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[2003] WASC 144
Supreme Court of WA
2003-08-01
Wheeler J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : WILKIN -v- SCARDINA [2003] WASC 144
Caveat - Application under s 138D of Transfer of Land Act 1893 (WA) for leave to lodge further caveats - Principles
Jandric v Jandric & Anor [1999] WASC 22
Midland Brick Company Pty Ltd v Welsh [2002] WASC 248
1 WHEELER J: This is an application pursuant to s 138D of the Transfer of Land Act for an order giving leave for the plaintiff to lodge a further caveat over the interest of the defendant in certain land in Geraldton. The history of this matter is as follows.
2 In 1991 the defendant and his parents became registered proprietors as joint tenants of the land in question, which appears to be a residential property. In 1998 the plaintiff agreed with the defendant and the defendant's wife that the plaintiff would sell to the defendant a business for the sum of $30,000 plus stock at valuation. The agreement for the sale of that business provided by way of special condition that payment of the purchase price, which was to be payable over a period of five years in instalments, was to be secured to the vendor by an absolute caveat over the interest of the defendant in the land.
3 Although there was some dispute in the affidavits of the parties as to whether the defendant understood at the time that the agreement contained such a condition, it is unnecessary to resolve this issue. The defendant's affidavits do not appear to go so far as to contain any material which would support a plea of non est factum, or of unconscionability, and it was conceded by the defendant's counsel that those matters were really irrelevant to the issues before me.
4 In July 1998 the defendant took over the business and commenced trading and in August 1998 the plaintiff lodged his caveat. It appears that there was some concern on the part of the defendant's elderly parents that the presence of a caveat would make it difficult for them to sell the land and to travel overseas for an extended period. It appears that it was for this reason that in December 1998 the defendant caused a notice to be issued by the Registrar pursuant to s 138B of the Transfer of Land Act, which of course would have the effect that the caveat would lapse after 21 days unless an order extending it was obtained from the court.
5 On receipt of the notice, the plaintiff telephoned the defendant. The precise conversation is unknown. Neither the plaintiff nor the defendant in their respective affidavits purported to give anything like a verbatim account of the conversation. Each was cross-examined, and in evidence each effectively gave evidence about what he had intended to convey and the impression which he had received from the conversation, but without any evidence as to the conversation's content which would assist me in ascertaining what really took place. Broadly, it appears that the defendant advised the plaintiff of the reason for wishing to remove the caveat. The defendant told the plaintiff that when the sale of the land was completed he would apply his share of the proceeds to the balance of the purchase price owing to the plaintiff. The plaintiff told the defendant that he wanted something in writing to that effect, which the defendant said he would provide. The plaintiff was not legally advised at the time. It appears that the plaintiff was under the impression that an offer had been received for the land, but it is by no means clear how that impression was received; in particular, he did not go so far as to suggest that the defendant had said anything to him which would positively have led to that conclusion.
6 On 28 December 1998 the defendant wrote to the plaintiff a note which stated that he agreed "to hand over my share of the sale of the property [which was then described]. This being the agreed security settlement between [the plaintiff] and [the defendant]". It appears this letter was not received by the plaintiff's solicitors until after the lapse of the caveat which took place on 31 December 1998.
7 As to his reasons for permitting the lapse of the caveat, the plaintiff deposed as follows:
"By reason of the defendant's assurances to me and further by reason of my being unable to afford the expense of an application to the Supreme Court of Western Australia I elected not to instruct my solicitors to take any steps to avoid the lapse of the caveat."
In cross-examination, he elaborated somewhat on the first part of that reason, by explaining that he thought that permitting a sale of the property to go ahead and receiving a share of the proceeds represented the best practical way for him to obtain payment of the sum secured.
8 However, it appears that, for whatever reason, the property in question did not sell. The defendant got into difficulties in the business and it closed its doors in March 1999. Immediately after the closure, the plaintiff enforced a chattel mortgage which he had taken pursuant to the agreement for the sale of the business, and collected the defendant's assets.
9 A few days later, on about 10 March 1999 the defendant and his wife were declared bankrupt. On 12 March 1999 ITSA (the Insolvency and Trustee Service Australia) wrote to the plaintiff advising of the defendant's bankruptcy, and advising further: "You are currently disclosed as a secured creditor in respect of a caveat which encumbers their residential property ... ". That observation was incorrect, the caveat having lapsed some months previously. The letter referred, in somewhat confusing terms, to an equitable charge over the property, which ITSA understood to arise from the agreement for sale of the business.
10 Although it is not necessary to decide the matter, it seems the correct view of the status of the defendant's interest in the land at that time was as follows. Bankruptcy is an event which severs a joint tenancy, so that the defendant became a tenant in common with his parents as to a one third undivided share in the property. There seems to be no reason why that interest should not have vested in the trustee in bankruptcy, along with the defendant's other property, although of course subject to the equitable charge created by the sale agreement. If the equitable charge constituted a "charge" for the purposes of the definition of "secured creditor" in s 5 of the Bankruptcy Act, the plaintiff would still be able to enforce his remedy under that agreement.
11 In any event, the plaintiff in 1999 instituted District Court proceedings to recover the unpaid balance of the purchase price of the business, and obtained default judgment in September 2000 in that action for almost $31,000. At some subsequent time, a writ of fi fa was lodged by the plaintiff. In August 2001 the Bailiff conducted an auction under the writ of fi fa, but received no bids in respect of the defendant's interest. The writ has been renewed a number of times since then. Because he was concerned at the expense involved in renewing the writ of fi fa, the plaintiff instructed his solicitors to seek the defendant's consent to lodge a further caveat against his interest in the land, which consent was refused. Application was then made to this Court.
12 The plaintiff asserted in effect that he clearly had a caveatable interest, and that the balance of convenience favoured the granting of leave for the lodgement of a further caveat, in order to avoid the expense of the repeated renewals of the writ of fi fa. The defendant's arguments revolved around the proposition that the property had vested in the trustee in bankruptcy, and that by reason of a number of provisions of the Bankruptcy Act, the plaintiff was unable to take further steps to enforce his security.
13 In my view, to the extent that the argument in this matter raised questions of the interest which might exist in the trustee in bankruptcy, it is entirely inappropriate to resolve them without the trustee being joined as a party, or at least having some notice of this action. However, in my view it is not necessary to determine any of these interesting issues. Rather, I would refuse leave on discretionary grounds which appear to me to flow from s 138D of the Transfer of Land Act.
"The driving force behind the proposed caveat removal provisions is that the existing provisions of the Transfer of Land Act imposed an unfair burden upon the registered proprietor. This is especially the case where the caveator has made a claim which does not appear to establish a proper legal ground for the interest being claimed. Under the Act, the burden is then on the registered proprietor to start legal proceedings to have the caveat removed and to bear the expense of those proceedings. Further, it is considered that a caveator who asserts an interest in the land should bear the onus of proving it and these amendments will ensure that the onus of proof is on the caveator." (Second Reading Speech of the Minister for Lands, Hansard 29th August 1996, p 4866.)
The new procedure was that a simple notice would suffice to cause the caveat to lapse, unless the caveator took steps to discharge the onus which rested upon the caveator to demonstrate an interest. If the caveat had once lapsed or been removed subsequent to a notice, the registered proprietor was then apparently to be free of any further caveat unless the court granted leave. I infer that there must be some considerations positively pointing in favour of a grant of leave. The question is whether it is enough to found a grant of leave simply that there appears to be, a caveatable interest.
15 The question of what principles should govern leave to permit a fresh caveat is discussed in Colbran and Jackson, Caveats (1996) at 481 - 487. The cases in which these issues have arisen have largely concerned s 148 of the Land Transfer Act 1952 of New Zealand. That section is applicable both where a caveat has been removed, on the application of the registered proprietor (Under a provision similar to the procedure in Western Australia prior to s 138B), and where it has lapsed. The cases generally appear to deal with caveats which have either lapsed, or been removed in circumstances where the removal was not contested. Usefully summarised at p 482 are some of the factors which have in that jurisdiction been held to weigh against permitting a second caveat to be lodged. They include delay ensuing since the first caveat lapsed, particularly where there is no reasonable explanation for the delay, and the existence of ample alternative protection for the plaintiff. Factors weighing in favour of the grant of leave will be a very strong prima facie case for the caveator, an oversight which has been explained, and matters of that kind. It appears that those principles, which have much in common with the principles which determine where the balance of convenience lies in relation to applications for interlocutory injunctions, are, in my respectful opinion, appropriate ones to apply in respect of s 138D.
16 In this case, it does appear that prima facie there is a caveatable interest. However, rather than the lapse of the caveat occurring through any oversight, it was the deliberate decision of the plaintiff, based on his own interests as he understood them at the time. There is nothing either in the affidavits or in the oral evidence which suggests to me that there was any misrepresentation by the defendant which led the plaintiff to that view. The consent to lodge a further caveat was not sought until almost three years had elapsed since the lapse of the caveat, and the originating summons was issued by the plaintiff's solicitors almost three and a half years from the date of lapse of the caveat. There is no suggestion that the writ of fi fa lodged by the plaintiff does not protect his interest. The only difficulty which the plaintiff encounters is in the expense of having to renew it. In effect, the plaintiff seeks the court's aid to avoid the consequences of a deliberate decision he made about three and a half years ago, in circumstances where his interest continues to be protected, although by a means which is not the most convenient to him. It is my view that it is not appropriate in those circumstances to grant leave pursuant to s 138D.
# Wilkin
Scardina \[2003\] WASC 144