Transfer of Land Act 1893 s 140

Caveatees entitled to compensation for damage assessed at $5041.87

Anfrank Nominees Pty Ltd v Connell (1991) 6 WAR 271

Ceda Nominees Pty Ltd v Registrar of Titles & Anor, unreported; SCt of WA; Library No 4474; 16 April 1982

Collins v Westralian Sands Ltd (1993) 9 WAR 56

Commonwealth Bank v Baranyay [1993] VicRp 43; [1993] 1 VR 589

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

Haines v Bendall [1991] HCA 15; (1992) 172 CLR 60

Hooke v Holland [1984] WAR 16

Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534

Young v Rydalmere Credits Pty Ltd [1964-5] NSWR 1001

1 HEENAN J: On 18 September 1997 Walsh J ordered the removal of a caveat which the defendant had lodged on the title to land registered in the names of the plaintiffs. Now they seek compensation from the defendant for lodging the caveat without reasonable cause, pursuant to s 140 of the Transfer of Land Act 1893.

2 The parties had been next door neighbours in Willetton since 1991 or thereabouts, the plaintiffs residing at 15 Suelex Street and the defendant at 13 Suelex Street. During the latter part of 1995 the defendant complained that the plaintiffs' construction of a concrete path and apron on their land had forced the common boundary fence out of alignment and had caused stormwater to flow over the boundary, resulting in erosion and damage to the lawns, gardens and foundations on his land. In December 1996 the local council gave the plaintiffs notice requiring them to carry out certain works to resolve the complaint. In turn they appealed to the Minister for Local Government. The operation of the notice was stayed pending determination of the appeal.

3 On 3 April 1997 the plaintiffs put their property on the market for sale. The defendant and his wife already had consulted a solicitor in Fremantle. According to them, he had told them that they had a genuine claim and that they "had to put a caveat on the plaintiffs' property in order to recover damages". After learning that the plaintiffs had put their property on the market the defendant consulted the solicitor again. According to the defendant, the solicitor told him that he "should put a caveat on straightaway" and to go ahead with the case against the plaintiffs. The defendant went to a solicitor in Nedlands to get a second opinion. On 10 June 1997 the latter wrote to the plaintiffs' estate agents. Having referred to the defendant's grievance as to the encroachment on his property the letter stated that, pending the outcome of the plaintiffs' appeal to the council, the defendant intended "to take all actions available to him in equity and at law" for the resulting damage and that as those matters "could have an adverse impact on any purchaser of the property" his instructions were to put the agents on notice. It is significant that the letter made no reference to the lodging of a caveat against the title to the plaintiffs' property. Indeed, the answers given by the defendant under cross-examination in these proceedings have satisfied me that the solicitor in Nedlands advised him against taking that step.

4 The evidence shows that by the end of 1995 a great deal of animosity was developing between the parties. In addition to the representations which he had made to the council the defendant made many complaints to the police about the plaintiffs and took action to obtain restraining orders against them. On Friday 25 July 1997, while he was attending the Court of Petty Sessions at Fremantle in relation to a charge which had been brought against him, the defendant noticed that Mrs McKellar was at the Court. He inferred that she was there to give evidence against him as a police witness.

5 Early on the morning of Monday 28 July 1997, having gained the impression that the plaintiffs had begun to move their belongings out of their house, the defendant telephoned the solicitor whom he had first consulted. Then he went to the latter's residence and drove him to the office of the Department of Land Administration at Midland. The solicitor filled in a printed caveat form and tried to lodge it. The clerk refused to accept the document, saying that it "did not correctly set out the basis for the caveat". The solicitor and the defendant then went to "the legal section" where the former borrowed a book from a member of the Department's staff. He copied something from the book and presented the document again. This time it was accepted. It described the defendant as "equitable claimant for damages" claiming "an interest in equity by virtue of the claim on the facts stated in the supporting statutory declaration by the caveator (to be lodged)", and it concluded by forbidding the registration of any instrument affecting the plaintiffs' estate or interest in the land at 15 Suelex Street "unless such instrument be subject to the caveator's claim". A statutory declaration made by the defendant in support of the caveat was filed, it seems, on 10 August 1997. It stated that the estate or interest claimed by the caveat arose by virtue of the liability of the plaintiffs for "damages in tort".

6 Meanwhile, on 29 July 1997 the plaintiffs had entered into two contracts, one for the sale of their Suelex Street property and the other for the purchase of a property at 50 Chancery Crescent, Willetton. On 21 August 1997 their solicitors wrote to the defendant advising him that settlement in respect of the former property, which was to have been effected on 20 August 1997, had not been possible because of the lodging of a caveat. They said that they had not yet been able to obtain a copy of the caveat but that their clients believed that he had lodged it. Having expressed their view that he had no proprietary interest in the property and accordingly no basis for lodging a caveat, they pointed out that the Minister had decided on 18 August 1997 to uphold the plaintiffs' appeal and had directed the council to revoke the notice which had been issued at the defendant's instigation in December 1996. The letter went on to say,

"In the event that you have wrongfully lodged a caveat against our client's property, you will be liable for any loss and damage suffered by our clients as a result of your actions. If the sale of our client's property does not proceed as a result of the caveat, those damages could be considerable.

In the event that you are the party who has lodged the caveat, we hereby demand that you withdraw that caveat forthwith, and advise us that you intend to do so by 10 am on 22 August 1997. In the event that you fail to do so, we will commence action in the Supreme Court to have the caveat removed, without any further notice to you."

On 25 August 1997 the plaintiffs commenced the action which led to the order for removal of the caveat. Settlement in relation to each of the two properties took place on 3 October 1997.

7 It is clear that the defendant did not have a caveatable interest in the land but that fact alone does not necessarily mean that the caveat was lodged without reasonable cause. The plaintiffs must show the absence of an honest belief based upon reasonable grounds that there was such an interest: see Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 at 108 per Wootten J. On the evidence presently before the Court it is clear that, if he had the skill and knowledge which one expects of a member of the legal profession, the solicitor in question should have known that there was no caveatable interest to be protected. He had no reasonable grounds for believing otherwise. As a solicitor acting in his professional capacity is the agent of his client, I should have thought that, even if the defendant personally had been blameless, he would be liable to the plaintiffs on the basis that his solicitor had lodged the caveat without reasonable cause. However, at the hearing of this matter counsel for the plaintiffs informed me that, relying upon the authority of Bolton v Excell, unreported; FCt SCt of WA; Library No 930175; 7 April 1993, he accepted that the issue before me was whether the defendant acted honestly and reasonably in relying upon the advice which he was given by the solicitor who lodged the caveat. I am satisfied that counsel erred in taking that approach. In Bolton v Excell, unlike this case, the evidence did not clearly show that the solicitor did not have reasonable grounds for belief that his clients had a caveatable interest. It was necessary, therefore, for the court to consider whether the evidence showed the absence of reasonable grounds for such a belief on the part of the caveators themselves. As it happened, the court resolved the issue in favour of the caveators. That case is not authority for the proposition that whenever a caveat is lodged by a solicitor on behalf of a client an applicant for compensation under s 140 of the Act bears the onus of proving that the client personally did not have an honest belief based upon reasonable grounds as to the existence of a caveatable interest. If that were so the claimant might well be without a remedy no matter how negligent the solicitor and how great the damage done by the lodging of the caveat. In my opinion, in a case such as the present one - in which the solicitor has acted with the authority of the client and has full knowledge of the relevant circumstances - a decision as to whether or not the caveat was lodged without reasonable cause generally should depend solely upon a finding as to the reasonableness or otherwise of the solicitor's action in lodging the caveat. In the present case the approach taken by counsel produces the same result.

8 Here, there is no evidence that the defendant or his wife had any particular experience with land dealings or commercial matters, but in the course of his affidavit sworn on 24 November 1997 the defendant deposed as follows:

"5. I had previously heard of a caveat in the course of a marital dispute in which a family friend was involved. I attended with that friend when she went to the Women's Legal Aid Office to obtain advice as to what action she could take regarding marital property. I was present when she was advised by the Women's Legal Aid Office that she should put a caveat on the marital home, which was solely in her husband's name. I understood from what was said during that discussion that if a person had a genuine claim against another person they could put a caveat on that other person's property and that a caveat operated as an injunction preventing sale of the property until the claim was settled."

The defendant and his wife both were present when the matter of lodging a caveat first was raised. Although their evidence as to the date is confusing it seems probable that it was in January 1997 that the solicitor in Fremantle first told them that they had a genuine claim for damages against the plaintiffs and that they had a "99.9% chance" of winning their case. After looking at photographs of the damage caused by the water he told them that they "could expect to recover up to $100,000" and that he "had been handling many such cases in Melbourne and that he had been successful in most cases". The defendant's wife deposed that she was surprised to hear that they would be entitled to such damages and that she did not wish to make any claim against the plaintiffs if the latter had to pay that much money. She told the defendant of her view and, because she was not willing to go ahead with the matter, no caveat was lodged at that time.

9 Bearing in mind the concerns expressed to him by his wife following their first meeting with the solicitor, his decision not to lodge the caveat at that time and the different advice which he received from the solicitor in Nedlands, I am satisfied that by mid-1997 the defendant either had grave doubt or should have had grave doubt as to the reliability of the advice which he had first received. He was given further reason for such doubt when he saw that the solicitor experienced difficulty in having the caveat accepted. Bearing in mind that there had been a lapse of six months or more since he was first advised to lodge a caveat and a lapse of about four months since he became aware that the plaintiffs had put their property on the market, I am inclined to think that his decision to lodge the caveat on 28 July 1997 was prompted rather by his own animosity towards the plaintiffs than by any belief which he might have retained in the soundness of the advice which the solicitor in Fremantle had given him. I doubt whether he acted on that advice but, if he did, I find that it was unreasonable of him to do so. In all the circumstances I doubt whether the defendant honestly believed that he had a caveatable interest in the land and I am positively satisfied that he did not have reasonable grounds for such a belief. The plaintiffs therefore are entitled to compensation for the damage which they have sustained by reason of the lodging of the caveat.

10 As we have seen, settlement in respect of the sale of the plaintiffs' property was to have taken place on 20 August 1997. The caveat was removed on 1 October and settlement took place two days later - that is, 44 days after the original date, including that date but excluding the date upon which the settlement was effected. Counsel for the defendant referred to s 138 of the Act, which provides a means for taking steps to have the caveat removed as, for example, by enabling a proprietor to apply for registration of a transfer or other dealing so as to cause the caveat to lapse upon the expiry of 14 days notice of the application unless the caveator before the expiry of that period has applied to a Judge for a direction to the Registrar to delay registering the dealing. As was the case in Hooke v Holland [1984] WAR 16, no explanation was given as to why those steps were not taken in this case. Had they been taken, settlement might have been effected as early as 9 September, provided that the defendant had not taken action to delay registration of the dealing. But the plain fact is that the defendant chose not to withdraw the caveat after receiving the letter of 21 August 1997 from the plaintiffs' solicitors, and the caveat was not removed until the order made by Walsh J had been perfected and served on the Registrar. In those circumstances, the defendant is not entitled to complain about the means which the plaintiffs adopted to secure their rights. Nor does the evidence show that any unreasonable delay on their part contributed to the lapse of time before settlement took place.

11 The plaintiffs claim to have sustained damage in two respects: first, they were obliged to pay penalty interest by reason of the delay in effecting the sale of their property; secondly, they incurred solicitors' costs in having the caveat removed. I shall deal with those matters now.

12 The question of penalty interest arises because the Joint Form of General Conditions for the Sale of Land, published by the Law Society and the Real Estate Institute, was incorporated into each of the contracts in question_._ The effect of those provisions is that, if for any reason not attributable to the other party to each transaction, the settlement was not effected within three business days after the appointed settlement date, the plaintiffs were required to pay to the other party on settlement interest at the daily rate of 15 per cent per annum on the balance of the purchase price. The interest was to be calculated from and including the date appointed for settlement but excluding the date upon which settlement actually took place.

13 The purchaser of the plaintiffs' property had gone into possession on 3 September on the understanding that he would pay rent at the rate of $180 per week until settlement took place. On the basis of the provisions of cl 5(2) of the Conditions quoted above the plaintiffs were debited with interest on the balance of the purchase price at the prescribed rate of 15 per cent calculated from 3 September (presumably because the purchaser either was not ready to settle or was not committed to pay finance charges before then) until 3 October. In respect of that period of 30 days (calculated, I find, in accordance with the provisions in the Conditions) the plaintiffs suffered a net loss of $991.67, representing interest of $1,763.10 less $771.43 credited to them for rent.

14 The contract for the plaintiffs' purchase of the Chancery Crescent property also appointed 20 August 1997 as the settlement date, but the purchase was expressed to be "subject to the successful settlement of purchaser's property at 15 Suelex Street, Willetton". As it happened, settlement in respect of the Chancery Crescent property also took place on 3 October. On the basis of the penalty provisions in the Conditions the plaintiffs were debited with penalty interest of $4,050.20 in respect of the 44 day period from 20 August to 3 October. On behalf of the defendant it was argued that, by reason of the contingent condition just quoted, the contract did not become enforceable until settlement of the other transaction on 3 October 1999 and, therefore, that the plaintiffs were not obliged to pay any penalty interest to the vendor in respect of the delay. I am not persuaded by that argument. According to my interpretation of the contingent condition, the contract was voidable at the option of either party when "successful settlement" of the other transaction did not take place on 20 August. As it was not avoided, the contract remained on foot (see Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 441-2 per Latham CJ, Williams and Fullagar JJ and the discussion in Cheshire and Fifoot's Law of Contract 7th Aust ed at 729). In the absence of any express agreement to the contrary the plaintiffs remained under an obligation to proceed with the purchase upon settlement of the other transaction, and the other provisions of the contract continued to apply. I conclude that the plaintiffs were not relieved of the obligation imposed upon them to pay penalty interest for delay in settlement.

15 The evidence does not show that the defendant actually knew that the plaintiffs had entered into a contract to purchase another property. However, he should have known it was likely that they had done so. Also, he should have known that delay in the sale of their property would cause financial loss of the type which did result from application of the penalty interest provisions. That being so, the plaintiffs are entitled to recover the two amounts of $991.67 and $4,050.20 by way of compensation.

16 When granting the plaintiffs' application for removal of the caveat Walsh J ordered that the defendant pay their costs to be taxed. The costs were taxed at $1,117.85 and the defendant paid that amount. Now the plaintiffs seek to recover a further $3,171.05 which they paid to their solicitors in respect of those proceedings. As counsel for the defendant submitted, if the plaintiffs considered that they were entitled to recover indemnity costs or some form of special costs, they should have made that application when Walsh J ordered removal of the caveat. It is too late now to go behind the costs order which his Honour made then. In either event, normally there should be no difference between the items and amounts allowed under a party and party bill of costs and those under a solicitor and client bill (see Unioil v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 per Ipp J at 191). In my opinion the plaintiffs are not entitled to recover any further costs in respect of the proceedings for removal of the caveat.

17 I conclude that the plaintiffs should receive compensation of $5,041.87 from the defendant.