REAL PROPERTY - general principles - caveats - principles for extending caveats.

Corporations Act 2001 (Cth)

Evidence Act 1995 (Cth) s 160

Acts Interpretation Act 1901 (Cth) s 29

Land Titles Act 1925 (ACT), ss 106, 108, 161

Legislation Act 2001 (ACT), s 250

Partnership Act 1963 (ACT), ss 9, 10

Matken Constructions Pty Ltd v James & Anor [2009] ACTSC 100

Goodman v J Eban Ltd [1954] 1 QB 550

Big River Timbers Pty Ltd v Stewart (1999) 9 BPR 16,605

Wildschut v Borg Warner Acceptance Corporation (Aust) Ltd (1987) 4 BPR 9453

Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 40

Rising Developments Pty Ltd v Hoskins (1996) 39 NSWLR 157

Eng Mee Yong v Letchumanan (1980) AC 331

Australian Security Estates Pty Ltd and Bluecrest Holdings Pty Ltd (1991) 9 BPR 17,533

N & J Efkarpidis Holdings Pty Ltd v Tancred Brothers Pty Ltd (ACTSC Gallop J 2 July 1986 unreported)

Vella & Anor v Aliperti & Anor (1995) NSW ConvR 55-750

Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150

Lawrence v Appleby & Anor [2001] NSWSC 649; (2002) NSW ConvR 55-993

Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987

Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630

Renascent Interiors & Refurbishers Pty Ltd v ASEL Property Group Pty Ltd [2002] NSWSC 345

BP Oil New Zealand Ltd v Van Beers Motors Ltd [1992] 1 NZLR 211

Buchanan & Anor v Cross & Gleeson Business Finance Pty Ltd (2006) 13 BPR 24,513

Templeton v Leviathan Pty Ltd [1921] HCA 55; (1921) 30 CLR 34

BETWEEN: GR8 CONSTRUCTIONS PTY LTD (ACN: 105 581 646)

AND: REGISTRAR GENERAL, ACT LAND TITLES OFFICE, OFFICE OF REGULATORY SERVICES

Upon the Plaintiff undertaking to submit to any order the court considers just for paying compensation, to be assessed by the court or as directed by the court, to someone (whether or not a party to the proceeding) who is adversely affected by - a) the operation of the interlocutory order or undertaking; or b) any continuation of the order or undertaking, the court orders that:

1. To the extent that the Caveats lodged by GR8 Constructions Pty Ltd (ACN 105 581 646) in respect of land, being Block 6 Section 25 Division of Spence contained in Volume 717 Folio 91 and Block 7 Section 25 Division of Spence contained in Volume 651 Folio 49, have not lapsed, they be extended until further order.

2. The Registrar-General be restrained from registering any dealing in respect of the land being Block 6 Section 25 Division of Spence contained in Volume 717 Folio 91 and Block 7 Section 25 Division of Spence contained in Volume 651 Folio 49, until further order.

3. The plaintiff give notice of this order to the defendants by delivering a sealed copy of the order to each defendant at the address shown on the Originating Application and to Elrington Boardman Allport and to Stephen O'Donnell at 20 Pemulwuy Street Ngunnawal ACT 2913, no later than 4 pm on Wednesday 25 May 2011.

4. The plaintiff have leave to issue and serve on or before 12 noon on 24 May 2011 a subpoena directed to the ACT Planning and Land Authority or other agency of the Australian Capital Territory to produce at 11.30 am on 26 May 2011 the "building file" in respect of the land, being Block 6 Section 25 Division of Spence and Block 7 Section 25 Division of Spence, so long as the plaintiff's solicitors advise the Authority or other agency on or before 5 pm on 23 May 2011 of this order.

5. The plaintiff file any further affidavits on which it proposes to rely on or before 4.15 pm on 27 May 2011.

6. The further hearing of this matter be adjourned to 1 June 2011 at 9.30 am.

7. Liberty be reserved to all parties to apply on two days notice.

1. The plaintiff is a company registered under the Corporations Act 2001 (Cth) and carries on business as a builder. It entered into a building contract for the construction of certain buildings on land owned by the first, second and third defendants (the subject land). In circumstances I will refer to below, the plaintiff lodged a caveat over the subject land.

2. Upon receipt of various instruments in respect of one of the blocks of the subject land, apparently a discharge, transfer, change of name and mortgage, the fourth defendant, as required under s 106(1) of the Land Titles Act 1925 (ACT) (the Land Titles Act) purportedly caused a lapsing notice to be sent to the plaintiff giving details of the lodgement of the instruments.

3. As a result, under that section, the caveat will lapse to the extent of permitting registration of the lodged documents unless the court otherwise orders. The caveat lapses 14 days after the date of the notice, without such a court order. I shall refer to the notice further in these reasons.

4. The plaintiff accordingly sought an order of the court that the caveat not lapse, thus preventing the registration of the instruments. The basis of the caveat is that the building contract includes a term, which charges the land with payment to the plaintiff of all money payable under the contract. This clause is part of what is clearly a standard form contract and has been considered by Master Harper who, in Matken Constructions Pty Ltd v James & Anor [2009] ACTSC 100, accepted (at [3]) that it was sufficient to support a caveatable interest. I see no reason to doubt his Honour's view, which seems to me undoubtedly right.

5. At the commencement of the hearing, I raised issues about the lapsing notice, its service and the 14 day period after which the caveats lapse. A lapsing notice was signed by rubber stamp of the Deputy Registrar-General and dated 5 May 2011. It appears that this amounts to a signature: Goodman v J Eban Ltd [1954] 1 QB 550. The affidavit of the plaintiff's solicitors showed that that, for some unexplained reason, the notice was not delivered to that solicitor's office until 11 May 2011.

6. The question of whether the caveat has lapsed because of the expiry of the 14 days was raised by me. Had the caveat lapsed before I could make an order? If the date of the notice is the start of the 14 day period, then the caveat has already lapsed. If the date when it would have been received in the ordinary course of post is the criterion, as provided for in s 250 of the Legislation Act 2001 (ACT) (the Legislation Act), then it seems inevitably that it would have also lapsed, since, though I have no specific evidence of it, it seems unlikely that the ordinary course of post between two addresses in Canberra would be more than two or three days.

7. If s 160 of the Evidence Act 1995 (Cth) (the Evidence Act) applies, then the actual date of receipt, as deposed by the plaintiff's solicitor, would apply and the caveat would not have lapsed. If, independent of such provision, the actual date of receipt is the relevant time, then the caveat would not have lapsed either.

8. To determine this, I considered section 106(1) of the Land Titles Act. It provides:

(1) Except in the case of a caveat lodged -

• (a) by a settlor; or

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

  • (c) by the registrar-general;

a caveat lodged against a registered proprietor shall, unless the court otherwise orders, lapse 14 days after the date of a notice to the caveator that application has been made for the registration of a document in respect of the land or interest to which the caveat relates.

9. It seems to me clear that the reference is to the date of the notice, not to the date on which it is received by the caveator or is deemed to have been served. This is reinforced by reference in s 107 of the Land Titles Act to the equivalent notice where a registered proprietor seeks to have a caveat removed. The Registrar-General is required to give notice and the 14 day period is expressly provided to commence from the date of service, as set out in section 107(2) as follows:

(2) On receipt of an application under subsection (1), the registrar-general shall -

• (a) give notice of the application to the caveator; and

• (b) not less than 14 days from the date of service of the notice, remove the caveat from the register, unless the court otherwise orders.

10. Accordingly, it seemed to me that I could not extend the caveat for it probably had lapsed. That however, was not the end of the matter. The lapsing notice itself stated as follows:

Your caveat will temporarily lapse to allow registration of the above instruments, upon the expiration of 14 days after the date of service of this notice upon you, unless an order to the contrary is obtained from the Supreme Court, or judge thereof, and such order (or copy) is lodged with this office within that period.

11. It appears to me to be inconsistent with s 106(1) of the Land Titles Act. I was informed that it was generally understood that, notwithstanding what I have said about s 106, the lapsing period only started on receipt of the lapsing notice; as stated in the notice itself. Even that may not be correct, for s 250 of the Legislation Act seems to be a statutory deeming provision that is not provisional in the sense that deemed date of service is subject to proof of actual service to the contrary. This is in express contradistinction to provisions such as s 29 of the Acts Interpretation Act 1901 (Cth) or section 160 of the Evidence Act, which expressly make the deeming subject to contrary evidence.

12. I note that s 250(2) of the Legislation Act provides that the section does not affect the operation of s 160 of the Evidence Act. I am not entirely clear what that means and how the two provisions interact, but the note to s 250(2) of the Legislation Act which makes clear that s 160 of the Evidence Act provides for a rebuttable presumption suggests that section 250(1) of the Legislation Act is not a rebuttable presumption.

13. The question, then, is whether the lapsing notice in this case, arguably making a quite serious error in the notice under s 106 of the Land Titles Act, is a lapsing notice at all. It did, at the very least, amount arguably to a misleading document in an important way. As this was an ex parte application, I do not consider I can decide this matter and the Registrar-General at least should have an opportunity to be heard before I make any findings about the issue.

14. The question then is how I should deal with the matter in the interim. There are some other issues, which are not straightforward and need careful attention. The building contract describes the owner as "Stephen O'Donnell", both in the area of the contract for describing the parties and also in Appendix A to the building contract. Mr O'Donnell appears to have signed the contract. There is no indication in any of these places that Mr O'Donnell is signing other than as an individual on his own behalf.

15. Appendix A sets out, amongst other things, the "site on which the building works will be performed". It describes them as:

Land address Block 6 - 7 Section 25 Division Spence

Title Particulars _____________________________

Name(s) of registered Land Owner(s) S & J O'Donnell & Carol O'Donnell

The words in italics were inserted in the contract in manuscript.

16. It appears clear that Mr O'Donnell is not the sole registered proprietor of the subject land. That is further clarified in these proceedings, where a title search shows that the registered proprietor of Block 6 is Carol Ann O'Donnell alone and the registered proprietor of Block 7 is Stephen Thomas O'Donnell and Jie Gao O'Donnell.

17. The lapsing notice is only in respect of Block 6. It appears that the charge in the building contract, having been given by Stephen O'Donnell, does not extend to any interest in Block 6. Mr O'Donnell, who granted the charge, has no proprietary interest in Block 6 over which he could grant the charge. If this is correct, then Mr O'Donnell has no caveatable interest in Block 6 and there is no basis for extending the caveat in any event in this application or alternatively, to permit the plaintiff to lodge a further caveat if the current caveats have lapsed.

18. In correspondence between the parties, however, the plaintiff's lawyers suggested that the owner was in fact a partnership and that Mr O'Donnell was merely signing the building contract on behalf of the partnership. This would appear to be authorised by s 9 of the Partnership Act 1963 (ACT), which makes each partner an agent of the partnership. There are some limits, but these do not appear relevant here. I do note, however, that s 10 of that Act only binds the other partners if the instrument executed is in the firm name or in any other way showing an intention to bind the firm.

19. There is nothing in the building contract to suggest that Mr O'Donnell was acting for a partnership or was binding a firm. It seems to me the suggestion that the building contract was entered into between the plaintiff and a partnership of which Mr O'Donnell was a partner with the power and intention of binding the firm cannot be made out either on the evidence before me. There may, however, be further evidence that may clarify that position.

20. Of course, that the chargee is a co-owner does not deprive the charge and therefore the caveat based on it, of any effect. The chargee can bind his or her interest in the property with the charge (see Big River Timbers Pty Ltd v Stewart (1999) 9 BPR 16,605 at 16,609). Were the co-owners joint tenants, there may be some difficulties in that position, however, as noted in Wildschut v Borg Warner Acceptance Corporation (Aust) Ltd (1987) 4 BPR 9453.

21. That however is not the position here, for Mr O'Donnell has no apparent interest in Block 6 at all. Any equitable interest is not noted in the title, nor protected by a caveat and the documents lodged with the Registrar of Titles would, once registered, take priority over any such interest (see Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407 at (418-419)).

22. The fact, however, that work has been done on the site under the building contract may provide a basis for suggesting that there is an interest sufficient to justify the caveat. In Rising Developments Pty Ltd v Hoskins (1996) 39 NSWLR 157, Brownie J upheld a caveat based on a charging clause, similar to the one in this case, to protect payments under a building contract where the chargee was not the registered proprietor but the daughter of the registered proprietors. Relying on English authority his Honour held (at 158):

Here, the first and second defendants knowingly permitted the third defendant to erect the house on their land. In that sense they charged their interest in the land in favour of the third defendant and she then charged her interest in the land in favour of the plaintiff.

23. That seems to be a similar situation to the position of the plaintiff here, though the evidence, as to any knowing permission, is only at this stage to be inferred. Again, further evidence as to what works, if any, have been carried out with what permission from the registered proprietor may be needed to show that there is a real interest that Mr O'Donnell has in block 6.

24. The decision as to whether to extend the caveat or discharge it has been held to be akin to an application for an interim injunction. This was held by the Privy Council in Eng Mee Yong v Letchumanan (1980) AC 331. That authority has generally been followed in Australia, though it is said the analogy cannot be pressed too far: see Australian Security Estates Pty Ltd and Bluecrest Holdings Pty Ltd (1991) 9 BPR 17,533 (at 17,534). It has generally been followed in this Territory: see N & J Efkarpidis Holdings Pty Ltd v Tancred Brothers Pty Ltd (ACTSC, Gallop J, 2 July 1986, unreported).

25. This requires ordinarily that the caveat or discharge an onus to show that its claim "has or may have substance" since, as Santow J put it in Vella & Anor v Aliperti & Anor (1995) NSW ConvR 55-750 at 55,772: "...[T]he registered proprietors have a prima facie right to deal freely in their land." His Honour went on to say (at 55,772):

It is sufficient for the caveators to establish that a claim of substance may be raised after the caveator has had the opportunity of discovery, inspection and interrogatories, particularly where the caveators' position will be irretrievable after the registration of the competing dealing. (footnotes omitted)

26. That is to say there must be a serious question to be tried.

27. Similarly, the balance of convenience must favour the extension of the caveat as opposed to other options. As Pullin JA (with whom Miller and Newnes JJA agreed) said in the Court of Appeal Western Australia in Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150 (at 159, [22]):

Balance of convenience issues are usually of little or no significance where the caveator claims an estate in fee simple or a leasehold estate. In those fairly common cases, it is "unusual", as Owen J states, that, once an arguable case is made out by the caveator that there is such a caveatable interest, balance of convenience issues will result in removal. However, if for example the interest claimed by the caveator is a security interest or an interest in competition with another claimant against the registered proprietor, then balance of convenience issues may become decisive.

28. Thus, for example, damages may be an adequate remedy as they were in Lawrence v Appleby & Anor [2001] NSWSC 649; (2002) NSW ConvR 55-993. Similarly, a caveat should not be used for what Young J in Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 (at 11,991) called "a blackmailing device," described by his Honour as where, "... a caveat can legitimately be lodged in respect of a relatively small claim and force the registered proprietor to pay out such a claim even though it is bitterly contested." See also Wildschut v Borg Warner Acceptance Corporation (Aust) Pty Ltd.

29. In Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630, Young J held, in respect of a situation not dissimilar to this one, that the caveator was entitled to a substitute security for the claim and costs, having found that there was clearly an interest in the subject land in a charging clause quite similar to the present one. That case, and the subsequent decision of the Supreme Court of New South Wales to the same effect in Renascent Interiors & Refurbishers Pty Ltd v ASEL Property Group Pty Ltd [2002] NSWSC 345, which followed it, were followed by Master Harper in Matken Constructions Pty Ltd v James & Anor.

30. The final issue is whether an undertaking as to damages can be required. It is clear it can; see BP Oil New Zealand Ltd v Van Beers Motors Ltd [1992] 1 NZLR 211. Each case, however, must be dealt with on its own facts. For example, it may strengthen the case for extending the caveat if an undertaking is proffered. See Buchanan & Anor v Cross & Gleeson Business Finance Pty Ltd (2006) 13 BPR 24,513 where Brereton J said (at [25]):

I am inclined to accept that the absence of such an undertaking may be less significant where it is conceded or clear that the caveator does have a caveatable interest and it is for that reason that I have thought it appropriate to review the balance of convenience in more detail rather than simply to rely on the absence of an undertaking as to damages. Nonetheless, the absence of an undertaking to damages is still relevant where the caveat prevents legitimate dealings by a party with a superior interest and weighs in the balance of convenience. The absence of such an undertaking strengthens the basis for the conclusion which I would in any event have reached.

31. His Honour there directed that the caveat be withdrawn.

32. Mr G Blank, who appeared for the plaintiff, also pointed to the protection for the registered proprietor in s 108 of the Land Titles Act. That, however, applies only to compensation payable where the caveat was lodged "without reasonable cause" and does not necessarily protect the registered proprietor for caveats lodged where there was reasonable cause to lodge them but they ultimately are found not to be maintainable. These issues, however, do not need to be resolved today though they are important for an assessment of what next steps should be taken.

33. In this case, it seems to me that I cannot decide definitively to extend the caveat at this stage for it may have lapsed. Similarly, having regard to the terms of the lapsing notice it would be unfair to leave the plaintiff in a position where it had lost the right to maintain its caveat because of confusion not dispelled by the lapsing notice. It may be that the caveat has lapsed but until the dealings lodged with the Registrar-General are finally registered the plaintiff's position is not prejudiced. The gap between lodgment and registration is a critical one; see Templeton v Leviathan Pty Ltd [1921] HCA 55; (1921) 30 CLR 34 (at 54-55). It seems to me that the status quo should be preserved until the parties have had an opportunity to make detailed submissions about the issues I have raised, in particular: whether the lapsing notice is a notice under s 106 of the Land Titles Act, if it is; when it expires and whether the plaintiff has a caveatable interest in the land at Block 6, Section 25 Spence. The other issues of the terms under which the caveat is extended or withdrawn can also then be determined.

34. It seems to me also that under s 161 of the Land Titles Act, I can restrain the Registrar from registering instruments in order to preserve priorities until the proceedings are resolved or, at least, clearer.

35. Accordingly, I will, on the plaintiff by his counsel giving the usual undertaking as to damages, which he did before me, order that:

(1) To the extent that the Caveats lodged by GR8 Constructions Pty Ltd (ACN 105 581 646) in respect of land, being Block 6 Section 25 Division of Spence contained in Volume 717 Folio 91 and Block 7 Section 25 Division of Spence contained in Volume 651 Folio 49, have not lapsed, they be extended until further order.

(2) The Registrar-General be restrained from registering any dealing in respect of the land being Block 6 Section 25 Division of Spence contained in Volume 717 Folio 91 and Block 7 Section 25 Division of Spence contained in Volume 651 Folio 49, until further order.

(3) The plaintiff give notice of this order to the defendants by delivering a sealed copy of the order to each defendant at the address shown on the Originating Application and to Elrington Boardman Allport and to Stephen O'Donnell at 20 Pemulwuy Street Ngunnawal ACT 2913, no later than 4 pm on Wednesday 25 May 2011.

(4) The plaintiff have leave to issue and serve on or before 12 noon on 24 May 2011 a subpoena directed to the ACT Planning and Land Authority or other agency of the Australian Capital Territory to produce at 11.30 am on 26 May 2011 the "building file" in respect of the land, being Block 6 Section 25 Division of Spence and Block 7 Section 25 Division of Spence, so long as the plaintiff's solicitors advise the Authority or other agency on or before 5 pm on 23 May 2011 of this order.

(5) The plaintiff file any further affidavits on which it proposes to rely on or before 4.15 pm on 27 May 2011.

(6) The further hearing of this matter be adjourned to 1 June 2011 at 9.30 am.

(7) Liberty be reserved to all parties to apply on two days notice.

I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.