Scott Darren Pascoe and Mark Robinson in their capacity as Trustees for the sale of the Land known as 124 Tennyson Road Gladesville v Michael James and Ors

The plaintiffs/trustees attempt to sell the Land - 2006 to 2012 6The background to the present application may be shortly stated. The first plaintiff, Scott Darren Pascoe was appointed the trustee of the bankrupt estate of Helen Smirneos on 2 August 2006. At the time Ms Smirneos was made bankrupt she and her husband Mr Andrew Smirneos were the registered proprietors of the Land. On 7 June 2010 the Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia) appointed the second plaintiff, Mr Robinson, together with Mr Pascoe as trustees for sale of the Land ("the Trustees"), and ordered that both the bankrupt and Mr Andrew Smirneos vacate the Land to facilitate its sale. 7The Federal Magistrates Court took steps to remove the bankrupt and her husband from the Land and to effect its sale. A writ for possession, issued on 27 July 2010, was stayed until 23 August 2010, on an application the bankrupt made on 19 August 2010. Upon another occupant's failure to comply with the orders on 23 August 2010 the Trustees became entitled to execute a writ for possession. In response to a notice to vacate dated 9 November 2010, Mr Andrew Smirneos made a further application to stay the writ for possession and a stay was granted on 2 December 2010 until 18 January 2011. Again the bankrupt and other occupants did not comply with the orders to vacate on or before 18 January 2011. 8A series of further applications in relation to the Land were made to the Federal Magistrates Court in 2011 and 2012. The Sheriff executed a writ of possession on 24 February 2011 and changed the locks to the house on the Land. But after a number of failed attempts to sell the Land, it came to the Trustee's attention in October and early November 2011 that the house on the Land appeared once again to be occupied. This inhibited the ability of the Trustees to market the Land for sale as giving vacant possession on sale. So on 17 May 2011 the Trustees applied to the Federal Magistrates Court for a writ of restitution, which writ was executed on 28 June 2012. The Land was finally sold at public auction on 18 August 2012. 9The August 2012 auction sale resulted in the Trustees' issuing a contract for the sale of the Land, which scheduled completion on 1 October 2012. But completion did not take place on that date. The Trustees found out that the house on the Land had yet again been entered and painted and certain renovation works had been carried out on it. On 29 October 2012 the Trustees issued a notice to complete to the purchaser, who failed to comply on 15 November 2012. As a result the contract was terminated. 10Marketing for the sale of the Land resumed in January 2013. From the time the property was remarketed, conduct occurred that led to the present claim, conduct that was probably connected with the earlier disruptive conduct of occupying the property before the auction.

The current contract for sale and the Shane McGaw caveat - March to June 2013 11As a result of their marketing efforts the Trustees signed a contract for the sale of the Land on 15 March 2013 ("the March 2013 Contract"), which scheduled settlement for 26 April 2013. 12But before settlement on 4 April 2013, the Trustees were informed by the auction company they had retained that furniture had been discovered in the garage of the residence on the Land. The Trustees' real estate agent asked the bankrupt and Mr Andrew Smirneos to remove the furniture. Most of it was removed by 18 April. But settlement did not take place as scheduled on 26 April. It was cancelled because on 27 March 2013 one Shane McGaw lodged a caveat number AH627910 on the title to the Land ("McGaw Caveat"). The solicitors for the Trustees, Messrs Kemp Strang wrote promptly on 10 April 2013 to Mr McGaw seeking removal of the McGaw Caveat, alleging that it had been invalidly lodged. On its face there appears to have been substance to Kemp Strang's contentions because the McGaw caveat simply claimed an "equitable interest" by virtue of an invoice that Mr McGaw gave to Mr Andrew Smirneos on 14 September 2012. But well before the September 2012 date of this invoice the plaintiffs had become registered proprietors of the Land, in place of the bankrupt and Mr Smirneos. Mr McGaw's claim of an "equitable interest" in the Land in these circumstances would be very difficult to justify. 13Mr McGaw did not agree to withdraw the McGaw Caveat so Kemp Strang served a "Notice to Caveator of Proposed Lapsing of Caveat" under Real Property Act s 74J. As a result of the service of that Notice the McGaw Caveat lapsed on 13 June 2013. 14The Trustees had rescheduled the settlement of the March 2013 Contract for 3pm on 14 June 2013. After the lapsing of the McGaw Caveat settlement would have taken place at that time but for other caveats, discussed below, which were lodged on the title by other parties.

Caveats by Macquarie Land Group - April to July 2013 15On 29 April 2013 Macquarie Land lodged a caveat on the title to the Land ("the First Macquarie Land Caveat"). Like the McGaw Caveat, the First Macquarie Land Caveat relied upon a claim of an equitable interest said to be based upon an invoice dated 27 September 2012 apparently issued to Peter and Andrew Smirneos for some $122,600 of renovation works. A Mr Michael James swore a statutory declaration as to the validity of the claim made in the caveat on behalf of Macquarie Land. Mr James is recorded as the lodging party of this caveat. Macquarie Land and Mr James could not be persuaded by correspondence on 7 May to withdraw the First Macquarie Land Caveat, so on 16 May 2013 Kemp Strang served a Real Property Act s 74J lapsing notice on Macquarie Land. And on 13 June 2013 the First Macquarie Land Caveat lapsed. 16But settlement did not take place on 14 June because Macquarie Land filed another caveat that day before settlement ("the Second Macquarie Land Caveat"). A final search on the day of settlement, 14 June, revealed this further caveat. The Second Macquarie Land Caveat claimed an identical equitable interest arising out of the same document as the First Macquarie Land Caveat. Both these caveats are based on the alleged execution of renovation works to the property after dealings in 2012 between the caveators and certain persons (Mr Peter and Mr Andrew Smirneos), who were not then registered proprietors. 17Mr Michael James was also the lodging party for this caveat. But the statutory declaration supporting the claim in the Second Macquarie Land Caveat was made by a Mr Kon Pavlou. Kemp Strang sought removal of the Second Macquarie Land Caveat by letter on 19 June 2013. The Second Macquarie Land Caveat ultimately lapsed on 3 July 2013 due to the service of a lapsing notice, but not before it had interfered with the orderly settlement of the March 2013 contract on 14 June.

Trenddair caveat - June to August 2013 18Before the Second Macquarie Land Caveat lapsed on 4 July Trenddair lodged a caveat on the title to the Land on 27 June 2013 ("the Trenddair Caveat"). Mr Michael James is also connected with the Trenddair Caveat. He was the lodging party and the declarant of the validity of the claim described in the caveat. Like the earlier caveats the Trenddair Caveat claimed an equitable interest based on an invoice dated 30 September 2012 and apparently recording a transaction between Trenddair and Mr Andrew and Mr Peter Smirneos for building and improvement works to the value of $142,000. 19The Trustees did not authorise Mr Andrew or Mr Peter Smirneos to enter into any contract to perform work on the Land prior to the sale. I accept the Trustees' evidence that they are not aware of any basis for the interests claimed in the Land in the Trenddair Caveat, in the McGaw Caveat, or in the First or Second of Macquarie Land Caveats. 20The Trustees commenced these proceedings to remove the Trenddair Caveat which result was effected as a result of Kunc J's orders on 6 August 2013. His Honour also ordered that each of Mr James, Trenddair, Macquarie Land and Mr Kon Pavlou also be restrained from lodging further caveats on the title to the Land without the leave of the Court. 21ASIC searches reveal that Mr Pavlou is a director of both Trenddair and Macquarie Land. 22There is much evidence to connect Mr James and Mr Pavlou with the First and Second Macquarie Land Caveats and the Trenddair Caveat: Mr James lodged each caveat; and the address for service on each caveat was the same Clarence St, Sydney address; Trenddair and Macquarie Land have the same postal address; Mr James made the statutory declaration in support of the First Macquarie Land Caveat and the Trenddair Caveat and Mr Pavlou completed the statutory declaration in respect of the Second Macquarie Land Caveat; and in a telephone conversation with staff of the Trustees on 10 July 2013 Mr James explained that he was an employee of Trenddair and that Mr Kon Pavlou had authorised him to lodge the Trenddair caveat. 23Moreover, there is evidence to suggest that the postal address given on the caveats in Harrington St, Sydney were locked premises having nothing to do with Trenddair or Macquarie Land, indicating that the caveator had no wish to be contacted by the registered proprietors and was not conducting genuine business from those premises.

The Claim for a pecuniary loss 24The Trustees calculate their claim for pecuniary on the basis that had settlement taken place on 26 April 2013 they would have received net sale proceeds in the sum of $566,005.32 on that date. But settlement ultimately only took place on 12 August 2013, so the Trustees say they were deprived of the benefit of any interest which would have accrued on the settlement funds from 26 April 2013 until the actual settlement day of 12 August 2013. 25The Trustees rely upon Real Property Act s 74P(1) which makes liable any person who "without reasonable cause...lodges a caveat" or "being a caveator refuses or fails to withdraw such caveat after being requested to do so". Real Property Act s 74P(1) makes such a person liable to pay "to any person who sustains pecuniary loss that is attributable to [such] an act, refusal or failure...compensation with respect to that loss". The essential task is to ascertain what loss was occasioned to the Trustees by the lodging of the caveats. 26Real Property Act s 74P requires that the caveats in question be filed "without reasonable cause". Kunc J has already determined this matter against the defendants: first judgment at [3] and [4]. But even if that were not so, the failure of the various caveators, as alleged suppliers of services, to deal with the registered proprietors and the lack of any explanation as to how an "equitable interest" arises out of the invoices relied upon, are all bases to conclude that these caveators had no caveatable interest, had no actual belief that there was a caveatable interest in the Land, and had no reasonable grounds for holding such a belief: Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057 at [61], Natuna Pty Ltd v Cook [2007] NSWSC 121 at [195]. 27Ordinarily, in a claim for compensation brought under Real Property Act s 74P claiming loss occasioned by the presence of a caveat it is usual in order to prove loss to demonstrate: that some attempt was made to prove relevant loss; that some attempt was made to negotiate a withdrawal of a caveat; or that steps were taken to cause the caveat to lapse: Mahendran v Chase Enterprises Pty Ltd [2013] NSWCA 280 at [55] per Barrett JA. The Trustees have clearly established these matters by their evidence in this case, in respect of each of the caveats. 28The Trustees' case raises two questions for consideration: first, whether the Trustees' loss should be calculated from the date they claim, 26 April, or from the later date of 14 June 2013; and secondly, whether each of the four defendants is equally responsible for the loss claimed. 29The Trustees' loss should be calculated from 14 June, not 26 April. The filing of the McGaw Caveat, which had an association with Alpha Consulting Services Pty Ltd, is what caused the cancellation of the settlement scheduled for 26 April. But there is no evidence that any of the current defendants lodged or were behind the lodging of the McGaw Caveat. I see no basis for concluding that any of the existing defendants lodged the McGaw caveat or refused to withdraw it, such that the Trustees' pecuniary loss associated with delay to the scheduled 26 April 2012 settlement should be attributable to them. 30But there is little doubt that the First and Second Macquarie Land Caveats and the Trenddair Caveat all contributed to the delay in settlement from 14 June to 12 August. I accept that settlement could not take place on 14 June because these caveats were in place. The Court is prepared to allow a loss of interest on the delayed receipt of settlement funds for the period 14 June to 12 August. In addition to that interest I accept that the Trustees have incurred legal costs of $37,661 arising out of the delayed settlement. 31After the hearing I requested the Trustees to recalculate the amount of the pecuniary loss claimed taking into account the shorter period for which the Court is prepared to allow. I accept the Trustees' evidence that had settlement taken place on 14 June 2013 they would have received net sale proceeds in the sum of $540,962.20 on that date. And they further say that the interest they would have received on that amount between 14 June and 12 August 2013, when the settlement ultimately occurred, is $7,948.93. 32All the defendants are jointly and severally liable for the whole of the pecuniary loss suffered during the period 14 June to 12 August 2013. It is not possible to separate out the conduct of the respective defendants. Mr James and Mr Pavlou seem to be active in both Macquarie Land and Trenddair. The actions of these two companies under the agency of these two individuals seems to have been coordinated. The delays caused by the caveats overlapped significantly. In my view they are all equally liable for the loss suffered during the whole period 14 June to 12 August 2013. I am satisfied of the correctness of the Trustees' calculation of these pecuniary losses, which are set out in the orders below.

Conclusions and orders 33In the result therefore the plaintiffs have made out their claim for pecuniary loss under Real Property Act, s 74P as claimed. The defendants conduct warrants an order for costs on the indemnity basis. The Court therefore makes the following orders: (1)Order that the defendants jointly and severally pay pecuniary loss to the plaintiffs in the sum of $45,609.93. (2)The Court notes that the sum of $45,609.93 comprises: (a)Loss of interest in the sum of: $7,948.93; (b)Costs incurred by the plaintiffs in the sum of: $37,661.00 Total: 45,609.93 (3)Order that defendants pay the plaintiffs' costs of the application for pecuniary loss on the indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 November 2013