When will I be able to appeal successfully from the dismissal of application to remove caveat under section 90(3) of the Transfer of Land Act?

1.     The Court of Appeal (Beach, Kyrou and Kaye JJA), considered whether the Trial Judge erred in dismissing an application to remove a caveat under section 90(3) of the TL Act (see Chan and anor v Liu and anor [2020] VSCA 28).

 

2.     The appeal did not of itself make any alteration to the existing law relating to the removal of caveats. In particular, the Court of Appeal approved of and followed the decision in Piroshenko v Grojsman (2010) 27 VR 489.

 

3.     In Chan, the substance of the dispute related to whether the respondent purchaser had failed to settle the purchase on time, or whether an extension of time to settle had been granted.

 

4.     Interestingly, the purchaser had actually withdrawn its original caveat, in response to a demand by the vendor. It then lodged a subsequent to caveat (ostensibly in breach of section 91(4) of the TL Act). For reasons that are not clear from the Court of Appeal’s judgement, the trial judge did not consider that s 91(4) of the TL Act had the effect of prohibiting the respondent from lodging the [subsequent] caveat.

 

5.     The trial judge found that on the facts, there was a serious issue to be tried as to whether the purchaser had a caveatable interest in the property, and that the balance of convenience favoured the retention of the caveat.

 

6.     The power of the court, under section 90(3) of the TL Act, to remove a caveat is discretionary. Accordingly, in order to succeed on the application for leave to appeal, the applicants had to establish material error by the judge in the exercise of that discretion.

 

7.     Counsel for the applicant raised grounds that were not relied on at the hearing before the trial judge.

 

8.     The Court of Appeal noted (at paragraph 47) that:

Ordinarily, a party may not be permitted to raise a point, or rely on an argument on appeal, that was not put before the court that determined the matter at first instance.

 

9.     However, at paragraph 49, they noted:

That principle has been applied with less stringency in cases in which the decision, that is the subject of appeal, was by way of summary or interlocutory judgment.

 

10.  The Justices of Appeal then noted (at paragraph 50):

In the present case, the decision, concerning the removal of the caveat, had the potential effect of substantially affecting the rights of the respective parties. If the judge had ordered that the caveat be removed, such a decision would, in a practical sense, have rendered nugatory any right of the respondent to insist on specific performance of the contract of sale. Alternatively, the decision by the judge, not to order removal of the caveat, has had the practical effect that the applicants are, and will remain, in default of the contract to re-sell the property until the trial of this proceeding. In that way, the decision of the primary judge had the potential to substantially adversely affect the rights of the applicants under that contract.

 

11.  In determining whether to allow further arguments to be put to the Court of Appeal, which were not put to the trial judge, they decided:

… bearing in mind the substantive effect of the decision made by the judge on the rights of the applicants, and the circumstance that, if the points made … had been contended before the judge no further evidence would have been adduced, we consider that it is appropriate to permit counsel for the applicants to rely on those propositions.

 

12.  The Court of Appeal agreed that the primary submission, made by the applicants, was that, by his conduct the respondent elected not to rely on his rights to specific performance of the contract of sale, but, rather, to confine those rights to a claim for damages for the alleged repudiation of the contract by the applicants.

 

13.  In reply, Counsel for the respondent submitted that the Court of Appeal should not determine whether the respondent's conduct constituted an election by him between inconsistent competing rights under the contract. Counsel contended that the Court should do no more than acknowledge that the question, whether there was an election (or estoppel) affecting the rights of the respondent, under the contract of sale, is an arguable issue, but that proposition did not preclude or affect the conclusion that the respondent had established that there was a serious issue to be tried that he had a caveatable interest in the property.

 

14.  In the circumstances, the Court of Appeal did not consider it appropriate or necessary to determine conclusively whether, on the evidence, there was a binding election by the respondent which would preclude him from seeking specific performance of the contract of sale. However, they noted that they were well satisfied that there were strong grounds for concluding that such an election was made by the respondent as contended for on behalf of the applicants.

 

15.  The Court of Appeal agreed that there was a serious issue to be tried as to whether he had a caveatable interest in the property. However, based upon the assessment referred to in the previous paragraph, the Court of Appeal concluded that the balance of convenience in the case clearly favoured the removal of the caveat. They noted that the applicants had entered into a contract to sell the property to a third party after purporting to rescind the contract with the respondent, and after the respondent had previously withdrawn his caveat.  

 

16.  It was the matters that were not argued before the trial judge, but were argued before the Court of Appeal, that tipped the balance of convenience in favour of the removal of the caveat.

 

Conclusion

17.  The appeal in this proceeding succeeded on the basis of arguments that were not raised before the trial judge. That in itself makes this appeal, and its success, unusual.

 

18.  Apart from that, the appeal itself does not raise any new issues of law.  

WG Stark 

Hayden Starke Chambers

When will a hand-written licence to occupy premises in a contract of sale of real estate be enforceable?

1.     In CAG Company P/L v Cheruku and anor [2020] VCC 13, the County Court (Marks J) considered the interpretation of a handwritten clause in a contract of sale of real estate allowing the purchaser to take possession of the property being sold 5 and 1/2 months before settlement.

 

2.     The plaintiff agreed to sell its Coburg North property to the defendants in February 2019, for $1.37 million, with settlement to take place some seven months later, on 1 September 2019. The contract of sale included a handwritten clause, which was added by the plaintiff’s real estate agent and initialled by the defendants when they signed the contract of sale on 9 February 2019.

 

3.     The precise wording of the hand-written clause was:

The Vendor allows the purchaser to take possession of the property

under lease LICENCE agreement on the March 20th March [sic] 2019 at $700 per week until Settlement.

 

4.     Settlement eventually occurred on 2 September 2019 and the defendants moved in. They did not take possession before settlement.

 

5.     The dispute (the value of which was $16,500) was over whether the defendants were obliged to pay the licence fee or not.

 

6.     The plaintiff vendor submitted that the clause was ambiguous. It said that it could mean that the $700 per week payment it sets out was mandatory (payable regardless of whether the defendants took possession before settlement) – or that it was permissive (only payable if the defendants took possession before settlement).

 

7.     The plaintiff then argued that where a clause is ambiguous and there is a constructional choice as to how it is interpreted, that ambiguity may be resolved by considering pre-contractual negotiations in order to establish the parties’ objective intentions. Finally, the plaintiff submitted that the pre-contractual negotiations established that the parties’ objective intentions were that payment was mandatory. The fact the defendants did not take possession is irrelevant: the fee provided for by the clause was payable in any event as a fee for the opportunity to take possession.

 

8.     The defendants, on the other hand, argued the handwritten clause was not ambiguous. It permitted the defendants to enter the property under a licence agreement but it did not compel them to do so, nor did it create a liability to pay if they had not entered the property before settlement.

 

9.     The lawyers for the vendor must have realised that there was a problem with the clause as drafted by the estate agent, and after the contract of sale was signed proceeded on the basis that the defendants were required to sign a further agreement, described as a ‘Licence Agreement’ which included extensive terms not provided for in the contract of sale.

 

10.  At paragraph 31, of the judgment Her Honour noted:

… the plaintiff did not offer the defendants possession of the property on or from 20 March 2019 based on the handwritten clause. On the contrary, they issued proceedings seeking to force the defendants to sign the Licence Agreement.

 

11.  It was not until trial that the plaintiff claimed that $16,500 was due to it as a debt because of the handwritten clause.

 

12.  This allowed the judge to conclude that the parties had not reached agreement. She found (at paragraphs 34 to 35):

 

… it is for the plaintiff to show, on the balance of probabilities, that it

has established the precondition to the debt claim it now pursues.

 

35 It has not. On its construction of the handwritten clause, in order to succeed on its claim it needs to establish that after the contract of sale was executed it offered the defendants possession based on that clause. It needs to show it was ready, willing and able to offer possession – without requiring as a further condition of possession that the defendants agree to further conditions not contemplated in the contract of sale. It did not show that.

 

13.  Her honour went on to explain the meaning of the hand written clause. She noted at paragraph 36 that the clause was “unambiguous". The word allows is clearly permissive.

 

14.  Following on from that construction, Judge Marks concluded (at paragraph 38, emphasis added):

The proper construction of the clause is that the plaintiff is giving the defendants the opportunity to take possession of the property under licence from 20 March 2019, at the cost of $700 per week until settlement if they take possession.

 

Conclusion

15.  With all due respect to real estate agents in Victoria, they should be leaving the drafting of unusual terms in Contracts for the Sale of real Estate to lawyers.

 

16.  The ambiguity in the licence clause shows that it is imperative that the drafting of such a clause is clear, as well as concise.

 

17.  The vendor’s lawyers clearly recognised that the hand written clause was inadequate, which led to their attempt to renegotiate the clause and its effect by drafting a more detailed licence agreement. Unfortunately, the evidence showed that no agreement could be reached about the terms of the proposed licence agreement, and so it seems that the vendor ‘jumped the gun’ in seeking to enforce the licence agreement, leading to unnecessary (and ultimately unsuccessful) litigation.

WG Stark

Hayden Starke Chambers

When is it appropriate to seek summary possession under order 53 of the Victorian Supreme or County Court Rules?

Summary procedure for possession under order 53

1.     In March 2020, the Court of Appeal (Maxwell P, Tate and Forrest JJA), looked at whether the summary procedure for possession of land under order 53 was appropriate in the case of a dispute between a brother and sister (see Chan and Lin v Chan [2020] VSCA 40).

 

2.     Maxwell P and Forrest JA agreed with the detailed reasons for decision written by Tate JA.

 

Background

3.     The dispute was between a brother and sister over the ownership of land in Victoria. Ching Ha Chan (‘Carol’) was the registered proprietor of 2 units in Plenty Road, Bundoora. Carol paid the deposit on each unit using money given to her from her parents. Carol and her brother, Ching Lung Chan (‘Michael’), lived in Unit 2 while Carol rented out a number of other bedrooms in Unit 2 and all of the bedrooms in Unit 1. Carol used the rental income to service the mortgage repayments. When Michael married Ying Lin (‘Lisa’) he moved to Unit 1 with his wife and eventually collected the rent from the other tenants in Unit 1 for himself. Michael claims that the money their parents gave to Carol was to purchase Unit 2 for herself and to hold Unit 1 on trust for him. Since late 2017, Michael had been in dispute with Carol about the ownership of unit 1. However, it was not in dispute that Michael and Lisa moved into Unit 1 with Carol’s consent.

 

4.     Carol brought summary possession proceedings for possession under order 53 in the County Court on 30 July 2018 to evict Michael and Lisa. She denied that she held Unit 1 on trust for Michael.

 

5.     A County Court judge made orders under Order 53 of the County Court Civil Procedure Rules 2018 in favour of Carol for the summary recovery of land.

 

6.     In the County Court, Michael and Lisa had claimed that they had an interest in unit one, ostensibly on the basis of a resulting, constructive or implied trust (although not in those terms, as they were not represented by counsel at the hearing).

 

7.     Counsel for Carol had submitted that nothing that Michael and Lisa raised had displaced the presumption of indefeasibility of title under the Transfer of Land Act, 1958. Justice of Appeal Tate found (at paragraph 38) that:

… counsel was wrong to submit that nothing had emerged either from Michael’s and Lisa’s affidavit, or Lisa’s oral submissions, to support an arguable case for the recognition of an equitable interest that might

attract an exception to indefeasibility (See, for example, Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131, [128] – [130]).

 

8.     Michael and Lisa applied for leave to appeal from the orders of the County Court. The primary basis for the appeal was that the dispute was not an appropriate case for the summary procedure under order 53, and

in the circumstances there were disputed facts and legal

contentions in respect of their equitable interest in Unit 1 that warrant a trial.

 

9.     The Honourable Justice of Appeal Tate granted leave to appeal and allowed the appeal.

 

10.  As a part of her reasoning, Tate JA examined the history, purpose, and scope of Order 53 (commencing at paragraph 46 of her reasons).

 

11.  Among other points of interest, Tate JA concluded that the summary procedure does not apply to a tenant, including a tenant holding over after the determination of the tenancy (in paragraph 8).

 

12.  Tate JA quoted from a decision by Derham As J (In Framlingham Aboriginal

Trust v McGuiness [2014] VSC 241, which was upheld on appeal in Framlingham Aboriginal Trust v McGuiness [2014] VSC 354 (Ginnane J). Associate Justice Derham summarised the principles that govern the application of Order 53 as follows:

(a)   It is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby trespassers are keeping the proprietor out;

(b)  It is intended to apply only in clear cases where there is no question to try;

(c)   The existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly;

(d)  While an order for possession may be made notwithstanding that there is a factual dispute between the parties, such an order will only be appropriate if the Court is able to satisfy itself as to the material facts that bring the case within Order 53;

(e)   The jurisdiction should be exercised with great care;

(f)    Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to Rule 4.07 of the Rules; and

(g)   Where the Court gives judgment for possession under Order 53, it may grant a stay of execution.

 

13.  Derham As J concluded with the following summary:

The power to give summary judgment for possession is similar in nature to the power to give summary final judgment under Rule 22.02 of the Rules. That power should be exercised with great care and should never be exercised unless it is clear that there is no question to be tried. The need for exceptional caution in exercising the power is the subject of numerous observations of courts in this country.

 

14.  Justice of Appeal Tate then analysed a number of other cases which held that the procedure under order 53 was not appropriate to deal with a factual dispute.

 

15.  In summary, she noted as follows:

The purpose of proceedings for the summary recovery of land is to protect against trespassers, that is, those who enter land without lawful authority or those who remain in occupation when the licence or consent to that occupation has been withdrawn. The procedure is only appropriate in a clear case, although it may be available where there is a minor factual dispute providing the dispute can be readily and fairly resolved by the judge.

 

The dispute between Carol, and Michael and Lisa, as to whether Unit 1 was held on trust by Carol for Michael, is not minor. The issue was not resolved by the judge, nor could it be without a trial. The judge, quite properly, determined not to hear the application until the parties had been given an opportunity to adduce evidence by affidavit. The evidence filed established a relevant contest of fact between the parties that could not be fairly and readily resolved summarily.

 

16.  After her analysis of the history, purpose, and scope of Order 53, Tate JA then noted that the two issues raised by the grounds of appeal relate to the status of Michael and Lisa as tenants at will or licensees and whether Carol holds Unit 1 on trust for Michael.

 

17.  The Honourable Justice of Appeal Tate then noted “When a person is given an uncertain interest in premises, the law may presume a tenancy at will” (paragraph73).

 

18.  At paragraph 76, Tate JA noted:

Michael and Lisa entered into occupation of Unit 1 lawfully. They

were permitted to occupy Unit 1 rent-free. There is no evidence to suggest that the occupation was for any defined term. There was no relevant lease. Their interest in Unit 1 is uncertain. If they had exclusive possession of Unit 1 by reason of an express or implied agreement with Carol, the law would likely presume a tenancy at will. While the position of a tenant at will has been described as somewhere between a lessee and a licensee, it is accepted that tenants at will are not licensees, licensees not being entitled to exclusive possession.

 

19.  As a result, Tate JA concluded that having never been nor become licensees, Michael and Lisa would fall outside the scope of Order 53.

 

20.  On the hearing of the appeal, both parties attempted to rely on new evidence. This evidence tended to establish that there may have been a constructive trust arrangement in place. The Court of Appeal rejected the attempt to introduce new evidence.

 

21.  Tate JA also outlined some of the (disputed) evidence from the hearing in the County Court and concluded (at paragraph 87):

While the evidence may seem somewhat scant to found a constructive trust based on principles of proprietary estoppel, in my view it is sufficient to indicate that the matter ought to have been directed to proceed by way of trial. … This was especially so given that Michael and Lisa were self-represented below and the identification of a relevant equitable interest is a complex matter.

 

22.  Finally at paragraph 91, the Honourable Justice Tate concluded:

I cannot confidently conclude that a constructive trust could not be found against Carol at a trial hearing of this proceeding. In those circumstances, the summary procedure under Order 53 is neither available nor appropriate.

 

Conclusion

23.  This case provides a useful summary of the law as it relates to the summary procedure for possession of land, as provided by order 53, as well as a thorough analysis of the circumstances in which the procedure will and will not be available.

WG Stark

Hayden Starke Chambers

Can I claim costs against a lawyer who lodges a caveat on behalf of his or her client?

1.     In Alliance Developments v Arbab [2019] VSC 832, the Supreme Court of Victoria (Garde J) considered the circumstances in which it may be appropriate to order indemnity costs against a solicitor in respect of an application to remove a caveat lodged on behalf of a client.

 

Background

2.     The Court had previously ordered that the Registrar of Titles (‘Registrar’) remove two caveats lodged by the solicitor for Mr Arbab, the first defendant, who was a resident of Pakistan, over two properties owned by the plaintiff.

 

3.     In this application, the plaintiff sought an indemnity costs order against Mr Arbab, as well as against Pasha Legal and its sole principal Ms Hina Pasha, who acted for Mr Arbab.

 

4.     The plaintiff alleged that there was no proper basis for lodging the caveats, and that Mr Arbab never had the interests in the two properties that were claimed.

 

5.     In 2013, the plaintiff entered into a contract to buy vacant land in California Gully, Victoria. It intended to subdivide the property into five lots and build new homes on the lots. Mr Arbab, who was then a director of the plaintiff, alleged that he contributed $34,300 to the purchase.

 

6.     In 2014, another director of the plaintiff entered into a contract to buy a property located in Laverton North for a purchase price of $423,000. The plaintiff was subsequently nominated as the purchaser and became registered as owner of the Laverton North property.

 

7.     In the background, Mr Arbab was in dispute with his fellow directors about building projects on eight properties, not including the California Gully and Laverton North properties.

 

8.     In the judgment, Garde J noted, among other things, at paragraph 16 (emphasis added):

When lodging a caveat, the estate or interest claimed, the ground of the claim, and the nature of the prohibition are of prime importance. The claimed estate or interest in land is a central concept in a caveat. Care must be taken to ensure that the claims made are correct, and accurately reflect the caveator’s estate or interest in the land the subject of the caveat. A caveat may only be lodged in a form commensurate to the interest it is designed to protect.

 

9.     The Honourable Justice Garde then proceeded to list several cases where the caveats in question were held to be defective.

 

10.  The lawyer for Mr Arbab lodged a caveat over the title to each of the California Gully property and the Laverton North property.

 

11.  In respect of the Laverton North property, the estate or interest claimed was a freehold estate, and the prohibition was absolute. The ground of the claim was ‘Implied, Resulting, Constructive Trust’. Garde J noted at paragraph 24:

The ground relied on by Mr Arbab was expressed in general terms. It did not refer to any agreement or basis for the claim. It did not descend into particulars or provide any explanation as to how the alleged trust arose, or how it gave rise to a freehold estate.

 

12.  In respect of the California Gully property, the estate or interest claimed was again 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.

 

13.  Garde J noted at paragraphs 27 to 29 of the judgment:

The claim made was misconceived and nonsensical. The plaintiff had been the registered proprietor of the California Gully property 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.

 

28. Mr Arbab was not and did not purport to be the registered proprietor of the California Gully property. He claimed an interest in the California Gully property on the basis that he contributed $34,300 to the purchase price when the property was acquired.

 

29 The 2018 caveat made no reference to any agreement or financial contribution made by Mr Arbab at the time of the purchase of the California Gully property. It did not claim a lien or any other right relating to supervision or management work of Mr Arbab in connection with other properties, or assert any lien or right over the California Gully property. It did not make any claim for an interest consequent upon a resulting trust as suggested by … [counsel’s] advice.

 

14.  The plaintiff applied to the Registrar of Titles pursuant to section 89A of the Transfer of Land Act, 1958 (“the TL Act”) for removal of the two caveats.

 

15.  In response, the lawyer for Mr Arbab wrote to the registrar of titles and asserted that proceedings were on foot to justify the caveats.

 

16.  In fact, the only proceedings on foot were in relation to the shareholder dispute between Mr Arbab and his fellow directors of the plaintiff.

 

17.  At paragraph 34, Garde J noted:

The notice given by Ms Pasha was wrong and misleading.

 

18.  This is not a finding that a legal practitioner wants a Supreme Court Justice to make!

 

19.  In any event, the Registrar of Titles took no action to remove the caveats, pending the outcome of the proceedings that he thought were on foot.

 

20.  This necessitated the plaintiff issuing its own proceedings and seeking an order for removal of the caveats under section 90(3) of the TL Act. Before initiating proceedings, its lawyers sent a letter demanding that the caveats be removed. In that letter, the lawyers for the plaintiff foreshadowed an application for costs against the lawyer for the caveator.

 

21.  After the proceeding was issued, and directions were made about filing further affidavits and submissions, Mr Arbab consented to the removal of the caveats and to an order that he pay costs an indemnity basis.

 

22.  The plaintiff then made this application for an order that the caveator’s lawyer pay its costs of the application, on an indemnity basis.

 

23.  At paragraphs 56 and 57 of his judgment, Garde J noted (emphasis added):

It is well established that the lodging of a caveat is a serious business. It has the potential to affect commercial transactions and the lives and financial interests of others, and is not available as a bargaining chip. A shareholder has no caveatable interest in land belonging to a company.

 

57. The only proper purpose in lodging a caveat under s 89(1) of the Act is to protect the estate or interest claimed in the caveat by operation of the statutory injunction against the registration of subsequent dealings and to provide notice of the existence of the estate or interest to those who inspect the Register. The lodging of a caveat for ulterior purposes is a serious misuse of the statutory provisions.

 

24.  The Honourable Justice Garde then analysed the cases relating to indemnity costs, and noted:

In Love v Kempton, Forrest J observed that a person who lodged a caveat without proper grounds should be brought to book if others are forced to resort to court proceedings to remove a caveat which has no proper basis. The costs associated with removal of a caveat are heavy and the difference between standard costs and indemnity costs is considerable.

 

25.  Garde J concluded that special circumstances existed in this case, such that the defendant, Mr Arbab, should be ordered to pay the plaintiff’s costs of the proceeding on an indemnity basis.

 

26.  At paragraph 70, Grade J noted (after analysing the facts leading to the lodging of the caveats):

In light of the above, it must be concluded that the … caveats were not seriously intended to maintain the estate or interest in land claimed in them, but were intended to apply commercial pressure on the plaintiff and its directors and inhibit their property dealings. They were bargaining chips which had the effect of freezing the California Gully and the Laverton North properties. Their purpose was to make it impossible for the plaintiff to sell or use the properties as security for loans.

 

27.  Perhaps of more interest to practitioners is what Garde J had to say about the application for indemnity costs against the lawyers for the caveator. Those costs were claimed from the lawyer under either order 63.23(1) or the inherent jurisdiction of the court to supervise its own process. Garde J noted that: “The inherent jurisdiction requires a serious dereliction of duty or gross negligence, but this is not necessary 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. It extends to orders that a solicitor personally pay costs in cases where it is proper to do so.”

 

28.  Among other considerations, Garde J noted

(at paragraph 87): Pasha Legal’s duties to the Court included a duty on      the factual and legal material available not to make a claim or           respond to a claim in a civil proceeding that did not have a proper           basis. Pasha Legal was required not to engage in misleading or deceptive conduct or conduct likely to mislead or deceive.

 

(at paragraph 88, among other matters): there is no sign of any     serious assessment by Pasha Legal of the basis of the claims made in           the caveats; there was no documentary evidence or corroboration of        the claim made in either caveat; Pasha Legal was given notice that it      was at risk for costs; no attempt was made to uphold either caveat;           the real purpose behind the caveats was to use them as a bargaining   chip; in relation to the s 89A application, Pasha Legal engaged in   conduct that was misleading or deceptive or likely to mislead or       deceive by misrepresenting to the Registrar that the correction     proceeding would substantiate Mr Arbab’s claims as caveator in       relation to the Laverton North and California Gully properties and the       estate or interest which he claimed. The correction proceeding   related to the state of the plaintiff’s share registry, and did not seek          any relief concerning the Laverton North or California Gully     properties; when they found out what had occurred, the plaintiff’s            solicitors expressed concern at the certification and statements made    to the Registrar. Despite this, Pasha Legal did not withdraw the    caveats or advise Mr Arbab that they should be withdrawn                immediately; by refusing to withdraw the caveats, or to obtain                  counsel’s advice, Pasha Legal triggered the proceeding to remove      them. Pasha Legal did not at any time appreciate that the caveats             were not maintainable and were highly likely to be removed by the        Court; Pasha Legal maintained a combative style, particularly in the       early stages of the proceeding; and ultimately, it was Mr Arbab who          came to the view that the proceeding should not be opposed, and   agreed to pay the plaintiff’s costs of the proceeding.

 

(At paragraph 89): … it is my view that Pasha Legal failed to act with         reasonable competence and was negligent and in breach of its    duties to the Court as to:

(a) the drafting of the caveats;

(b) the s 89A application;

(c) the misrepresentations made 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 as to whether the caveats were maintainable.

 

(And finally at paragraph 90): … I am satisfied to a comfortable level of satisfaction on the balance of probabilities that Ms Pasha failed to

act with reasonable competence and that she was negligent and acted in breach of her duties to the Court. The statements and certifications made to the Registrar were egregious. They

resulted in the need for the plaintiff to incur the costs of the proceeding.

 

Conclusion

29.  As noted, the Court concluded in this case that the caveats in question were inherently defective and the solicitor in question failed to act with reasonable competence in lodging the caveat.

 

30.  As a result of those findings, the Court ordered that the caveator and the solicitor pay the applicant’s costs on an indemnity basis.

31. This case confirms how critically important it is to ensure that a caveat has a proper basis for lodgement, and the serious consequences that may flow from not meeting the minimum standards required in assessing the alleged basis of the caveat. 

WG Stark

Hayden Starke Chambers

Can I claim compensation from a lawyer who lodges a caveat on behalf of his or her client?

1.     In Lanciana v Alderuccio [2020] VSCA 152, the Court of Appeal in a joint judgment (Tate, Hargrave and Emerton JJA) considered the circumstances in which it may be appropriate to order that a solicitor pay compensation under section 118 of the Transfer of Land Act 1958 in respect of a caveat lodged on behalf of a client without reasonable cause.

 

Background 

2.     The appellants brought a claim against the lawyers for the caveator, rather than the caveator itself, for compensation for losses sustained by reason of the lodgement of the caveat.

 

3.     Section 118 of the Transfer of Land Act, 1958, provides:

Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as a court deems just and orders.

 

4.     At the original trial, the Court posed a preliminary question for determination in the proceeding, as follows:

Whether, assuming that the allegations contained in the further amended statement of claim are true, the [respondents] are ‘a person’ lodging a caveat with the Registrar for the purposes of s 118 of the Transfer of Land Act 1958 (Vic), or whether the [applicant] is confined to seeking compensation from the party identified as the caveator in the relevant caveats.

 

5.     The trial judge concluded that the respondents were not a person lodging a caveat with the Registrar for the purposes of s118 of the TLA.  

 

6.     The central contest between the parties was whether the words ‘[a]ny person lodging’ in s 118 of the Act bear their literal meaning and give rise to a purely factual question as to who in fact lodged the caveat at issue, as the applicant contends; or whether, as the respondents contend, the words ‘[a]ny person lodging’ in s 118 should be construed in the context of the Act as a whole and s 89 in particular, so that ‘any person lodging’ a caveat is to be interpreted in light of the phrase ‘[a]ny person claiming any estate or interest in land’ in s 89(1).

 

7.     In a joint judgment, the Court of Appeal noted (at paragraph 12) that the Trial Judge had found:

… the critical words in s 118 — ‘[a]ny person lodging’ — naturally invited the question, ‘who lodges the caveat?’. The judge found a clear and unambiguous answer to that question in s 89(1) of the Act: ‘Any person claiming any estate or interest in the land … ’. The judge did not accept the applicant’s submission that the Act should be construed on the premise that ss 89(1) and 118 play independent roles, as this ignored the fact that ‘[a]ny person lodging’ a caveat is a statutory concept which has been a feature of the statutory framework since the Real Property Act 1862. Moreover, the fact that s 89(1) expressly authorises a person to lodge a caveat by ‘his agent’ strengthens the conclusion that an agent who lodges a caveat is not ‘any person’ lodging a caveat in his or her own right; the act of lodging is the act of the principal.

 

8.     The Court of Appeal then set out the arguments of both parties, and (at paragraph 31) concluded:

 

…  s 89(1) … confers a right on a person who claims to have an interest in land to lodge a caveat to protect the asserted interest and to do so either directly or by his or her agent. The right is conferred on the person claiming the interest, whether or not the interest is ultimately established. Insofar as the caveat is lodged by an agent of the person claiming the interest, the agent, according to the well-established principles of the law of agency, stands in the shoes of the person claiming the interest. The act of lodging the caveat is the act of the principal, that is, the person claiming the interest in the land.

 

9.     The Court of Appeal then concluded (at paragraph 32):

… It is clear, therefore, that the respondents lodged the caveats as agents for Bloomingdale. In these circumstances, the acts of the respondents in lodging the caveats were the acts of Bloomingdale and the judge correctly so found in answering the first limb of the preliminary question. Bloomingdale lodged the caveats within the meaning of s 118.

 

10.  Among other matters considered by the Court of Appeal, they concluded:

(At paragraph 33) Accordingly, ‘any person lodging’ a caveat is a statutory concept, not simply a question of fact. The identity of a person ‘lodging’ a caveat is ascertained by reference to the exercise of the entitlement conferred by s 89(1). As the judge held, the answer to the question, ‘who lodged the caveat?’ is provided clearly and unambiguously by s 89(1): ‘Any person claiming any estate or interest in the land … ’.

…

(At paragraph 34) We also agree with the judge that the proposition, that s 118 involves a factual enquiry about the person who lodged the caveat, proceeds from the false premise that s 89(1) does not provide an answer to the question and fails to appreciate that lodgement involves a statutory concept that can only be understood by reference to the requirements governing eligibility for lodging under the Act.

…

(At paragraph 35) … the primary task of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of the statute as a whole.

…

(At paragraph 40) In our view, the judge’s construction accords with the requirement to construe the provisions of a statute in a manner that is consistent with the language and purpose of all of the provisions of the statute. It focusses on the language of ss 89(1) and 118 and how those provisions operate together, having regard to the words chosen by the legislature. It accords with authority emphasising the primacy of the text in statutory construction.

 

Conclusion

11.  It seems relatively clear that lawyers should be advising clients about whether the client has a caveatable interest and to refuse to lodge a caveat on a client’s behalf in circumstances where there is no caveatable interest.

 

12.  However, if the lawyer does lodge a caveat on behalf of a client in circumstances where there is no reasonable basis for doing so, it is the client who is claiming the caveatable interest, not the lawyer, and so it is the client who will be liable to pay any compensation under s 118 of the Transfer of Land Act, 1958.

 

WG Stark

Hayden Starke Chambers