Are there any recent Victorian cases about a mortgagee's duty of good faith in selling in a pandemic?

Further to my post (see: https://melbournepropertylaw.blogspot.com/2021/06/are-there-any-recent-cases-about.html) about a decision of the Supreme Court of Queensland about a mortgagee's duty of good faith in selling in a pandemic, the Supreme Court of Victoria has now had to deal with the same issue. 

Matthews As J in 230V Harvest Home Road Pty Ltd v Joseph Salvo & Ors [2021] VSC 558 heard an application for summary judgment and concluded that the plaintiff had no real prospects of success on its statement of claim. As a result, summary judgment was granted in favour of the defendants/mortgagees. 

The claim related to the enforcement by the mortgagees of a $1.7m loan that they made to the Plaintiff, secured by a first registered mortgage over the property located in Harvest Home Road, Wollert (‘Property’). The Property was approximately 3,900 square metres of vacant land that was suitable for residential development.  After purchasing the Property, the Plaintiff obtained a planning permit for the construction of 18 townhouses on the Property.

The loan and accrued interest were due to be paid by 21 December 2019.  The Plaintiff failed to do so.  The mortgagees served a notice pursuant to s 76 of the Transfer of Land Act 1958 (Vic) (‘TLA’) on the Plaintiff or about 15 January 2020. 

After the notice was served, the Plaintiff advised the mortgagees that it had sold the Property for $2.5m plus GST. Unfortunately, this sale did not complete. 

On 6 June 2020, the mortgagees exercised their power of sale and sold the Property for $1.9m plus GST, with settlement due on 7 August 2020.  Settlement occurred after the Plaintiff’s application for an interim injunction to prevent settlement from occurring was dismissed.

In the claim, the Plaintiff alleged that the mortgagees did not:

(a)                Act in good faith and have regard to the interests of the Plaintiff by selling the Property for $1.9m which was substantially below the value of the Property;

(b)               Take reasonable steps to obtain the best price for the Property which was valued up to $2.4m; and

(c)                Have regard to the interests of other encumbrancers including a subsequent mortgagee and caveators.

At paragraph 43, Her Honour noted: 

"The key questions in this proceeding concern the Mortgagee Sale and whether the [mortgagees] breached their duties as mortgagees [of good faith in conducting the sale of the Property], causing loss and damage to the Plaintiff."  

The evidence before the Court included the following:

In March 2020, the mortgagees obtained a valuation of the Property in the range of $1.8m to $2m from the real estate engaged to sell the Property. The agent asserted that the sale price of $1.9m plus GST was market value, perhaps even higher than market value in the then current climate, and was the best offer made to purchase the Property.

The auction (scheduled for 4 April 2020) was cancelled due to the restrictions imposed by the Victorian government due to the COVID-19 pandemic, and the mortgagees instructed the agent to instead sell the Property by private treaty. 

The mortgagee sale was an arm’s‑length contract, the mortgagees and the purchaser were not previously known to each other nor had any previous association, and were introduced by the real estate agent. 

In addition to the offer which was accepted by the mortgagees that led to the contract, the following offers were made and rejected:

(a)                $1.8m, subject to certain conditions in favour of the prospective purchaser, with settlement in October 2020;

(b)               $1.81m including GST, subject to strict conditions in favour of the prospective purchaser; and

(c)                $1.9m, subject to the prospective purchaser obtaining finance, with settlement not before 15 October 2020.

The amount owing by the Plaintiff to the mortgagees was $1,878,500 plus the costs of enforcing the Loan Agreement and the Mortgage. There was also an outstanding costs order in the mortgagees' favour arising from the earlier failed injunction application by the plaintiff. The mortgagees demanded $115,329.49 from the Plaintiff and from a guarantor, which was alleged to be the shortfall following the settlement of the Mortgagee Sale, which was not paid at the date of the hearing.

The plaintiff asserted that February Sale fell through as the purchaser’s bank would not lend at a high enough leverage-to-value ratio as was necessary for the purchaser to settle the purchase of the Property. 

The plaintiff intended to try and get a further extension from the mortgagees for this purchaser, who was seeking to obtain private alternative finance, or find a new buyer at the same price or to refinance the Property. 

Appraisals obtained by the plaintiff valued the Property between $2.1m and $2.4m.

The mortgagees argued that they had, in the circumstances of the case and the current COVID-19 epidemic, obtained the best price consistent with their entitlement to realise its security. 

There was no allegation that the purchaser has acted otherwise than bona fide and in his own best interests.  

The Plaintiff submitted that by selling the Property for $1.9m, which is below the appraisals made by three real estate agents around that time, the mortgagees sold the Property at an undervalue.  This was said to be an undervalue of between $300,000 and $500,000 based on those appraisals, or $600,000 when compared with the February Sale. 

The Plaintiff submitted that there is no evidence that the mortgagees or their real estate agent obtained an expert independent valuation prior to the sale, which failure was said to be contrary to standard practice in mortgagee sales and for the sale of undeveloped land.  It also said that providing a price range in the absence of an auction created an artificial ceiling on the price of the land. 

The Plaintiff asserted that the absence of an independent valuation and the evidence of the Property being sold at substantially undervalue pointed to a breach of the mortgagees’ duties in exercising their power of sale.  

Her Honour rejected the Plaintiff’s submission that the onus was on the mortgagees to show that they had satisfied their duties under the TLA and that the Plaintiff has nothing more than a fanciful chance of success.

At paragraph 91 of the judgment, Matthews As J concluded that the onus is not on the mortgagees to disprove the Plaintiff’s case by positively proving their own case.  The onus is on the mortgagees to show that the Plaintiff’s case has no real prospect of success, which the Plaintiff can refute by showing cause to the contrary. 

At paragraph 93, Her Honour proceeded:              

"Hence, rather than the [mortgagees] having the onus of showing that they have satisfied their duties as mortgagees, the question is whether there is sufficient evidence before the Court that the allegation that the [mortgagees] have breached their duties as mortgagees has a real prospect of success. 

The evidence relied upon by the mortgagees established that a conventional marketing campaign was undertaken.  There was nothing unconventional about the marketing material or the marketing channels; rather, the usual methods of selling land were employed.  This included advertising on commercial and development focused websites.

Having embarked upon a conventional marketing campaign in early March 2020, the mortgagees were then confronted with "exceptionally unconventional circumstances".  By mid to late March 2020, the state of Victoria was in lockdown due to the COVID-19 pandemic.  It was hardly surprising that in those circumstances, the auction of the Property which had been scheduled for 4 April 2020 was cancelled.  It was also hardly surprising that the mortgagees instructed the real estate agent to proceed to attempt to sell the Property by private treaty." 

At paragraph 100, Matthews As J noted:

"I do not see how it can be said that these actions constitute a breach of the mortgagee’s duties.  The auction could not physically be held, and a mortgagee is not obliged to wait until market conditions improve before conducting a mortgagee sale. A mortgagee has an entitlement to realise its security, provided that it abides by its duties in doing so. The duty to take reasonable steps to obtain the best price is a duty to take appropriate steps in the circumstances which are consistent with its right to enforce its security interest."

At paragraph 102 and following, Her Honour stated:           

"That really leaves the question of whether the Property was sold by the [mortgagees] at an undervalue.  While I accept that there is no evidence to explain how [the real estate agent] came to a range of $1.8m to $2m when advising the [mortgagees], the only evidence that this is an undervalue is that contained in the [the plaintiff's director's] Affidavit.  The fact that the Plaintiff had entered into the February Sale at $2.5m plus GST is not indicative of $1.9m plus GST being below market value, as the purchaser under that contract was unable to complete [the sale] due to an inability to obtain finance at that price.  I do not see how a failed contract can be said to be indicative of market value.  There is no evidence at all to support [the plaintiff's director’s] own view of value, being $2.475m to $2.7m, as he simply does not give any evidence to show how he came to that range.

The selling real estate agent's appraisal was followed by a marketing campaign and by offers made which were rejected.  The Plaintiff says that the marketing campaign put a range of $1.9m to $2.09m on the Property.  First, there [was] no evidence before [the Court] as to that other than [the plaintiff's director’s] statement: there is no document exhibited that shows this was the range stated in the marketing material.  Even if [the plaintiff's director’s] evidence in this regard is accepted, and I have no reason not to accept it given that the mortgagees could have contradicted it if they had felt the need to, there is no evidence before me that putting this range on the marketing material constitutes bad faith or a failure to obtain the best possible price.  Second, [the plaintiff's director’s] states that once the mortgagees advertised it at this price, “no one was willing to buy the property at what it was worth because it was now being advertised for $600,000 less”.  I do not accept this.  There is no evidence to support the finding that this was $600,000 below market value, and in any event this is opinion evidence which is inadmissible as [the plaintiff's director’s] is not an expert.  There is no evidence to state that putting the range that the real estate did put on the Property constitutes a failure to obtain the best price.  Having given the range of $1.8m to $2m to the mortgagees, it was entirely consistent for the real estate agent to have stated that range in the marketing material. 

Importantly, the evidence is that there was a significant amount of interest in the Property, but that interest manifested in only four offers (the three described above and the one which was accepted), all roughly within the price range given to the mortgagees.  Of the rejected offers, two were at the bottom end of the real estate agent's valuation and all three were on terms less favourable than the offer which was ultimately accepted.  Further, it is not as if the Property was sold to the first offeror or that it was on the market for a brief period of time.  The evidence is that the Property was on the market for about 3 months before the mortgagees accepted the best offer they had received in that time.

The evidence was that after the Mortgagee Sale, there remained a shortfall in the amount owing to the mortgagees of at least $115,329.49.  This supports the position that the mortgagees accepted the best available offer to them at the time.

At paragraph 107, Matthews As J did not accept that the Plaintiff has demonstrated that its claims that the mortgagees failed to abide by their duties as mortgagees when exercising their power of sale have a real prospect of success.

In the Injunction Application, the Court had already held that the Plaintiff had not established it had a prima facie case.  The Plaintiff’s evidence being no better than it was then, if a prima facie case had not been established at the time of the Injunction Application, her Honour found it difficult to see how it could then be said that the Plaintiff’s case has a real prospect of success.

Conclusion

In the circumstances of this case, it is clear that a borrower will have great difficulty in establishing that a lender has not acted in good faith simply by selling a security property during the COVID-19 pandemic. 

A borrower will need to establish a lack of good faith in the sale, something which is not made out simply by proving that the sale was at an under value (although that was not in fact proven in this case). 

WG Stark 

Hayden Starke Chambers

Are there any cases about the Victorian retail tenancies moratorium due to the Covid-19 pandemic?

In C B Buffet (Burwood) Pty Ltd v Delloyd Pty Ltd [2020] VCAT 1234 VCAT member Kincaid heard an application for an injunction to restrain a landlord from taking possession of retail premises. 

The case is of interest as it considered the application of the moratorium on rent in retail leases introduced by the Victorian government for the Covid-19 pandemic. 

As readers will know, in order to establish an entitlement to interlocutory injunctive relief an applicant must first demonstrate that there is a serious question to be tried as to its entitlement to relief. In respect of this question, the applicant must make out a prima facie case in the sense of demonstrating that, in the circumstances, there is a sufficient likelihood of success at trial, in respect of the question, to justify the preservation of the status quo pending the determination of the parties’ rights at trial. This does not mean that the applicant has to establish that it is more likely than not that it will succeed at trial. How strong the probability needs to be depends upon the nature of the rights asserted, and the practical consequences likely to flow from the relief sought.

An applicant must also establish that the balance of convenience favours the granting of an injunction. The Tribunal should take whichever course appears to carry the lowest risk of injustice should it turn out to have been wrong, in the sense of granting an injunction to a party who fails to establish its right at trial or failing to grant an injunction to a party who succeeds at trial.

Background

The tenant alleged that it operated a Chinese buffet style restaurant, and that it suffered a decline in business “from around January 2020” due to the Covid-19 pandemic.

The member stated that it was noteworthy that in late January 2020 the first Australian cases of Covid-19 were reported, mainly incoming travellers from China. The first Australian death from Covid-19 was reported on 1 March 2020, and the WHO declared the pandemic on 11 March 2020. News reports at the time indicated, however, that by early February 2020 Chinese restaurant businesses in Melbourne had substantially lost their customer base, and by mid-February 2020 many well-known Chinese restaurants in Melbourne had been forced to close.

The tenant gave evidence that in “early February 2020” its business was closed.

On 13 March 2020 the tenant received from the landlord a notice of default, which required the tenant to remedy certain defaults within 14 days. 

On 27 March 2020 the landlord took possession of the premises due to the non-payment of rent and other outgoings claimed in the notice of default.

On 29 March 2020 the National Cabinet announced a set of principles by which there should be a moratorium on evictions of commercial and residential tenants over the next six months for tenants who were unable to meet their commitments due to the impact of the Covid-19 pandemic. The principles were formalised on 3 April 2020, and were subsequently contained in what was called the National Cabinet Mandatory Code of Conduct-SME Commercial Leasing Principles During Covid-19 (the “Code of Conduct”).

These principles subsequently became the subject of legislation in Victoria (the “Covid-19 legislation”), comprising:

(a) COVID-19 Omnibus (Emergency Measures) Act 2020 (the “Act”), which came into operation on 25 April 2020;

(b) COVID-19 Omnibus (Emergency Measures)(Commercial Leases and Licences) Regulations 2020 (the “Regulations”), made 1 May 2020 under section 15 of the Act, but taken to have come into operation on 29 March 2020; and

(c) Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (the “Rules”), which came into effect on 9 April 2020.

In summary, the Regulations provide that where a tenant has an “eligible lease” as defined in section 13 of the Act, it is entitled to avail itself of a rent relief regime as described in the Regulations. When promulgated, the Regulations were to expire on 29 September 2020, but they have since been extended.

One of the requirements for qualification as an “eligible lease” was that the lease was in effect on the day the first regulations made under section 15 of the Act came into operation. That date was 29 March 2020. The landlord submitted that the lease, having been brought to an end on 27 March 2020, did therefore not qualify as an eligible lease. 

The landlord also submitted that this was relevant when considering the tenant’s alternative claim for relief against forfeiture, and the liabilities the tenant would have to meet as the usual condition of granting relief.

Interestingly for our purposes, the tenant alleged that the landlord was not entitled to re-enter the retail premises other than by having first complied with the provisions of the Act and the Regulations.

Regulation 9(2) of the regulations provides:

A landlord under an eligible lease must not evict or attempt to evict a tenant under the eligible lease to whom sub-regulation [9(1)] applies.

As noted, an eligible lease under the Act, being a lease that therefore had the protection of the rent relief provisions of the Regulations, was one that was in effect on 29 March 2020. The Tribunal found in this case that there was no serious question to be tried concerning the right of the landlord to bring the lease to an end by re-entry on 27 March 2020, and as a consequence the Tribunal found that there was no serious question to be tried concerning the right of the tenant to the protections against ejectment provided by the Covid-19 legislation.

As well as injunctive relief, the tenant claimed in the alternative relief against forfeiture. 

The landlord submitted that as to the future rent, the tenant may not be able to pay it for months or years as its capability of doing so, being linked to the tenant’s turnover, would require the tenant promptly to operate at the same level as the period prior to the onset of the Covid-19 pandemic. 

The Tribunal concluded that the tenant did not intend to seek relief from its obligation to pay rent and outgoings pursuant to the Covid-19 legislation, such that the amount of rent payable by the tenant until its business started operating again would be a matter for determination, failing agreement between the parties.  

The Tribunal accepted the evidence of the tenant’s director to the effect that the tenant is enrolled in the JobKeeper Scheme, and that the director is an “eligible business participant” engaged in the business of the tenant and entitled to receipt of the Jobkeeper payment. The Tribunal also accepted that the tenant qualified for the JobKeeper Scheme, as “carrying on business” in Australia on 1 March 2020, notwithstanding the landlord having taken possession of the premises on 27 February 2020. 

However, the Tribunal concluded that in regard to the tenant's obligation to pay rent and other amounts in arrears as a condition of the granting of relief against forfeiture, there was no serious question as to whether the tenant was entitled to take advantage of the rent relief provisions contained in the Covid-19 legislation. The Member accepted the landlord's submission that the lease was not an “eligible lease” within the meaning of section 13 of the Act because there was no serious question as to whether it was in effect on 29 March 2020. The tenant would therefore not be entitled to any rent relief or relief from any liabilities under the Covid-19 legislation.

Ultimately the Tribunal granted the tenant’s application for relief against forfeiture on the basis that all rent and outgoings that would otherwise have been paid by the tenant to the landlord to the date of the decision, had the landlord not taken possession when it did, must be paid by the tenant as a condition of granting relief.

This case shows the analysis that the Tribunal must undertake in order to determine whether a case falls within the moratorium granted by the  Code of Conduct and the Act and regulations created under it. 

W G Stark 

Hayden Starke Chambers

How far above ground level can an owner of land enforce their rights of ownership?

In Janney v Steller Works Pty Ltd [2017] VSC 363, (2017) 53 VR 677, Justice Riordan of the Supreme Court of Victoria was asked to consider the extent of a landowner's right to possession of the airspace over their land, and their ability to control entry onto their land. 

The circumstances of the case were that the neighbour was proposing to interfere with the landowner's right of possession by incursion into airspace over that land through the operation of a construction crane sailing over the land at times during a proposed 11 month construction period. The proposed construction was of a four-storey building comprising 27 dwellings above a basement car park on neighbouring properties at Foam Street and Ormond Road, Elwood ("the Construction Site"). 

The developer served a notice purporting to protect works on the Construction Site, which included the use of the crane during the construction. 

In fact, the relevant Building Regulations did not apply to the proposed crane; in any event, the landowners objected to the proposed notice, stating among other things that: "We are very concerned about the safety of our family if/when the crane boom is over our property."

The landowner and the developer engaged in extensive correspondence prior to the court proceedings. The landowner noted that they owned the airspace above their property and that the proposed crane use would be a trespass. They sought compensation to allow them to relocate to a similar property in Elwood for the duration of construction, or alternatively that construction proceed without a crane. The developer rejected this proposal. 

The landowner applied for an injunction to restrain the developer from engaging in the threatened incursion. 

At paragraph 28 of his judgment, Riordan J noted:

The fact that the plaintiffs’ rights as the owner of land extends into airspace is trite. On one view, the owner’s rights extend to protecting not only the land but the sky space above the land stretching the limits of the atmosphere and the soil beneath the surface down to the centre of the earth (The Latin maxim: cujus est solum, equs est usque ad coelom et ad inferos. See Bernstein v Skyviews & General Ltd [1978] 1 QB 479, 485). The issue of whether such rights are limited to the prevention of incursions that ‘[interfere] with that part of the airspace above [the] land which is requisite for the proper use and enjoyment of that land’ (Graham v K D Morris & Sons Pty Ltd [1974] Qd R 1, 4) (such that, for example, claims in trespass cannot prevent aircraft flying over property), has been said to await a definitive ruling from the High Court (Anthony P Moore, Scott Grattan, Lynden Griggs, Bradbrook, MacCallum and Moore’s Australian Real Property Law (Thomson Reuters, 6th ed, 2016) 812 [16.140]).

Despite noting the absence of High Court authority, Justice Riordan concluded that even applying the more restricted view, the incursions of the crane, while in weathervaning mode, constituted an actionable trespass. 

He set out his reasons at paragraph 30. 

He noted that the case of Graham v K D Morris & Sons Pty Ltd [1974] Qd R 1 was a similar fact situation. The judge concluded in that case that the invasion of the plaintiff’s airspace by the projection of the crane jib was a trespass and the overhanging crane interfered with that part of the airspace above the land which is requisite for the proper use and enjoyment of that land. The judge in that case also noted that any hardship which the defendant will suffer [as a result of the injunction] has been brought about by its own negligence and its cavalier and high-handed attitude.

In Anchor Brewhouse Developments Ltd v Berkley House (Docklands Developments) Pty Ltd [1987] 2 EGLR 173, Scott J granted a permanent injunction to restrain a tower crane from weathervaning over the plaintiffs' land. 

Scott J rejected the defendant’s argument that there was no trespass and said:

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    What is complained of in the present case is infringement of air space by a structure positioned upon a neighbour’s land. The defendant has erected tower cranes on its land. Attached to each tower crane is a boom which swings over the plaintiffs’ land. The booms invade the air space over the plaintiffs’ land. Each boom is part of the structure on the defendant’s land. The tort of trespass represents an interference with possession or with the right to possession. A landowner is entitled, as an attribute of his ownership of the land, to place structures on his land and thereby to reduce into actual possession the air space above his land. If an adjoining owner places a structure on his (the adjoining owner’s) land that overhangs his neighbour’s land, he thereby takes into his possession air space to which his neighbour is entitled. That, in my judgment, is trespass. It does not depend upon any balancing of rights.
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  • He also noted that:
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  • It is not, in my view, accurate to say that no harm is being done to the plaintiffs by the trespassing cranes. 
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In London & Manchester Assurance Co Ltd v O & H Construction Ltd (1989) 2 EGLR 185, Harman J also considered a swinging crane, in that case over the Albion Wharf on the Thames. His Honour said:

• •  
    It is, in my view, beyond any possible question on the authorities and the law that a party is not entitled to swing his crane over neighbouring land without the consent of the neighbouring owner.

At paragraph 32, Riordan J noted that by legislative amendments, New South Wales, the Northern Territory, Queensland and Tasmania have provided for the statutory imposition of an easement by the courts to promote land development. That has not happened in Victoria.

The Honourable Justice Riordan concluded at paragraph 33 that:

Even without the authorities, I would conclude that the weathervaning was neither a trifling nor de minimus interruption of the plaintiffs’ rights. The evidence established that the plaintiffs live on the property with their two children. This is not a case ... where the property is used purely for commercial purposes. Collapses of cranes are not unknown. I accept the plaintiffs’ evidence that the plaintiffs and their children may be well justified on leaving their home if very strong winds were forecast ... Owners of property should not have to live with the fear that at any time the boom of a crane may be above their home and the risk (however small) that it may crash down on their family.

He also concluded (at paragraph 34) that:

Neither in money terms is the encroachment insignificant. As Lord Selbourne pointed out in Goodson v Richardson, an interest in land may have ‘precisely the value which that power of veto upon its use creates’.

At paragraph 35, he concluded that:

An encroachment into airspace raises a strong prima facie entitlement to an injunction. He referred to the decision of AL Smith LJ in Shelfer v City of London Electric Lighting Co, to the following effect: 

Many judges have stated, and I emphatically agree with them, that a person by committing a wrongful act … is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be. 

In such cases the well-known rule is not to accede to the application, but to grant the injunction sought, for the plaintiff’s legal right has been invaded, and he is prima facie entitled to an injunction. 

In the result, Riordan J granted the injunction restraining the developer from allowing the tower crane to swing onto the plaintiff's land. 

Conclusion 

As the recent construction boom in Victoria has continued despite the impact of COVID-19, it seems likely that cavalier builders who wish to use construction cranes without considering the effect on neighbours may have to face the possibility that they will be restrained from those actions. 

The take away from these decisions is that builders and developers who propose to construct with the assistance of a tower crane will need to ensure that they obtain their neighbours' permission for any intrusions over the neighbours' air space, prior to the commencement of construction.  

WG Stark 

Hayden Starke Chambers

Can I lodge a second caveat if my first caveat is removed or lapses in Victoria?

I have recently come across a spate of cases where a caveat has been removed (either by the Registrar of Titles on application, or by Court order), only for the caveator to lodge the same caveat again!

Section 91(4) of the Transfer of Land Act, 1958 makes it clear that the second caveat cannot remain on the title. That sub-section provides:

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.

Case law – Section 91(4)

Gobbo J was called on to remove a caveat under section 91(4) in Gurwitz v Gurwitz [1988] VicSC 239.

At the end of the first paragraph on page 4 of the unreported judgment, Gobbo J noted:

… nothing was done and, accordingly, simply as a matter of the operation of s. 89(a) (sic), the first caveat lapsed. On 4 May the respondent lodged another caveat, which I will refer to as the second caveat, through different solicitors.

At the start of the first paragraph on page 5 of the unreported judgment, Gobbo J noted:

The applicant accordingly applied to remove the second caveat on the three bases ... Secondly, that the second caveat should be removed because it covers the same ground as the first caveat and falls within section 91 (4) …

At the foot of page 5 of the unreported judgment, Gobbo J noted:

… The section is not concerned with matters of grounds or evidence in support of the interest. The sub-section could scarcely have been intended to depend (page 6) upon whether the evidence in support of a particular interest varied and, for that reason also, perhaps the grounds in support of a particular interest. It seems to me that what the section is designed to do was to identify whether it was, in substance, the same interest that was set up.  

At the foot of page 8 of the unreported judgment, Gobbo J concluded:

I am therefore of the view that section 91 (4) applies in the present case. It is clear that this first caveat had lapsed. It further appears that the second caveat is one that is made on behalf of the same person in respect of the same interest in the same parcel of land, and that the prohibition against it being renewed applies here, and that provides good cause as to why the second caveat should be removed.

In Sinn v National Westminster Finance Ltd [1985] VR 363, Tadgell J considered the operation of section 91(4), in the following terms (at VR 365 – 6):

A provision equivalent to section 91 (4) of the Transfer of Land Act 1958 has stood in the Torrens title legislation of this State since the Transfer of Land Statute 1866 (Act No. 301) but it appears to have attracted remarkably little attention from the courts.…Venerable of lineage and economical of words though section 91 (4) is, it is not a model of clarity. The following observations seem to be deserved. A caveat, once it has lapsed or have been removed, cannot in strictness be renewed in the sense of restored, revived, regenerated or re-established. The word “renewed” in the sub-section seems to mean “replaced” or, perhaps, “repeated”. The phrase “by your on behalf of the same person in respect of the same interest” evidently involves a kind of ellipsis. I think it must intended to convey, when read the words preceding it, that a person by whom or on whose behalf a caveat has been lodged that has lapsed or been removed shall not lodge or have lodged on his behalf another caveat in respect of the same interest as that in respect of which the first caveat was lodged. … the effect of s91(4), therefore, would appear to be that a person may not claim and specify by a caveat an interest which is the same interest as that which he has claimed and specified by a caveat that has lapsed or been removed.

In Burgtreus Pty Ltd v Burgin & Anor [2005] VSC 339, Cummins J dealt with another similar application. At paragraph 16, Cummins J noted:

The essential points are these in my view. First, in my view the caveat, being the second caveat, covers the same ground as the first caveat and falls within section 91 (4) of the Act. The first defendant lodged the first caveat … The stated interest there claimed was an estate in fee simple; the grounds of the claim an equitable interest by way of constructive trust. The second caveat, the subject of these proceedings, again claims an estate in fee simple; however the grounds of claim are “Financial contributions to purchase price of each property and labour and cost of improvements. Verbal agreements”. It is clear that a caveat ought not be accepted in the circumstance where the same interest is claimed in the second as the first. That was established in Gurwitz v Gurwitz; also Sinn v National Westminster Finance Ltd.

In Austwide Property & Developments Pty Ltd v Vukasinec [2004] VSC 333; BC200406309 Osborn J dealt with an application under section 91(4) as follows (at paragraphs 9 to 10):

[9] In the current case it is contended the caveat is bad for two reasons: firstly, it is said the caveat does not disclose a caveatable interest in land. Secondly, it is said that it has been lodged in breach of s 90(4) (sic) of the Transfer of Land Act. This provides: "A caveat shall not be renewed by or on behalf of the same person in respect of the same interest."
[10] Although it is strongly arguable that the caveat does not disclose a caveatable interest, I would have some reluctance to dispose of it on this basis if I were persuaded that what was really in issue was a matter of English expression by a litigant in person whose first language I infer is not English. It is strictly unnecessary, however, for me to determine this question because I have reached the view that there is no credible evidence that the grounds of the interest claimed could be sustained and that the caveat was lodged in breach of s 90(4) (sic) of the Transfer of Land Act.

In the matter of Jankovic v Dobrijevic (SCI 2017 03587), I appeared for the plaintiff who sought removal of a caveat lodged in breach of section 91(4). The Honourable Justice Jack Forrest of the Supreme Court of Victoria ordered the removal of the caveat and ordered the caveator to pay the plaintiff’s costs on an indemnity basis.

In the matter of Strathmore Views P/L and anor v High Street Projects P/L and anor (SCI 2017 04894), the Honourable Justice Keogh ordered the removal of the caveat and ordered the caveator to pay the plaintiff’s costs of the proceeding.

In both of these cases, the second caveat (claiming the same interest as the caveat that had already been removed), should never have been lodged.

Although it seems clear to me that neither of the caveats in question should have been lodged, and when requested to be removed, the caveats should have been removed without the need for proceedings, this didn't occur. 

As readers will know, if a Victorian practising lawyer lodged a second caveat in these circumstances, that would amount to professional misconduct, rendering the lawyer liable to be dealt with by the Victorian Legal Services Board + Commissioner.

As noted, the Court in Jankovic made an order for indemnity costs, on the basis that the registered proprietor of the property ought not be out of pocket as a result of the conduct of the caveator in lodging a caveat in circumstances where it should never have been lodged, and then refusing to remove that caveat.

  

W G Stark

Hayden Starke Chambers