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 (5 of 6)

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

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

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

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

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

 

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

RECENT SUPREME COURT CASES DEC 2017 – FEB 2018 (4 of 6)

A claim for costs against the Registrar of Titles arising from lodgement of a Notice of Action

Lee Nyong Pty Ltd & Anor v Di Blasi & Anor [2018] VSC 5 (15 January 2018) J. Forrest  J. 

But for one novel point this was a standard case of a caveator claiming an equitable interest pursuant to a charge being ordered to pay indemnity costs to a prior registered second mortgagee.  The caveat was voluntarily removed only after the mortgagee had commenced a s. 90(3) application.  The caveator was motivated by alleged fraudulent withdrawal of a previous caveat: if so, his Honour observed, the appropriate action was to notify the police and claim compensation from the Assurance Fund not maintain a position with no chance of success vis a vis mortgagees.

The novel point was that costs were also sought against the Registrar of Titles, the facts relevant to this point being:

  • before the second mortgage was lodged for registration the caveator had caveated based on a charge but due, the caveator alleged, to forgery in a notice of withdrawal this caveat had been withdrawn;
  • after registration of a second mortgage the caveator re-caveated and the Registrar of Titles lodged a Notice of Action relating to the allegation, based only on the caveator’s assertion, of forgery.  The Notice was purportedly an exercise of power under the Transfer of Land Act s. 106(1)(f) enabling the Registrar to “take any other step necessary to protect the operation, effectiveness and integrity of the Register, including, but not limited to, the making of a notation on a folio of the Register”.  The Registrar stated that the Notice did not prevent the lodgement or registration of any dealings and would be removed when he considered appropriate;
  • the Registrar subsequently refused to remove this Notice unless in substance the caveator either consented or failed to enjoin registration of a transfer;
  • part of the relief sought in the caveat removal proceeding was that the Registrar withdraw the Notice and pay costs;
  • once the caveat was removed the Registrar removed the Notice.

His Honour observed:

  1. A Notice of Action had no statutory force. It is not a creature of statute and simply indicates that the Registrar has concerns about a particular transaction.
  2. The Registrar argued that he had a discretion to refuse to register dealings where registration may cause detriment to the public, or may result in a claim for indemnity under s. 110(1). The Notice was a reasonable initial response but eventually the principles associated with priority, indefeasibility, and bona fide purchasers should have prevailed.  His Honour had reservations as to whether proper consideration was given to the plaintiffs’ request for the removal of the Notice.
  3. However costs would not be ordered against the Registrar: the sole cause of s. 90(3) application was not the Registrar’s Notice but rather the caveator’s failure to remove the second caveat, whereby “this whole debacle would have been avoided”.

RECENT SUPREME COURT CASES Dec 2017 – Feb 2018 (1 of 6)

Today’s blog is the first of six brief entries discussing recent Supreme Court cases.

 Whether a purchaser of a lot in land yet to be subdivided, who caveats over all the land, can, after subdivision and transfer to it of the lot sold, retain the caveat over the rest of the land.

 Bisognin & Anor v Hera Project Pty Ltd & Anor [2017] VSC 783 (15 December 2017) Daly AsJ.

 The chronology was –

13 March 2015          Plaintiffs enter contract to sell the southern portion (“southern lot”) of their soon to be subdivided land to the first defendant, retaining the northern portion (“northern lot”).

4 March 2016            Sloss J holds the vendors contractually required to undertake water supply and sewerage facility works.  Works remain unperformed. 

3 June 2016               Purchaser caveats claiming an estate in fee simple over the whole of the land, the interest claimed being as purchaser. 

16 December 2016    Court of Appeal holds the purchaser contractually required to pay fees (the “bonds”) on the vendors’ behalf to Water Authorities.  Payments subsequently made.

22 May 2017              Riordan J orders specific performance of the contract.  Vendors appeal seeking relief including recovery of southern lot.  Appeal subsequently heard but judgment reserved.

15 September 2017   Registration of plan of subdivision creating both lots.
Caveat remains registered over both. 

2 October 2017       Settlement of sale of southern lot. 

27 October 2017    Application to remove caveat under Transfer of Land Act s. 90(3). 

The purchaser argued that: the caveat was lodged to secure the vendors’ performance of their outstanding contractual obligations; by not undertaking the works the vendors had taken the benefit of the bonds; if the vendors did undertake the works and the bonds were refunded the vendors were required to repay the bonds to the purchaser, and this obligation created a lien or a resulting or constructive trust. 

Daly AsJ removed the caveat, holding –

  1. A purchaser of land anticipated to be subdivided could caveat over the whole of the land before subdivision, and over the purchased land after subdivision.  But on transfer of a subdivided lot the purchaser retained no interest in the unsold lot.
  2. The purchaser was in effect seeking to use the unsold lot as security for contractual obligations: but, absent a contractual term creating a charge, continuing actual or contingent liabilities of the vendor did not create a caveatable interest in the land retained.  
  3. Referring to authority that a purchaser had a lien over the property to secure repayment of the deposit if the contract ended, even if the vendors’ contingent liability to repay the bonds automatically created a lien there was no serious question to be tried that this created the estate or interest claimed in the caveat.  

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.