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