MATTER : Section 138 of the Transfer of Land Act 1893

BETWEEN : BINNINGUP NOMINEES PTY LTD (ACN 008 794 938)

Caveats - Application to remove "notice" caveat lodged by party claiming under a settlement - Procedure to be followed

Transfer of Land Act, s 138, s 138A, s 138B, s240(4)

Caveat removed to allow dealing with part of property

Leave to lodge fresh caveat over remaining property

Binningup Nominees Pty Ltd as Trustee for Lakewood Shores Unit Trust v Brogue Tableau Pty Ltd [2004] WASC 14

1 MASTER SANDERSON: By an originating summons filed 14 September 2004 the plaintiff in these proceedings sought to have the defendant show cause why the defendant's caveat lodged over certain property owned by the defendant should not be removed. It can be seen immediately that the summons is in an unusual form. Why that is so I will explain below. At the conclusion of argument I made certain orders allowing for the lifting of the caveat and giving the defendant leave to re-lodge a caveat over certain remaining property. Again, I will more fully explain these orders below. At the conclusion of the hearing I indicated to the parties that I would publish reasons for my decision. These are those reasons.

2 This matter has quite some history. It begins with the decision of Pullin J in Binningup Nominees Pty Ltd as Trustee for Lakewood Shores Unit Trust v Brogue Tableau Pty Ltd [2004] WASC 14. In that case the present plaintiff (who I will refer to as "Binningup Nominees") applied pursuant to s 138 of the Transfer of Land Act 1893 to have the present first defendant ("Brogue Tableau") show cause why a caveat relating to land known as the "South Land" should not be removed. Binningup Nominees was shown as the registered proprietor of the South Land. This statement of the matters at issue in the proceedings is to be found in par 1 of his Honour's judgment. His Honour then sets out the facts in some detail. For present purposes a summary of the facts is all that is required.

3 His Honour found that Binningup Nominees held the trust fund of the Lakewood Trust, including the South Land on trust for the beneficiaries of the Binningup Trust (par 5). His Honour then goes on (pars 6 - 7):

"The plaintiff [Binningup Nominees] and defendant [Brogue Tableau] negotiated over a proposal by the defendant to redeem its units in the Binningup Trust, and the parties could not reach agreement. In the course of the negotiations which commenced in the year 2000 and which extended through until 2002, the defendant learned that the plaintiff was proposing to sell the South Land to a company called Baycrest Pty Ltd. A director of Baycrest Pty Ltd is the son of Mr Waller, who is a director of the plaintiff. The secretary of Baycrest is a Mr Linton Scott, who is associated with Adamstoun. Mr Waller and Mr Scott are directors also of A M Securities Pty Ltd, which is the mortgagee of the South Land.

After learning of the proposed sale by the plaintiff to Baycrest Pty Ltd, the defendant lodged the caveat on 6 September 2002."

4 The caveat lodged was an absolute caveat. That is, it acted to forbid any dealing with the subject land. His Honour then went on to consider the Binningup Trust Deed and concluded that the deed allowed Binningup Nominees as trustee the power to sell investments in the trust fund. His Honour noted that it was not argued that a unit holder did not have a proprietary interest in each of the assets comprised in the entity of the trust fund. His Honour pointed out that the unit holder is not entitled to have exclusive use or ownership of any particular assets. His Honour also said that there was no doubt that the terms of the unit trust in each case will determine what effect the law will give to the instrument. Measuring the established equitable principles against the terms of the trust deed, his Honour determined that Brogue Tableau had an equitable proprietary interest in the South Land. The question then was whether, based upon this proprietary interest, Brogue Tableau had a "caveatable" interest in the South Land. His Honour concluded that Brogue Tableau did have such an interest. The question then was whether that interest was such as to allow Brogue Tableau to lodge an absolute caveat.

5 His Honour said s 137 of the Transfer of Land Act appears to confer a right on a caveator to choose one of three types of caveat. They are an absolute caveat, a caveat forbidding registration of any transfer or instrument until after notice of the intended registration or dealing be given to the caveator (a "notice" caveat) or a "subject claim" caveat. His Honour noted that a caveator may not lodge a caveat which goes beyond the legitimate claim necessary to protect the caveator's rights. His Honour then concluded (par 39):

"The appropriate caveat in such circumstances would have been a 'notice' caveat. A notice caveat has the effect that the caveator is given notice of a proposed transfer or dealing. Fourteen days after notice is given, the proposed dealing or transfer may be lodged, whereupon the caveat will then lapse, unless in the meantime the operation of the caveat has been extended by the court pursuant to s 138C of the Transfer of Land Act."

6 His Honour made final orders on 6 April 2004. He ordered the plaintiff to withdraw the then existing caveat and granted leave to the defendant to lodge a "notice" caveat in the form of the draft annexed to the order. The caveat itself set out a basis upon which Brogue Tableau claimed an interest in the property and forbidding any registration of any instrument affecting the estate or interest "until after notice of any intended registration or registered dealing to the caveator at the address for service of the notice".

7 On 18 August 2004 the Registrar of Titles wrote to Brogue Tableau advising that an application had been lodged under s 138B of the Transfer of Land Act requesting that he send notice to the caveator. The letter was in standard form and advised that unless the caveat was extended by order of the Supreme Court, the caveat would lapse within 21 days from the date of service of the notice. As a consequence of that advice, Brogue Tableau did issue proceedings seeking an order that the operation of the caveat be extended. These proceedings were CIV 2164 of 2004. Binningup Nominees was named as the first defendant and the Registrar of Titles was named as the second defendant. On 8 September 2004 Master Newnes extended the caveat until 14 September 2004 and on 13 September 2004 I extended the operation of the caveat until midnight on 16 September 2004.

8 On 10 September 2004 the Assistant Registrar of Titles wrote to the Court raising certain matters relating to the caveat. Relevantly, this letter reads:

"Caveat I848054 was prepared by Jackson McDonald, Lawyers, and lodged at the Department of Land Information on 8 April 2004 by their agents acting on behalf of the plaintiff (Brogue Tableau). The cover sheet of the caveat refers to an 'order amending a caveat' as being a document lodged with the caveat, but there is nothing in the body of the caveat to indicate that it was lodged pursuant to an order made by Pullin J in chambers on 6 April 2004."

9 This paragraph is partly right and it is partly wrong. His Honour did determine that he should make an order amending the caveat. However, as a matter of convenience, his Honour thought this could be achieved by ordering the withdrawal of the absolute caveat and giving leave to lodge a notice caveat: see par 41. The cover sheet then appears slightly misleading, although in reality it is not. Further, as I have mentioned above, the final order made by his Honour had attached to it the form of the notice caveat. It was in that form that the caveat was lodged. It is not true then to say that the caveat was lodged by order of his Honour; rather, it was lodged pursuant to leave granted by his Honour.

10 The letter from the Department of Land Information then goes on:

"As a result of the lodgment of the caveat, Tottle Partners, Lawyers, prepared application I987512 for the removal of the caveat and requested that a 21 day notice to be sent to the plaintiff/caveator under section 138B of the Transfer of Land Act 1893 ("the Act"). Application I987512 was lodged at DLI on 16 August 2004 and a 21 day notice was sent to the plaintiff/caveator care of Jackson McDonald, Lawyers, on 18 August 2004, informing them that the registered proprietor had issued an application pursuant to section 138B and that the caveat would lapse at midnight on 8 September 2004. A letter was also sent to Tottle and Partners [sic] informing them that a notice had been sent to the plaintiff/caveator.

Arguable, the notice pursuant to section 138B should not have been sent to the plaintiff/caveator because the caveat was not one to which section 138B of the Act applies - section 138A of the Act provides that 'a caveat that has not been lodged under (a) to (g) of section 138A of the Act is a caveat for the purposes of section 138B to 138D of the Act. Again, arguably, the caveat was lodged pursuant to section 138A(c)."

11 Before dealing with these comments by the Deputy Registrar I should say something of the basis upon which the plaintiff in CIV 2164 (Brogue Tableau) sought to extend the operation of the caveat and the basis upon which that application was opposed. In support of the application, Brogue Tableau relied on an affidavit of John Santamaria sworn 7 September 2004. That affidavit did no more than annex details of the property in question, details of the caveat and a copy of Pullin J's order and reasons for decision. It was implicit that Brogue Tableau took the view that the caveat lodged had been lodged pursuant to a court order and there was no basis upon which it could be removed.

12 Binningup Nominees relied upon an affidavit of Barry Granville Waller sworn 8 September 2004. Mr Waller set out the history of the proceedings and referred to the Deed for the Binningup Estate Unit Trust ("the Deed"). He then went on to say (pars 8 and 9):

"8. Between 1996/97 and 2002 Binningup Nominees has, pursuant to the express provisions of the Deed, subdivided parts of the South Land and has sold more than 60 blocks of land for the benefit of all unit holders in the Binningup Estate Unit Trust. All such sales were made with the express knowledge and approval of the plaintiff.

9. Recently, Binningup Nominees has entered into agreements for the sale and purchase of a further nine blocks of land forming part of the South Land ('Sale Land'). The lots comprising the Sale Land are lots, 1, 2, 3, 4, 4147, 4148, 4149, 4150, and 4184 on Deposited Plan No 42094."

13 Mr Waller also said it was anticipated that new titles for the Sale Land would be issued around 19 September. He said that, upon the issue of such titles, Binningup Nominees would be require to settle the purchase of the nine blocks and deliver clear title to the respective purchasers. Against that background, Binningup Nominees proposed that the caveat presently registered against the South Land be discharged, that the titles to the Sale Land issue and that Brogue Tableau should then have liberty to re-lodge the caveat against the remaining land. This proposal was unacceptable to Brogue Tableau.

14 When the matter came back before the Court on 16 September, Brogue Tableau applied to amend its originating summons in CIV 2164. By an amended par 1 the plaintiff claimed:

"A declaration that the Notice issued by the Registrar of Titles under section 138B of the Transfer of Land Act 1893 in respect of caveat number I848054 is invalid."

15 Counsel for Binningup Nominees consented to the amended paragraph 1 and further consented to an order being made in terms of that paragraph. The result was that the remainder of the originating summons was dismissed and the caveat remained in place. That then left this Originating Summons issued by Binningup Nominees seeking to have Brogue Tableau show cause why the caveat should not be removed to be determined. The reason for this turn of events can be understood once the provisions of the Transfer of Land Act are considered.

16 Sections 138A and 138B of the Transfer of Land Act are in the following form:

"138A. Caveats to which sections 138B to 138D apply

A caveat that has not been lodged -

(a) under section 30, 176 or 223A;

(b) by or on behalf of a beneficiary claiming under a will or settlement;

(c) under a court order;

(d) by the Registrar on the direction of the Commissioner;

(e) under any written law other than this Act;

(f) under any Commonwealth Act; or

(g) by or on behalf, or with the consent, of the Minister for Lands,

is a caveat for the purposes of sections 138B to 138D.

138B**. Certain caveats may lapse unless justified by caveator**

(1) If a section 138A caveat has been lodged then the proprietor of the land in respect of which the caveat was lodged may apply, in an approved form and on payment of the prescribed fee, for the Registrar to serve the caveator with a notice to the effect that, unless the caveator takes the action referred to in subsection (2) within 21 days after the day on which the notice is served, the caveat will lapse.

(2) If the notice referred to in subsection (1) is served on the caveator then the caveat lapses 21 days after the day on which the notice was served unless, before that time, the caveator has -

(a) obtained from the Supreme Court an order extending the operation of the caveat -

(i) for such further period as is specified in the order; or

(ii) until the further order of the Court;

and

(b) lodged with the Registrar a copy of the order."

17 As can be seen from the letter of the Deputy Registrar, he was concerned that the caveat lodged by Brogue Tableau was lodged pursuant to a court order. If that was so, pursuant to s 138A(c) the provisions of s 138B would not apply and there was no basis upon which the Commissioner could issue the 21-day notice. In my view, the caveat was not lodged pursuant to a court order. On one view, it was amended pursuant to Pullin J's order. The other view is that the caveat was lodged pursuant to leave granted by his Honour. That is to say, the Court determined that Brogue Tableau had a right to lodge a notice caveat and it (Brogue Tableau) exercised its rights pursuant to law. The Court did not order Brogue Tableau to lodge the caveat. It would not have been liable to any penalty had it not done so. No matter which of these two views is adopted s 138A(c) has no application.

18 However, when counsel for Binningup Nominees gave some consideration to s 138A, he realised that s 138A(b) applied. The caveat lodged by Brogue Tableau was lodged on behalf of a beneficiary claiming under a settlement. It was, therefore, not a caveat to which s 138B to s 138D applied and it was not liable to lapse after notice was given. Hence, counsel, quite properly, consented to the amendment to Brogue Tableau's originating summons in CIV 2164 and consented to the making of the declaration as sought.

19 To determine how caveats not subject to the provisions of s 138B to s 138D are removed, it is necessary to look to s 138. That section reads as follows:

"138. Consequences of lodgment of caveat

Upon receipt of such caveat the Registrar shall notify the same to the person against whose application to be registered as proprietor or (as the case may be) to the proprietor against whose title to deal with the estate or interest such caveat has been lodged; and such applicant or proprietor or any person claiming under any transfer or other instrument signed by the proprietor may if he think fit summon the caveator to attend before the Supreme Court or a Judge in chambers to show cause why such caveat should not be removed; and such court or Judge may upon proof that such caveator has been summoned make such order in the premises either ex parte or otherwise as to such court or Judge may seem fit. Except in the case of a caveat lodged by or on behalf of a beneficiary claiming under any will or settlement or by the Registrar pursuant to the direction of the Commissioner every caveat lodged against a proprietor shall be deemed to have lapsed as to the land affected by the transfer or other dealing upon the expiration of 14 days after notice served on the caveator that such proprietor has applied for the registration of a transfer or other dealing unless in the meantime such application is withdrawn. A caveat shall not be renewed by or on behalf of the same person in respect of the same estate or interest except subject to the state of the Register at the time of the renewal of such caveat; but if before the expiration of the said period of 14 days or such further period as shall be specified in any order made under this section the caveator or his agent appears before a judge and gives such undertaking or security or lodges such sum in court as such judge may consider sufficient to indemnify every person against any damage that may be sustained by reason of any disposition of the property being delayed then and in such case such judge may direct the Registrar to delay registering any dealing with the land lease mortgage or charge for a further period to be specified in such order or may make such other order as may be just."

20 Two things about this section are relevant to this application. First, the standard 14-day notice which issues after lodgment of a dealing and which, if not acted upon, will result in the caveat being removed does not apply if the caveat has been lodged "under any will or settlement". Second, the only option available to a registered proprietor over whose land a caveat has been lodged when the interest claimed is pursuant to a settlement is to cause the caveator to attend before the Supreme Court or a Judge in chambers to show cause why such caveat should not be removed. It is to be noted that there is nothing in the section which indicates how an application to show cause is to be made. In particular, there is no temporal reference. That is perhaps surprising when s 138 otherwise specifies a 14-day time period and s 138B refers to 21 days. This is a point of some importance.

21 During the course of his submissions, counsel for Brogue Tableau made reference to the Land Titles Registration Practice Manual, ed 7.1 (January 2004). As the title suggests, this is a manual designed to assist persons in their dealings with the Land Titles Office. The manual carries no legislative force. It does not have the status of regulations, unlike, for instance, the Supreme Court Rules. But over the years many people, in particular legal practitioners, have found the manual of great assistance. It reflects the Office of Land Titles' deep understanding of the Torrens System and the way the system operates in practice. For those reasons it is worth noting how the Office deals with notice caveats. Relevantly, par 4.1.8 reads as follows:

"Until after notice of any intended registration or dealing to be given to the caveator

Caveats in this form are useful for those caveators whose claim will not be defeated by the registration of any change of interest in the land, and who merely wish to be informed of any change in interest occurring on the title. If the change in interest is detrimental to the caveator the caveator may choose to negotiate with the parties or obtain an injunction to prevent the registration of the instrument.

These caveats may be shown in the limitations, Interests, Encumbrances and Notifications panel of any instrument dealing with the land in the title affected by the caveat. Before an instrument is lodged against land affected by such a caveat, notice must be given to the caveator. The notice:

• must be addressed to the caveator, and if more than one caveator, be separately addressed;

• must refer to the caveator, and the caveat number;

• must give the particulars of the instrument(s) to be lodged subject to the caveat by reference to:

- the nature of the instrument;

- the parties to the instrument; and

- the date of the instrument;

• must state the intention to register the instrument at the expiration of the 14 days notice period.

Conveyancers should refer to Section 240(4) of TLA when calculating the expiry date of the notice period.

The documents or instruments may then be lodged with the Registrar at the end of the notice period. Proof of compliance with the above in the form of a statutory declaration setting out the action taken, and annexing a copy of the notice must accompany the dealing. The dealing must be lodged as soon as possible after the expiry of the notice period or the process of serving notice must be repeated. If the parties to the transaction do not wish to register their instrument subject to the caveators claim they must either negotiate its withdrawal or have it removed by initiating action by the Registrar under Sections 138 or 138B of the TLA, action by the Commissioner under Section 141A, or action in the Courts under Sections 138 or 138B."

22 With respect, I am not sure that these paragraphs reflect entirely accurately the position under the Transfer of Land Act. Section 137 of the Act specifies the three forms of caveat which may be lodged against land under the Act. In the case of a notice caveat, the caveat has the effect of forbidding the registration of any dealing with the property "until after notice of the intended registration or dealing be given to the caveator". Section 137 says nothing further about the notice and how it is to be given. Presumably it is to overcome this lacuna in the legislation that the procedure set out in the manual has been developed. But that is not the only option available to a registered proprietor. Section 138 offers to every registered proprietor, who is notified that a caveat has been lodged over his property, the option of summoning the caveator to show cause why the caveat ought not be removed. If this step is not taken and a dealing is lodged in relation to the caveated land then, unless the caveator takes steps to obtain an order from the Court maintaining the caveat, it will lapse after 14 days. Once again, that provision would appear to operate no matter what form of caveat has been lodged. The only instance where it does not apply is when the caveat has been lodged "by or on behalf of a beneficiary claiming under any Will or settlement or by the Registrar pursuant to the direction of the Commissioner".

23 The other way to remove a caveat is pursuant to s 138B. That involves the Registrar, not the registered proprietor, serving on a caveator a 21 day notice. If the caveator takes no action under s 138C then the caveat will lapse. Section 138B only applies to s 138A caveats. This particular caveat does not fall within s 138A but there is no reason why a notice caveat could not do so. So while there would appear to be nothing in the Transfer of Land Act which would not permit the regime set out in the manual, it is not the only way that a notice caveat can be removed from a title.

24 Section 240 of the Transfer of Land Act deals with "service of notices". It is a facilitative section. It does not suggest, for instance, that where service of a notice is required but no time limit for taking action is specified, the notice period should be 14 days. Rather, it deals with the way that service may be effected in certain instances. For present purposes, the section is not relevant.

25 At the hearing of this application counsel for Brogue Tableau submitted that Binningup Nominees' originating process ought be adjourned. Essentially it was said that Brogue Tableau had not received sufficient notice of the originating summons to allow it to put before the Court any matters which might entitle it to apply for an injunction. I refused the application for the adjournment. To understand why I refused the application it is necessary to say something more about the options available to Brogue Tableau once it received notice as required as a consequence of the caveat lodged over the land.

26 It had two options. First, it could have done nothing. The notice Brogue Tableau received did not comply with the requirements for notice as set out in the manual. Consequently, if asked to do so, the Registrar would not have removed the caveat and the caveat would have continued to operate to prevent any dealing with the property. Furthermore, if a dealing was actually lodged, the caveat would not lapse after a 14-day notice - that is what s 138 says with respect to caveats of the type lodged by Brogue Tableau. It was, of course, open to the registered proprietor to issue a show cause notice under s 138. But that was a matter for Binningup Nominees and not Brogue Tableau. So doing nothing after receiving notice was a perfectly respectable option for the caveator. The second available option was to apply for an injunction restraining the registered proprietor from dealing with the land in the manner proposed. But if the caveator is summoned to show cause or applies for an injunction they must satisfy the usual provisions relating to the grant of injunctions - they must satisfy the Court that there is a serious question to be tried and that the balance of convenience favours the grant of the injunction. So when Brogue Tableau applied in CIV 2164 of 2004 for an order extending the registration of its caveat, it had to put before the Court material which indicated both that there was a serious question to be tried and the balance of convenience favoured the extension of the caveat. In other words, it had to do in those proceedings precisely what it needed to do in these proceedings. That being the case, it seemed to me that it had received sufficient notice of what it was required to do to make adjournment of this hearing both unnecessary and inappropriate. That was the basis upon which I refused the application for the adjournment.

27 The question then to be determined was whether Brogue Tableau could show there was good cause why the caveat ought not be removed. Or, perhaps more correctly, whether it could satisfy the requirements for the grant of an injunction. It was simply unable to do so. Without going through the evidence in detail, it can be summarised in this way. Brogue Tableau is suspicious of the actions of Binningup Nominees. In the past there has been a suggestion that the South Land, or some part of it, might have been sold by Binningup Nominees to related parties at under-value. The same concerns arise in relation to the transaction involving the Sale Land. However, there is nothing in the evidence which could found such a suspicion. Quite the reverse. It appears that the sale of the specified lots is an arm's-length transaction which is in the interests of all parties. Furthermore, Binningup Nominees is content to allow registration of a notice caveat against the land once the titles to the subject lots have issued. In my view, there is absolutely no basis upon which an injunction could be granted.

28 Having reached that conclusion, I made the following orders:

Subject to the plaintiff undertaking that it will not deal with, or seek to deal with, the land described in the schedule hereto, otherwise than in accordance with the agreements which form annexure "BGW3" to the affidavit of Barry Granville Waller sworn 8 September 2004 in these proceedings ("the Agreements"), and that the plaintiff shall advise the first defendant in writing if the sale the subject of any of the Agreements does not settle in accordance with the terms of the relevant agreement, the Court orders that:

(1) the operation of caveat number I848054C be extended until further order in relation to the land comprised and described in Certificate of Title volume 2194, folio 802 with the exception of the land being lot numbers 1, 2, 3, 4, 147, 148, 148, 149, 150 and 184 on Plan No 42094 ("the Sale Land");

(2) caveat number I848054C be discharged in respect of the Sale Land, such discharge to be effective immediately upon the issuing of new Certificates of Title in relation to Sale Land;

(3) there be liberty to both the plaintiff and the first defendant to apply to discharge or vary these orders on not less than 48 hours' notice in writing for costs reserved.

(In the original application in CIV 2164 of 2004 five lots were mentioned, being lot numbers 4147, 4148, 4149, 4150 and 4184. These lots were misdescribed. In fact, in each case the "4" was to be removed. I mention this point lest any confusion occur when reference is made to the Sale Land).