Windlock Pty Ltd v Velibor Davidovic & Ors

Judgment 1The plaintiff took a mortgage over three properties of which V&M Davidovic Pty Ltd was the registered proprietor. The properties were in Doyle Avenue, Nolan Street and Sylvester Avenue Unanderra. 2The V&M company defaulted under the mortgages. 3On or about 8 November 2001 a caveat was lodged by the first defendant Velibor Davidovic over all three properties. This is referred to in the proceedings as the "first caveat". 4On or about 13 December 2011 a second caveat was lodged in respect of the Nolan Street property by DMZ Investment (NSW) Pty Ltd. This is known as the "second caveat". 5On 1 March 2012 the fourth defendant Desanka Davidovic, the wife of Velibor Davidovic and the mother of the second defendant Milanka Zugic lodged a caveat which is called in evidence the "fourth caveat". 6Each of those caveats was in due course removed by the court. 7The plaintiff now seeks compensation in respect of each of the three caveats, claiming that each was lodged without reasonable cause. 8The plaintiffs claim is made under s 74P of the Real Property Act 1900 NSW which, so far as is relevant, reads as follows: (1) Any person who, without reasonable cause: (a) lodges a caveat with the Registrar-General under a provision of this Part, (b) procures the lapsing of such a caveat, or (c) being the caveator, refuses or fails to withdraw such a caveat after being requested to do so, is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss. 9The proceedings commenced by Statement of Claim and, as there was no defence filed to the Statement of Claim, the plaintiff filed a motion on 16 December 2013 seeking judgment. 10The proceedings came before me on 6 March 2014. Dr S Chapple of counsel appeared for the plaintiff. When the matter was called the first and second defendants appeared. Ms Milanka Zugic appeared for the third defendant. She was also the spokesperson for all of the defendants, the first and second defendants being her mother and father. 11Ms Zugic filed a series of motions seeking that default judgment be set aside and that the first, second and fourth defendants be granted leave to file a defence. The first part of the motion was unnecessary, as no default judgment had ever been given. So far as the draft defences are concerned the second defendant Ms Zugic simply said that she was not a director of DMZ at the time when the caveat was lodged and Mrs Davdovic says that she acted by lodging a caveat to protect her own interest in Nolan St. Neither of these defences really addressed the claim that was being made against them. 12Under the court rules where an allegation in a statement of claim is not answered it is deemed to be admitted. The allegation in paragraph 45 of the statement of claim as to the fourth caveat is that Mrs Davidovic lodged the fourth caveat with the intention of delaying or frustrating the sale of those propertied and that is not only not denied in the proposed defence but the way in which it is put seems to suggest that it is true. 13The first caveat is in similar plight. 14On the material before me, even accepting what is in the draft defences handed up at the hearing, it s clear that the caveats were lodged without reasonable cause. There is the statement in the statement of claim that this is the case and that has not been expressly or impliedly denied. Further, the caveats were removed by the court, Thus there must be a verdict for the plaintiff. 15So far as Mr Davidovic is concerned the claim is for legal fees, expended in removing the caveat. A solicitor's itemised account is annexed, but as I put to Dr Chapple during argument it is not a document which, on the face of it, is entirely consistent. The claim is for $548.30. Whilst this, on the face of it, appears to be a reasonable amount the oddities about the dissection of the amount mean that I should reduce it to $450 as a lump sum. Accordingly there should be a verdict for the plaintiff against the first defendant for $450. 16As against the fourth defendant, in respect of the fourth caveat, the claim is for $6,712.20, an itemised solicitors bill is attached. There is no material to show that this bill has ever been assessed, nor are there detailed items that are costed, nor is there any evidence from a cost assessor or cost expert or another solicitor that the charges are fair and reasonable. However, the only evidence presented seems within the range and accordingly there should be a verdict against the fourth defendant for $6,712.20. 17The real problem is with respect to the case against the second defendant. The allegation against her is that the second defendant lodged a caveat, and at the time she did not have an honest belief based on reasonable grounds that DMZ had a caveatable interest over the Nolan St property, and that she placed the caveat with the intention of delaying or frustrating the sale of the property. The vital question is whether the second defendant actually did lodge a caveat. 18The second caveat is set out at page 111 and 112 of the court book. It says on its face that the caveat was lodged by Steve Mitreveski of Balgownie, but the caveator was DMZ Investment (NSW) Pty Ltd and it was the person to be served with any notice. The interest claimed was an equitable interest under a contract for sale of land, the caveator having paid a $100,000 deposit. 19The only connection between the caveat and Ms Zugic, the second defendant, was that she made the statutory declaration required by the caveat form that to the best of her knowledge the caveator had a good and valid claim to the estate. The words "Director of DMZ Investments (NSW) Pty Ltd" have been written on after her signature and the signature of the justice of the peace who took the statutory declaration. It is unclear who wrote these words or when they were written. 20As has been noted, s 74P gives a statutory cause of action against "any person" who "lodges a caveat". The question is who comes within those words? 21In 1996, Section 74P replaced the former provision which had appeared in the Torrens legislation from the beginning and was s 98 of the 1900 Act. The words "any person" seem to have been used in the original Torrens Act and certainly were part of the language of the former s 98. 22These provisions introduced a new statutory cause of action. It is only if one can fir within the terms of the section that one has any right to compensation. 23In some respects these words are strict. For instance the highly respected conveyancer, Stanley Robertson in his book Transfer of Land in Victoria (Law Book Company 1979) at 434 notes that at that stage (1979) no damages flowed from maintaining a caveat because of the explicit words in the section. That deficiency has now been remedied by the addition of paragraph 1(c). However, the basal point remains. Who lodges a caveat? 24The only persons who are eligible to lodge a caveat are those persons referred to in s74F. That is a person who by virtue of an unregistered dealing or by devolution of law or otherwise claims to be entitled to a legal or equitable estate in land under the Act. 25I thought for a while that "any person" in s74O must refer to a person who had the right under 74F. However, Dr Chapple put it to me that s 74P was to deal with caveats that should not be put on the title, and it was quite likely that there be a class of caveats put on by a person who has no right to put on a caveat, as opposed to ones that were put on by a person with such right but which were defective. I accept that submission. 26In New Zealand, the Court of Appeal consisting of Thomas, Blanchard and Doogue JJ held in Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 that "any person lodging a caveat" in s 146 of the New Zealand Land Transfer Act 1952 was not restricted to the caveator, so that, for instance, a solicitor and any other person actually lodging the caveat might be ordered to pay compensation under the NZ equivalent to our section s 74P. The impact of that decision was lessened however because the court ruled that if a solicitor, or other person, other than the caveator is sued then the test is whether that person had any reasonable cause, so that if a solicitor was not told crucial facts and on the material given to him or her advised that a caveatable interest might exist and a caveat should be lodged then the solicitor would not be liable (at 288). 27The New Zealand decision was given on the interpretation of the New Zealand Act, which, although similar to the NSW statute, is not on all fours with it. I must confess that when I first read the decision I had extreme doubts as to its applicability in this state. Dr Chapple's submissions in support of it and some of my own research has made me a little less certain of my initial view. 28As far as counsel's research and my own have gone the New Zealand decision has only three times been referred to in Australia and on none of those occasions was it necessary to consider whether it should be followed. Those cases are: Brogue Tableau Pty Ltd v Binningup Nominess Pty Ltd (2007) 35 WAR 27; [2007] WASCA 179 [97]; RTN Developments Pty Ltd v Shtrambrandt [2011] VSC 130; Deutsch v Rodkin [2012] VS 450 [17] [18]. 29However, some support for the New Zealand decision is given by the decision of B Macfarlan J in Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463. That was a decision under the old section 98, which was the predecessor of s 74P. The decision focussed on the words "is liable to pay to any person who sustains pecuniary loss" rather than "any person" in the opening of the section. 30B Macfarlan, J said: "It was said... that s 98 was only concerned to protect the proprietor in respect of his title or persons taking under a registrable instrument. The argument acknowledged that its acceptance would require the ordinary meaning of the words to be read down, but did not insist upon such a limitation being placed upon the meaning of the same phrase where it was first used in the section. I am unable to accept these arguments. The phrase 'any person' in my opinion has the same meaning in both places where it is used in the section, and that meaning is not restricted in the way that the defendant suggests. In my opinion the true meaning of s 98 is that parliament is creating a statutory right to damages in cases which the section specifies. But the limits of that right are not seen by looking only to the class of person who may, a priori, be thought to be entitled to enjoy its benefits". 31If "any person" has the same meaning in the first few words of the section as it has in the latter part of the section then what His Honour said would tend to support the New Zealand decision . 32There are many difficulties with this interpretation. First, the words "lodging a caveat" have always had in the Act a specific meaning, namely a person who makes a claim under a caveat and files that claim with the Registrar General. Caveats as opposed to all other dealings are lodged not registered. 33It has been common in court decisions where a solicitor lodges a caveat to say that the solicitor has lodged the caveat on behalf of the caveator. 34Surely there can only be one entity that lodges a caveat (putting to one side joint proprietors of a right) and when one is looking to see who lodges a caveat one must come up with a single person or group of people. 35It would seem wrong to say that if a client instructs a solicitor to lodge a caveat and the solicitor hires a corporation that trades as a law stationer and that law stationer employs a person of 18 years of age without any law degree physically to hand the document over the counter at the titles office then each and every one of them has lodged the caveat, and each and every one of them is liable if their action was without reasonable cause. 36It may be possible as the New Zealand case suggests that a solicitor who lodges a caveat can be excused if they were given the appropriate instructions to lodge the caveat when facts were withheld from him or her but the same could hardly be said of the 18 year old junior who handed the document in at the registry. He or she cannot rely on any "superior orders" type defence. Again there are problems as to whether there is proportionate liability in respect of each of the people or not. 37Secondly, the purpose of the legislation was to protect the registered proprietor and other persons from caveats which had no standing or were placed on to obtain delay. The compensation was to discourage people from doing this. It is hard to see how allowing compensation against the person who happened to hand the piece of paper containing the caveat across the counter fulfils this purpose. Dr Chapple says that the wider interpretation makes everyone who handles the caveat potentially liable to pay compensation and that this inhibits wrongful caveats. I do not think this outweighs the other detriments. 38Further there are reasons why the words "any person" might be read in a wide form to mean persons other than the caveator, yet not catch solicitors or filing clerks. It may be that there are people other than the caveators who can lodge a caveat rather than merely being the agent of the caveator, for instance a person named as executor of a deceased person who has not yet taken out probate where the unregistered interest which could the subject of a caveat is part of the estate and is threatened. Another possibility is to cove a person seeking a guardianship order in respect of an incapable person who has such an unregistered interest. It may well be that the legislature thought that it should use the words "any person" to cover that sort of situation, uncommon though it is likely to be. 39Accordingly, even though I have the greatest respect for the New Zealand Court of Appeal, and especially a court which includes Blanchard J who must be one of the premier property lawyers in New Zealand, I do not feel inclined to follow it as a guide to the construction of the NSW Torrens Act. 40That means that in my view when the court considers who lodged the caveat it is not a person like Mr Mitrevski in the present case, who was the mere agent of the caveator in lodging the caveat. The caveat was lodged by DMZ. 41Even if I was in error in not following the New Zealand decision, it seems to me clear that Ms Zugic is not liable to the plaintiff under s 74P.. All that Ms Zugic did was to sign a statutory declaration in the caveat. She purportedly did so, if the words written on the form are hers (about which I have some doubts), because she was a director of DMZ. She denies that she was a director at the relevant time. The section however, only makes liable any person who lodges a caveat. The only person who could be said to have lodged a caveat was DMZ, or if the New Zealand decision is right, Mr Mitrevski. Ms Zugic did not lodge the caveat by making the statutory declaration in the caveat. 42Accordingly, in no way can Ms Zugic be liable to the plaintiff. There must therefore, be a verdict for Ms Zugic in respect of the second caveat. 43So far as costs are concerned, these proceedings should have been brought in the Local Court in Wollongong. There is a verdict against the first defendant for $450.00 and against the second defendant for a few thousand. The plaintiff should have its costs but only on the scale as would have been applicable had the matter been tried in the Wollongong Local Court. Ms Zugic should have her costs against the plaintiff. As she was brought to the Supreme Court she should have her costs on the Supreme Court scale. As a litigant in person these are not likely to be very great. 44So far as the defendant's motions are concerned there is no sense in setting aside any default judgment, as there is not one. The matters raised in the defences which they seek to file are no answer to the plaintiffs claim so their motion should simply be dismissed. 45Accordingly the case can be finally resolved in the way that I have indicated.