WESTERN AUSTRALIAN REAL ESTATE CUSTODIAN LTD (ACN 069 896 966)

Real property - Caveats - Application for extension of caveat under s 138B of the Transfer of Land Act 1893

Transfer of Land Act 1893, s 137, s 138, s 138A, s 138B, s 138C

Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] NSWLR 106

Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78

Carroll v Azolia Pty Ltd, unreported; SCt of WA (Wheeler J); Library No 980004; 19 January 1998

Ceda Nominees Pty Ltd v Registrar of Titles, unreported; SCt of WA (Olney J); Library No 4474; 16 April 1982

Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129

Municipal District of Concord v Coles [1905] HCA 35; (1906) 3 CLR 96

1 PULLIN J: This is an application by the plaintiffs under s 138B(2) of the Transfer of Land Act 1893 for an order extending the operation of a "s 138A caveat" which was lodged by the plaintiffs on 17 October 1996.

2 The facts, which are not in dispute, are that the plaintiffs are small unit holders in a unit trust known as Kelmscott Village (1998) Unit Trust. The trustee of that trust is Magenta Nominees Pty Ltd.

3 Relevant terms of the trust deed relating to the unit trust are as follows:

3.1 IN CONSIDERATION of the premises the Trustee HEREBY DECLARES that it will henceforth stand possessed of the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions hereinafter expressed concerning the same."

" THE UNITS

4.3 Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund."

" POWERS OF THE TRUSTEE

12.1 (e) to vary or transpose any investments into or for any other or others of any nature whatsoever and to vary the terms of or property comprised in any security;

(f) to ... sell, transfer, convey, ... let, ... mortgage, ... or otherwise deal with any real .. property ... ."

4 At some stage, land on which the Kelmscott Village shopping centre stands was acquired by the trust and became part of the trust fund.

5 Disputes then developed between the plaintiffs and Magenta Nominees Pty Ltd. I was informed by both counsel that proceedings were commenced at some time in the past by Magenta Nominees Pty Ltd against the plaintiffs, seeking money said to be owing by the plaintiffs to the trustee. This was met by counterclaims by the plaintiffs that Magenta Nominees Pty Ltd had, inter alia, breached its duty to account and had endeavoured to deny the plaintiffs information about the affairs of the trust. Those proceedings have not been resolved.

6 On 22 December 1995, Magenta Nominees Pty Ltd conveyed the legal estate in the land to the first defendant (then called Western Property Investments Ltd), which became the registered proprietor of the land on that day. The first defendant held the land on trust for Magenta Nominees Pty Ltd.

7 On 17 October 1996, the plaintiffs lodged a caveat under s 137 of the Transfer of Land Act. A caveat may forbid the registration of an instrument either absolutely or unless the instrument be expressed to be subject to the claim of the caveator or it may forbid registration until after notice of the intended registration or dealing be given to the caveator. The caveat in this case was of the latter kind, ie it forbade the registration of an instrument affecting the claimed estate or interest "until after notice of any intended registration or registered dealing to the Caveator ...". The estate or interest claimed in the caveat was on the basis that the plaintiffs were "unitholders having a beneficial interest in the land through the Trust Fund known as The Kelmscott Village (1988) Unit Trust". The caveat stated that the caveator claimed the estate or interest by virtue of -

"The purchase by the Caveators of 500 units in The Kelmscott Village (1988) Unit Trust (the "Trust") established by a Deed of Trust (the "Trust Deed") dated 28 October 1988 made between Magenta Nominees Pty Ltd as trustee (the "Trustee"), Benrone Pty Ltd (as trustee for the BL & J Denboer Family Trust), Milone Pty Ltd (as trustee for JM Kelly Family Trust) and Callao Pty Ltd (as trustee for the S.J. Chesson Family Trust). The Trustee became the registered proprietor in the land described above by virtue of Transfer D957186 and pursuant to the Trust Deed, the land became part of the Trust Fund. By virtue of Transfer G64464 the Trustee transferred title to the above described property to the abovementioned registered proprietor, such transfer stating that the transfer was made for nil consideration pursuant to a Deed of Appointment of Sub-Trustee dated 12 December 1995, as will more fully appear from the Statutory Declarations filed herein and executed by the Caveators on 15 October 1996."

8 Before I refer to further facts which are relevant to the application, I will deal with the legal issue which arises at this point, which is whether or not the plaintiffs have a caveatable interest in the land.

9 Before 1996, proceedings under s 138 of the Transfer of Land Act 1893 to remove a caveat or to delay registration involved the court considering whether there was an arguable case as to the existence of a caveatable interest. Collateral proceedings had to be brought to finally decide the question. The reasons for this were legal - as to which see Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129, at 141 - and practical - as to which see Porter v McDonald [1984] WAR 271, at 276.

10 In 1996, the Transfer of Land Act 1893 was amended to introduce new provisions governing, inter alia, the circumstances in which certain caveats would lapse and authorising the court to extend the operation of those caveats. These provisions relate to what is called a "s 138A caveat".

11 In proceedings under s 138B(2), to extend the operation of a caveat, the court has jurisdiction to decide whether the caveator's claim "has or may have substance". In most cases, the practical reasons will still require only a decision about whether the caveator's claim "may have" substance; in other words, if the caveator has an arguable case. However, there is no longer any legal reason why, in a clear case, the court cannot finally decide that the caveator's claim "has" substance, ie to finally decide the caveator's claim. And see Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd [1999] NSWSC 524, par 4.

12 In my opinion, this is a clear case. Neither party suggested to me that collateral proceedings were necessary.

13 A unit under the trust deed in question here confers a proprietary interest in all of the property which for the time being is subject to the trust of the deed. If there is a proprietary interest in the entirety, then there is a proprietary interest in each of the assets of which the entirety is composed. When Magenta Nominees Pty Ltd was the registered proprietor of the land, it held the legal estate and the unit holders had a beneficial interest in the equitable estate. See Costa & Duppe Properties Pty Ltd v Duppe [1986] VicRp 9; [1986] VR 90; Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352; and Commissioner of State Taxation v Merifield Cooksey Holdings Pty Ltd, unreported; FCt SCt of WA; Library No 940594; 31 October 1994. Clause 4.3 is similar to the clause which was found in the trust deed in the Costa v Duppe case.

14 When the first defendant became the registered proprietor, it then held the legal estate in the land and Magenta Nominees Pty Ltd held the equitable estate in the land on trust for the unit holders. The plaintiffs therefore had a proprietary interest in the equitable estate in the land held by Magenta Nominees Pty Ltd. It was noted by Fullagar J in Livingston v Commissioner of Stamp Duties (Q) [1960] HCA 94; (1960) 107 CLR 411, at 438, that to say that the plaintiffs had an interest in the equitable estate is to say something that requires explanation and analysis. The explanation in this case, as in most cases, is that the equitable interest is an interest which is held subject to the provisions of the trust deed. So, for example, the trustee of the trust has wide powers, including the power to sell real estate. If the land were sold under a valid exercise of that power, then of course the plaintiffs would no longer have any caveatable interest in the land. Their interest then would be in the proceeds of sale which would become part of the trust fund. The power of sale, however, has not been exercised and the plaintiffs do therefore have a proprietary interest in the equitable estate in the land. My conclusion is that the plaintiffs have a caveatable interest. In consequence, to use the language of s 138C, I am satisfied that the caveator's claim has substance.

15 Counsel for the first defendant argued that the caveator's claim did not have substance, but no authorities were advanced to support that argument and the only submission made was that the facts in the Costa v Duppe case were different. In my opinion, the first defendant's argument must be rejected.

16 I now need to relate some more facts. On 28 February 2001, a notice was served on the plaintiffs by the Registrar of Titles under s 138B(1) of the Transfer of Land Act 1893. That notice required the caveator to take action to obtain from the Supreme Court, an order extending the operation of the caveat, failing which the caveat would lapse after 21 days.

17 The plaintiffs' solicitors responded to this notice by sending a facsimile to the solicitors for the first defendant and Magenta Nominees Pty Ltd, asking if there was some commercial reason why the caveat needed to be lifted. The facsimile stated that if a satisfactory commercial reason for the need to have the caveat lifted was given, then they would "co-operate with the trustee with a view to preserving the Trust assets". The response from the solicitors for the first defendant and Magenta Nominees Pty Ltd stated that: "The commercial reason for the removal of your client's caveat is the proper conduct of the business of the Kelmscott Village (1988) Unit Trust". This communication stated that the trustee had power to deal with the assets of the trust, and reference was made to cl 12.1 and the powers contained therein. It was also stated that the solicitors contended that the plaintiffs did not have a caveatable interest because of cl 4.3 of the trust deed. A further request was made by the plaintiffs' solicitors of the defendant's solicitors, asking whether there was any immediate need to remove the caveat. There was no response, and as a result these proceedings were commenced. Justice Parker made orders on 19 March 2001 extending the caveat until further order, and the matter was otherwise adjourned to a special appointment.

18 Later, in May of 2001, the solicitors for the defendant advised of negotiations with a proposed tenant in the shopping centre, namely Optus, and the plaintiffs offered to arrange for the withdrawal of the caveat to allow for the registration of the lease, together with the lodgment of a new caveat immediately thereafter. The solicitors for Optus were also advised of this by the plaintiffs' solicitors. Without continuing the history in detail, the evidence in the affidavits reveals that the plaintiffs' solicitors made efforts to try and facilitate the registration of the lease and to lift the caveat and re-lodge it after that registration had taken place. When no agreement could be reached, the solicitors for the plaintiffs then made an application under s 138D, seeking the leave of the Supreme Court for lodgment of a further caveat after the withdrawal of the present caveat and after the registration of the Optus lease.

19 On 28 May 2001, advice was given to the plaintiffs' solicitors that Optus no longer wished to continue with the lease arrangement. As a result, the application by the plaintiffs for leave to remove and re-lodge the caveat was no longer necessary, and it was dismissed.

20 The correspondence reveals why Optus decided not to proceed. Tozer International Pty Ltd wrote a letter on behalf of Optus, stating that the amendment being proposed by Mr Chesson on behalf of an agent for the trustee of the unit trust, was contrary to an offer which had been made by Mr Chesson at some earlier date. The letter continued:

"Further, the matter in relation to the caveat, which has been lodged on the title and the related, impending court proceedings, would appear to inhibit the proposed lessee from registering the proposed lease ... the matter appears to have become complicated by court proceedings which involve parties other than Optus and for which Optus can do nothing about.

Optus are not prepared to spend time, money and resources on a matter which (sic) they have no involvement."

21 The first defendant also said that it wished to refinance the project and that there was a need to register mortgages and to enter into other transactions. It complained that any instrument which was lodged for registration would have to wait 21 days before registration was complete while notice was given to the plaintiffs. It is argued by counsel for the first defendant that the plaintiffs should not be entitled to interfere with the trustee's dealings with the property and that the delay caused by the existence of the caveat is inconvenient.

22 In an affidavit filed the day before the hearing, Mr Chesson says that the trustee has agreed to -

"exchange the subject property for the whole of the interest in the Kelmscott Central Development Trust as at 1 July 2001. This transaction has been entered into by the trustee in order to allow the trust to pursue its business of developing the property. The trustee has plans to replace the registered proprietor of the property with Western Australian Real Estate Investments Limited (WAREIT) which is registered with the ASIC as a manager of property trust. I expect that WAREIT will enter into further dealings with the property, including leases and mortgages, in the near future. Registration of the transfer to the new responsible entity and further dealings with the property will be impaired by the plaintiffs caveat."

The constitution of the Kelmscott Central Development Trust shows that if WAREIT becomes the trustee under this constitution, a member will not be entitled to lodge any caveat or any other instrument over the real property comprised in the trust fund.

23 The first defendant argues that the existence of the caveat is commercially inconvenient. It was argued that unit holders could interfere with the operations of a trust if they all lodged caveats preventing dealings with real estate owned by the trustee on behalf of the trust. In my view, there is no substance in that complaint. In the first place, and from the practical point of view, it may be observed that the trustee has agreed to act as trustee under a trust deed which does not prohibit the lodgment of a caveat. If the trustee prefers to leave the trust deed in that form, then I do not see that it has any basis for complaint about commercial inconvenience. There is a variation power in the trust deed, and it did not have to allow the present circumstances to arise. In the second place, the balance of convenience will rarely be any justification for removal of a caveat when it is established that the plaintiffs have an equitable interest in the land. They are then entitled to protect that interest by caveat - Porter v McDonald (supra); Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, at 50.

24 I reject the first defendant's submission that I should order that the caveat be removed.

25 I am therefore disposed to make an order extending the operation of the caveat. The remaining question is about the period of time for that extension. The Chamber summons seeks an order that the operation of the caveat be extended until the plaintiffs cease to be unit holders in the Kelmscott Village (1988) Unit Trust. I do not think that I can make that order because circumstances may change. For example, as I have already mentioned, if the trustee sells the land, then the unit holders would thereafter only have an interest in the proceeds of sale and not in the property itself. I think that the only order which can be made is that the operation of the caveat be extended until further order of the Court. That is the order I will make.