MYRA PTY LTD -v- THOMPSON [2011] WASC 230 (2 September 2011)

3 On 12 November 2010 Mr Walsh, a director of the plaintiff, with an associate, Mr Harwood, attended at the café and informed Mr Thompson that he intended to eject Mr Thompson from the café. Mr Thompson said that the plaintiff had no right to terminate the lease or evict him from the premises and he refused to vacate the premises. Mr Thompson telephoned Sydney Chesson who had previously provided financial and property consulting services to the plaintiff and Mr Walsh and asked him to attend the café. Mr Chesson came to the café. There was a discussion concerning payment of the rent and Mr Thompson occupying the premises. An agreement was reached. Mr Chesson handwrote a document (the Consent) which provided that the defendants consented to the lodgement of a caveat over their property subject to the caveat being lifted at certain times or under certain circumstances. The Consent was signed by the defendants and witnessed by Mr Harwood.

4 On 10 December 2010 Mr Walsh again attended the café and retook possession. He says that he did so because despite the agreement made on 12 November 2010 no payments had been received from the defendants.

5 On 12 November 2010 the defendants owned land at Dawesville (the Dawesville land) as well as the Falcon land. On 9 June 2011 the plaintiff lodged a caveat over the Falcon land and at or about the same time lodged a caveat over the Dawesville land. In or around early June 2011 Mr Walsh was informed by the plaintiff's solicitors that the defendants had entered into a contract for the sale of the Dawesville land, that the existing first mortgage would absorb all of the sale proceeds from that property and the defendants requested that the plaintiff withdraw the caveat over the Dawesville land. The plaintiff did so.

6 On or about 14 May 2011 the defendants entered into a contract for the sale of the Falcon land. The sale agreement is unconditional and settlement of the sale was to take place on 8 July 2011. However, the defendants have been unable to settle the sale of the Falcon land because the plaintiff has refused to remove its caveat. The defendants asked the Registrar of Titles to send the plaintiff a notice under s 138B of the Act. The Registrar sent the s 138B notice to the plaintiff on 22 July 2011. As a result the caveat would have lapsed at midnight on 15 August 2011 if the court had not ordered otherwise.

7 On 2 August 2011 the plaintiff filed a chamber summons seeking an order pursuant to s 138C(2) of the Act that the operation of the caveat be extended until further order. At a directions hearing on 11 August I ordered that the plaintiff's application be adjourned to a special appointment on 15 August 2011 and that the operation of the caveat be extended until further order. I made directions for the filing of affidavits and submissions. The application was heard on 15 August 2011. At the conclusion of the hearing I reserved my decision to 2.15 pm on 17 August and extended the operation of the caveat until further order. On the morning of 17 August the plaintiff's solicitors forwarded to the court an affidavit sworn that day by Mr Harwood with the request that it be brought to my attention. When the matter came on for delivery of judgment on the afternoon of 17 August counsel for the plaintiff moved that the plaintiff have leave to reopen and adduce the evidence of Mr Harwood contained in his affidavit sworn that day.

Section 138C

8 Section 138C of the Act provides that the court may, amongst other things, make an order extending the operation of the caveat if the court is satisfied that the caveator's claim has or may have substance. In Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 Newnes JA, with whom Pullin JA agreed, said:

It was common ground (and in my view it is the case) that on the hearing of an application under s 138C of the Act the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists and that the balance of convenience favours the retention of the caveat on the title; that is, that the principles applicable to an application under s 138 of the Act apply to an application under s 138C of the Act: as to which, see Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 48 - 50.

Those principles, however, must now be understood in light of the decision of the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82 so that the existence of a serious question to be tried involves showing 'a sufficient likelihood of success to justify in the circumstances the preservation of the status quo' pending trial. How strong the likelihood of success needs to be depends upon the nature of the rights asserted and the practical consequences likely to flow from the order sought.

In that context, it is important to bear in mind, as Owen J (as his Honour then was) pointed out in Custom Credit (50) that the purpose of a caveat is to prevent the registered proprietor from dealing with the land in a way which will defeat or derogate from some other proprietary interest in the land, and that in many cases removal of a caveat will have the effect of destroying for all practical purposes the benefit of that proprietary interest.

The potential seriousness of the consequences of refusing relief must not, however, distract attention from the obligation that lies on a party seeking to maintain a caveat to show a sufficient likelihood of success to justify in the circumstances the maintenance of the caveat. A party who fails to show any likelihood of success does not overcome that by showing that they would suffer very severe consequences if relief were refused [41] [44].

9 The plaintiff submits that the Consent gives the plaintiff a caveatable interest in the Falcon land. The defendants submit that the plaintiff does not have a caveatable interest in the Falcon land for two reasons. First, the property the subject of the Consent is the Dawesville land and does not include the Falcon land. Secondly, the plaintiff has no continuing interest in the Falcon land arising from the agreement made on 12 November 2010 because that agreement had been terminated by the time the caveat was lodged.

... the lodgement of a caveat over our property subject to the caveat being lifted at the time of settlement of a sale of the Millhouse Restaurant and adjoining block at 45 McLarty Road, Dwellingup, WA or at payment of any outstanding debt of rent and outgoings, or at the expiry of the restaurant lease.

11 'Property' is not defined or identified. It can only refer to land of which the defendants were the registered proprietors. The language of the Consent suggests that 'property' refers to one block or lot of land. That is because the Consent refers to 'a' and 'the' caveat rather than 'caveats' and 'property' rather than 'properties'. However, the words are capable of referring to more than one lot. In construing any written agreement or document the court is entitled to look at evidence of the objective factual background known to the parties at or before the date of the contract or document, although this does not entitle the court to look at evidence of the parties' subjective intentions nor to ascribe to the words of the document a meaning that they cannot legitimately bear. In this case it is necessary to have regard to the surrounding circumstances to determine what 'property' the Consent refers to. That requires a consideration of the evidence.

12 In considering whether there is a prima facie case the court does not ordinarily evaluate the applicant's evidence or undertake a preliminary trial: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 622. However, in Eng Mee Yong v Letchumanan [1980] AC 331, 341 the Privy Council held that a trial judge had not erred in finding that there was no serious question to be tried on the American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396 test given the vague, inconsistent and implausible assertions contained in an affidavit made by a caveator.

13 Mr Thompson swore an affidavit on 9 August 2011. In that affidavit Mr Thompson gives the following evidence concerning the discussions on 12 November 2010:

1. Mr Thompson stated to Mr Walsh that the defendants were considering selling the Dawesville land and mentioned the possibility that they might be able to come to an arrangement whereby the Dawesville land could be transferred to the plaintiff in a direct swap for the café in full and final settlement of all matters between the parties.
2. Mr Thompson said words to the effect that in any event the Dawesville land had recently been valued at around $1.1 million which would mean the defendants had around $500,000 to $600,000 equity in the Dawesville land which equity would more than cover any debt that might later be proved to be owed to the plaintiff.
3. Another option discussed was that if the defendants were able to trade through Christmas and January they would be in a position where they may be able to sell the business at a reasonable profit and resolve the matters between the parties that way.
4. An agreement was reached that they would look into doing a direct swap of the Dawesville land for the café property and that in any event the defendants would allow the plaintiff to lodge a caveat over the Dawesville land in return for the plaintiff agreeing not to reenter possession of the café property and either:

(a) allowing the defendants to trade through Christmas and January then look to sell the business; or

(b) effecting a direct swap of the Dawesville land for the café; or

(c) the parties reaching an agreement regarding any outstanding debts owed between the parties and any said debts being paid out; or

(d) otherwise, allowing the defendants to see out the remainder of the term of the lease.

1. It was never agreed that the plaintiff was to have a caveatable interest over the Falcon land.
2. At the time Mr Thompson was not aware that either the plaintiff or Mr Walsh was aware of the existence of the Falcon property as it had never been discussed with them either prior to or during the meeting and was not the subject of discussions with regard to the caveat.
3. The agreement reached with the plaintiffs was that they could lodge a caveat over the Dawesville land only.

14 Mr Chesson gave evidence by an affidavit sworn 15 August 2011 about the discussions at the meeting on 12 November 2010 which includes the following:

1. Mr Thompson said to Mr Walsh that he had finally been able to arrive at a position where there was a small trading profit such that he could pay off his outstanding creditors other than the plaintiff.
2. Mr Thompson said that he had bookings through to Christmas and expected a very good trade in the January holidays that would enable him to clear his creditors other than the plaintiff and to make some considerable headway into any debt that was owed to the plaintiff.
3. Mr Thompson said that he would sell the business now that it was profitable and would pay the plaintiff any debt that was owed to it from the proceeds of the sale of the business.
4. Mr Walsh and Mr Thompson agreed that Mr Thompson could stay in the premises until after Christmas in order to trade the business if Mr Thompson signed a caveat over the Dawesville land.
5. There was no discussion of a caveat over any other property.
6. Mr Walsh dictated the terms of the agreement to him and he wrote them down as dictated on the Consent.

15 The plaintiff read the affidavit of Mr Walsh sworn 1 August 2011. The evidence of Mr Walsh in relation to the agreement reached on 12 November 2010 is confined to the following statements:

1. The defendants refused to vacate the premises and promised to pay.
2. I agreed on behalf of [the plaintiff] that I would allow the [defendants] to stay in the café on the basis that:

(a) they paid all outstanding monies;

(b) they gave us security for that payment by way of consenting to a caveat over their properties.

1. I was aware at that stage that the [defendants] owned the two properties we caveated as we had previously negotiated for them to purchase the café and pay by transferring the [Falcon land].
2. The [defendants] agreed to that and so Chesson drew up a quick document to give effect to that agreement.

16 Mr Thompson's affidavit was served on the plaintiff before the directions hearing on 11 August 2011. At that directions hearing I gave directions permitting the plaintiff to file and serve any further affidavits. The plaintiff did not file or serve any further affidavits and did not seek to adduce any evidence at the hearing on 15 August except for the affidavit of Mr Walsh. At the hearing of the plaintiff's application the plaintiff did not object to the defendants reading the affidavit of Mr Chesson and did not seek leave to deliver or rely upon any affidavit in reply to the affidavits of Mr Thompson or Mr Chesson. Much of the evidence given by Mr Thompson and Mr Chesson is uncontradicted by Mr Walsh. In those circumstances, in the absence of Mr Harwood's affidavit being received in evidence, I would accept the evidence of Mr Thompson and Mr Chesson insofar as it is not contradicted by the affidavit evidence of Mr Walsh.

17 Mr Walsh's evidence is sparse and conclusionary in nature. Mr Walsh asserts what was agreed rather than attempting to set out what was said. Nevertheless, Mr Walsh says that the defendants agreed to give the plaintiff security by way of consenting to a caveat over 'their properties'. Furthermore, Mr Walsh says that he and the defendants had previously negotiated for the defendant to purchase the café and pay by transferring the Falcon land. If that evidence is accepted at trial then it is arguable that the words 'our property' in the Consent would have been understood by reasonable people in the position of the defendants and Mr Walsh to refer to the Falcon land as well as the Dawesville land. I find that there is a serious question to be tried that the 'property' referred to in the Consent includes the Falcon property. Therefore, if the agreement made on 12 November 2010 was not terminated before the plaintiff lodged the caveat, there is a serious question to be tried, or a prima facie case, that the plaintiff has a caveatable interest in the Falcon land.

18 The affidavit of Mr Harwood, if it is taken into consideration, strengthens the plaintiff's case. Mr Harwood swears that on 12 November 2010 the plaintiff and the defendants agreed, amongst other things, that the defendants granted a caveat over both their properties, that is the Falcon land and the Dawesville land, as a security for the outstanding sums owing to the plaintiff.

19 The effect of Mr Thompson's evidence is that the agreement made on 12 November 2010 was that the defendants would allow the plaintiff to lodge a caveat over the relevant property in return for the plaintiff agreeing not to reenter and take possession of the café until whichever of the events referred to in [13] first occurred. Mr Chesson's evidence is that Mr Walsh and Mr Thompson agreed that the defendants could stay in the premises until after Christmas in order to trade the business if Mr Thompson signed a caveat over the Dawesville land. There is some inconsistency between the evidence of Mr Thompson and Mr Chesson insofar as Mr Thompson refers to trading through Christmas and January and Mr Chesson refers to staying in the premises until after Christmas. However, the discrepancy is not great. The period from Christmas to January is a holiday period.

20 If the affidavit of Mr Harwood is disregarded, the plaintiff has not contradicted that evidence. If I did not have regard to the evidence of Mr Harwood I would have found that the agreement made on 12 November 2010 included a term to the effect that in consideration of the defendants granting the plaintiff a charge over their property to secure any outstanding debt owing to the plaintiff and entitling the plaintiff to lodge a caveat to secure that payment the plaintiff would permit the defendants, or Mr Thompson, to remain in occupation of the café premises until after Christmas or January. For the purposes of this application it is not necessary to determine the meaning of 'after Christmas' or 'Christmas and January'. The period must extend at least until after 25 December 2010.

21 The plaintiff reentered the premises on 10 December 2010. In his affidavit sworn 9 August 2011 Mr Thompson says that the plaintiff did so 'in breach of the agreement we had reached'. That is the assertion of a legal conclusion. However, it is a conclusion which follows from the evidence of Mr Thompson and Mr Chesson of the terms of the agreement made on 12 November 2010. In the absence of any evidence to contradict that evidence, I would find that by reentering the premises on 10 December 2010 the plaintiff repudiated the agreement made on 12 November 2010. The defendants accepted, or purported to accept, the repudiation of the agreement by making no attempt to reenter the premises or to regain possession of the premises and by subsequently entering into contracts to sell the Dawesville land and the Falcon land free of any encumbrance in the form of a charge in favour of the plaintiff. The effect of the defendants' evidence is that the agreement was terminated before the plaintiff lodged the caveat over the Falcon land on 9 June 2011 and hence at that time the plaintiff had no charge over the land and had no entitlement to lodge the caveat.

22 The affidavit of Mr Harwood sworn 17 August 2011 contradicts the evidence of Mr Thompson and Mr Chesson concerning the agreement made between the plaintiff and the defendants on 12 November 2010. Unfortunately, in his affidavit Mr Harwood gives a summary of the agreement that was reached rather than a statement of the evidence that he can give. Mr Harwood says that Mr Walsh and the Thompsons agreed that:

(a) given the Thompsons had indicated the business was now becoming profitable they would pay a lump off the outstanding rent;

(b) commence making rent payments;

(c) try and remedy the debt that had accrued on the lease;

(d) put a formal proposal to Myra for repayment of the outstanding monies in full and to clarify their intention regarding the purchase of the Millhouse Café;

(e) within two weeks provide this plan to remedy the outstanding monies and make payment moving forward;

(f) grant a caveat over both their properties in Mandurah (the Balingup Loop and Coco Drive properties) as a security for the outstanding sums;

(g) the caveat granted by the Thompsons for the amount outstanding on the Millhouse Café lease would be removed when the outstanding monies were paid from the eventual sale of one or both of those properties or be sorted out in the purchase of the Café.

Although the Thompsons wanted Terry Walsh to agree not to evict them until after the Christmas period was over Terry was reluctant to agree to this much time and was only prepared to agree to a short period, around a couple weeks, to finalize the proposal to payout the debt and commence payment on the property. In fact Terry said that he would refuse to agree to anything without the promise of the caveat over the two properties owned by the Thompsons and wouldn't leave without it.

... The Thompsons were to provide a written plan within approximately a fortnight of how this would be achieved. In fact, Terry was even prepared to consider a proposal from the Thompsons to reduce the rent. There was no promise by Terry that the Thompsons would not be evicted from the Café, indeed Terry made it clear saying words to the effect that unless the issues were sorted out within approximately a fortnight he would be back to evict the Thompsons [19] [20].

23 Some support for Mr Harwood's account of the agreement made on 12 November 2010 is provided by an email of 24 November 2010 from Mr Walsh to Mr Thompson. That email included the following statement:

We therefore advise that unless a satisfactory deal is presented by the 30th Nov 2010 (we were advised that we would have this by last weekend) we will be reentering the property and taking possession.

24 If the evidence of Mr Harwood is taken into account then there is evidence that the plaintiff did not agree on 12 November 2010 not to reenter the premises until after Christmas, that the defendants agreed to pay a lump off the outstanding rent, to commence making rent payments and to put a formal proposal to the plaintiff for repayment of the outstanding monies in full within two weeks. If Mr Harwood's evidence is taken into account then there is a serious question to be tried, or prima facie case, that the agreement that the defendants give the plaintiff the right to lodge a caveat remained on foot and that the plaintiff has a caveatable interest in the Falcon land. Accordingly, it is necessary to determine whether the plaintiff should be given leave to reopen its case and to rely upon the evidence of Mr Harwood.

25 The hearing of the plaintiff's application for a continuation of the operation of the caveat concluded on 15 August. On 17 August the plaintiff delivered to the court the affidavit of Mr Harwood. The affidavit was delivered without leave having been given by the court. Once an application has been heard, there is no right for any party to deliver any further affidavit or other material without leave because it is at the hearing itself that the parties are expected to make a complete statement of their case and position: Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246, 258 (Mason J). In Bull v Lee (No 2) [2009] NSWCA 362, cited with approval by Heydon, Crennan and Bell JJ in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, the New South Wales Court of Appeal stated:

The effect of making submissions after judgment has been either delivered or reserved, that go beyond the scope of any leave that has been granted is not confined to having those submissions ignored. Counsel should understand that it is a breach of their professional responsibilities to the court to seek to make submissions that go outside the scope of the leave that has been granted. For counsel to act in that way seeks to undermine the important principle that, save in the most exceptional circumstances, all arguments relating to an appeal should be put at the one time. It has the capacity to cause waste of the court's time, and both waste of time and expense for counsel's opponent in deciding what to do about the submissions that have been made without leave [9].

Those observations apply even more so to an attempt to put evidence before the court without leave. When these matters were drawn to the attention of the plaintiff's solicitors, the plaintiff applied for leave to reopen its case and to read the affidavit of Mr Harwood.

26 The court has power to reopen a case after a hearing has concluded but before judgment is delivered for the purpose of admitting new or additional evidence. The decision to do so involves an exercise of discretion. Leave will more readily be given where the application is made after judgment has been reserved and before judgment has been given. In Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256 Brennan, Dawson, Toohey and Gaudron JJ said:

It is again necessary to distinguish between the considerations which may bear on a decision to reopen and the processes involved in reconsideration once a case has been reopened. If an application is made to reopen on the basis that new or additional evidence is available, it will be relevant, at that stage, to inquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment have been delivered. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side (266 267).

27 The court should also have regard to the statements by the members of the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 with regard to the need for the court to manage litigation efficiently and with a view to dispatch and without unnecessary use of resources. With regard to an application to make a late amendment to a pleading French CJ said:

'It might be said that the adjournment effected by the primary judge's decision to entertain the amendment application and to allow written submissions to be filed and evidence to be put on, and the subsequent delay in his decision, rendered academic any concern about further waste of court resources or inefficiencies flowing from the amendment ultimately being allowed. It might be said that in those circumstances, to refuse the amendment would be punitive. It is true that a punitive response to the substance of a late amendment application is not appropriate. But neither is a party to be rewarded by weighing in its favour the disruptive consequences of its own application. In any event the granting of the amendment in this case, at the time it was granted, meant that there would still be further delay while interlocutory processes flowing from the new claims were put in place' [35].

28 These considerations were also addressed in the joint reasons of Gummow, Hayne, Crennan, Kiefel and Bell JJ at [73] [83]. The passages emphasise that whenever an application is made for some procedural relief which is made late, or well out of time, or which is likely to cause further delay to the determination of proceedings, the matter should be dealt with on its merits but bearing in mind the disruptive consequences which may follow if an indulgence being sought is granted.

29 The first question of relevance to the exercise of the discretion to reopen to admit new or further evidence is why the evidence was not called at the hearing and in particular whether a deliberate decision was made not to call the evidence at the hearing. It would be unfair to permit an unsuccessful party that had made a deliberate decision as a tactical matter that has failed, to reopen its case. On the other hand, in InspectorGeneral in Bankruptcy v Bradshaw [2006] FCA 22 Kenny J said at [24]:

The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to reopen, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill [1937] SASR 285 at 287; Smith v New South Wales Bar Association [No 2] [1992] HCA 36; (1992) 108 ALR 55 at 612); (2) inadvertent error (Brown v Petranker (1991) 22 NSWLR 717 at 728 (application to recall a witness); Murray v Figge (1974) 4 ALR 612 at 614 (application to tender answers to interrogatories): Henning v Lynch [1974] 2 NSWLR 254 at 259 (application to reopen); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 ('UTA') at 478; and (4) mistaken apprehension of the law (UTA at 478). In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to reopen; see UTA at 478; also The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard's Pty Ltd (No 2) [2004] FCA 1310 ('Silver Fox') at [22] and [25].

30 The reasons for the plaintiff not tendering the evidence of Mr Harwood at the hearing on 15 August 2011 are explained by Mr Crawford, a solicitor assisting in the conduct of the matter on behalf of the plaintiff, in his affidavit sworn 18 August 2011. In his affidavit Mr Crawford swears:

Having conferred with Mr Campbell regarding the hearing on Monday, 15 August 2011 it was not until the actual argument before the Honourable Justice Le Miere that a new basis I had not previously considered was raised, namely that the charge document amounted to the written portion of a contractual agreement between the Plaintiff and the First Defendants which contained an oral or implied agreement not to reenter the premises. This had not previously occurred to me as the charge document appeared on its face to be determinable only upon the payment of the outstanding monies, the sale of the Millhouse Café or the expiry of the lease term.

In the circumstances I respectfully request that the Court grant leave for the Plaintiff to reopen its case and to rely upon the affidavit of Robert Phillip Harwood in support thereof. The failure to file the affidavit earlier was a result of lack of foresight on the Plaintiff's solicitor's part and the absence of the principal file manager during the crucial period [22] [23].

31 The defendants oppose leave to reopen. Counsel for the defendants submitted that the proposition that the Consent was part of an agreement between the plaintiff and the defendants which contained a term that the plaintiff not reenter the premises was clearly set out in the affidavit of Mr Thompson which was served on the plaintiff on 10 August and in the defendants' written submissions that were served on the plaintiff on 12 August. Furthermore, on 12 August, that is, after service of the affidavit of Mr Thompson and before the hearing on 15 August, the plaintiff's solicitors informed the defendants' solicitors that the plaintiff did not intend to file any further affidavit evidence.

32 I find that the failure of the plaintiff to lead the evidence of Mr Harwood on 15 August was not a tactical decision. It was a result of the plaintiff's legal representatives failing to apprehend the case being put against the plaintiff. The plaintiff's legal representatives only apprehended the case being put against the plaintiff as a result of submissions made by the defendants' counsel and questions put to the plaintiff's counsel by the court in the course of the hearing.

33 In deciding whether to grant leave to reopen the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to reopen. If the plaintiff is given an opportunity to adduce the evidence now the prejudice to the defendants caused by the plaintiff's failure to adduce the evidence at the original hearing can be met by an order for costs. The defendants do not point to any other prejudice. If the plaintiff is denied the opportunity, its claim, in relation to which I have found there is a serious question to be tried, will remain without a remedy. The interests of justice are served by granting leave to reopen and leave to adduce the evidence of Mr Harwood.

34 Once the evidence of Mr Harwood is taken into account the plaintiff has established a serious question to be tried that it is entitled to a charge over the Falcon land and has a caveatable interest in that land.

35 Section 138C of the Act confers a discretion on the court. In Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Owen J, with whom Malcolm CJ and Walsh J agreed, said:

In my opinion, the balance of convenience is a factor to be considered in an application under s 138. However, it seems to me that interlocutory removal of a caveat where an arguable case as to the existence of the caveatable interest has been demonstrated, will be unusual. It is important to bear in mind the nature and purpose of a caveat under the Torrens System. By its very nature, a caveatable interest must be a proprietary interest in land. The purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidents attaching to that proprietary interest until the respective rights of the parties have been honoured (if there is agreement) or determined (if there is disagreement). In many cases, removal of the caveat will have the effect of destroying for all practical purposes, the benefit of the proprietary interest. For example, a creditor, having a specific security interest in land, will rank as an unsecured creditor once the property, the subject of the specific security, no longer exists. This will often be the result of removal of a caveat which permits the registered proprietor to sell the property free from any practical obligation to account to the secured creditor for the proceeds of sale (50).

36 In Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95; (2009) 40 WAR 150 Pullin JA, with whom Miller and Newnes JJA agreed, said:

It is true that experience shows that parties are most commonly in dispute about the existence of a caveatable interest. 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, that 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 [22].

...

In addition, although there is no ground of appeal to this effect, it appears that his Honour also erred by acting on wrong principle. His Honour treated what was said by Owen J in the Custom Credit case as the test to be applied under s 138 in deciding whether to make an order removing the caveat. His Honour seemed to envisage a two-step process in which once the caveator made out an arguable case for a caveatable interest, it must be shown that the 'circumstances are so unusual' that the caveat should be removed. That is not required by the statute and the comment of Owen J, previously referred to, that it would be 'unusual' to discharge a caveat, is not a proposition of law but simply a general observation as a matter of fact [29].

37 The following matters are relevant to the exercise of the court's discretion:

1. The plaintiff does not claim an estate in fee simple or a leasehold estate. The interest claimed by the plaintiff is a security interest to secure a debt allegedly owing under the assigned lease.
2. The plaintiff reentered the premises and terminated the lease on 10 December 2010.
3. On 21 January 2011 the plaintiff commenced proceedings in the District Court to recover the amounts allegedly owing by Mr Thompson under the assigned lease. The plaintiff made no claim that it had a security interest in the Falcon land or any claim to enforce a charge over that property.
4. The defendants entered into a contract to sell the Falcon land on 14 May 2011. At that time the plaintiff had not lodged a caveat over the land.
5. The interests of the purchasers of the Falcon land will be adversely affected if the caveat remains.

38 The caveat was not on the Falcon land at the time the defendants entered into the contract to sell it. For more than six months the plaintiff had done nothing to enforce its alleged charge or assert is entitlement to lodge a caveat over the Falcon land. Furthermore, the plaintiff's claim could not be regarded as strong on the present material. The evidence of Mr Walsh is sparse in the extreme, fails to condescend to any details of the discussions giving rise to the agreement made on 12 November 2010 and wholly fails to contradict the evidence of the defendants that they agreed to the plaintiff being entitled to lodge a caveat in consideration for the plaintiff not reentering the premises until after Christmas 2010. Mr Harwood's affidavit was sworn after the hearing on 15 August 2011 and is directed to contradicting the evidence of Mr Thompson and Mr Chesson concerning the terms of the agreement made on 12 November 2010. However, Mr Harwood's affidavit is in form argumentative and conclusionary. To a substantial degree Mr Harwood states in a summary way the agreement that was made rather than what was said that gave rise to the agreement.

39 If the operation of the caveat is extended that will prevent the sale of the Falcon land under the contract of 14 May 2011 proceeding to settlement. That is likely to cause loss and damage to the defendants and adversely affect the purchasers. The interests of the plaintiff are best served by providing a fund to satisfy any judgment they obtained rather than by preventing the sale of the Falcon land. The court has power to grant an injunction restraining the defendants from dealing with the net proceeds of the sale of the Falcon land pending the determination of the plaintiff's claim to a charge over the Falcon land. The source of the court's power is s 138C(2)(a)(iii) of the Act or the court's power to grant an injunction in all cases in which it appears to the court to be just and convenient to do so.

40 On 19 August 2011 I ordered that the first defendants be restrained from disposing or dealing with the net proceeds of the sale of the Falcon land pending the determination of the plaintiff's claim that it has a charge over the land. The purpose of the order is to allow the sale of the Falcon land to proceed with the net proceeds to be held in trust until the proprietary rights of the plaintiff, if any, are established. There are well recognised legal principles for determining the rights of a property owner whose property is converted into a common fund: see Humphris (as Administrator of Hazelton Air Charter Pty Ltd) v Mentha [2002] FCA 529; Re Timbercorp Securities Ltd (in liq) (No 3) [2009] VSC 510. The fund is to be divided by reference to the proportionate share of the fund measured by the extent and value of the rights given up by the plaintiff in exchange for an interest in the fund.

CITATION : MYRA PTY LTD -v- THOMPSON [2011] WASC 230 (S)

MATTER : Section 138C of the Transfer of Land Act 1893 (WA)

Costs - Application to extend caveat - Application to re-open - Party sought indulgence of court to adduce new evidence - New evidence altered outcome - Turns on own facts

Supreme Court Act 1935 (WA), s 37

Transfer of Land Act 1893 (WA), s 138C

Plaintiff and first defendants' costs of the application to extend caveat stand as costs of substantive proceedings

Plaintiff pay first defendants' costs of the plaintiff's application to re-open

1 On 2 August 2011 the plaintiff applied for an order under s 138C(2) of the Transfer of Land Act 1893 (WA) that a caveat registered by the plaintiff over land at Falcon be extended until further order. On 11 August I ordered that the operation of the caveat continue until further order. On 15 August the hearing of the plaintiff's application for an order extending the operation of the caveat concluded. I ordered that the operation of the caveat continue until further order. On 17 August the plaintiff applied for leave to reopen and to read the affidavit of Robert Harwood sworn 17 August 2011. I ordered that the orders made 11 and 15 August 2011 extending the operation of the caveat be discharged and the first defendants be restrained from disposing or dealing with the net proceeds of the sale of the Falcon land. On 19 August 2011 I heard the plaintiff's application for leave to reopen and to read the affidavit of Robert Harwood. I ordered that the plaintiff have leave to reopen and to read the affidavit of Mr Harwood. I further ordered that the injunction made on 17 August 2011 be further extended. On 2 September 2011 I delivered my reasons for those orders: Myra Pty Ltd v Thompson [2011] WASC 230. I reserved the costs of the plaintiff's applications. These are my reasons for orders in relation to the costs of those applications.

2 Supreme Court Act 1935 (WA) s 37 provides that, subject to the Rules, the costs of and incidental to all proceedings in the court shall be in the discretion of the court or a judge. Rules of the Supreme Court 1971 (WA) O 66 r 1(1) provides that subject to the express provisions of any statute and of the Rules, the costs of and incidental to all proceedings shall be in the discretion of the court but, without limiting the general discretion conferred on the court by the Act, and subject to O 66, the court will generally order that the successful party to any action or matter recover his costs. As the general rule that a successful party should have its costs is directed to a consideration of the litigation as a whole, or at least in respect of final orders, the general rule does not necessarily apply to every interlocutory step in the principal proceedings. As the court's primary aim is to reflect the justice of the situation in any costs order, the court is often unable at an interlocutory step in proceedings to determine who in justice should bear the costs of that step.

3 The only relief sought in these proceedings is in relation to the extension of the operation of a caveat. The substantive proceedings, which would ultimately determine the rights between the parties, have now been brought as separate proceedings. Questions may arise concerning whether the proceedings for extension of the operation of a caveat are in their nature final or interlocutory and, whether or not that be strictly so, whether the costs ought to be dealt with on the basis that such proceedings ought to be regarded as of an interlocutory sort. The principles as to costs in interlocutory applications are different from the principles on final hearings. In interlocutory applications for an injunction or extension of a caveat a successful plaintiff will often obtain an order that the costs of the application be its costs in the substantive proceedings. This will mean that the plaintiff will recover the costs of the caveat proceedings if it is successful in the substantive proceedings. If it is not, it will not recover the costs of the caveat proceedings but the defendant will not be entitled to recover under an order for costs in its favour the costs of the caveat proceedings.

4 The plaintiff did not obtain an order extending the operation of the caveat. However, the plaintiff was, in a practical sense, the successful party. The plaintiff obtained an order that the first defendants be restrained from disposing or dealing with the net proceeds of the sale of the Falcon land pending the determination of the plaintiff's claim that it has a charge over the land. The purpose of the order is to allow the sale of the Falcon land to proceed with the net proceeds to be held in trust until the proprietary rights of the plaintiff, if any, are established. The plaintiff proposed to the first defendants a similar outcome before proceeding with their application. In those circumstances I would have been inclined to order that the plaintiff's costs be its costs in the substantive proceedings but for the matters to which I will now refer.

5 The first defendants responded to an application by the plaintiff that was supported only by an affidavit of Mr Walsh sworn 1 August 2011. It was not until after the hearing on 15 August 2011 had concluded that the plaintiff served on the defendant, and subsequently sought to read into evidence, the affidavit of Mr Harwood sworn 17 August 2011. In my reasons for deciding the plaintiff's application for an extension of the operation of the caveat I said that if I did not have regard to the evidence of Mr Harwood I would have made findings which would have led to the plaintiff's application being dismissed.

6 In the circumstances the appropriate order for costs in relation to the plaintiff's application for an extension of the operation of the caveat is that the costs of both the plaintiff and the first defendants should stand as costs in the substantive proceedings, that is Supreme Court action CIV 2651 of 2011.

7 As a general but not inflexible rule, a party who seeks a dispensation, indulgence or favour of the court is ordered to pay the other party's costs of the application, whether or not it succeeds. Wheeler JA explained in Stanley v Layne Christensen Company [2006] WASCA 56:

The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party's conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. That is implicitly recognised in Briggs at 14, where Owen and Parker JJ appear to accept that an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the "normal rule" relating to indulgences. However, in that case their Honours considered that it could not be said that the other party was unreasonable to require that the proposed amendment be justified to the satisfaction of a judicial officer [52].

8 The plaintiff's application to reopen and read the affidavit of Mr Harwood was an application which sought an indulgence or favour of the court. The first defendants did not act unreasonably in requiring the reopening to be justified to the satisfaction of the court. That is particularly so where on 12 August, that is after service of the affidavit of Mr Thompson and before the hearing on 15 August, the plaintiff's solicitors informed the defendant's solicitors that the plaintiff did not intend to file any further affidavit evidence. The appropriate order is that the plaintiff pay the first defendant's costs of the application to reopen.