act in the proceeding due to an unidentified potential conflict of interest;

o   on 25 September another solicitor appeared in court as agent for the caveator, directions were given including for filing of material by Arbab, and the proceeding was adjourned with the caveator being ordered to pay the plaintiff’s costs of the adjournment on an indemnity basis;

o    on 26 September the solicitor emailed the plaintiff’s solicitors confirming that she did not hold instructions but attaching an email from the caveator stating in substance that he would agree to removal of the caveats for particular reasons with costs, and that for medical reasons he had been unable to deal with the application;

o   on 30 September the solicitor advised the plaintiff’s solicitors that the caveator had not so agreed until 25 September. 

·      On 3 October the caveator emailed the Court and the plaintiff’s solicitors, agreeing to pay the costs of the plaintiff on an indemnity basis, but not to their amount without further information.  On that day, no material having been filed by the caveator who also did not appear, Ginnane J. ordered removal of the caveats and required that any application for indemnity costs be by summons.

The plaintiff issued such a summons seeking indemnity costs against caveator, the firm and the solicitor under s. 24(1) of the Supreme Court Act, which gave the Court a general discretion as to costs, and under r. 63.23(1) of the Supreme Court (General Civil Procedure) Rules 2015, which gave the Court power to make a ‘wasted costs order’ against the solicitor of a party to litigation.   The evidence included that Alliance had entered into a contract to purchase another property (as to which the evidence was conflicting).  Arbab elected to waive legal professional privilege and the solicitor deposed to her instructions.

Garde J held that Alliance’s costs up to and including 3 October 2019 were payable on an indemnity basis jointly and severally by the caveator and the solicitor on the following grounds – 

1.  The estate or interest claimed in a caveat, its ground, and the nature of the prohi­bition were of prime importance.  Examples of inaccuracies in caveats from previous cases were: “an interest as chargee” based on an implied, resulting or constructive trust; an “[e]quitable interest as a 50% shareholder of the property pursuant to a trust Deed” – a shareholder has no caveatable interest in land belonging to a company; a claim by an unregistered mortgagee to an absolute prohibition on dealings which stultified the exercise of a power of sale by a registered mortgagee.  By contrast, as illustrated in in Lawrence & Hansen Group Pty Ltd v Young [2017] VSCA 172, where only one of two registered proprietors gave a charge, a claim for absolute prohibition was sufficiently clear and should be construed as limited to the interest of the charging joint proprietor. [16]-[20], [56], Footnote 15

2.   The purposes of requiring the caveator to specify the estate or interest claimed were to enable: the registered proprietor to ascertain the claim to be met; the Registrar to determine whether a dealing lodged for registration was inconsistent with that claimed; the Registrar to determine whether a caveator’s notice was of a proceeding to substantiate the interest claimed and satisfied s. 89A(3)(b). [21]-[22] 

3.   However, if a caveator had more or different rights in land than those claimed, the caveator could lodge another caveat claiming the additional interests. [23]

4.   As to the claim in the Laverton North caveat of a freehold estate on the ground of a trust: the ground was expressed generally without referring to any agreement or basis, nor descending into particulars or explanation of how the alleged trust or freehold interest arose (there were three kinds of freehold estates – most commonly a fee simple, but also a fee tail and a life estate). [25], Footnote 15

5.  The claim made in the California Gully caveat was misconceived and nonsensical. As Alliance had been its registered proprietor since 2017 the ground of claim was suitable only for a registered proprietor who sought to receive notification from the Registrar of the lodgement of a dealing affecting the land.   Whatever Arbab’s claim – whether pursuant to any agreement or financial contribution or otherwise – it was not referred to in the caveat. [26]-[29], [65]-[68]

6.  The notice given by the solicitor to the Registrar was wrong and misleading.  The Corporations Act proceeding sought orders related to the shareholdings not to substantiate the estate or interest claimed in the caveats. [33]-[34]

7.   The lodging of a caveat was a serious business. His Honour set out why this was so and what the proper purpose of lodging a caveat was, referringto Goldstraw v Goldstraw [2002] VSC 491; Piroshenko v Grojsman & Ors (2010) 27 VR 489; Love v Kempton [2010] VSC 254; Campbell v Pastras & Anor [2015] VSC 162. [56]-[59].

8.   After referring to the criteria in Fountain Selected Meats (Sales) Pty Ltd v Inter­national Produce Merchants Pty Ltd (1988) 81 ALR 397 and Ugly Tribe Company Pty Ltd v Sikola & Ors [2001] VSC 189, Arbab was ordered to pay indemnity costs because 

(a)  he agreed to pay costs on 25 September 2019 and indemnity costs on 3 October 2019, disputing only the final amount;

(b)  the caveats were lodged and maintained on his instructions;

(c)  the caveats were misconceived and without merit;

(d)  the caveats were lodged and relied on without regard for known facts and clearly established law;

(e)  the caveats were intended as a bargaining chip in the Corporations proceeding; and

(f) it would be unfair to the other shareholders if Alliance bore the difference between an indemnity costs and a standard costs order. [60]-[73]

9.  The Court’s power under r 63.23 reflected the inherent jurisdiction of the Court to supervise its own affairs. The inherent jurisdiction required a serious dereliction of duty or gross negligence, but this was unnecessary under r 63.23.  Under r 63.23, a solicitor’s negligence or failure to act with reasonable competence may justify a personal costs order.  His Honour set out matters found relevant by previous judges in the exercise of the wasted costs jurisdiction in  Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400; (2014) 48 VR 1;  Apollo 169 Management Pty Ltd v Pinefield Nominees Pty Ltd (No 2) [2010] VSC; Sekhon & Anor v Chandyoke & Anor [2018] VSC 327 (Blog 17); McKewins Hairdressing and Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation and Anor (2000) 74 ALJR 1000; Pearl Lingerie Australia Pty Ltd v TGY Pty Ltd; Pearl Lingerie Australia Pty Ltd v John Giarratana Pearl Lingerie [2012] VSC 451; Gatto Corporate Solutions Pty Ltd v Mountney [2016] VSC 752; and White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1988) 156 ALR 169.  [75]-[84]

10.The firm had a paramount duty to the Court and in the administration of justice to act honestly in relation to the dispute. These duties included a duty on the factual and legal material available not to make a claim or respond to a claim in a civil proceeding without a proper basis.  The firm was required not to engage in misleading or deceptive conduct or conduct likely to mislead or deceive. [86]-[87]

11. Assuming the standard laid down by Dixon J. in Briginshaw v Briginshaw (1938) 60 CLR 336 applied, his Honour was satisfied to a comfortable level of satisfaction on the balance of probabilities that the firm (and solicitor) failed to act with reasonable competence and was negligent and in breach of duties to the Court in:

(a)  the drafting of the caveats;

(b)  the s 89A application;

(c)  the misrepresentations to the Registrar;

(d)  the refusal to withdraw the caveats to avoid the proceeding;

(e)  the failure to acknowledge that the caveats were unsustainable; and

(f)   the failure to brief counsel with the relevant facts, or if in doubt, obtain counsel’s opinion on whether the caveats were maintainable. [88]-[90]

In Alliance Developments Pty Ltd v Arbab & Ors (No 2) [2020] VSC 37 Garde J held that the plaintiff’s costs after 3 October 2019 were payable on an indemnity basis jointly and severally by the caveator and the solicitor for similar reasons to the previous costs order, including that the solicitor had acted contrary to the overarching principles set out in the Civil Procedure Act, including the obligation to act honestly, the requirement to have a proper basis for a civil claim, and the obligation not to mislead or deceive.

Philip H. Barton

Owen Dixon Chambers West

5 May 2020

22. Caveats based on trusts alleged to arise in the domestic context – Muschinski v Dodds trust? Sale of land subject to caveat with requirement of retention of net proceeds to meet caveator’s future claim – Requirement in case of conflict of testimony that caveat be removed unless caveator commenced proceeding to establish interest – Power of courts exercising Family Law jurisdiction to alter property interests rests on legislation not on trusts – Family Law Act does not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest though court order under that Act could have that effect – Comparison of procedures under TLA s. 90(3) and s. 89A – Indemnity costs against client and reserved against solicitor who lodged caveat.

Karan v Nicholas [2019] VSC 35 (7 February 2019) Daly AsJ.

McRae v Mackrae-Bathory [2019] VSC 298 (7 May 2019) Derham AsJ.  

Hermiz v Yousif [2019] VSC 160 (15 March 2019) Derham AsJ.

 

Karan is a case of a son with a caveatable interest in his parents’ property based on a Muschinski v Dodds constructive trust.

McRae is a dispute between real or alleged domestic partners concerning two properties, involving a Muschinski v Dodds constructive trust, with analysis by Derham AsJ of: (1) the balance of convenience where despite a caveatable interest it is necessary that a property be sold, and; in the case of a property not being sold, the law that, where a caveator has established a prima facie case but there is a conflict of testimony, the caveat would not be removed outright but may be ordered to be removed unless within a certain time a proceeding is issued to establish the caveator’s title.

Hermiz is a groundless claim for a Muschinski v Dodds constructive trust by the mother of a registered proprietor’s child, which also: ventilated why the TLA s. 90(3) procedure should be taken rather than that under s. 89A, and; attracted an order for indemnity costs against the caveator and reserved the caveating solicitor’s liability also to pay them.  This case reiterates that the power of courts exercising Family Law jurisdiction to alter property interests rests on legislation not on the principles of constructive trusts; and that the Family Law Act does not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest, although an order under that Act could have that effect.

Karan v Nicholas [2019] VSC 35 (7 February 2019) Daly AsJ.

The facts were –

  • Mrs Karan was the registered proprietor of a residential property. Her son Theo was registered proprietor of a neighbouring property where his parents and then his mother lived for many years.
  • She died, as administrator of her estate her other son Frank desired to sell the property, but Theo had caveated claiming an equitable estate in fee simple on the ground of an implied or constructive trust.
  • Frank applied under the Transfer of Land Act (TLA) s. 90(3) to remove the caveat. Theo was agreeable provided part of the sale proceeds was held in trust pending determination of his claim.
  • Theo alleged in substance:
    • residence in the property since 1988;
    • that Frank had used both properties to raise funds for business ventures on the basis of being responsible for the mortgage repayments which he subsequently ceased making leaving Theo to make some repayments;
    • payment of rates and outgoings including insurance;
    • expenditure on repairs, renovations and extensions;
    • in summary, total contributions of over $200,000.

Daly AsJ:

  1. Referred to a “Baumgartner constructive trust” (based on the High Court case of Baumgartner v Baumgartner (1987) 164 CLR 137, also known as a Muschinski v Dodds constructive trust, based on the High Court case of that name: (1984) 160 CLR 583)). The elements of this trust are that a constructive trust for the holding of a beneficial interest in land in particular shares may arise regardless of agreement or intention where:

(a)   A relationship or joint endeavour has broken down without any blame attributable to any party to it;

(b)   There has been a financial contribution by one or both parties to the relationship or to the joint endeavour;

(c)   In these circumstances, and in all the circumstances, it would be unconscionable for one party to the relationship or joint endeavour to retain a benefit greater than that party’s contribution. [7]

  1. Held that Theo had established a serious question to be tried that such a trust existed from before 2012, on the basis of arguments that:

(a)   he and their parents were involved in a joint endeavour whereby he made contributions to the property, which enabled him and his family to live rent free at the property, and enabled his parents to live rent free at his property;

(b)   they all pooled their resources to facilitate the joint endeavour;

(c)   the joint endeavour ended without blame upon the death of the parents; and

(d)   it would be unconscionable for the estate to retain the benefit of his contributions. [8], [14], [16]

  1. Ordered removal of the caveat on condition that all or part of the net sale proceeds be retained to meet any claim by Theo, who was also required to commence a proceeding to pursue his claim within a specified time. [3(k)], [18]-[20]

McRae v Mackrae-Bathory [2019] VSC 298 (7 May 2019) Derham AsJ.  

The chronology was –

  • The plaintiff (Zachary) was the registered proprietor of a property at Albion acquired in 2004 and of a property at Lara acquired in 2013, each encumbered by the same mortgage.
  • In January 2019 the defendant (Rachel) caveated over each piece of land claiming an interest in the land “as chargee” under an implied, resulting or constructive trust.
  • In March 2019 Zachary entered into a contract to sell the Albion property to be settled in May 2019.
  • He applied for removal of the caveats under the TLA s. 90(3).
  • He alleged that:
    • in 2012 she gave birth to their twins, but he had never lived with her as a couple in a de facto relationship and there was no agreement between them sufficient to give rise to a constructive trust;
    • until recently the children lived with her during the week and with him every weekend;
    • in January 2019 she had attempted to kill him leading to an intervention order.
  • Rachel alleged that:
    • they had resided in a ‘full emotional and sexual’ committed de facto relationship between 2002 and 2019 and were publicly known as such;
    • they pooled their income for joint expenses;
    • the properties were acquired during the course of the relationship;
    • she made financial contributions to their purchase and development;
    • Zachary always ‘indicated’ to her that she had an interest in both properties and was entitled to a half share of them;
    • his evidence as to residence with the children was incorrect and that she had not assaulted him.

Derham AsJ held:

  1. The estate or interest claimed as chargee was likely to be the result of a legal error. [3]
  2. If Rachel’s testimony was accepted there was a sensible basis for, and a sufficient probability of, finding that there was a Muschinski v Dodds constructive trust over both properties to the extent of her having an equitable estate in fee simple as a co-tenant with Zachary. This basis was: her direct contributions to the acquisition of the Albion property; her contributions to the maintenance and mortgage payments of both properties. [17]-[19]
  3. Accordingly, while it was neither necessary or appropriate to determine disputed questions of fact, Rachel had a sufficient likelihood of success justifying the practical effect of maintaining the caveat over the Albion property or of requiring deployment of most of the net sale proceeds in reducing the mortgage. [13], [20]
  4. The interaction between the strength of the caveator’s case and the balance of convenience was such that the lowest risk of injustice, whatever the outcome of the disputes, lay in removal of the caveat at settlement on the proviso that the net proceeds of the sale were (after payment of certain credit card debts – see below) applied to reduce the mortgage (Zachary also undertaking not to withdraw loan monies under the mortgage). This outcome preserved most of the benefit of Rachel’s caveatable interest.  To withhold this protection would do her irreparable harm if she succeeded in establishing her claimed interests, while to grant it would not greatly injure Zachary if her claims failed. [4], [21], [22], [24]
  5. However, certain of Zachary’s credit card debts were first to be paid out of the sale proceeds because most were incurred during the relationship alleged by Rachel and some had been incurred in completing the Lara property and so would ultimately benefit Rachel if her constructive trust claim succeeded. [4], [23]
  6. As regards the Lara property, it was clearly established law that where a caveator established a prima facie case but there was a conflict of testimony the court would not order outright removal of the caveat but may order removal unless steps were taken to establish the caveator’s title within a certain time. Accordingly the caveat would be ordered to be removed unless the caveator commenced proceedings to establish her title within a month. [5], [25], [26]
  7. Having regard to offers made by each side before the hearing, which were each to some extent appropriate, the defendant was ordered to pay the plaintiff’s costs fixed at $1,400, being disbursements incurred in issuing the originating process and paying the search fees incurred in putting forward exhibits to his affidavit in support. [27]

 

Hermiz v Yousif [2019] VSC 160 (15 March 2019) Derham AsJ.

The chronology was –

  • In 1998 the plaintiff (Hermiz) and the first defendant (Yousif) were sexually intimate leading to the birth of a child.  They ceased their relationship at about this time and Hermiz had never met the child.
  • Hermiz paid child support.  Yousif never provided him with any financial support.
  • Hermiz married his wife Dina in 2004.  In 2010 they purchased a residential property, became registered proprietors and subsequently cohabited there.
  • Yousif made no contribution to the property, or to any other asset owned by Hermiz, he made no promise about the property or declaration of trust or like arrangement concerning it, and no court order related to it.
  • In December 2018 Hermiz and Dina entered into a contract to sell the land with settlement due in February 2019.
  • In January 2019 Yousif lodged a caveat claiming an interest in the land pursuant to a court order under the Family Law Act.  There was no order giving such an interest.  The caveat was voluntarily removed.
  • On 1 February 2019 Yousif via a firm of solicitors lodged the caveat the subject of this proceeding claiming a freehold estate on the basis of an implied, resulting or constructive trust.  Hermiz’s solicitors wrote to Yousif’s solicitors expounding the absence of basis for the caveat and forshadowing an application for damages and indemnity costs.
  • Hermiz and Dina could not complete the sale, but gave the purchaser possession under a licence and also remained liable to keep up mortgage repayments.
  • Hermiz applied under the TLA s. 90(3) to remove the caveat.
  • Two days before the Supreme Court hearing Yousif filed an application in the Federal Circuit Court for a property order, in particular for an order that the net proceeds of sale of this property be held in trust pending final orders, supported by an affidavit including allegations referred to in 1 below.

Derham AsJ held:

  1. Yousif had not discharged the burden of establishing a serious question to be tried (in the sense of a prima facie case) of the interest in land claimed in the caveat.  There was insufficient evidence of a Muschinski v Dodds constructive trust: her allegation of cooking, cleaning and supporting Hermiz financially whilst he studied for his Australian medical qualification more than a decade before purchase of the land did not reveal that it is or would be unconscionable for him to deny her an interest in the land. [32]-[37], [40], [41]
  2. On the dissolution of marriage or the breakdown of a de facto or domestic relationship, the scope of the Federal Circuit Court’s power to alter property interests was determined by legislation, in this case the Family Law Act s. 90SM, rather than by the principles of constructive trusts.  The Family Law Act did not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest, although an order under that Act could have that effect. [38], [39]
  3. The balance of convenience was also against Yousif. [42]
  4. Hermiz was justified in applying under the TLA s. 90(3) as opposed to using the administrative procedure in s. 89A. The very reason for the summary procedure under s. 90(3) was to enable an application that avoided the delay involved under s. 89A. [44], [45]
  5. Indemnity costs would be awarded against Yousif because: the nominated basis of resulting, implied or constructive trust for lodging the caveat was without merit, and; she was using the caveat process as a bargaining chip. [52], [53]
  6. Leave would be reserved to Hermiz to claim costs against the solicitors who lodged the caveat. [54]

21. Options – Indemnity costs – Injunction against caveating

Pollard v Pollard [2019] VSC 21 (8 February 2019) Daly AsJ. 

Kuipers v Harrington (No 2) [2019] VSC 190 (25 March 2019) Derham AsJ.

 

These two cases are in contrast.  Pollard illustrates that a well drawn option to purchase creates a caveatable interest.  Kuipers illustrates a badly drawn option clause, no caveatable interest, and consequential award of indemnity costs and enjoining of the caveator. 

Pollard v Pollard [2019] VSC 21 (8 February 2019) Daly AsJ.  This was not a case under the TLA s. 90(3) but was a trial in which, if the defendant succeeded (as she did), she would have a caveatable interest.  The facts were –

·       In 2004 the parties entered into a deed inter alia concerning a property owned by a company and later by the plaintiff which included (cl. 5.7) that if the plaintiff wished to sell it he must first give the defendant the option to purchase it: at a value calculated by multiplying the annual gross rent paid by the tenants at such time by 10 times; but if it was untenanted, then at current market value established by sworn valuation; and the defendant was to be given at least 30 days’ prior notice in writing of such intention to sell, with her then to exercise her option to purchase within 21 days of receipt of such notice;

·    In 2009 the defendant lodged a caveat on the grounds of “As beneficiary of an option to purchase pursuant to a written agreement” then describing the agreement;

·    In February 2018 the plaintiff informed the defendant that the property was going on the market, stated its market value according to a real estate agent, and asked her intentions.  At that time the property was leased to a tenant;

·      Initially the defendant stated that she was not interested in purchasing the property and that the caveat would only be lifted at settlement of a sale.  Subsequently she confirmed that she wished to exercise her right to purchase at 10 times the current annual rent; 

·       The plaintiff commenced proceedings seeking removal of the caveat.   

Daly AsJ found or held –

1.    The plaintiff was obliged to give the defendant the option to purchase the property at the price calculated in accordance with the Deed, ie to give 30 days’ notice of intention to sell and concurrently to give the option to purchase the property at ten times the annual rental receivable at the time of the notice.  The obligation to offer the property to the defendant for sale at market value only arose if the property was untenanted. [32]

2.    The defendant was only obliged to respond to an offer made in accordance with the Deed.  No such offer was ever made.  She was not required to enquire whether the property was tenanted. [35]

3. The defendant was entitled to an order for specific performance of the plaintiff’s obligations. [34], [37]-[46]

 

Kuipers v Harrington (No 2) [2019] VSC 190 (25 March 2019) Derham AsJ.

The chronology was –

·         The plaintiffs owned a 38.38 ha. property at West Rosebud.  On 4 April 2014 they and the first defendant executed a Heads of Agreement and a Deed of Agreement”.  Under the Deed the first defendant was to facilitate development of the property by subdividing it into ten acre lots, in return for transfer to him of one such lot.  Clause 7 of the Deed purported to give the first defendant the plaintiffs’ consent to the lodgement of a caveat over the land to ‘better secure the opportunity’ for the first defendant to develop it;

·         The Heads, described by his Honour as “an ill drawn document ([14]) –

·         Recited that:

·    the seller has agreed to grant to the option holder a three-year call option for the properties to either purchase the properties, source a joint venture partner or investor, source a funder to develop them or to source an ultimate buyer/buyers.  This was the only reference in the document to a period of three years for exercise of the call option;

·     if the option holder exercised the call option, the seller and the ultimate buyer and/or their nominees must enter into an unconditional contract of sale;

·     the option holder was entitled to earn the profit margin between the seller and buyer less any relevant costs, fees, and commissions due to third parties.

·         Defined:

·    “Expiry Date” of the Heads as “three years from the commencement date” (but the term “Expiry Date” was not subsequently used in the document);

·      “Option Call” as an irrevocable offer to enter into a REIV sale contract with an ultimate buyer.

·      Provided, in a Payment Agreement”, that for facilitating the subdivision the first defendant would receive a ten acre parcel;

·         Provided that “the seller grants to the option holder an irrevocable right and option: (a) to require the seller to enter into a contract of sale with either the option holder or the ultimate buyer (cl. 2.1(a)); (b) to nominate a person or entity as selected buy (sic) the option holder to enter into a contract as the ultimate buyer, to purchase the property or properties listed on this agreement and on the terms contained in this agreement”; (cl. 2.1(b));

·   Provided: that the “call option” may be exercised during the term of the agreement by notice (cl. 2.2); the option holder, the first defendant, must pay the seller (the plaintiffs) $1 which is deemed to be a holding deposit towards the purchase of the properties” (cl. 2.8); “This agreement can only be terminated by either of; the expiry of this agreement, or by mutual consent of both parties (cl 2.11);

·       Provided that (cl. 4):

“The seller consents and grants to the option holder and the ultimate buyer, an interest in the property for the purpose of securing the development approval, and when a Contract is offered, the option holder and/or the ultimate buyer are authorised to lodge a caveat on the title of the property, a) but the caveat shall be discharged in favour of mortgages to be lodged for a contract of purchase, b) the caveat will protect any equitable interest of the option holders until settlement of the contract by the ultimate buyer; c) cost of removal will be paid by the lodger of the caveat”.

·     Nothing then occurred until 2018 when, after the plaintiffs had entered into a contract to sell the land to someone else, the first defendant lodged a caveat claiming a freehold estate in the land pursuant to an agreement dated 4 April 2014;

·     On an application by the plaintiffs to remove this caveat Daly AsJ found that the caveator’s prospects of maintaining a claim for an interest in the land were modest at best and on the  balance of convenience the caveat should be removed;

·       A month after this removal the first defendant lodged a second caveat claiming an interest as chargee apparently on the ground that the Heads created a charge;

·    The plaintiffs applied under the Transfer of Land Act s. 90(3) to remove the caveat.  Before filing the summons the plaintiffs’ solicitors wrote foreshadowing an application for indemnity costs. 

Derham AsJ held –

1.    On its proper construction, the option right, if any, conferred by the Heads was limited to three years from the date of the agreement. [20]

2.    However the Heads were uncertain, and therefore void and unenforceable, because 

(a)    it was unclear who was responsible to pay the option holder the ‘profit margin’, how it was to be calculated or what if any costs were to be taken into account;

(b)     the price at which the land was to be sold was to be determined by later agreement;

(c)     many terms of the subsequent REIV sale contract were unknown;

(d)     the nomination provision was uncertain in its reference to “on the terms contained in this agreement” which were unidentified; and

(e)   it was unclear whether the contract of sale to be entered into was to be between the plaintiffs, the option holder and the ultimate buyer under which the option holder was to be paid some unidentified profit margin. [21]

3.    The wording of clause 4 (consent to caveat) was unclear as to what interest in the property was purportedly granted and it appeared that the right to lodge a caveat did not arise until a contract was offered to the sellers. [23]

4.    There was accordingly no serious question to be tried that the Heads gave the caveator a caveatable interest because:

(f)      there was no charging clause;

(g)     the call option was void for uncertainty;

(h)     the time for exercise of the call option had expired; and

(i)   the sellers’ consent to caveat was little better than a contractual consent to lodge a caveat in certain circumstances, which had not arisen and, if they had, would not give rise to an interest in the land. [24] 

5.    The balance of convenience also favoured removal of the caveat. [26]

6.    Indemnity costs were awarded against the caveator.  His Honour comprehensively recited the principles governing an award of indemnity costs.  An order for indemnity costs warranted by: the nominated basis for lodging the caveat, ie a charge, was untenable; the pre-summons warning; the caveator was attempting to use the caveat as a bargaining chip. [33]-[35]

7.    The first defendant would be enjoined against lodging any further caveat on the basis of the Heads or the Deed because the lodgement of the second caveat was frivolous, vexatious and an abuse of process.  The caveator had shown a profound disregard of the absence of any underlying basis for the second caveat and displayed that he was ready, willing and able to continue to disrupt any sale.  There was accordingly a prima facie case that he would continue to lodge caveats if not restrained. The balance of convenience also favoured the grant of an injunction. [36]-[37]

17. An application for costs by registered proprietors against a caveator, and a consequential application for costs by all against the caveator’s solicitor, and his application for costs against them

 

Sekhon & Anor v Chandyoke and Ors [2018] VSC 327 (19 June 2018) T Forrest J.

The plaintiffs were a married couple.  The first defendant was the wife’s mother who caveated over a property owned by the couple.  The first defendant’s solicitor was separately represented on an application that he personally bear costs.  The judge had previously ordered removal of the caveat.  The first defendant had been advised by previous counsel that she had no caveatable interest and by her solicitor that there were issues with the caveat, including that there was significant doubt about the caveatable interest and her right to impugned funds.  The defendant conceded that there was no proper basis on which she could have defended the application for removal of the caveat but blamed her solicitor.

His Honour held –

1.      The defendant was made aware on numerous occasions, by both counsel and her solicitor, that she probably had no caveatable interest over the property, but refused to instruct her solicitor to remove the caveat.  Her conduct in the litigation was obstructive and sharp – she demonstrated contemptuous disregard for the litigation.  She persisted with a near hopeless case for the collateral purpose of recovering funds she believed to have been stolen from her but which she knew or ought to have known were unrelated to the property.  There were special or unusual circumstances sufficient to warrant an order that she pay the plaintiff’s costs of the litigation on an indemnity basis. [39]-[40], [42]

2.      To justify an order that the solicitor bear the costs it was unnecessary to establish dishonesty, obliquy or similar – misconduct, default or serious or gross negligence sufficed.  Although the solicitor was at times dilatory he acted for a very difficult client, who directly or indirectly obstructed the fair hearing of the caveat withdrawal application.  The solicitor on several occasions advised the client in effect that it was very likely she would lose and warning of the consequences.  It was also doubtful that the defendant would have taken advice no matter how forceful.  The principles applying to the application, whether under r 63.23 of the Supreme Court Rules or s 29 of the Civil Procedure Act showed that a non-party costs order was prima facie unjust, required caution and should only be made in a clear case.  This was not such a case. [41]

 

Sekhon & Anor v Chandyoke and Ors [2018] VSC 435 (7 August 2018) T Forrest J

 

This case was related to the previous application by the plaintiffs and the first defendant that the first defendant’s solicitor pay costs, which failed in the case referred to above.  The solicitor sought indemnity costs based on two offers before the costs hearing: 

(a) An offer to the plaintiffs on 23 March 2018 open for five days that the solicitor pay the plaintiffs’ costs of the proceeding fixed in the sum of $7500 within two business days;

(b) An offer to the plaintiffs and the defendant on 14 May 2018 open for five days that the application for costs against the solicitor be dismissed and the plaintiffs and defendant pay his costs of the application fixed in the sum of $6000 with a stay of 30 days.

His Honour held –

1.      The general rule that costs followed the event applied and so the plaintiffs and the first defendant were liable to pay the solicitor’s costs on a standard basis.  These costs would be awarded against the plaintiffs alone from 28 March, being from when it was reasonable for the solicitor to commence preparations for his defence, to 5 April, and against the plaintiffs as to half and the first defendant as to half from 6 April, being the date the first defendant filed a notice of waiver and intention to participate in the costs proceedings.   Notwithstanding that the solicitor was dilatory at times this did not justify application of any exceptions to the normal costs rule.  His Honour noted – “Solicitors cannot pick and choose their clients and ought not be judged too harshly when the sins of their clients are sought to be visited upon them”. [9]-[11], [16]-[18]

2.     Indemnity costs would not be awarded because rejection of the:

(a)   first offer was not unreasonable because it preceded any affidavit from the solicitor explaining his conduct; [13]

(b)   second offer was not unreasonable because, being an offer to undertake joint liability, neither party could accept the offer alone: they were an unlikely coalition and it would be unfair to penalise one for the unreasonableness of the other. [14]

 

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.  

 

2. 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]