Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd - [2007] WASCA 179

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BROGUE TABLEAU PTY LTD -v- BINNINGUP NOMINEES PTY LTD [2007] WASCA 179

CORAM: WHEELER JA
PULLIN JA
BUSS JA

HEARD: 15 MAY 2007

DELIVERED : 31 AUGUST 2007

FILE NO/S: CACV 97 of 2006

BETWEEN: BROGUE TABLEAU PTY LTD (ACN 009 271 970)
Appellant
AND
BINNINGUP NOMINEES PTY LTD (ACN 008 794 938)
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :BINNINGUP NOMINEES PTY LTD -v- BROGUE TABLEAU PTY LTD [2006] WASC 156
File No  :CIV 1001 of 2006

Catchwords:

Torrens system - Caveat - Caveatable interest existed - Absolute caveat lodged - Court ordered removal of absolute caveat - Claim for compensation - Whether caveat was lodged without reasonable cause - The "imputing" to a client of a solicitor's absence of reasonable grounds for advice where the client, on the basis of that advice, lodges a caveat

Words and phrases - "Without reasonable cause"

Legislation:

Transfer of Land Act 1893 (WA), s 137, s 138, s 139, s 140, s 142

Result:

Appeal allowed

Category: A

Representation:

Counsel:

Appellant: Mr D G Robertson
Respondent: Mr C L Zelestis QC & Mr J A Thomson

Solicitors:

Appellant: Arthur Metaxas & Co
Respondent: Tottle Partners

Case(s) referred to in judgment(s):

Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459
Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106
Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14
Black v Garnock [2007] HCA 31
Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993)
Bundock Bros v Bergl & Co (1897) 8 QLJ 106
Coles KMA Ltd v Sword Nominees Pty Ltd (1986) 44 SASR 120
Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589
Commonwealth Dairy Produce Equalisation Committee Ltd v Hanson [1944] QSR 95
Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Dykstra v Dykstra (1991) 22 NSWLR 556
Edmonds v Donovan (2005) 12 VR 513
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Farvet Pty Ltd v Frost [1997] 2 Qd R 39
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281
Hooke v Holland [1984] WAR 16
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171
Kaihu Valley Railway Co v Kauri Timber Co (1889) 11 NZLR 403
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lee v Ross (No 2) [2003] NSWSC 507; (2003) 11 BPR 20,991
Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407
Longmuir v The Commonwealth (1986) 88 FLR 399
McKellar v Singh [1999] WASC 145
Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287
Nelson v Kimberley Homes Pty Ltd (1988) NSW ConvR 55‑394
Re Calder; Ex parte Cable Sands (WA) Pty Ltd (1998) 20 WAR 343
Sunbird Plaza Pty Ltd v Boheto Pty Ltd [1983] 1 Qd R 248
Taylor v Couchman (Unreported, NZCA, 29 April 1996)
The State of New South Wales v Taylor (2001) 204 CLR 461
Theseus Exploration NL v Foyster (1972) 126 CLR 507
Truefilm Pty Ltd v J R Investment Holdings Pty Ltd (2004) 12 BPR 22,769
Weiss v The Queen (2005) 224 CLR 300
Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463

WHEELER JA: I have had the advantage of reading in draft the reasons for decision of both Pullin and Buss JJA. Those reasons reveal a difficulty in discerning the precise proposition or propositions for which Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993) is authority. It is not necessary for me to express a view in relation to that issue. It is sufficient, in order to dispose of the present appeal, for me to note my agreement with that portion of the reasons of Buss JA, at [103] ‑ [118], which follows the heading "The Merits of the Appeal".
PULLIN JA: This is an appeal against the summary judgment of Master Sanderson, in which he ordered that the appellant pay the respondent compensation under s 140 of the Transfer of Land Act 1893 (WA), with the quantum to be assessed later.

The facts

The respondent is the trustee of the Binningup Estate Unit Trust and in that capacity is the registered proprietor of certain land between Mandurah and Harvey ("land"). The land has been subdivided into a large number of blocks. At the time of the summary judgment application, the subdivision consisted of 67 lots in one stage, 33 lots in another stage and nine lots in a third stage.
The appellant is the holder of 182 "A" class units in the Binningup Estate Unit Trust. A total of 2,000,280 units have been issued. All units have the same entitlement which means that the respondent holds only a very small proportion of units in the trust - approximately 0.01 per cent.
The trust deed contains two provisions of relevance, one being cl 24 which reads:
NOTWITHSTANDING anything herein to the contrary or otherwise contained but subject to the provisions of Clause 7 hereof the Trustees shall have the power at their absolute discretion TO SELL transfer hire lease or dispose of any real or personal property to the Trust Fund …
and cl 35 which reads:
THE Trustees shall have the sole and absolute discretion in the exercise of all rights appertaining to the shares or other investments comprised in the Trust Fund and no Unit Holder shall save as is herein expressly provided have any right with respect to the Trust Fund to attend meetings of shareholders or to vote to take part in or consent to any corporate or shareholders action or save as expressly provided by this Deed to interfere with or question the exercise or non‑exercise by the Trustees of the rights and powers of the Trustees as the owners of the investments of the Trust Fund.

In 2002, the appellant became suspicious about a proposed transaction concerning a portion of the land. The appellant discovered that the respondent proposed to sell some of the trust land to a company called Baycrest Pty Ltd. Mr Waller was a director of the respondent. A director of Baycrest Pty Ltd was a relation of Mr Waller. Mr Waller also had an associate who was the secretary of Baycrest Pty Ltd. The appellant sought information about the terms of the proposed sale but could not obtain it from the respondent. The fact that the appellant could not obtain information about the terms of sale and the fact that the appellant was suspicious that the sale price was or might be less than market value motivated the appellant to consult solicitors. It sought advice about whether a caveat could be lodged in relation to the trust land. The advice was given by Jackson McDonald. The advice was set out in two letters which read:
Dear Sirs
CAVEAT – BROGUE TABLEAU PTY LTD
Thank you for your fax of this morning, 3 September 2002.
Based on the information you have given us, Brogue Tableau Pty Ltd, as the owner of A-class units in the Lakewood Shores Unit Trust, would be entitled to a proportion of the proceeds of sale of Lakewood Shores Estate, and therefore has a caveatable interest in the Lakewood Shores Estate land.
However, we would need to see the Trust Deed to confirm our view. Could you please provide us with a copy of the Trust Deed.
Assuming that Brogue Tableau Pty Ltd does have a caveatable interest, our costs for preparing and lodging the caveat would be $250.00 plus GST and disbursements.
We look forward to receiving a copy of the Trust Deed.
Yours faithfully
JACKSON MCDONALD
(The respondent's former name was Lakewood Shores Pty Ltd whilst the former name of the Binningup Estate Unit Trust was the Lakewood Shores Unit trust).
Dear Sirs
CAVEAT – BROGUE TABLEAU PTY LTD
We refer to the letter from Mr John Santamaria of Sanbern Management Services Pty Ltd received by fax this morning, attaching a copy of the Unit Trust Deed.
There do not appear to be any provisions in the Trust Deed limiting Brogue Tableau's entitlement to a proportion of the proceeds of sale of Lakewood Shores Estate.
It is accepted that a unitholder in a unit trust has a proprietary interest in each asset of the trust, notwithstanding the possible long duration of the trust and the extremely wide powers of management given to the trustee. This is so even though the trust provides that no unitholder is entitled to any particular part of the trust fund or to have any part of the trust fund transferred to him otherwise than in accordance with the terms of the deed: Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90.
Our main disbursements for registering a caveat will be:
Title Search:  $11.00
Registration Fee:  $75.00
Attendance Fees:  $43.00
Plus GST. In addition, our costs to date, incurred in reviewing the Trust Deed and considering whether Brogue Tableau Pty Ltd has a caveatable interest, are $250.00.
We look forward to your further instructions.
Yours faithfully
JACKSON MCDONALD
A director of the appellant, Mr Santamaria, deposed in an affidavit sworn 21 February 2006 that he relied on Jackson McDonald's advice and instructed them to lodge the caveat to protect the appellant's interest in the trust estate.
On 6 September 2002, a caveat was lodged. There was some discussion during the appeal about who lodged the caveat. The affidavit of Mr Waller sworn 24 January 2006 said it was lodged by the appellant. Mr Santamaria said that Jackson McDonald was instructed to lodge it. The document itself says that the caveat was "prepared by" Jackson McDonald and lodged by a settlement agent. Who physically took it, and lodged it, is not in issue in these proceedings. It is sufficient to say that it was lodged on behalf of, and therefore by, the appellant.
The caveat described the land as Lot 165 on diagram 39312 and being the whole of the land in Certificate of Title Vol 2194 Folio 802. This was the whole of the trust land. The respondent by its former name was shown as the registered proprietor.
The "estate or interest" claimed in the caveat was "as beneficiary of a trust, against land held by the trustee for the trust". The caveat form also stated that "The CAVEATOR claims an estate or interest as specified herein of the estate or interest of the abovenamed REGISTERED PROPRIETOR in the land above described by virtue of [the] Unit Trust Deed …" The caveat stated that the caveator:
FORBIDS the registration of any Instrument affecting the estate or interest … Absolutely.
Mr Santamaria said in his affidavit:
Since first lodging the caveat, I have made it clear to the [respondent] that the [appellant] did not wish to stand in the way of any sales, but only wished to protect the trust property particularly when it became apparent to me that the trustee intended to sell the property to Baycrest, the ultimate shareholder and director of which was Barry Waller's son.
Mr Waller, in an affidavit sworn 27 April 2006, in the proceedings before the Master, deposed that at the date of lodgement of the caveat the respondent had in conferral with the relevant authorities and contractors, compiled a development plan; obtained all necessary "local and governmental" approvals for the subdivision and development of approximately 140 lots of the trust land; constructed an entry point off the main highway leading to the trust land; and constructed the required infrastructure, roads, drainage system and the necessary community open space areas to support the proposed development. In another affidavit sworn 1 February 2006, Mr Waller deposed to the fact that Shire rate notices were paid for the financial years ended 2003 and 2004 and that the respondent was paying interest on moneys borrowed and secured by mortgage in relation to the property. Mr Waller also deposed that the respondent had incurred legal fees in taking steps to have the caveat removed over and above costs recovered as a result of court order.
In par 11 of Mr Waller's affidavit sworn 27 April 2006, he said:
During the period 6 September 2002 to 12 February 2004 that the Absolute Caveat was registered over the Trust Land, the plaintiff was prevented from, inter alia, carrying out the following:
(a)the planned development of the next stage of approximately 30 lots;
(b)the overall planning process;
(c)any further housing construction programs; and
(d)any further marketing and sales programs.
On 3 October 2002, the respondent commenced proceedings under s 138 of the Transfer of Land Act requiring the appellant to show cause why the caveat should not be removed. These proceedings were determined in Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14 ("the first Binningup case").
The order was that the appellant withdraw caveat 1228079C within seven days and that the defendant have leave to lodge a "notice" caveat in a form approved by the court. As a result, the absolute caveat was withdrawn on 12 February 2004. There was an issue in the first Binningup case about whether the appellant had the caveatable interest claimed in the caveat. The court held that the appellant as beneficiary in the unit trust did have a caveatable interest. The court also held that the caveat lodged being a caveat forbidding the registration of any instrument "Absolutely" would prevent the registration of any instrument, even one resulting from a proper exercise of the trustee's powers (and unrelated to the proposed Baycrest transaction) and, for that reason, there was no right to lodge an absolute caveat to protect the caveatable interest. In these proceedings the appellant accepts the correctness of that decision. The appellant subsequently lodged a notice caveat which has itself produced a set of proceedings and another judgment, but it is not relevant to go into the details of those proceedings or the judgment.
The respondent then issued a writ claiming compensation pursuant to s 140 of the Transfer of Land Act along with interest pursuant to s 32 of the Supreme Court Act 1935 (WA). Section 140 says that the application should be determined by a Judge in Chambers which suggests that a writ was not the correct initiating process, but no point is made about that. When the appellant entered an appearance, the respondent applied for summary judgment which was granted by Master Sanderson. The application for summary judgment was supported by four affidavits of Mr Waller sworn 24 January 2006, 1 February 2006, 27 April 2006 and 2 May 2006. It is necessary to mention that before the hearing commenced before Master Sanderson, the appellant objected to par 11 of Mr Waller's affidavit sworn 27 April 2006 which is set out above. The objection was on the basis that it contained "a conclusion on the basis of facts not proved and/or comment". The Master did not rule on the objection.
At the hearing before the Master, counsel for the respondent informed the Master that the respondent was only seeking an order that "there is a liability with the compensation to be assessed at a later stage". The appellant did not voice any objection about this course being followed. It may be noted that in Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129, a similar course was followed. See Corwest at page 142. Strictly speaking a claimant has to establish some loss before there is any cause of action, but the conduct of the parties assumes that there was at least some loss, the quantum of which was to be determined later.

The Master's reasons

In his reasons for decision, the Master summarised the facts, observed that it was unusual for a person to apply for summary judgment in "a case such as this" (meaning a claim for compensation under s 140), but he noted in effect, there was no objection to this course being taken.
The Master observed that both parties accepted that the power to order summary judgment should be exercised with caution and only in a clear case. He referred to General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87.
The Master said that there was no dispute between the parties as to the test to be applied in determining whether a caveator had reasonable cause to lodge a caveat and then quoted from Malcolm CJ's judgment in Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993) at page 3 where his Honour said:
The test to be applied in determining whether a caveator had reasonable cause to lodge a caveat for the purposes of s 140 of the Transfer of Land Act is not whether the caveator had a caveatable interest at the time the caveat was lodged, but whether the caveator had an honest belief based upon reasonable grounds that he or she had such an interest: DeputyCommissioner of Taxation (Cth) v Corwest Management Pty Ltd [1978] WAR 129 per Brinsden J at 141-142; Bedford Properties Pty Ltd v Surgo Pty Ltd (1981) 1 NSWLR 106 per Wootten J at 108; and Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 (at 433 - 434) per Malcolm CJ. The test is not akin to a test of negligence.
The Master also referred to what Jenkins J said in John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171, at [32], namely:
First, the onus is on the party claiming damages to prove that the caveat was lodged without reasonable cause. Secondly, the test to be applied in determining whether a caveator has reasonable cause to lodge a caveat for the purposes of the act, section 140, is not whether the caveator had a caveatable interest at that time the caveat was lodged, but whether the caveator had an honest belief based on reasonable grounds that he or she had such an interest. Thirdly, that belief is to be judged as of the date that the caveat was lodged.
The Master said there was no issue that the onus was on the respondent to prove the absence of reasonable grounds.
The Master then said:
The second question is, then, whether the caveator (the defendant) at the time the caveat was lodged had an honest belief based on reasonable grounds that it had a caveatable interest. As Pullin J found, the defendant did have a caveatable interest. But that is not here the issue. The question is whether the caveator had an honest belief based on reasonable grounds that he had such an interest.
The Master noted a concession made by counsel for the respondent that on a summary judgment application, the Master was not in a position to establish that the appellant did not hold an honest belief.
The Master referred to the fact that the appellant lodged the absolute caveat because of its awareness of the Baycrest transaction which he particularised and continued:
15Counsel for the [respondent] submitted, and I accept, that the [appellant's] express basis for lodging the absolute caveat was nothing more than a suspicion that the [respondent] would sell part of the Trust Land under‑value.
16That suspicion was entirely unsupported by any evidence. In the course of my earlier decision in the related proceedings [2004] WASC 207 I said (at [27]):
'The question then to be determined was whether Brogue Tableau could show there was good cause why the caveat ought not be removed. Or, perhaps more correctly, whether it could satisfy the requirements for the grant of an injunction. It was simply unable to do so. Without going through the evidence in detail, it can be summarised in this way. Brogue Tableau is suspicious of the actions of Binningup Nominees. In the past there has been a suggestion that the South Land, or some part of it, might have been sold by Binningup Nominees to related parties at under-value. The same concerns arise in relation to the transaction involving the Sale Land. However, there is nothing in the evidence which could found such a suspicion. Quite the reverse. It appears that the sale of the specified lots is an arm's-length transaction which is in the interests of all parties. Furthermore, Binningup Nominees is content to allow registration of a notice caveat against the land once the titles to the subject lots have issued. In my view, there is absolutely no basis upon which an injunction could be granted'.
17It necessarily follows from that conclusion that in relation to the caveat there was no serious question to be tried. Counsel for the defendant did not suggest otherwise.
18Counsel for the plaintiff also pointed out that the defendant does not assert (and could not assert, having regard to cl 35 of the Binningup Estate Unit Trust) that it, through Santamaria, reasonably believed that as a unit holder it had the right to approve or veto each and every sale of part of the Trust Land by the plaintiff. Yet, that was the precise effect of lodging an absolute caveat preventing a sale of any part of the Trust Land.

The Master then turned to consider the legal advice which had been obtained. He set out the two letters from Jackson McDonald in full and said:
20It has to be said that these letters are remarkably brief. In fact, they may not amount to legal advice at all. Both letters are rather mechanical in nature. The defendant has not seen fit to give any indication of what instructions were issued to the solicitors which resulted in these letters. There is certainly nothing in either letter which suggests a detailed brief was delivered which resulted in comprehensive advice.
21Nonetheless, it must be accepted that legal advice was sought and obtained by the defendant prior to lodging the caveat. The consequences of seeking legal advice when assessing whether a caveator acted reasonably in lodging the caveat must necessarily depend upon the circumstances. This is exemplified by what was said by Heenan J in McKellar & Anor v Singh [1999] WASC 145.
The Master quoted a passage from McKellar v Singh [1999] WASC 145 from [9] where Heenan J said by reference to the facts in that case, that he doubted whether the caveator there acted on the legal advice which he had been given, but "if he did, I find it was unreasonable of him to do so".
The Master concluded:
22If it be the case that Santamaria, and hence, through him the defendant, relied on the legal advice provided on 3 and 4 September 2002, it was clearly unreasonable for him to do so. In no way can it be said that the advice is comprehensive or that it was given after the solicitor concerned had been fully apprised of all relevant facts. If it was the case that the solicitor was comprehensively briefed, then it was for the defendant to put that evidence before the Court – in other words, to condescend upon particulars: see Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109.
23The unreasonableness of the defendant's position is further compounded by the fact that it had a miniscule interest in the Binningup Estate Unit Trust. The question can be put this way: given the defendant had such a small interest in the Trust, was it reasonable for it to hold up the whole project so as to protect its interest? The answer, I think, must be no. There was no suggestion that some other form of redress was not open to the defendant if it thought its interests were being compromised. To lodge an absolute caveat in such circumstances was out of all proportion to what might have been regarded as reasonable to protect the defendant's position.
24I am satisfied, then, that although the defendant may have had an honest belief it was entitled to lodge a caveat, I am not satisfied that belief was held on reasonable grounds. There ought therefore be judgment for the plaintiff with damages to be assessed.

Observations on the Master's reasons

There are two observations which may be made about the Master's reasons.
First, the Master suggested at [12] that there was a question about whether the caveator at the time the caveat was lodged "had an honest belief based on reasonable grounds that it had a caveatable interest". In fact that was not a point in issue. There was no doubt that the appellant had a caveatable interest. Jackson McDonald correctly advised that there was a caveatable interest. The first Binningup decision established that this advice was correct. The aspect of the caveat which had to be considered in this case on the application under s 140 was not the existence or non-existence of a caveatable interest, but rather the fact that the caveat forbade the registration "absolutely" of any instrument affecting the claimed estate or interest. The fact that the Master erroneously referred to whether the appellant had an honest belief based on reasonable grounds that it had a caveatable interest is not a point taken by the appellant, perhaps because the Master did go on to address and decide the real issue. The real issue was about the extent of the prohibition. The Master addressed this in [18], [23] and [24] of his reasons.
The second observation concerns the law which governs an application for summary judgment. The Master referred to General Steel and Fancourt to the effect that summary judgment should be exercised with caution and only in a clear case. It may be added that there are authorities suggesting that where there are complex or serious points of law raised, a Judge in chambers should not decide them but ought to give unconditional leave to defend. See Bundock Bros v Bergl & Co (1897) 8 QLJ 106, referred to in Theseus Exploration NL v Foyster (1972) 126 CLR 507 at 515 and see also Commonwealth Dairy Produce Equalisation Committee Ltd v Hanson [1944] QSR 95 at 98, also referred to in Theseus. In Theseus, Gibbs J at [515] commented that:
No doubt the remarks in these cases were not intended to preclude the exercise of some discretion by a judge to whom application for summary judgment is made in deciding whether the question of law raised is so difficult that it ought not to be decided summarily, and no doubt also sometimes some explanation or reference to authorities will be necessary to enable a judge to decide whether a question is really unarguable.
In Theseus, the High Court held that the questions were "serious and disputable", that the primary Judge had a discretion and that it was proper for him to decline to dispose of the matter in chambers; however, having heard full argument the High Court decided the issue on the basis it would be absurd having decided the point against the respondent, to give the respondent leave to defend. In Sunbird Plaza Pty Ltd v Boheto Pty Ltd [1983] 1 Qd R 248, McPherson J said at 255:
To require that a judge should invariably refrain from determining what are said to be difficult questions of law in Chambers, even though he may be ready, willing and able to undertake the task, is to deprive him of the discretion which the Rules unquestionably confer upon him in relation to such matters. The only likely result of this form of enforced judicial inertia is the kind of lengthy and unnecessary delay that is traditionally identified with a denial of justice.
McPherson J also referred to Stephen J's remark in Theseus, that "it would, in my view, be contrary both to good sense and to justice now, after full argument, to permit the action to go to trial in the Supreme Court, followed perhaps by an appeal".
In this case it is possible that if the case went to trial more evidence might be given about what instructions were given to the solicitors, but as will be explained below, evidence about what instructions were given would not alter the outcome.

The grounds of appeal

The appellant's grounds of appeal are as follows:
(a)that the Master erred in finding that the appellant did not have reasonable grounds that it was entitled to lodge a caveat and that the Master erred in finding that the legal advice was not comprehensive (grounds 1 and 2);
(b)the Master erred in finding that the lodgement of the caveat was unreasonable because of the appellant's miniscule interest in the trust (ground 3);
(c)the Master erred in finding that the lodgement of the caveat held up the project for the development of the land and that there was therefore no evidence of any damage suffered by the respondent, save for the evidence contained in par 11 of Waller's affidavit which had been the subject of objection which had not been ruled upon or which, if implicitly ruled upon, was in error (ground 4);
(d)the Master erred in finding that the lodgement of the caveat was out of all proportion to what might be regarded as reasonable (ground 5);
(e)the Master erred in finding that the reasonableness of the lodgement should be determined by reference to possible alternative forms of redress open to the appellant to protect its interests (ground 6);
(f)the Master erred in finding that his decision in another action, that there was no good cause for maintenance of the subsequent notice caveat, was relevant to the issue for determination of the application before him (ground 7).

The statutory provisions

It will be necessary to set out the statutory provisions, lengthy as they are, and then to address the construction of s 140. However, before doing so, it may be useful to summarise the overall effect of the provisions. Ignoring irrelevant or minor amendments the relevant provisions of Pt V of the Transfer of Land Act 1893; namely, ss 137, 138, 139, 140 and 142, have remained unchanged since 1893. Some changes to Pt V occurred in 1996 when some new sections were introduced, but they will be referred to later. The following is a summary of the effect of the 1893 provisions.
In broad terms, s 137, s 138, s 139, s 140 and s 142 provided for the lodgement of a caveat, provided for what could be prohibited by the caveat, provided for the giving of notice to the caveator if a dealing prohibited by the caveat was lodged, provided for the lapsing of the caveat 14 days after notice was given by the Registrar of the proposed transfer or dealing and provided in s 138 (now s 138(4)) for a caveator served with notice to apply to the Supreme Court for an injunction restraining the Registrar from registering the dealing subject to the usual undertaking as to damages. Once notice was given by the Registrar, the caveat would lapse, whether or not an application was made for an injunction. If the court granted an injunction then that restraint would replace the prohibition on dealings effected by the caveat. The interests of the registered proprietor would then be protected by the caveator's unconditional undertaking as to damages given to the court, rather than by the conditional protection contained in s 140.
The 1893 provisions provided another method for removal of a caveat. That was also found in s 138 (now s 138(2)) and it involved the registered proprietor or other affected person summonsing the caveator to show cause before the Supreme Court why the caveat should not be removed. This alternative method put the registered proprietor or other interested party to the trouble and expense of retaining solicitors and commencing proceedings in the Supreme Court, but it was doubtless often the preferred method, because a registered proprietor wishing to deal with the land for example by selling it, was naturally reluctant to do so knowing that the transfer when lodged might be held up pending litigation prompted by the Registrar's notice to the caveator.
In 1996 the Transfer of Land Amendment Act 1996 (WA) made substantial amendments to Pt 5 of the Act. The amendment Act inserted a new s 136K and s 138A to s 138D. In short, these provisions related to a class of caveat defined as "a section 138A caveat". Where a caveat was lodged and a registered proprietor wanted to have the caveat removed, then the registered proprietor could apply to the Registrar to serve the caveator with a notice, that unless the caveator applied to the Supreme Court within 21 days extending the operation of the caveat, then the caveat would lapse. The effect of this was to provide an alternative procedure to that provided under s 138 under the 1893 provisions. Now by authorising the registered proprietor to require the Registrar to serve notice on the caveator, it was the caveator who had to go to the trouble and expense of commencing proceedings in the Supreme Court to extend the operation of the caveat, failing which the caveat would lapse. There is no need to further discuss the 1996 changes because this case involved an application commenced under s 138(2) of the Act.
Finally it is appropriate to briefly mention s 140. The section has not been amended at all since 1893. Section 140 authorises a Judge to order compensation for loss sustained by the lodgement of the caveat. The proper construction of the section is addressed below.

The 1893 provisions

The sections are set out as they now stand. They incorporate some amendment made since the Act was passed in 1893. So for example, s 138 originally had no subsections and now it is broken down into four subsections. However, the changes to the sections made since they were originally enacted are not of any relevance for present purposes.
137.Lodgment of caveat where land already under Act
(1)Any beneficiary or other person claiming any estate or interest in land under the operation of this Act or in any lease mortgage or charge under any unregistered instrument document or writing or under any equitable mortgage or charge by deposit without writing or by devolution in law or otherwise may lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or until after notice of the intended registration or dealing be given to the caveator or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat. Every such caveat shall state the name and address of the person by whom or on whose behalf the same is lodged and (except in case of a caveat lodged by order of the Supreme Court or by the Registrar pursuant to the direction of the Commissioner as hereinafter provided) shall be signed by the caveator or by his agent. The person lodging such caveat shall if required by the Registrar support the same by statutory declaration stating the nature of the estate or interest claimed and the title thereto and may withdraw any such caveat. If such declaration when required by the Registrar be not lodged with him within 7 days from the date of such requisition the caveat shall be absolutely null and void. A caveat under this section cannot be lodged unless it contains an address, or a number for a facsimile machine, in Australia for the service of notices in relation to the caveat.
…
138.Consequences of lodgment of caveat
(1)Upon receipt of such caveat the Registrar shall notify the same to the person against whose application to be registered as proprietor or (as the case may be) to the proprietor against whose title to deal with the estate or interest such caveat has been lodged or the judgment creditor named in any property (seizure and sale) order registered under section 133 in respect of the judgment debtor's saleable interest in such land.
(2)Any such applicant, proprietor or judgment creditor, or any person claiming under any transfer or other instrument signed by the proprietor may if he think fit summon the caveator to attend before the Supreme Court or a Judge in chambers to show cause why such caveat should not be removed; and such court or Judge may upon proof that such caveator has been summoned make such order in the premises either ex parte or otherwise as to such court or Judge may seem fit.
(3)Except in the case of a caveat lodged by or on behalf of a beneficiary claiming under any will or settlement or by the Registrar pursuant to the direction of the Commissioner every caveat lodged against a proprietor shall be deemed to have lapsed as to the land affected by the transfer or other dealing upon the expiration of 14 days after notice served on the caveator that such proprietor has applied for the registration of a transfer or other dealing unless in the meantime such application is withdrawn.
(4)A caveat shall not be renewed by or on behalf of the same person in respect of the same estate or interest except subject to the state of the Register at the time of the renewal of such caveat; but if before the expiration of the said period of 14 days or such further period as shall be specified in any order made under this section the caveator or his agent appears before a judge and gives such undertaking or security or lodges such sum in court as such judge may consider sufficient to indemnify every person against any damage that may be sustained by reason of any disposition of the property being delayed then and in such case such judge may direct the Registrar to delay registering any dealing with the land lease mortgage or charge for a further period to be specified in such order or may make such other order as may be just.
…
139.No entry to be made in Register affecting land in respect to which caveat continues in force
(1)Subject to the provisions of the next succeeding subsection except in the cases provided by section 142 so long as any caveat shall remain in force prohibiting any registration or dealing the Registrar shall not enter in the Register any change in the proprietorship of or any transfer or other instrument purporting to transfer or otherwise deal with or affect the estate or interest in respect to which such caveat may be lodged.
(2)Where an instrument is presented for registration and a caveat is lodged after the time of the presentation of the instrument, the caveat shall not have the effect of preventing registration of the instrument but the caveat shall take effect as if lodged after registration of the instrument.
140.Compensation for lodging caveat without reasonable cause
Any person lodging any caveat with the Registrar either against bringing land under this Act or otherwise without reasonable cause shall be liable to make to any person who may have sustained damage thereby such compensation as a judge on a summons in chambers shall deem just and order.
…
142.A caveat on behalf of a beneficiary under a will or settlement does not bar registration in certain cases
Where a caveat has been lodged by or on behalf of a beneficiary claiming under a will or settlement and a change in the proprietorship of or a transfer or other dealing with or affecting the land estate or interest in respect of which the caveat was lodged is presented for registration the same may notwithstanding section 139 be registered without the caveat being withdrawn and without determining the operation of the caveat provided the Commissioner is of opinion that such change of proprietorship or such transfer or other dealing is authorised by the will or settlement and the caveator either consents to the registration or does not lodge a written protest against such registration within 14 days after being served with notice as such caveator.

What a caveat may forbid

Under s 137 "Any beneficiary or other person claiming any estate or interest in land" is authorised to lodge a caveat. The claimant may forbid the "registration of any person as transferee or proprietor of and of any instrument affecting" the claimed estate or interest. The word "affect" means "to act on; produce an effect or a change in". See Macquarie Dictionary. But the claimant, before preparing or lodging the caveat, has a choice to make. The choice is whether to forbid such registration:
(a)"absolutely"; or
(b)"until after notice of the intended registration or dealing be given to the caveator"; or
(c)"unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat".
A caveat which "absolutely" forbids registration of any person as transferee or proprietor and of any instrument affecting such estate or interest hardly needs any explanation. It prohibits these things, completely or wholly, with no exception. This type of caveat would commonly be lodged by someone who claimed to be entitled to be registered as the proprietor of the land free of encumbrances.
A "notice" caveat is appropriate where the caveator is a beneficiary claiming under a Will or settlement and who merely wishes to have notice to ensure that he or she has time to check that any dealing by the trustee with trust land is in accordance with the trust deed or terms of the Will. Section 142 of the Act provides that a "notice" caveat will not prevent registration if the Commissioner is of the opinion that the change of proprietorship, transfer or other dealing is authorised by the Will or settlement and the caveator either consents to the registration or does not lodge a written protest after being served with notice. So, for example, where a transfer of land merely reflects a change of trustee in accordance with the trust deed, then the beneficiary who has a notice caveat on the title, is likely to consent to the transfer and the Commissioner is likely to form the opinion necessary to allow the dealing to be registered without the caveat being withdrawn. The point of s 142 seems to be to afford some means of protection to beneficiaries under a system of registration which is mainly concerned with legal title.

A caveat forbidding dealings "unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat", is also clear enough in its meaning. It might be used, for example, by a person who claims to hold a leasehold interest in the land. If a "subject to the claim" caveat is lodged, then it will not prohibit registration of an instrument expressed to be subject to the claim of the caveator. See Coles KMA Ltd v Sword Nominees Pty Ltd (1986) 44 SASR 120; Longmuir v The Commonwealth (1986) 88 FLR 399 and Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407. An instrument lodged expressed to be "subject to the claim" of the caveator, will still result in a notice being sent by the Registrar under s 138(3) and the caveat will lapse upon the expiration of 14 days after service of the notice. The caveator will not have to take steps to obtain an injunction under s 138(4) because the instrument which will be registered showing it is subject to the claim of the caveator will protect the caveator's interest, although at some stage the validity of the claim would have to be determined.

The construction of s 140 of the Transfer of Land Act

Section 140, like the equivalent provision in New South Wales, Victoria, the Australian Capital Territory, Tasmania, Queensland, the Northern Territory and New Zealand, requires proof that the caveat was lodged without reasonable cause before compensation may be ordered. (South Australia requires proof that the caveat was lodged "wrongfully and without reasonable cause": Real Property Act 1886 (SA), s 191(j)).
The task of statutory construction involves the fundamental proposition that "it is the words of the statute that ultimately govern, not the many subsequent judicial expositions of that meaning which have sought to express the operation [of the statute] … by using other words": Weiss v The Queen (2005) 224 CLR 300 at [9]. In the case of s 140 and its equivalents in other jurisdictions, there have been judicial expositions of the meaning of the expression "without reasonable cause"; but, if attention is paid first to the words of the section, it is clear there is no reference to the state of mind of the caveator. The words "without reasonable cause" might appear to introduce an entirely objective condition. This is because "causes" are "neither reasonable nor unreasonable"; they are facts even though a value judgment has sometimes to be made in finding the existence of the fact. See The State of New South Wales v Taylor (2001) 204 CLR 461 at [15] per Gleeson CJ, McHugh and Hayne JJ. Callinan J (at [99]) said that the word "reasonable" was not apt to qualify "an abstraction such as a cause". Callinan J dissented on the outcome because he considered at [99] ‑ [100] that the word "reasonable" qualified "belief" in the provision under consideration, rather than "cause", by a process of "hypallage". Kirby J who with Callinan J dissented in the outcome stated at [69] that the reference to "'no reasonable cause' takes the decision‑maker beyond the subjective beliefs of the person who made the election …".
Taylor's case did not relate to s 140 of the Transfer of Land Act or any of its equivalents elsewhere. It was concerned with workers' compensation legislation, but the reasoning strongly suggests that when legislation requires a Court to decide whether a belief was held "without reasonable cause" it is for the court to determine whether the "reasonable cause" exists "as an objective fact". See Taylor's case [21]. The same reasoning would seem to apply where the question is whether something is done by a person "without reasonable cause". Based only on the words in s 140 and without reference to any authority on the meaning of s 140 or the equivalent elsewhere, the conclusion therefore might be that the state of mind of the caveator is entirely irrelevant. That is the conclusion I would have reached if there were no authority on the point.
However, the courts in this State, in New South Wales, Victoria, Queensland and New Zealand have developed a different view about the meaning of "reasonable cause" in s 140 of the Transfer of Land Act and the equivalent provisions in those other jurisdictions. Thus in Western Australia in Bolton v Excell at 11, Owen J, Ipp J agreeing, said that the "test to be applied in deciding whether the caveators had reasonable grounds to believe that they had a caveatable interest involved both objective and subjective elements". Owen J quoted Wootten J in Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 where he said "the foundation for reasonable cause must be, not the actual possession of a caveatable interest, but an honest belief based upon reasonable grounds that the caveator has such an interest". See also Malcolm CJ at 3, who reached the same conclusion. A similar view has been expressed in New South Wales, Victoria and Queensland. See Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 (Hayne J); Farvet Pty Ltd v Frost [1997] 2 Qd R 39. All the Australian authorities have reached this view following Wootten J's judgment in Bedford Properties at 108 which in turn sprang from the approach of Connolly J in the New Zealand case of Kaihu Valley Railway Co v Kauri Timber Co (1889) 11 NZLR 403. Bedford Properties has been followed in other cases. In the face of those authorities and no argument being advanced that they should not be followed, I will adopt the "honest belief based upon reasonable grounds" test.
However, it should be noted that in all the cases referred to above the issue was about whether there was a caveatable interest. None of the cases involved circumstances where a caveatable interest was found to exist, but where the prohibition was drawn too widely and without reasonable cause. It is important to bear in mind that when lodging a caveat the caveator must "claim" to have an estate or interest and it may be that the subjective aspect arises in those cases because the question then is whether there was any "reasonable cause" for the "claim".
However, that is not the question in this case. The appellant unquestionably has a caveatable interest. The respondent contends that these authorities insofar as they require the consideration of subjective considerations when deciding whether a caveat has been lodged without reasonable cause, would not survive scrutiny in the light of Taylor's case. The respondent reserves the right to argue that Bolton v Excell should not be followed should the matter go further. However, it does not on this appeal, ask this Court to overrule Bolton v Excell or Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 in which Malcolm CJ (Pidgeon and Seaman JJ agreeing) followed Justice Wootten's decision in the Bedford Properties case and it does not need to argue that they do not apply in this case.
The Master made it plain that it was impossible to determine in a summary judgment application and on affidavit, whether the caveator did, or did not, have an "honest belief". What was left for consideration and what is in issue here, is whether, assuming that the appellant had an honest belief, that there were no reasonable grounds (for that belief). That is the objective aspect of the condition which the cases all acknowledge must be demonstrated. That raises the same question which would have to be considered if the law was that there was only an objective test to be applied.

Bolton v Excell and Kuper v Keywest Management

Owen J's judgment in Bolton v Excell reveals that the existence of advice from a solicitor was a fact taken into account in the assessment of whether the caveat in that case was lodged without reasonable cause. His Honour said at 14:
A solicitor also told them that they had an enforceable contract. In my opinion in these circumstances it was not unreasonable for them to accept that advice even though they had not examined the First Offer and the General Conditions of Sale and had not personally satisfied themselves that that which they thought to be the case was in fact the case. In my view the failure of the appellants to examine the First Offer is not something which would render their conduct unreasonable.
The fact that his Honour referred to whether their actions would "render their conduct unreasonable" may suggest that his Honour was referring to an objective consideration. However, his Honour continued his discussion about the "reasonableness of the appellants' conduct" in the next paragraph, concluding in the last sentence of that paragraph that:
In the end it comes back to the question whether, bearing in mind all of the facts and circumstances, the caveator honestly believed on reasonable grounds that he or she had a caveatable interest.
Thus, it seems clear that Owen J was considering all factors which went to both the objective and subjective considerations. He did not distinguish between them. The evidence about the fact that the appellants were "lay people", that there was no evidence that they "had particular experience with land dealings or commercial matters" and that the solicitor had given them advice, arguably goes to the subjective element and what the caveators in that case "believed" and whether they had an "honest" belief that they had an enforceable contract. Malcolm CJ also referred to the fact that the appellants in that case were advised to lodge a caveat and concluded that he was "unable to accept that the appellants could fairly be held to have acted without reasonable cause in this case on the basis that it was unreasonable for them to have acted on the legal advice they were given". It is clear that the Chief Justice had in mind both the subjective and objective elements, because he began his consideration of the facts leading to that conclusion, by referring to the question which he considered to be relevant; namely, "whether the caveator had an honest belief based upon reasonable grounds" that the caveators had an interest to support a caveat. The Chief Justice cited the Bedford Properties case in support of this view. As an aside, it should be noted that the Chief Justice cited Deputy Commissioner of Taxation v Corwest Management Pty Ltd per Brinsden J at 141 ‑ 142 in support of the view that objective and subjective considerations must be taken into account whereas in fact, there appears to be nothing in Corwest's case which supports that view.
The Court in Bolton v Excell took into account the existence of legal advice in forming the view that there were reasonable grounds for the caveator's honest belief. However, the Court did not hold that whenever legal advice is given that a caveat may be lodged, that it cannot then be shown that the caveat was lodged without reasonable cause. Heenan J said as much in McKellar v Singh at [7]. Heenan J also perceived the unsatisfactory result which might flow if advice from a solicitor, however negligent it might be, could be relied upon to disprove that a caveat was lodged without reasonable cause. Palmer J in Lee v Ross (No 2) [2003] NSWSC 507; (2003) 11 BPR 20,991 made a similar observation. He pointed out that the solicitor is the agent of the party who employs the solicitor in the transaction and the acts or omissions of the agent in the transaction are usually taken as those of the principal. He said at [34]:
So, for example, a party to a contract whose solicitor or conveyancer insists on a completely unsupportable construction of the contract cannot be heard to say as against another party to the contract that he or she is relieved of the legal consequences because he or she personally had no view one way or another and simply acted on legal advice. If the advice given by the solicitor or conveyancer without reasonable ground causes the client to be in breach of contract, the client is not exonerated from liability to the other party to the contract and if the client thereby suffers loss, it may be that the client's remedy is against the solicitor or the conveyancer.
Palmer J observed at [37] that to hold that any advice which the solicitor might have given was reasonable because the solicitor did not have a copy of the clause in the contract which falsified the caveator's claim "would be to reward neglect and to punish diligence".
Bolton v Excell indicates no more than that on the facts of that case legal advice was a relevant factor. The case is not authority for the proposition that if a caveat is lodged on legal advice that it could never be proved that the caveat was lodged without reasonable cause. The same may be said about Kuper's case, which also involved the issue about whether the caveator had an honest belief on reasonable grounds for claiming to have a caveatable interest. The question here is whether the caveat was lodged without reasonable cause insofar as it prohibited absolutely the registration of any instrument affecting the claimed interest.

Was there reasonable cause for lodging an absolute caveat?

The appellant's solicitors correctly advised that the appellant was a unitholder in a unit trust and that this gave the appellant a caveatable interest. However, the solicitors gave no consideration in their written advice as to whether the existence of the caveatable interest gave the appellant a right to prohibit "absolutely" the registration of any instrument affecting the claimed interest. Even brief attention to the trust deed would have revealed that the trustee had the power to sell the land (see cl 24) and that no unitholder had the right to interfere with the exercise of that power (cl 35). The letters from the solicitors to the appellant do not reveal that any instructions were given about the facts which motivated the appellant's wish to lodge the caveat, ie the concern that the sale of a part of the land to Baycrest might be in breach of trust. If those instructions were not given about those facts, then what the solicitors advised was based on inadequate information. However, if the solicitors were in fact fully apprised of the facts, they should have advised that an absolute caveat was the wrong form of caveat. They should have advised that an absolute caveat would prohibit dealings which were entirely justified under the trust deed and that there were no grounds for doing so. The fact that they did not give that advice does not assist the appellant. The appellant well knew that there should not be an absolute prohibition on all dealings. Indeed, the appellant did not want to stop any dealings other than the proposed Baycrest transaction.
Viewed objectively, there were no grounds at all, in the circumstances, for the lodgement of an absolute caveat. The appellant did not wish to prohibit the registration of instruments lodged as a result of the sale of property in accordance with the trust deed. Mr Santamaria's affidavit makes it plain that he "did not wish to stand in the way of any sales" but only "wished to protect the trust property" in relation to the sale of one part of the land to Baycrest.
Notwithstanding this it went ahead with the lodgement of a caveat which prohibited absolutely all dealings with the land. There was no reasonable cause for lodging such a caveat.
In Corwest's case, Burt CJ reached the conclusion that the primary Judge was correct to conclude that there was no reasonable cause for lodging the caveat because there was no caveatable interest, but he went on to add that there was "no reasonable cause shown for lodging the caveat forbidding dealings absolutely so as to protect an interest by way of equitable charge". See 134. Wickham J also concluded that the primary Judge's conclusion was correct and also added that "having regard to the interest claimed in the caveat, an absolute caveat was not in any event justified". See 136.
The absolute caveat was not justified in this case. Grounds 1 and 2 must therefore be dismissed.
I agree with the appellant that the fact that the appellant's interest was miniscule is not determinative of the issue about whether the lodgement was without reasonable cause as alleged in ground 3 but that does not affect the outcome. Similarly I agree with the appellant in relation to the points made in grounds 6 and 7 but that does not assist the appellant because for the reasons given above the lodgement of the caveat was lodged without reasonable cause.

Finally ground 4 only had to be decided if the hearing before the Master concerned quantum. It did not because the appellant did not object to the issue of quantum being dealt with later.
As a result the appeal should be dismissed.
BUSS JA: The material facts, the reasoning of the learned Master and the grounds of appeal are set out in the reasons of Pullin JA.

The purpose of a caveat

In J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, Barwick CJ explained, at 552, the purpose of a caveat:
Its purpose is to act as an injunction to the Registrar‑General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator's estate or interest though if noted on the certificate of title, it may operate to give such notice.
Also see Black v Garnock [2007] HCA 31 per Gleeson CJ at [7].

The power to lodge a caveat

Section 137(1) of the Transfer of Land Act 1893 (WA) provides, relevantly, that any beneficiary or other person "claiming" any estate or interest in land under the operation of the Act may lodge a caveat with the Registrar in an approved form. The power to lodge a caveat is not conditional upon the caveator actually having the estate or interest in question. Rather, the caveator must "claim" the relevant estate or interest. Also see Taylor v Couchman (Unreported, NZCA, 29 April 1996); Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 at 288 ‑ 289.

Section 140 of the Transfer of Land Act

Section 140 of the Transfer of Land Act provides:
Any person lodging any caveat with the Registrar either against bringing land under this Act or otherwise without reasonable cause shall be liable to make to any person who may have sustained damage thereby such compensation as a Judge on a summons in chambers shall deem just and order.
A claimant under s 140 must establish that:

(a)a caveat has been lodged;
(b)the caveat was lodged without reasonable cause; and
(c)the claimant has sustained damage as a result of the caveat having been lodged without reasonable cause.

See Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 per Brinsden J at 142; Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 per Clarke JA at 469.

Comparable legislation in other jurisdictions

The Torrens system legislation in each of Victoria, Tasmania, the Australian Capital Territory and New Zealand contains a provision which is identical in substance to s 140 of the Transfer of Land Act. See s 118 of the Transfer of Land Act 1958 (Vic), s 138 of the Land Titles Act 1980 (Tas), s 108 of the Land Titles Act 1925 (ACT) and s 146 of the Land Transfer Act 1952 (NZ). In Edmonds v Donovan (2005) 12 VR 513, Phillips JA (with whom Winneke P and Charles JA agreed) reserved, at 551 [98], the question as to whether s 118 of the Victorian Act authorises compensation in circumstances where a caveat, if lodged with reasonable cause, is maintained when the reasonable cause ceases to exist.
Legislation in New South Wales contains a section which is similar to s 140, and also expressly provides for the payment of compensation where a caveator, without reasonable cause, refuses or fails to withdraw a caveat after being requested to do so. See s 74P of the Real Property Act 1900 (NSW).

The legislation in Queensland and the Northern Territory is materially different in that it imposes on the caveator the onus of proving reasonable cause and it provides for the awarding of exemplary damages. See s 130 of the Land Title Act 1994 (Qld) and s 146 of the Land Title Act (NT). The South Australian legislation requires that the caveat have been lodged "wrongfully and without reasonable cause". See s 191(j) of the Real Property Act 1886 (SA).
The New South Wales authorities concerning claims for compensation as a result of caveats having been lodged without reasonable cause should be approached with some caution, in that:
(a)between 1900 and 1988 the New South Wales legislation provided that any person who, "without reasonable cause", lodged a caveat was liable to pay to any person who sustained pecuniary loss that was attributable to that act, compensation with respect to that loss;
(b)in 1988 the legislation was amended to refer to the lodgment of a caveat "wrongfully and without reasonable cause"; and
(c)on 1 February 1997, "wrongfully" was omitted and the test was restored to its pre‑1988 formulation.
See Truefilm Pty Ltd v J R Investment Holdings Pty Ltd (2004) 12 BPR 22,769 per Gzell J at 22,770 [13] ‑ [14].

Onus of proof

The onus is on the person claiming compensation to prove each of the elements in s 140; that is, the lodging of a caveat, the caveat was lodged without reasonable cause, and the claimant sustained damage as a result of the caveat having been lodged without reasonable cause. See Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 per Wootten J at 107 ‑ 108; Hooke v Holland [1984] WAR 16 per Brinsden J at 18; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 per Hayne J at 600.
The claimant must prove that the caveator acted without reasonable cause at the time the caveat was lodged. See Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993) per Malcolm CJ at 3; Nelson v Kimberley Homes Pty Ltd (1988) NSW ConvR 55‑394 per Young J at 57,656.

The lodging of a caveat forbidding dealings absolutely

A person may not lodge a caveat that is expressed to be an absolute prohibition of dealings when, in the circumstances, it should be expressed to operate only to protect the particular interest claimed. See Corwest Management per Burt CJ at 131, 134; Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287 per Hasluck J at 350 ‑ 351 [342].

The meaning of "without reasonable cause" in s 140

I will consider the meaning of "without reasonable cause" in s 140 in the context of:
(a) a caveat which claims a caveatable interest; and
(b)a caveat which absolutely prohibits any dealings (that is, an absolute caveat as distinct from a subject to claim caveat and a notice caveat),
in circumstances where the caveator did not actually have a caveatable interest or an interest which supported an absolute caveat, as the case may be.
Section 140 refers to "[a]ny person lodging any caveat … without reasonable cause". The subject of the provision is the caveator. The critical question, for the purposes of s 140, is whether the particular caveator acted without reasonable cause in lodging the caveat. That is, s 140 focuses upon whether the particular caveator, in lodging a caveat claiming the estate or interest in question or in lodging an absolute caveat in respect of the claimed estate or interest, acted without reasonable cause. Although the notion of "reasonable cause" is an awkward expression (The State of New South Wales v Taylor (2001) 204 CLR 461 per Gleeson CJ, McHugh and Hayne JJ at 467 ‑ 468 [15]), the authorities on s 140 and comparable provisions in other jurisdictions have established that "reasonable cause", in relation to a particular caveator, embodies subjective and objective elements. The subjective element is the existence of an honest belief that he or she had a caveatable interest or an interest which supported an absolute caveat. The objective element is the existence of reasonable grounds for the honest belief. The purpose of the particular caveator in lodging the caveat may be relevant in deciding whether it was lodged without reasonable cause. The decision in Taylor is distinguishable. It involved a different statutory context and the structure of the provision which included the expression "reasonable cause" was materially different. See the joint judgment of Gleeson CJ, McHugh and Hayne JJ at 464 [1], 466 ‑ 467 [10] ‑ [11], 467 ‑ 468 [15].
The foundation for the existence of "reasonable cause", within s 140, is, therefore, not whether the caveator actually had a caveatable interest or an interest which supported an absolute caveat, but whether the caveator had an honest belief, based upon reasonable grounds, that he or she had such an interest. See Corwest Management per Burt CJ at 131, 134 and per Brinsden J at 141 ‑ 142; Bedford Properties per Wootten J at 108; Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 per Malcolm CJ at 433 ‑ 434; Dykstra v Dykstra (1991) 22 NSWLR 556 per McLelland J at 557 ‑ 558; Baranyay per Hayne J at 600; Bolton per Malcolm CJ at 3, and per Owen J (with whom Ipp J agreed) at 10 ‑ 11; Beca Developments per Clarke JA at 469 ‑ 470; Truefilm per Gzell J at 22,770 [15] ‑ [16].
However, the existence of an honest belief, based upon reasonable grounds, that there was a caveatable interest or an interest which supported an absolute caveat, as the case may be, may not, of itself, be sufficient. As Wootten J observed in Bedford Properties at 108:
I think the foundation for reasonable cause must be, not the actual possession of a caveatable interest, but an honest belief based on reasonable grounds that the caveator has such an interest. That, of course, may not be enough. In Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463 a caveator was held to have acted without reasonable cause when he lodged a caveat not for the protection of his interest but for an ulterior motive and without regard to its effect on transactions to which the caveator had agreed. Macfarlan J found that the caveator had been entitled to lodge the caveat, but he treated the question of whether or not he had the interest he claimed as irrelevant (pp 1472, 1473): see also Deputy Commissioner of Taxation v Corwest Management Pty Ltd (1978) WAR 129, at pp 141, 142.
Those observations were approved by Hayne J in Baranyay at 600. Also see Edmonds per Phillips JA at 548 [91].
Accordingly, a caveator who had an honest belief, based upon reasonable grounds, as to the existence of a caveatable interest or an interest which supported an absolute caveat (but who did not actually have such an interest) may not act with reasonable cause if the caveat was lodged for an ulterior or improper purpose.
Although it is well‑established that an ulterior or improper purpose is relevant where the caveator did not actually have a caveatable interest or an interest which supported an absolute caveat, but defends a claim under s 140 on the basis of an honest belief, based upon reasonable grounds, as to the existence of such an interest, the authorities are divided as to the relevance of an ulterior or improper purpose where the caveator actually had a caveatable interest or an interest which supported an absolute caveat. In Beca Developments, Clarke JA said, at 475:
It cannot be said, in my view, that a person who has a caveatable interest has no reasonable cause for lodging a caveat simply because he has some ulterior motive for lodging the caveat. The existence of the interest provides the reasonable cause. In this respect I am unable to agree with the reasoning of Macfarlan J in Young.
Waddell AJA agreed, in substance, with this aspect of Clarke JA's judgment. After referring to the decision of Macfarlan J in Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463, Waddell AJA said, at 479:
It is clear, I think, that [Macfarlan J] was expressing the view that, even if it is established that a caveator had the estate or interest which the caveat was lodged to protect, he may be held to have lodged it unreasonably if he did so contrary to contractual arrangements which he had entered into or for an ulterior purpose. With great respect to the learned judge, I do not think that this can be regarded as a satisfactory decision. It seems to me to be wrong in principle to award compensation to another person for breach of his contractual rights through the medium of a statutory provision such as the former section 98.
By contrast, in Kuper, Malcolm CJ (with whom Pidgeon and Seaman JJ agreed) appears to have agreed with Macfarlan J on this issue. Malcolm CJ said, at 434:
… I consider that the approach adopted by Macfarlan J in Young v Rydalmere Credits Pty Ltd [1964 ‑ 5] NSWR 1001 is correct. In Young it was held that although there was a caveatable interest the caveat was lodged for an ulterior motive and not by reason of fear of loss and damage.
It is unnecessary, in this appeal, to express an opinion in relation to this division in the authorities.

The notion of "without reasonable cause" in the context of a caveator taking legal advice

Before lodging a caveat, a person can reasonably be expected to get legal advice, and be reasonably sure that there is a proper ground for lodgment. See Bedford Properties at 109, where Wootten J noted:
If he does not, he may find that he has acted at his peril. This is all the more so when he knows, as Mr Richards [a director and shareholder of the defendant] knew, and indeed intended, that his action will prevent an important transaction involving a large sum of money.
In Bolton, the Full Court of the Supreme Court of Western Australia considered whether a client, who takes advice from a solicitor, and then, on the basis of that advice, instructs the solicitor to lodge a caveat, can be liable under s 140.
The salient facts of Bolton were these. On 24 December 1988, the respondents agreed to sell a parcel of land to a Ms Matthews and a Ms Davies ("the First Purchasers") pursuant to a contract of sale ("the First Contract"). The First Contract was conditional upon the First Purchasers selling two other properties by 25 January 1989. The First Contract also contained a term whereby the respondents reserved "the right to accept another more amenable offer but first giving the [First Purchasers] 72 hours notice in writing to make their offer unconditional". On 28 December 1988, the respondents agreed to sell the parcel of land in question to the appellants pursuant to a contract of sale ("the Second Contract"). The Second Contract contained a clause in these terms:
The [appellants] are aware an existing offer has been accepted giving [the First Purchasers] the option to make their offer unconditional within 72 hours as of noon Wednesday, 28 December, being the date of acceptance of this offer.
The respondents' agent gave notice to the First Purchasers pursuant to the "72 hour clause". On 3 January 1989, the First Purchasers served a written notice on the respondents in which they made the First Contract unconditional. A dispute arose as to whether the First Purchasers had elected to make the First Contract unconditional within the 72‑hour period and this turned on whether that period included public service holidays. Ultimately, it was held that the First Purchasers had validly exercised their rights under the "72‑hour clause" and that the First Contract was unconditional.
On 4 January 1989, the appellants consulted a solicitor concerning the Second Contract. The solicitor advised them that they were entitled to enforce the Second Contract and that they should lodge a caveat against the property to protect their rights. On 4 January 1989, the appellants lodged an absolute caveat claiming an estate or interest in fee simple which was said to arise by virtue of the Second Contract. The respondents asserted that the appellants had lodged a caveat when they had no interest in the property, and claimed damages under s 140.
The trial Judge found that the appellants had lodged their caveat without reasonable cause. He said that the appellants had negligently failed to carry out or cause to be carried out " … much more precise and careful investigation" than was apparently made as to the terms of the First Contract. His Honour said:
In those circumstances, the taking of legal advice could not have been expressed in sufficiently concrete terms or must self‑evidently have been given in circumstances where the precise nature of the relevant contractual terms was unknown to [the appellants], upon their own admission. In those circumstances I am satisfied that it has been established that they acted without reasonable cause …
The Full Court allowed the appellants' appeal.
Malcolm CJ said, at 4 ‑ 5:
It is not altogether clear whether the learned Judge meant that the appellants failed to give adequate instructions to their solicitors when seeking advice, or failed to appreciate that the advice given was not in sufficiently concrete terms to justify them acting on it by lodging a caveat. Although I am inclined to infer that he meant the latter, I am of opinion that, in either case, the learned Judge was in error. If the instructions were inadequate, it was reasonable to expect that the solicitors would seek further information. If the finding was that the advice was inadequate and the appellants should have appreciated that, and not acted upon it, I consider that the finding was against the evidence. The appellants were advised that their contract was enforceable and that they should lodge a caveat. The admitted fact that this advice was given when the appellants were not aware of the precise terms of the earlier contract cannot be held against them as a basis for a conclusion that they acted without reasonable cause. They were entitled to assume that the solicitors they consulted were satisfied that they had sufficient information to enable them to give the advice and to rely on the advice they were given. It was not the responsibility of the appellants to determine the scope of the investigations which their solicitors made before advising them. I am unable to accept that the appellants could fairly be held to have acted without reasonable cause in this case on the basis that it was unreasonable for them to have acted on the legal advice they were given.
Owen J (with whom Ipp J agreed) said, at 11, that there were at least five matters which were relevant in determining whether or not the appellants held an honest belief, on reasonable grounds, as to the existence of a caveatable interest. The legal advice which the appellants obtained was, in his Honour's view, of critical significance. His Honour said, at 12 ‑ 13:
The appellants consulted a solicitor and were given legal advice that they were entitled to enforce the [Second Contract] and that they should lodge a caveat to protect their rights. As the learned trial Judge pointed out, no evidence was placed before the Court as to the precise terms of the advice. However, [the appellants' solicitor's] letter of 4 January 1989 to the Commissioner of State Taxation (to which I have referred earlier) is consistent with the appellants' contention that they received advice to the effect that they have a caveatable interest. It could not be said that they acted precipitously. They took the step which would normally be expected of a reasonable person in a position of uncertainty as to legal rights, namely, they obtained the advice of a legal practitioner.
A little later in his reasons, Owen J noted that the only substantial ground advanced by counsel for the respondents to satisfy the onus of establishing that the appellants did not hold their belief honestly or on reasonable grounds was that the appellants should have examined the First Contract before lodging the caveat. His Honour said, at 13:
There is no evidence that [the appellants' solicitor] called for or examined the [First Contract] before giving the advice which he gave. Counsel for the respondents submitted that the [Second Contract] is inextricably linked with the [First Contract] and that had the [First Contract] been inspected, the true position as to the expiry of the period within which the First Purchasers were required to act would have been known to the appellants. Counsel submitted that given the failure of the appellants to call for and inspect the [First Contract] they cannot be heard to complain that they were not aware of the precise nature of its terms. This submission is at the heart of the appeal.
Owen J then noted that the case before the Court did not concern professional negligence. Whether the appellants' solicitor did call for, or should have called for, and examined the First Contract before giving his advice and, if he had done so, whether the advice would have been any different, were not the critical questions. His Honour said, at 13 ‑ 14:
Assuming, for the purposes of argument, that the solicitor's enquiry was incomplete, the question is whether the appellants acted honestly and reasonably in relying on the advice which they were given. There will be cases where a client will be bound by the advice which he or she obtains from a solicitor. An example would be where the solicitor has not been properly instructed. A client cannot absolve himself or herself of responsibility simply by taking legal advice. That is not enough. On the other hand it would be wrong to view the advice in isolation. It must be considered in the situation in which it was given. Ultimately, the question comes back to the reasonableness and honesty with which the caveator has formed his or her belief as to the existence of a caveatable interest.
The appellants are lay people. There was no evidence that they had particular experience with land dealings or commercial matters. They had a contract. It was a contract which was drafted by a person who, because of his relationship to the estate agency which was representing the vendor, could reasonably be expected to translate the terms of the relevant condition accurately onto the contract. Taken at face value, the time limit specified in the condition appeared to have expired. The agent with whom the appellants had dealt told them that they had an enforceable contract. A solicitor also told them that they had an enforceable contract. In my opinion in these circumstances it was not unreasonable for them to accept that advice even though they had not examined the [First Contract] and the General Conditions of Sale and had not personally satisfied themselves that that which they thought to be the case was in fact the case. In my view the failure of the appellants to examine the [First Contract] is not something which would render their conduct unreasonable.
Bolton should be followed, and Owen J's reasoning applied, in this State unless the High Court or a Bench of this Court comprising five Judges decides otherwise. See Re Calder; Ex parte Cable Sands (WA) Pty Ltd (1998) 20 WAR 343 per Steytler J (as his Honour then was) at 354.

The "imputing" to a client of a solicitor's absence of reasonable grounds for advice where the client, on the basis of that advice, lodges a caveat

In McKellar v Singh [1999] WASC 145, a Judge of the Supreme Court of Western Australia ordered the defendant to remove a caveat which he had lodged against the title to the plaintiffs' land. His Honour found that the defendant did not at any material time have a caveatable interest. The plaintiffs then sought compensation from the defendant under s 140. Before lodging the caveat, the defendant and his wife consulted a solicitor in Fremantle who, according to them, gave advice that they "had to put a caveat on the plaintiff's property in order to recover damages". The defendant then sought a second opinion from another solicitor. The trial Judge was satisfied that the second solicitor advised the defendant against lodging a caveat. The defendant then contacted the first solicitor who prepared and lodged the caveat. Heenan J doubted whether the defendant honestly believed that he had a caveatable interest, and was "positively satisfied" that he did not have reasonable grounds for such a belief. His Honour said, at [9]:
Bearing in mind the concerns expressed to him by his wife following their first meeting with the solicitor, his decision not to lodge the caveat at that time and the different advice which he received from the solicitor in Nedlands, I am satisfied that by mid-1997 the defendant either had grave doubt or should have had grave doubt as to the reliability of the advice which he had first received. He was given further reason for such doubt when he saw that the solicitor experienced difficulty in having the caveat accepted. Bearing in mind that there had been a lapse of six months or more since he was first advised to lodge a caveat and a lapse of about four months since he became aware that the plaintiffs had put their property on the market, I am inclined to think that his decision to lodge the caveat on 28 July 1997 was prompted rather by his own animosity towards the plaintiffs than by any belief which he might have retained in the soundness of the advice which the solicitor in Fremantle had given him. I doubt whether he acted on that advice but, if he did, I find that it was unreasonable of him to do so. In all the circumstances I doubt whether the defendant honestly believed that he had a caveatable interest in the land and I am positively satisfied that he did not have reasonable grounds for such a belief. The plaintiffs therefore are entitled to compensation for the damage which they have sustained by reason of the lodging of the caveat.
Earlier in his reasons, Heenan J considered the decision in Bolton, and expressed the opinion that where a solicitor lodges a caveat with his or her client's authority and with full knowledge of the relevant circumstances, whether or not the caveat was lodged with reasonable cause generally should depend solely upon a finding as to the reasonableness or otherwise of the solicitor's action in lodging the caveat. His Honour said, at [7]:
On the evidence presently before the Court it is clear that, if he had the skill and knowledge which one expects of a member of the legal profession, the solicitor in question should have known that there was no caveatable interest to be protected. He had no reasonable grounds for believing otherwise. As a solicitor acting in his professional capacity is the agent of his client, I should have thought that, even if the defendant personally had been blameless, he would be liable to the plaintiffs on the basis that his solicitor had lodged the caveat without reasonable cause. However, at the hearing of this matter counsel for the plaintiffs informed me that, relying upon the authority of Bolton v Excell, unreported; FCt SCt of WA; Library No 930175; 7 April 1993, he accepted that the issue before me was whether the defendant acted honestly and reasonably in relying upon the advice which he was given by the solicitor who lodged the caveat. I am satisfied that counsel erred in taking that approach. In Bolton v Excell, unlike this case, the evidence did not clearly show that the solicitor did not have reasonable grounds for belief that his clients had a caveatable interest. It was necessary, therefore, for the court to consider whether the evidence showed the absence of reasonable grounds for such a belief on the part of the caveators themselves. As it happened, the court resolved the issue in favour of the caveators. That case is not authority for the proposition that whenever a caveat is lodged by a solicitor on behalf of a client an applicant for compensation under s 140 of the Act bears the onus of proving that the client personally did not have an honest belief based upon reasonable grounds as to the existence of a caveatable interest. If that were so the claimant might well be without a remedy no matter how negligent the solicitor and how great the damage done by the lodging of the caveat. In my opinion, in a case such as the present one - in which the solicitor has acted with the authority of the client and has full knowledge of the relevant circumstances - a decision as to whether or not the caveat was lodged without reasonable cause generally should depend solely upon a finding as to the reasonableness or otherwise of the solicitor's action in lodging the caveat. In the present case the approach taken by counsel produces the same result.

In Lee v Ross (No 2) (2003) 11 BPR 20,991, the plaintiffs were purchasers of the defendants' land under an alleged contract of sale. The plaintiffs lodged a caveat. In the Supreme Court of New South Wales, Palmer J held that the plaintiffs did not have reasonable grounds for believing that the contract they thought had come into existence had not been validly terminated by the defendants. The plaintiffs' solicitor should have understood that the defendants' purported termination was valid, and advised the plaintiffs accordingly. He did not do so because he had mislaid a special condition in the alleged contract. His Honour held that the plaintiffs did not have reasonable grounds for their honest belief that they had a caveatable interest in that advice to that effect from their solicitor was based on a "completely unsupportable construction" of the alleged contract. According to his Honour, at 20,995 ‑ 20,996 [33] ‑ [35]:
It is important to recognise that for the purpose of liability for compensation under s 74P(1) of the Act the position of a party to a contract for sale who caveats the title to protect an interest under the contract is not always separate and distinct from the position of the solicitor or conveyancer who is acting for that party in the conveyance. Such a solicitor or conveyancer is the agent of the party who employs him or her in the transaction and the acts and omissions of the agent in the transaction are usually taken as those of the principal.
So, for example, a party to a contract whose solicitor or conveyancer insists on a completely unsupportable construction of the contract cannot be heard to say as against another party to the contract that he or she is relieved of the legal consequences because he or she personally had no view one way or another and simply acted on legal advice. If the advice given by the solicitor or conveyancer without reasonable ground causes the client to be in breach of contract, the client is not exonerated from liability to the other party to the contract and if the client thereby suffers loss, it may be that the client's remedy is against the solicitor or the conveyancer.
These observations are not, of course, addressed to a situation such as came before Powell J in Horswell v Paul [(1983) NSW ConvR 55‑126 at 56,942], above. There, prior to the lodgement of a caveat, the purchaser's solicitor had obtained the advice of counsel that a caveatable interest existed. In those circumstances, his Honour said that the vendor failed to show that the caveat had been lodged without reasonable cause. No doubt his Honour was of the view that counsel whose advice was sought was simply expressing a tenable legal opinion on the facts presented in the brief. His Honour does not discuss what would have been the result if, for example, the purchaser's solicitor had deliberately or negligently misstated critical facts in the brief to counsel.
His Honour concluded, at 20,996 [37] ‑ [38]:
Whichever of the two possibilities is correct, in my view, Mr Kwon could have had no reasonable ground for advising the purchasers that Mr Ross was acting inconsistently with the contract and that his termination on 7 March 1997 was, therefore, invalid. To hold that any advice which Mr Kwon might have given to the purchasers was reasonable because Mr Kwon did not have a copy of special condition 45 in his file at the time would be to reward neglect and to punish diligence. Unfortunately for the purchasers, they are visited with the consequences of acting on Mr Kwon's advice; as he had no reasonable ground to believe that a contract was still in existence on 14 March and that the purchasers therefore had a caveatable interest in the land under that contract, neither did the purchasers have a reasonable ground for such a belief for the purposes of s 74P(1).
It follows from the above that I am satisfied that the caveat was lodged without reasonable cause, so that the vendors have made out a basis for the purchasers' liability under s 74P(1).
In my opinion, Heenan J's analysis in McKellar of the Full Court's decision in Bolton was, with respect, in error. Bolton is authority for the proposition that even negligent advice from a solicitor to a client who, in reliance on the advice, lodges a caveat, may provide the caveator with reasonable grounds for an honest belief that he or she had a caveatable interest, if the caveator has not contributed to the giving of the wrong advice, for example, as a result of failing properly to inform the solicitor of the relevant facts. Also see Gordon per Blanchard J (who delivered the judgment of the Court of Appeal of New Zealand) at 288.
The observation of Palmer J in Lee to the effect that where a person, in reliance upon the advice of a solicitor, gives instructions to the solicitor to lodge a caveat, the client will have acted without reasonable cause if the solicitor did not have reasonable grounds for the advice given, is inconsistent with the proposition for which Bolton is authority. Bolton was not cited in Lee.
It is important to bear in mind that a solicitor who advises a client that he or she has a caveatable interest or an interest which supports an absolute caveat is not, in the giving of that advice, acting as the client's agent. If the client, on the basis of the solicitor's advice, instructs the solicitor to prepare, sign and lodge a caveat and the solicitor carries out those instructions, the solicitor will be the client's agent, relevantly, in signing the caveat and attending to lodgment.
Ultimately, as Owen J pointed out in Bolton at 13 ‑ 14, the content and accuracy of legal advice must be evaluated with all other relevant facts and circumstances in determining the honesty and reasonableness of the caveator's belief as to the existence of a caveatable interest. This approach also applies where the caveator's belief concerns the existence of an interest which supported an absolute caveat.
Finally, in this context, I should mention that in New Zealand there is a line of authority, based on the Court of Appeal's decision in Gordon, to the effect that solicitors and other agents may be rendered liable for the payment of compensation under the New Zealand counterpart to s 140 where they have played a part in lodging a caveat which proves to have been lodged without reasonable cause. See Gordon at 287 ‑ 289. It is unnecessary, in this appeal, to determine whether the reasoning on this issue in Gordon is applicable to the Western Australian provision.

The decision in Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14

In Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14, being proceedings which are related to this appeal, Pullin J (as his Honour then was) held that the appellant, in this appeal, had a caveatable interest in the land in question. His Honour also held, however, that the appellant's interest did not entitle it to lodge an absolute caveat. That is, the appellant had no right to lodge an absolute caveat based merely upon its interest as a beneficiary in the unit trust. His Honour ordered the appellant to remove the absolute caveat, but gave it leave to lodge a notice caveat in a form approved by the Court.

The merits of the appeal

The learned Master dealt with the respondent's summary judgment application in relation to its claim under s 140 on the basis that, at all material times, the appellant had an honest belief that it was entitled to lodge an absolute caveat. Before the Master, counsel for the respondent properly conceded that, on the summary judgment application, he was not in a position to establish that the appellant did not have an honest belief.
The appellant decided to lodge the caveat because it became aware that the respondent proposed to sell some of the trust land to a company, Baycrest Pty Ltd. Mr Barry Waller was a director of the respondent. A relative of Mr Waller was a director of Baycrest Pty Ltd and an associate of Mr Waller was its secretary. The learned Master said, at [14] ‑ [16]:
At the time of lodging the caveat, the [appellant] had no information about the terms of the proposed sale, although it had requested this information of the [respondent]. In effect, the [appellant] sought to maintain the caveat because it had not been provided with information about the terms of sale, and because it was allegedly "concerned" that the sale could be less than market value. …
The learned Master set out, at [19], the letters dated 3 September 2002 and 4 September 2002 from Jackson McDonald, solicitors, to the appellant, which have been reproduced by Pullin JA in his reasons. He then said, at [20] ‑ [21]:
It has to be said that these letters are remarkably brief. In fact, they may not amount to legal advice at all. Both letters are rather mechanical in nature. The [appellant] has not seen fit to give any indication of what instructions were issued to the solicitors which resulted in these letters. There is certainly nothing in either letter which suggests a detailed brief was delivered which resulted in comprehensive advice.
Nonetheless, it must be accepted that legal advice was sought and obtained by the [appellant] prior to lodging the caveat. The consequences of seeking legal advice when assessing whether a caveator acted reasonably in lodging the caveat must necessarily depend upon the circumstances. This is exemplified by what was said by Heenan J in McKellar & Anor v Singh [1999] WASC 145. …
The learned Master found, at [22], that if the appellant relied on the legal advice given by Jackson McDonald in the letters of 3 and 4 September 2002, it was "clearly unreasonable" for it to do so. He added:
In no way can it be said that the advice is comprehensive or that it was given after the solicitor concerned had been fully apprised of all relevant facts. If it was the case that the solicitor was comprehensively briefed, then it was for the [appellant] to put that evidence before the Court …
The learned Master asserted, at [23], that the unreasonableness of the appellant's position was compounded by the fact that it had a minuscule interest in the unit trust:
To lodge an absolute caveat in such circumstances was out of all proportion to what might have been regarded as reasonable to protect the [appellant's] position.
The learned Master concluded, at [24]:
I am satisfied, then, that although the [appellant] may have had an honest belief it was entitled to lodge a caveat, I am not satisfied that belief was held on reasonable grounds. There ought therefore be judgment for the [respondent] with damages to be assessed.
It is plain, in my opinion, that the appellant's interest in the land in question did not entitle it to lodge an absolute caveat. By cl 8(b) of the trust deed, relevantly, each unit holder has a beneficial interest in the trust fund as an entirety, but no unit holder is entitled to any particular security or investment and no unit holder is entitled to a transfer of any property comprised in the trust fund. By cl 24 of the deed, the trustee has power, relevantly, to sell or dispose of any real or personal property of the trust fund. Clause 35 provides, relevantly, that no unit holder shall interfere with the exercise by the trustee of the rights and powers of the trustee as the owner of the investments comprised in the trust fund.
The critical issue in the summary judgment application was whether, upon the evidence before the learned Master, the appellant had a reasonably arguable defence to that part of the respondent's claim which required it to prove that the appellant's honest belief (which was assumed for the purposes of the application) that it was entitled to lodge an absolute caveat was not based on any reasonable grounds. The assumption of an honest belief necessarily carried with it an assumption, for the purposes of the application, that the appellant did not lodge an absolute caveat for an ulterior or improper purpose.
The learned Master's conclusion, at [24], that he was not satisfied that the appellant's honest belief was held on reasonable grounds reveals an error. There is a fundamental distinction between not being satisfied that an honest belief was held on reasonable grounds, on the one hand, and the correct test, namely, being satisfied that an honest belief was not held on reasonable grounds, on the other. Compare Edmonds per Phillips JA at 550 [97].
The learned Master was also in error, with respect, in suggesting, at [20], that the letters dated 3 and 4 September 2002 from Jackson McDonald to the appellant "may not amount to legal advice at all". In my opinion, the solicitors did provide legal advice. Jackson McDonald examined the trust deed and, in the letter dated 4 September 2002, advised that the appellant had a caveatable interest. That advice was correct. See Binningup Nominees [2004] WASC 14, and also see [102] above.
After Jackson McDonald advised the appellant that it had a caveatable interest in the land, the appellant instructed them to prepare and lodge a caveat. Jackson McDonald then prepared the caveat which, relevantly:
(a)stated that the estate or interest being claimed was "As beneficiary of a trust, against land held by the trustee for the trust";
(b)forbid the registration of any instrument affecting the estate or interest "Absolutely"; and
(c)was dated 6 September 2002 and signed by Jackson McDonald as "solicitors and agents" for the appellant.
The caveat bears an indorsement that it was lodged by Sherwood Court Settlements (which is a settlement agent associated with Jackson McDonald).
No evidence was adduced, by either the appellant or the respondent, in relation to the giving or receiving of any advice that an absolute caveat (as distinct from a subject to claim caveat or a notice caveat) should be lodged.
A decision as to the appropriate caveat to be lodged (in particular, whether it was appropriate to lodge an absolute caveat) required legal advice. It was necessary for the trust deed to be examined and for consideration to be given to the nature of the appellant's interest in the trust fund, the powers of the respondent as trustee, and the potential consequences for the respondent, as the registered proprietor, arising from the lodgment of an absolute caveat.
In its letter dated 3 September 2002, Jackson McDonald requested a copy of the trust deed, and on 4 September 2002 the appellant sent them a copy of the deed. Jackson McDonald refer to the deed in their letter dated 4 September 2002.
The appellant's request for advice from Jackson McDonald as to whether there were grounds to lodge a caveat, and the appellant's instructions (after receipt of that advice) to lodge a caveat, at least arguably imposed on Jackson McDonald a duty to give any advice reasonably necessary as to the form and type of caveat which should be lodged, whether advice as to the form or type of caveat was expressly requested or not. Compare Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 per Anderson J at 332 ‑ 333.
In my opinion, the learned Master erred, with respect, in failing to hold, on the basis of the facts and circumstances referred to at [103], [109] and [111] ‑ [116] above, that the appellant had a reasonably arguable defence to that part of the respondent's claim which required it to prove that the appellant's honest belief that it was entitled to lodge an absolute caveat was not based on any reasonable grounds. A trial was necessary in order to find the facts relating to the decision to lodge an absolute caveat instead of a subject to claim caveat or a notice caveat, and to undertake the task referred to by Owen J in Bolton at 13 ‑ 14; namely, to evaluate those facts, with all other relevant facts and circumstances, and judge the honesty and reasonableness of the appellant's alleged belief as to the existence of an interest which supported an absolute caveat. The summary judgment application should have been dismissed, and unconditional leave to defend granted.
I would allow the appeal.