Conveyancing - Land titles under the Torrens System - Caveats against dealings - Lapse, removal and withdrawal - Removal - Balance of convenience test - Claimed profit à prendre.

Land Titles Act 1980 (Tas), s135.

Eng Mee Yong v Letchumanan [1980] AC 331; Re Burman's Caveat [1994] 1 Qd R 123; Porter v McDonald [1984] WAR 271; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42; Perpetual Trustee Australia Ltd v Shand (1992) 27 NSWLR 426, referred to.

Judgment Number: [2002] TASSC 39

1 The applicant is the registered proprietor of a property at Ellendale which is comprised in three certificates of title. The respondent has lodged a caveat prohibiting dealings in respect of the land in two of those certificates of title. The applicant applied for an order that the respondent show cause why his caveat should not be removed, and for an order that it be removed. The respondent, having been served with the application, appeared to show cause.

2 The respondent is the previous owner of the land. He sold it to the applicant pursuant to a contract dated 1 April 1999. Completion of that sale took place in late December 1999. A tractor was included in the sale. The directors of the applicant company were not happy with the condition of the tractor, but the contract contained no terms relating to its condition.

3 As a result of discussions between the respondent and two of the directors of the applicant company, he and they signed an agreement on 15 November 2001, in the following terms:

Keith Clark and the proprietors of 4 Oaks Enterprises agree that

1. Keith Clark pay the sum of $500 for repairs to farm tractor.

2. Jeff Warr and Bob Waddilove agree to Keith Clark removing 6 saw mill logs from 4 Oaks property. [Illegible]

3. Also 2 dead trees are to be delivered to 4 Oaks and the other for Keith Clark."

4 The Land Titles Act 1980, s133(2)(c), requires a caveat to state "the estate or interest claimed by the caveator". The estate or interest claimed by the respondent is described in the caveat as follows:

by virtue of an agreement in writing between FOUROAKS ENTERPRISES PTY LTD ACN 081 676 093 as the registered proprietor of the land herin [sic] described and the caveator and dated 15th November 2001 whereby it was agreed, inter alia, that the caveator could remove certain tress from the land ...".

5 The caveat is silent as to whether the respondent claims to have a profit à prendre, an exclusive licence amounting to an estate or interest in the land, or some other sort of estate or interest. The caveat is therefore defective: Cwalinski v Cwalinski [1958] Tas SR 56; Smith v Longden (Crawford J, 127/1997).

6 Further, the caveat purports to make a claim to an estate or interest in all the land comprised in the two certificates of title specified therein, an area totalling some 81 acres, whereas the evidence was that the November 2001 agreement related to a particular stand of timber comprising only part of that total area. Even allowing for the possibility that the agreement permitted the respondent to traverse other parts of the applicant's land when exercising his right to carry away the timber, I do not think it can be said that the respondent's claim relates to the whole of the land comprised in both certificates of title. The Land Titles Act, s133(2)(e) requires a caveat to state, "where the caveat relates to part only of the land in a folio of the Register ..., such further description as may be necessary to identify the subject land". However, this is not a situation where the caveat is defective in that it does not sufficiently describe part of the land comprised in a folio of the Register, or two folios of the Register. It is a case where the caveat is too wide, in that it asserts that the respondent claims an estate or interest in the whole of the land comprised in both folios, when he claims an estate or interest only in a smaller area. In such circumstances, a caveat forbidding any dealing with the land can be removed on the basis that it is too wide to be sustained: In re Paul (1902) 19 WN (NSW) 114; Re Powell's Caveat [1966] QWN 9; Queensland Estates Pty Ltd v Co-ownership Land Development Pty Ltd [1969] Qd R 150; Elliott v Blanshard (1970) 17 FLR 7; Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485; Nichols Constructions Pty Ltd v Henry (Cox J, A91/1994).

7 Although the caveat is both defective in failing to specify the sort of interest claimed and too wide in relation to the area of land that it affects, I would prefer not to order its removal on those grounds. When an application for the removal of a caveat is made under the Land Titles Act, s135(1), this Court "may make such order, either ex parte or otherwise, as it considers necessary": s135(2). In Hooper v Australia and New Zealand Banking Group Ltd (1996) 5 Tas R 398 at 404, Wright J said that, in his opinion, "the nature and purpose of a caveat is such that technical deficiencies in its form and content should not be allowed to deprive a bona fide claimant from obtaining the advantage and breathing space that prompt notification of his claim to the Registrar [sic] should, in principle, permit him to achieve". I agree. I hasten to add that this is a case in which the bona fides of the respondent are challenged.

8 If the respondent's evidence is truthful and accurate, it is at least arguable that he has a profit à prendre by virtue of the November 2001 agreement. However, there are both factual and legal issues in dispute between the parties. It would not be appropriate to determine those issues on the summary application that is before me. See Lindsay Caveats Against Dealings in Australia and New Zealand, 174; Colbran and Jackson Caveats, 332 - 333. The appropriate course is for me to determine whether, in the exercise of the discretion conferred by the Land Titles Act, s135(2), I should make an order for the removal of the caveat. There is a strong body of authority supporting the proposition that a statutory discretion to order the removal of a caveat should be exercised in accordance with the "balance of convenience" test that is applied in relation to interlocutory injunctions: Eng Mee Yong v Letchumanan [1980] AC 331; Re Burman's Caveat [1994] 1 Qd R 123; Lindsay (supra) at 203 - 207; Colbran and Jackson (supra) at 346 - 354. In Western Australia, the view has been taken that the "balance of convenience" test is relevant but not necessarily decisive: Porter v McDonald [1984] WAR 271; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.

9 On 30 April 2002, the applicant contracted to sell the property, ie, the land comprised in its three certificates of title, for $240,000. That is $40,000 more than it paid the respondent for the property in 1999. According to the respondent's affidavit, the felling of six trees from the area in question might yield timber worth $16,000 or $20,000 after harvesting and milling; the milling would be likely to cost $5,000; and the harvesting would be likely to cost about $3,000. He says that racking and drying the sawn timber over an 18 month period could double its value, but I assume that milled green undried timber is available commercially, and I will therefore disregard the profits that could be made from racking and drying such timber. The respondent's evidence is that an outlay of about $8,000 on harvesting and milling would yield timber worth $8,000 to $12,000 more than that. There is no suggestion that the respondent's right to a dead tree pursuant to cl 3 of the November 2001 agreement is of any significant value, and I will therefore ignore it. The applicant contends that its $240,000 sale warrants the removal of the caveat lodged by the respondent to protect his claim to an interest in the land when the evidence suggests that that interest is potentially worth about $8,000 to $12,000 to him.

10 The respondent gave evidence that, although the November 2001 agreement expressly referred to him "removing 6 saw mill logs" from the property, that document was a note or memorandum of a pre-existing oral agreement for the removal by him of "six or so" logs to be obtained by felling trees that were still growing. That evidence was contradicted by one of the applicant's directors, Mr Waddilove, who said that the respondent had pointed out six logs that had been lying on the ground for some time, and that it was orally agreed prior to the signing of the document that the respondent would be allowed to remove those six logs. There is a risk that the respondent will be disbelieved on this point, especially since the critical clause in the November 2001 agreement refers to "Keith Clark removing 6 saw mill logs" without any reference to the felling of trees, though it may be significant that the author of the document was one of the applicant's directors.

11 Sometimes a right to take from land some natural product of it, such as timber, will amount to a profit à prendre, but at other times it will not. In certain circumstances, a person with a right to take timber from certain land will not be the holder of a profit à prendre, but will have the status of a buyer pursuant to a contract for the sale of goods. The criteria for distinguishing between a sale of goods and a grant of a profit à prendre were referred to by Young J in Perpetual Trustee Australia Ltd v Shand (1992) 27 NSWLR 426 at 431 - 432, where his Honour said:

"The main problem in such cases is whether there is a sale of the timber or slate as a sale of goods, or whether there is an interest in the land. Everyone recognises that the cases are not completely consistent but, generally speaking, if the trees or slate are to be taken away immediately, there is a sale of goods; if the material is to be warehoused on the land for a particular period and then taken away, there is usually a sale of goods, but if it is to be left in situ for an indefinite period, in which case there may be further growth before reaping it, it is usual for the Court to hold that there is a profit à prendre: see, eg, Duppa v Mayo (1669) 1 Wms Saunders 275 at 276; [1669] EWHC J97; 85 ER 336 at 343; Marshall v Green (1875) LR 1 CPD 35 especially at 39."

12 The applicant had put the property on the market through a real estate agent in September 2001. The November 2001 agreement was entered into against that background. Although the agreement did not specify a date by which the "logs" and dead trees were to be removed, there are strong grounds for inferring that the parties did not intend that they were to be left in situ for an indefinite period, but intended that they were to be removed prior to the applicant completing its anticipated sale of the property, and that they did not intend that any purchaser would take title subject to the rights of the respondent. On this basis there is a significant risk that, even if the respondent's evidence as to the meaning of "saw mill logs" is accepted, it will be held that the agreement did not give rise to a profit à prendre.

13 The respondent's solicitors lodged a priority notice under the Land Titles Act on 13 May 2002, by which they reserved priority for his caveat, and subsequently lodged the caveat on 13 June 2002. If the caveat, or even the priority notice, had been lodged prior to 30 April 2002, the applicant might not have entered into a contract for the sale of the property. If the caveat is not removed, it may take a very long time for the nature of the respondent's rights to be determined in an action, and there is every likelihood that the purchaser will rescind the contract of 30 April 2002, and possibly even sue the applicant for damages. Two of the applicant's directors, Mr and Mrs Waddilove, apparently expecting some of the proceeds of the sale of the property to be made available to them, entered into a contract on 5 May 2002 for the purchase of a property for $168,000, subject to their bank making available a loan of $60,000. Mr Waddilove says in his affidavit that they are relying on the proceeds of the Ellendale sale to finance that purchase.

14 The respondent contends that the timing of the lodgement of his caveat was not unreasonable, on the basis that he had been making reasonable efforts to arrange for a contractor to harvest the timber, and for the owner of an adjoining property to permit the removal of the timber through that property; had encountered delays beyond his control; had learned of the applicant's sale of the property; and had needed to lodge a caveat to protect his rights. The applicant contends that the respondent had had a reasonable time to remove the timber that he was entitled to, and had failed to do so. I am not in a position to make a finding as to the reasonableness or unreasonableness of the respondent's timing. However, in deciding where the balance of convenience lies and in making a discretionary decision whether to order the removal of the caveat, it is highly significant that the priority notice and caveat were not lodged until after the applicant contracted the sell the property. When a registered proprietor of a piece of land, well aware of the nature of an unregistered interest in that land, contracts to sell it, in disregard of the rights of the holder of that interest, a complaint that a caveat was lodged only after the signing of a contract would ordinarily carry no weight at all. But this is not such a situation. It is by no means self-evident that the November 2001 agreement created, or might have created, a profit à prendre. There is no evidence that the status of the respondent's rights under that agreement was discussed with the directors of the applicant company or contemplated by them. The evidence suggests that the respondent gave no indication of any claim to an interest in the land until after the applicant contracted to sell it.

15 An order for the removal of the caveat will not leave the respondent without a remedy. If the facts are as he asserts them to be, he will be entitled to sue the applicant for damages for breach of contract. It seems his claim would be sufficiently small for the proceedings to be brought in the Civil Division of the Magistrates Court. The proceedings would be simpler and less costly than those he would have to institute if the caveat were to remain in force, since it would not be necessary for him to contend that the November 2001 agreement created a profit à prendre, nor for him to seek equitable relief. It seems most unlikely that he would have difficulty enforcing a judgment. The property is unencumbered. The applicant is selling it for $40,000 more than the price it paid the respondent for it in 1999. The company search obtained by the respondent shows that there are no registered charges in respect of the applicant's assets.

16 Although the respondent has a prima facie claim to an equitable interest in the nature of a profit à prendre in respect of part of the land affected by his caveat, I do not think it is appropriate to allow his caveat to remain in force because of (a) the weaknesses of his claim; (b) the fact that the applicant entered into a contract for the sale of its real estate at a time when there was apparently no suggestion that any claim by the respondent to an interest in the land had been communicated to it; (c) the likely adverse consequences for the applicant and its directors if that contract cannot proceed to completion; and (d) the likelihood that the respondent has an adequate remedy in damages.

17 For these reasons I order that Caveat No C380666 be removed in respect of certificates of title volume 205707, folio 1, and volume 203554, folio 1.