Layrill Pty Ltd v Furlap Constructions Pty Ltd [2002] VSC 51

Supreme Court of Victoria|2002-02-27|Before: Mandie J

CAVEATS - successive caveats - whether caveatable interest - whether renewal "in respect of the same interest". Transfer of Land Act 1958, ss. 91(4), 103(1).

The language of s.103(1) of the Transfer of Land Act is not entirely easy to interpret in the circumstances of this application, but there is clear authority that such an order can be obtained on such an application: see Delma Investments Pty Ltd v. Shillito[1], a decision of Gowans, J. It was referred to, I think it is fair to say, with approval by Brooking, J. in Swanston Mortgage Pty Ltd v. Trepan Investments Pty Ltd[2]; although I note that at p.683 His Honour noticed that it had not been submitted that the section did not authorise the giving of such directions. This case is somewhat similar, and Mr Hayes, who appears for the first defendant, did not contend that the Court did not have power under s.103(1) to make the orders sought if the case was otherwise made out.

The application arises in the following circumstances. Certain individuals decided to enter into a joint venture and purchased some land for the purpose of developing it under that joint venture. It is unnecessary to detail the precise facts leading up to the joint venture agreement or to canvass all the details of the purchase of the land. It is sufficient to say that the plaintiff became the purchaser of the land and that relations between the plaintiff and the first defendant (Layrill and Furlap respectively) were governed by a written joint venture agreement which was entered into, apparently, on 9 April 1999.

There are a number of relevant provisions, but the primary ones in the joint venture agreement are Clause 2.1, which provides that the parties to the agreement agree to associate themselves as joint venturers for the purpose of completing acquisition of the land and undertaking the project; Clause 2.5, which provides that the joint venturers agree that the land will be purchased in Layrill's name; and Clause 7.4, which provides for what is to happen following settlement of the purchase of the land, namely, that Layrill will be entitled to register a mortgage over the land as security for its interests in the joint venture and the project, and Furlap will be entitled to register a mortgage and/or caveat over the land as security for its interests in the joint venture and the project, which mortgage and/or caveat will rank subsequent to any mortgage registered by Layrill. So there seems to be a complementary set of provisions here. Both parties are entitled to register a mortgage over the land, the only difference being that Furlap's is to be subsequent to any mortgage registered by Layrill. That, it seems, is the method the parties adopted for protecting their interests under the joint venture, namely, to register a mortgage over the land which was the subject of the joint venture. The provision which deals with Furlap adds the words "and/or caveat", which, at least arguably, was intended to permit Furlap to protect its right to register a mortgage by a caveat.

Unfortunately, or perhaps for other reasons, a caveat was lodged not to protect that interest, so it would seem, or at least not expressly so, because a caveat was lodged dated 26 May 1999, claiming an equitable interest as a joint venturer in the land pursuant to Clause 7.5 of the joint venture agreement dated 9 April 1999. It seems to be a reference to the wrong clause of the agreement and it does not refer to a right to a mortgage. It says "an equitable interest as a joint venturer". That was subsequently amended by letter to the Registrar of 7 September 1999 to claim for an equitable interest as to 50% of the estate in fee simple under a joint venture agreement dated 9 April 1999.

The caveat in that form was the subject of an application for removal by Layrill, which came on before Balmford, J. on 27 September last year. Her Honour decided that the caveat did not disclose a caveatable interest because the joint venture agreement did not give rise to an entitlement to an equitable interest as to 50% of the estate in fee simple in favour of Furlap, and, with respect, her Honour was clearly correct. However, her Honour added that the then legal representative for Furlap "in my view rightly, did not submit that that clause created an equitable right as mortgagee sufficient to support a caveat. In any case, the interest claimed is an equitable interest in an estate in fee simple and not an interest as a mortgagee". So although apparently it was not submitted on behalf of Furlap that any interest was created by Clause 7.4 by way of an equitable right as mortgagee, her Honour said that such a submission would have been incorrect. That latter statement is clearly obiter and was not necessary for the decision, and obviously that aspect was not argued before her Honour; she did not have the benefit of any argument on it, and it was not sought to amend the caveat to claim an equitable right as mortgagee. The claim is one for an equitable estate in fee simple.

The caveat was removed, and now Furlap has lodged with the Registrar two further caveats, one, X786375Q dated 2 October 2001, claiming an equitable estate or interest as equitable mortgagee pursuant to an agreement dated 9 April 1999 between the registered proprietor and the caveator to grant a mortgage to the caveator to secure its interests, and another one of the same date, X786374T, claiming an equitable estate or interest in fee simple, pursuant to a constructive or implied trust created between 11 December 1999 and 25 March 1999(sic), when the registered proprietor and caveator agreed to purchase the land referred to above jointly in equal shares, although only the registered proprietor would be registered on title.

The evidence before the court does not, in my opinion, support that latter claim. There is no evidence of an agreement between Layrill and Furlap to purchase the land jointly in equal shares although only the registered proprietor would be registered on title. Even if such evidence existed, the estate or interest claimed is clearly incorrect. It claims an equitable estate or interest in fee simple in the whole of the land, and not as to an equal share thereof.

A further difficulty arises in respect of that caveat, because it seems to me that, in its present form, and certainly in an amended form which would more properly reflect the claim contained in it, it would run foul of s.91(4) of the Transfer of Land Act, which provides that a caveat that has lapsed or been removed shall not be renewed by or on behalf of the same person in respect of the same interest. It seems to me that that caveat has been lodged by the same person, namely, Furlap, in respect of the same interest, namely, an equitable estate or interest in fee simple, and, as it must be understood, as to one half, which was the same interest claimed in the caveat which has already been removed. It seems to me that that directly falls within the reasoning expressed by Tadgell, J. in Sinn v. National Westminster Finance Ltd[3]. That was a case where his Honour found that the second caveat was not claimed in the same interest as in the first caveat, but the reasoning is applicable here and I think that here this caveat is one which, within the language of s.91(4) of the Transfer of Land Act, is in respect of the same interest.

I am therefore prepared to order that the Registrar be directed to refuse to make a recording of that caveat, X786374T, in the Office of Titles and direct the Registrar to return that caveat to the solicitors for the first defendant.

When it comes to the other caveat, the position is, I think, more difficult. I do not think that that caveat makes a claim in respect of the same interest. It makes a claim for an equitable estate or interest as equitable mortgagee, which is an entirely different interest to that which is claimed in the caveat which has been removed, namely, an equitable estate in fee simple as to 50%. I do not think that that is the same interest in the sense intended by Tadgell, J. I was also referred to a decision of Gurwitz v. Gurwitz[4], a decision of Gobbo, J. In that case his Honour considered an argument as to whether a claim in a second caveat was in the same or a different interest from that covered by the first. His Honour found that the description in both caveats was of an equitable interest in fee simple in the whole of the land, and therefore it seemed to be in the same interest, and he went on to note that the same grounds seemed to be relied on, or at least it arose out of the same transaction, but that seemed to be additional to the primary finding that it was the same interest claimed. Reference was also made to a decision of Young, J. in Taylor v. Commonwealth Development Bank of Australia[5]. That decision relates to a section of the New South Wales Real Property Act, which is in different terms. It apparently provided that a caveat which has been lodged to replace a caveat which has lapsed has no effect if it is lodged on the same grounds, and his Honour found that it was essentially the one transaction. I do not know that I can be particularly assisted by that rather brief decision which relates to a differently worded section.

I do not think, in the present case, that the fact that the caveator has relied on the joint venture agreement in both cases necessarily means that he has made a claim in the same interest. It seems to me that a very different interest is claimed in caveat X786375Q, namely, the interest of an equitable mortgagee. I think, therefore, that that section does not debar Furlap from lodging this caveat and having it entered, because it is not a renewal in respect of the same interest. It is in fact a different caveat claiming a different interest. It is at least arguable, and I say this without prejudice to any subsequent application which might be made to remove the caveat, that Clause 7.4 of the joint venture agreement does give rise to a right or interest in Furlap in the land as an equitable mortgagee. I have heard some argument on that point, and it may be that there will be further argument if there is subsequently an application to remove the caveat, but I am not satisfied that the contention is so hopeless that I could say that there are no grounds at all for making a claim of that kind. It is not unarguable, in my view, and unless it is unarguable, then the Court should not decide on an application such as this that there is no caveatable interest to be protected.

It was also submitted by Layrill that there was an issue estoppel arising from Balmford, J.'s judgment, but it seems to me that her Honour's expression of opinion on a matter which was not even the subject of submission was not necessary for the order which was made in that case and, although the authorities on issue estoppel were not canvassed in any detail before me, I do not think that the doctrine applies where a court makes a finding about a submission which was not made, which was not necessary to the order which was in fact made and which dealt with a caveat in quite different terms to the one which is now before the Court. I myself raised in the course of argument with counsel the possibility of an "Anshun" estoppel preventing the first defendant from doing what it now seeks to do, but, again, that matter was not really canvassed by counsel and it may be that it is an inappropriate doctrine to apply in these circumstances. We are concerned with the lodging of caveats and not with the bringing of a second set of proceedings. The proceedings here have all been brought by Layrill, and it seems to me that, if s.91(4) does not prevent the lodging of this caveat, and I do not think that it does, there cannot be any question of estoppel in the "Anshun" sense.

It seems to me, therefore, that the Court ought not to make an absolute direction that the Registrar of Titles refuse to enter the caveat No. X786375Q, for the reasons which I have given. However, mention has been made to the Court that the caveat is at present stopped, apparently by reason of non-payment of stamp duty, although there may be other reasons for the Registrar to have stopped the caveat. The Registrar has said that he would abide by the order of the Court and has not sought to appear or make submissions, but it may be that further evidence about why the caveat has been stopped could affect the way the Court's discretion is exercised.

It has also been mentioned by counsel for the plaintiff that the effect of having the caveat sitting there in the Registrar's office and not being registered by reason of non-payment of stamp duty, or for whatever other reason, has the effect of prejudicing a sale of the property which has been effected. Whether these facts, which are not the subject of evidence, and whether there are any other facts which are not the subject of evidence which might exist which might affect the way the Court exercises its discretion, and whether the Court has power or ought to make an order that this caveat also be rejected by the Registrar if something is not done within a specific period of time, are matters which I think require some further consideration.

I therefore will not simply dismiss the summons as regards that caveat at this stage. I will adjourn the matter until a quarter past two tomorrow to enable either party to put in any evidence which they wish to put in to support any contentions they want to make about whether the Court should nevertheless make some order giving the first defendant time to do whatever needs to be done so that this caveat is either registered or not registered. It may be that the parties can get together and reach some resolution about this in the meantime, which would be a desirable course. I will not make any orders at this stage. I have made it clear that I will ultimately direct that one caveat be rejected. But, in the light of what I have said, I will now adjourn the matter until a quarter past two tomorrow.

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