187 Settlement Road v Kennards Storage Management - [2022] VSC 771

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2021 02373

187 SETTLEMENT ROAD PTY LTD (ACN 096 916 102)	Plaintiff
v
KENNARDS STORAGE MANAGEMENT PTY LTD (ACN 109 442 917)	Defendant

S ECI 2022 01215

GDM SELF STORAGE GROUP PTY LTD (ACN 167 215 858)	Plaintiff
v
KENNARDS STORAGE MANAGEMENT PTY LTD (ACN 109 442 917)	Defendant

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JUDGE:	Gorton J
WHERE HELD:	Melbourne
DATE OF HEARING:	15, 16, 17 and 23 November 2022
DATE OF JUDGMENT:	14 December 2022
CASE MAY BE CITED AS:	187 Settlement Road v Kennards Storage Management
MEDIUM NEUTRAL CITATION:	[2022] VSC 771

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CAVEATS – Where plaintiff claimed compensation for caveat lodged without reasonable cause – Whether defendant had a caveatable interest arising out of its right of first and last refusal – Whether the agreement with the right of first and last refusal had been substituted by a subsequent agreement – Where the question of whether there was a caveatable interest was uncertain – Caveat was not lodged without reasonable cause – Transfer of Land Act 1958 s 118.

CONTRACTS – Whether plaintiff is entitled to restitution of a fee paid to defendant – Whether rent paid by book entry should be included in the calculation of EBITDA – Fee paid should be recovered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R D Strong	George Schifter Johansson & Co
For the Defendant	Mr A J Purton	Dentons

TABLE OF CONTENTS

A. Background................................................................................................................................... 1

B.. The claim for compensation as a result of the lodging of the caveat................................. 2

B.1Did KSM have a right of first refusal?............................................................................... 3
B.1.1 The 2015 agreement and the 2019 agreement........................................................ 3
B.1.2Did clause 16 of the 2015 agreement apply in 2020?............................................ 5

B.2Did KSM have a caveatable interest?................................................................................. 8
B.3Was the caveat nonetheless lodged without reasonable cause?.................................... 8
B.3.1KSM’s belief in a right of first refusal..................................................................... 9
B.3.2The approach to the question.................................................................................. 9
B.3.3The communications leading to the lodging of the caveat............................... 11
B.3.4Whether the assumed right of first refusal would give rise to an equitable interest.................................................................................................................................. 16
B.3.5Conclusion: KSM did not lodge the caveat without reasonable cause........... 20

B.4Compensation...................................................................................................................... 22
B.4.1When would settlement have occurred but for the caveat?............................. 22
B.4.2What loss did 187SR suffer by reason of the delay in settlement?................... 26
B.4.3Would it be ‘just’ to award compensation?......................................................... 27

C. The claim for recovery of fees paid........................................................................................ 28

D. Disposition.................................................................................................................................. 32

HIS HONOUR:

A. Background

Mr Leslie Smith is associated with both 187 Settlement Road Pty Ltd (‘187SR’), the plaintiff in proceeding number S ECI 2021 02373, and GDM Self Storage Group Pty Ltd (‘GDM’), the plaintiff in proceeding number S ECI 2022 01215. 187SR owned a property at 187 Settlement Road in Thomastown and GDM owned the self-storage business that was carried on at that property. Kennards Storage Management Pty Ltd (‘KSM’), a company associated with Mr Sam Kennard and the defendant in both proceedings, was engaged to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] VSC 771
Decision Date: 14 December 2022

CaseChat Overview and Summary

The plaintiffs, 187 Settlement Road, sought compensation from the defendants, Kennards Storage Management, for a caveat that the defendants had lodged over the property located at 187 Settlement Road. The dispute reached the court over the legitimacy of the caveat and the defendants' entitlement to claim compensation. The court was required to determine whether the defendants possessed a caveatable interest due to their right of first and last refusal and if this right had been replaced by a subsequent agreement. Additionally, the court had to consider if the caveat was lodged without reasonable cause, as per the Transfer of Land Act 1958 section 118.

The court examined the nature of the defendants' interest and whether it was caveatable. It found that the defendants had a caveatable interest based on their right of first and last refusal agreement. However, the court also noted that this interest was uncertain due to the subsequent agreement. Given this uncertainty, the court ruled that the caveat was not lodged without reasonable cause. Furthermore, regarding the restitution of fees, the court held that the plaintiff was entitled to recover the fee paid to the defendants, but did not consider the rent paid by book entry in the calculation of EBITDA.

In its final orders, the court determined that the defendants were not liable for compensation to the plaintiffs for the caveat lodged. It also ruled that the plaintiffs were entitled to recover the fee paid to the defendants. The court did not include the rent paid by book entry in the EBITDA calculation, as this was not relevant to the restitution of the fee.

Orders