KB Corporate Pty Ltd v Sayfe
[2017] VSC 623
•22 December 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 04393
| KB CORPORATE PTY LTD | Plaintiff |
| v | |
| SIMON SAYFE (also known as SIMON KHOURY) | First Defendant |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | Mukhtar AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 November 2017 |
DATE OF JUDGMENT: | 22 December 2017 |
CASE MAY BE CITED AS: | KB Corporate Pty Ltd v Sayfe and anor |
MEDIUM NEUTRAL CITATION: | [2017] VSC 623 |
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REAL PROPERTY — Caveat — Caveator lacking caveatable interest — Claim for compensation for lodging caveat without reasonable cause — Applicable principles — Proof of causation of damage — Transfer of Land Act 1958 (Vic), s 118
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Gronow SC | SLF Lawyers |
| For the First Defendant | No appearance | |
| For the Second Defendant | No appearance |
HIS HONOUR:
On 8 November 2017, the Court (McMillan J) made orders by consent requiring the defendant to remove ten caveats lodged over the plaintiff’s properties. The properties were in the nature of strata title storage units in Collins Street Melbourne. The orders also referred to an Associate Judge ‘the question of costs’; that is the plaintiff’s costs of this proceeding. The originating motion and the summons on the motion both make the claim ‘That the First Defendant be directed to pay the Plaintiff its legal costs on an indemnity basis fixed in the sum of $15,642…‘ and also claim ‘That the First Defendant be directed to pay to the Plaintiff the loss and damage incurred as a result of his action, fixed in the sum of $33,174.06’. The latter can be taken to be an application by the plaintiff under s 118 of the Transfer of Land Act which states that ‘Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as a court deems just and orders’.
The order of McMillan J made no reference to the compensation claim. For the purposes of the removal application before her Honour, the plaintiff’s counsel filed ‘Short Written Outline of Submissions’ dated 1 November 2015 which stated:
11.The plaintiff should also be able to obtain from the first defendant damages and compensation in the additional sums in which it is now indebted to both lenders and other costs as set out in Mr Bell’s affidavit pursuant to s 118 of the Act. That is because, for the reasons given above, the first defendant has lodged the caveats ‘without reasonable cause’.
12.The first defendant cannot say that he had ‘an honest belief based on reasonable grounds’ that he had a caveatable interest in the storage unit properties, and appears to have lodged the caveats for an ’ulterior motive’ and purpose. [footnote omitted]
The affidavit of Mr Kaine Norman George Bell, to which the submissions refer, was sworn on 31 October 2017 in support of the removal application. He is the sole director, sole secretary and sole shareholder of the plaintiff. In it, he claimed compensation of $33,175.06 for the company, the components of which I shall return to later. As the claim for compensation was there propounded, at my instigation, an order made by Cavanough J on 29 November 2017 referred the application for compensation to an Associate Justice for hearing and determination under r 77.05.
In an unopposed hearing on 29 November 2017, I made an order requiring the first defendant to pay the plaintiff’s costs on the indemnity basis, that is, a basis of taxation of costs within the meaning of rule 63.30.1(1). I did so because on the objective evidence, the plaintiff was able to show there were no apparent grounds for lodging the caveat. I fixed costs at $28,114.12 according to the statement of reasons attached to that order.
I proceeded to hear the compensation claim. It concerned consequential losses said to have been suffered by the plaintiff in two other dealings. One was a two month loan agreement between the plaintiff and a private financier, Rigoni Private Finance Pty Ltd, for a loan of $172,000. That included prepaid interest of $10,320 for two months. Another more significant deal was a purchase of land in Kalkite New South Wales for $5.5 million between High Country Holdings Pty Ltd as purchaser (a company of which Mr Bell was sole director and shareholder) and Patricia Gaines as vendor. In essence the plaintiff says that the caveats delayed or impaired those dealings as a result of which it has incurred expense and financial liability, for which it says the first defendant ought pay compensation.
The affidavit evidence from Mr Bell in support of the claim was based on assertion and inelaborate facts. There were some odd circumstances shown by the documents, to which I shall return, agitating a sense of caution by the Court. As an unopposed matter, it caused apprehensions whether all facts had been properly adduced to enable the Court to properly assess the compensation claim. And there was the essential question of causation. I detected there was some sort of unexplained business or financial association between Mr Kaine Bell and the caveator Mr Sayfe. Senior counsel informed the Court there had been a ‘falling out’ between them. The Court then acceded to a request by senior counsel for an adjournment to file and service better affidavits, and a request that the compensation claim then be decided ‘on the papers’ that is without the need for another court appearance. That is not usual in substantive matters. But that is what was sought, in the expectation that objective facts would be clarified and documented to give reliability and sustain the claim. It must be said that this requested method of judicial adjudication means the Court decides the application on the material as presented ― ‘as is’. The plaintiff incurs especially the responsibility of adducing all that is necessary to satisfy its onus of proof and the legal elements of the claim.
Since then, Mr Bell has sworn a second affidavit dated 5 December 2017 in support of the compensation claim. The claim is now quantified at $33,343.22 which is a little bit more than the figure of $33,174.06 in the motion and more than the figure of $29,561.44 in Mr Bell’s first affidavit sworn 31 October 2017.
An affidavit of Sonja Ellis sworn 28 November 2017 proves postal service of the Court’s order and the additional affidavit material on the first defendant. There has been no communication to the Court by or on behalf of Mr Sayfe, and I would have expected the plaintiff’s solicitors to inform the Court if he had made contact with them in the meantime in a way material to the procedural way the court is proceeding. Thus, the compensation claim is unopposed. But as will appear, the matter is not elementary and requires some discourse on the law and an analysis of the facts which are not straightforward and, I have found, quite strange.
For a compensation order to be obtained under s 118 it is not enough to show that the caveator Mr Sayfe did not have a caveatable interest. The power to lodge a caveat is not conditional upon the caveator actually having the estate or interest in question. Even though no caveatable interest is shown to exist, it may be that the caveator believed he did have such an interest especially if he had taken legal advice in the matter. The plaintiff has the onus of proving that the caveator did not have an honest belief based on reasonable grounds that he had a caveatable interest. That has both a subjective and objective element. The approach to be taken was considered by the Victorian Court of Appeal in 2005 in Edmonds v Donovan and Others[1] and earlier this year by the New South Wales Court of Appeal in New Galaxy Investments Pty Ltd v Thomson & Others.[2]
[1](2005) 12 VR 513.
[2][2017] NSWCA 153.
Edmonds v Donovan affirmed that to recover compensation for the lodging of a caveat, the aggrieved party must go further than showing simply that the caveator never had a caveatable interest.[3] It recognised the earlier view of Hayne J in Commonwealth Bank v Baranyay[4] that the foundation for reasonable cause will often not be the actual possession of a caveatable interest but will be an honest belief based on reasonable grounds that the caveator had such an interest. Even then, it may be that an honest belief on reasonable grounds may not always be enough to show reasonable cause if, for example, the caveator was actuated not by the protection of the caveator’s interest but for an ulterior motive.[5] The Court of Appeal reversed the trial judge’s award for compensation as the judge focussed erroneously on the absence of a caveatable interest to conclude that there was no honest belief. Edmonds v Donovan recognises that a number of possibilities can arise to inform the question of belief and reasonable grounds when there is a dispute between parties and one of them lodges a caveat to protect an interest.
[3]Edmonds at [91].
[4][1983] 1 VR 589.
[5]Baranyay at p 600.
The New Galaxy case concerned a caveat compensation claim under identical Torrens title legislation in New South Wales. The facts were complicated but for present purposes it is enough to say that the trial Judge made a finding akin to the finding I was asked to make in this case: that the caveator had no caveatable interest and lodged caveats without giving any thought at all to their validity; defiantly maintained them; and then withdrew them at trial.[6] In New Galaxy there was an absence of any affirmative evidence by the caveators about their belief and the compensation claimants contended that their case (like this one) was established by inference from known facts, being primarily that the caveator had no caveatable interest. The primary judge made a declaration that the caveats had been lodged and maintained without reasonable cause, and ordered compensation of $796,026. The Court of Appeal by majority (Sackville AJA, Gleeson JA concurring; Basten JA dissenting) held there was no caveatable interest. But, on the question whether compensation was payable, the Court split differently – Basten and Gleeson JJA holding that no compensation was payable, Sackville AJA dissenting.
[6]New Galaxy at [54].
New Galaxy affirms the view that the onus lies on the claimant to show the caveator acted without reasonable cause; and that it is not enough to show the caveator did not have a caveatable interest. Basten JA held that the correct understanding of the phrase ‘without reasonable cause’ is that as stated by Biscoe AJ in Natuna v Cook[7] and accepted by the New South Wales Court of Appeal in Mahendran v Chase Enterprises[8] that ‘”Reasonable cause” for the lodgement of a caveat exists where the caveator has an honest belief, based upon reasonable grounds, that the caveator has a caveatable interest’. His Honour added this qualification:[9]
What is required is a belief as to a particular matter, held by the caveator at the relevant time, namely when the caveat was lodged. Nothing is added by calling it an “actual” belief; nor does the word “honest” carry the matter any further. [footnote omitted] The belief exists or it does not. Of course, evidence as to a belief may not be honest, and the belief itself may not be reasonable. Further … any question of improper motive … is not to be equated to a “dishonest belief”.
[7][2007] NSWSC 121 at [195].
[8][2013] NSWCA 280 at [52].
[9]New Galaxy at [18].
His Honour stated pertinently for the present case:[10]
There may undoubtedly be cases in which, without any evidence one way or the other as to the belief of the caveator, the circumstances demonstrate either that whatever belief the caveator held, there was no reasonable grounds for holding the belief, or that, in an extreme case, the caveator did not hold such a belief.
[10]At [58].
Otherwise, his Honour held, that the correct approach required two factors to be taken into account. First, the relevant state of mind of the caveator. Secondly, in circumstances where the caveator was represented by lawyers who effected the lodgement of the caveat, ‘it should usually be inferred that they received instructions, gave advice and then received instructions to do what they in fact did’.[11]
[11]At [64].
In New Galaxy the evidence at trial and the finding of the trial judge was that the caveator was advised that caveats should be lodged, a finding not challenged on appeal. The vendor’s case in New Galaxy was that the caveator did not have any interest in the land, so that any advice that it had such an interest was legally erroneous. In essence, the majority concluded that it was sufficient that the caveator held the belief based upon legal advice which was not demonstrated to have been clearly wrong.
Although Gleeson JA agreed with Basten JA on the question whether the caveator had an honest belief on reasonable grounds that it had a caveatable interest, his Honour agreed with Sackville AJA on the relevant legal principles concerning ‘without reasonable cause’.[12] Sackville AJA construed the compensation provision according to the judgment of Biscoe AJ in Natuna Pty Ltd v Cook that:[13]
‘Reasonable cause’ for the lodgement of a caveat exists where the caveator has an honest belief, based on reasonable grounds, that the caveator has a caveatable interest. In order to establish liability [under the provision] the onus is on Mr Cook to prove, first, that Natuna had no caveatable interest and, secondly, that Natuna did not have an honest belief based on reasonable grounds that a caveatable interest existed. As to the second issue, the test is partly subjective and partly objective. It is subjective in that it requires an examination of the caveator’s actual belief and whether it was honestly held. It is objective in that it requires that the belief be held on reasonable grounds. [citations omitted] A caveator may have reasonable grounds on which to believe that it has a caveatable interest even though it is mistaken and it is ultimately held that it did not. [citation omitted]
[12]At [121].
[13]As quoted at [324].
To the extent that the ‘reasonable cause’ question depends on whether the caveator was acting on legal advice, Sackville AJA said:[14]
Legal advice that the caveator was entitled to lodge a caveat may be of considerable significance in determining whether the claimant has established that the caveat was lodged without reasonable cause. [footnote omitted] Even if the legal advice is incorrect, the fact that the caveator acted on the advice when lodging the caveat may preclude the claimant from establishing that the caveator lacked reasonable grounds for believing that he or she was entitled to lodge the caveat.
On the other hand, it has been said that a caveator does not necessarily absolve himself or herself of responsibility by taking legal advice. It has been held in a New South Wales case, for example, that where a solicitor had no reasonable basis for advising the caveators to lodge a caveat, the caveators had no reasonable grounds for their belief that they were entitled to lodge a caveat.
[14]At [327-328].
Sackville AJA saw force in the view that the content and accuracy of legal advice must be evaluated with all other relevant facts and circumstances to determine the honesty and reasonableness of the caveator’s asserted belief in the existence of a caveatable interest.[15] It was concluded that the significance of legal advice received by a caveator ‘will depend on such matters as the completeness of instructions given to the lawyer, whether the advice has an arguable basis and the commercial or legal sophistication of the particular client’. On the evidence at trial, and pertinent to the present case, Sackville AJA noted that the caveator did not give evidence that, when she gave instructions to lodge the caveat, she had an honest belief that the caveator had a caveatable interest. Nor did the solicitor give evidence as to the basis upon which he was instructed to lodge the caveat. On that evidence, the dissenting view supported the trial judge’s conclusion that the caveator not only lacked a caveatable interest but lodged a caveat without giving any thought at all to its validity.
[15]At [329].
These two cases permit the following propositions to be stated concerning an application for compensation under s 118 for lodging a caveat without reasonable cause:
(a) the applicant must show the caveator had no caveatable interest;
(b) the applicant must show the caveator did not have an honest belief based on reasonable grounds that a caveatable interest existed;
(c) the test is partially subjective and partially objective;
(d) the subjective component requires an examination of the caveator’s belief and whether it was honestly held;
(e) it is objective in that it requires that the belief is held on reasonable grounds;
(f) it is a fallacy is to think that the absence of a caveatable interest at the time when the caveat was lodged establishes that the caveator did not have a reasonable basis for a belief that it was entitled to lodge a caveat; and
(g) legal advice that the caveator was entitled to lodge the caveat may be of considerable significance in determining whether the claimant has established that the caveat was lodged without reasonable cause, but the content and accuracy of the legal advice must be evaluated with all other relevant circumstances.
In my reasons for allowing indemnity costs I exposed the objective facts which show that Mr Sayfe did not have a caveatable interest. As for his belief, there is no direct evidence in this an unopposed application. The question of belief therefore has to be answered as a matter of inference from the established facts. He had solicitors acting for him, Kainelaw Australian Lawyers, who lodged the caveat presumably according to instructions, but from whom there is no evidence. I have no evidence from the new solicitors BWZ Lawyers (later Zouki Lawyers) that came to act for the caveator three days after the caveats were lodged, and who were pressed by the plaintiff in correspondence to justify the caveats. They ceased to act on 28 November 2017, the day before this application was heard. From the correspondence their only limited statement was to refer to the loan agreement without more and assert a caveatable interest, and then assert a breach of that loan agreement. But the cardinal fact is that the plaintiff and Mr Sayfe were not parties to that loan agreement. That agreement was not a source of any equitable interest. Nor are there any facts extrinsic to the agreement that somehow create a caveatable interest or show grounds for a belief that one existed. After proceedings were commenced the caveats were soon withdrawn with an agreement to pay costs, which was breached.
I turn now to the compensation claim. The claim is supported by two affidavits sworn by Mr Bell on 31 October 2017 and on 5 December 2017. The claim comes under two heads.
First, the plaintiff seeks compensation for the costs incurred in the private lending agreement that the plaintiff made with Rigoni Private Lending Pty Ltd which, Mr Bell says, was made to assist his company High Country Holdings Pty Ltd to purchase a property in Kalkite in New South Wales for $5.5 million to be developed into 91 blocks of land.[16] The sale contract was dated 16 August 2017. The deposit was stated to be $100,000. I do not see a completion date on the first page of the contract where expected, but Mr Bell says completion of the contract was due on 31 August.[17] That is a remarkably short completion period for such a substantial purchase. The contract appears to be not conditional on finance.
[16]Exhibit ‘KB-4’.
[17]See para 10 of his first affidavit.
He says that the settlement costs, solicitor’s fees and associated costs required an additional amount of capital from a short term lender in order to settle the property purchase. On 4 October 2017 Rigoni Private Finance Pty Ltd offered to lend $172,000 to the plaintiff ― not the purchaser ― for a term of 2 months at a non‑default interest rate of 36% per annum on a second mortgage security of the plaintiff’s 13 strata title units (over which Mr Sayfe subsequently lodged his caveats), and another property.[18] The plaintiff accepted the offer on 18 October 2017. Under the offer, the ‘Interest Commencement Date’ was five days later, on 23 October 2017.[19] Mr Bell says the loan was due to be settled by 24 October 2017 which was also the date when Mr Sayfe lodged the caveats over the same titles that were security for the loan from Rigoni Private Lending.
[18]Exhibit ‘KB-5’.
[19]See p 4 of the loan offer at Exhibit ‘KB-5’. See also Exhibit ‘KB-15’.
Pausing there, there is no evidence explaining what was happening between the completion date of 27 August 2017 and the pursuit of this relatively small loan over a month later. There is evidence explaining why it is that the plaintiff (who was not the purchaser) is involved in paying fees and costs ostensibly to settle the property. The facts as best as I can distil them on the second part of that claim suggests Mr Sayfe was somehow involved in the purchase of the Kalkite land; there were multiple extensions of the completion date; and there were financing problems; and as senior counsel remarked, there was ‘obviously a falling out’ between Bell and Sayfe. As I will show later, the facts are elusive.
In his second affidavit, Mr Bell informs the Court that the loan from Rigoni was partially settled in the sum of $72,000 but the lender held back the $100,000 balance of the loan pending removal of the caveats and interest was running. Removal of the caveats occurred on 3 November 2017. Therefore the plaintiff as borrower claims as compensation the interest incurred on the $100,000 loan from 24 October 2017 to 3 November 2017 at $169.18 per day until part-settlement on 31 October 2017 and then at the rate of $112.78 per day from 1 November 2017 to 3 November 2017. He says he also incurred additional fees from the lender. His evidence is:
13. The total additional amounts owing to Rigoni Private Lending by the plaintiff as a result of the failure of being able to settle the Rigoni Private Lending loan on time is:
Interest to 31 October 2017 (being 8 days) x $169.18
Interest to 3 November 2017 (being 3 days) x $112.78$1,353.44
$338.84
Re-scheduled and delayed settlement fee $1,100.00 Re-scheduled and delayed legal fees $990.00 Total $3,781.78
14. The Plaintiff has now paid the sum of $3,781.78 to Rigoni Private Lending.
These figures are confirmed by the lender.[20] This part of the compensation claim appears to be legitimate. The necessity to pay the lender was caused by the lodgement of the caveats. The claim is referable discretely to a secured loan agreement under which the plaintiff was liable. And Mr Sayfe cannot say he was not warned. Within two days of the caveats being lodged, on 26 October 2017 the plaintiff’s lawyers demanded removal of the caveats by noon the following day and warned Mr Sayfe about the financial detriment that the plaintiff would suffer under the financing arrangements if the caveats were not removed. When Mr Sayfe engaged new lawyers on 27 October 2017, another demand was made for the removal that day and a warning that:
each day that passes creates further costs and damages that our client is incurring by not being able to draw down on the loan he has arranged. The sole reason why my client cannot proceed with this loan is due to your client lodging his baseless caveat.
[20]See Exhibit ‘KB-15’.
Accordingly, in the language of s 118, I think it is just that the first defendant pay compensation of $3781.78 under this head of damage.
The evidence concerning the much larger compensation claim referable to the land purchase in Kalkite is unclear and needs a close analysis of the available facts. The plaintiff was not the purchaser of the land, and the material from Mr Bell as a director of both companies blends or equates the plaintiff with the purchaser High Country Holdings Pty Ltd. The facts as I discern them from the documents in evidence need to be articulated. I have to say, the Court has had to labour to distil the facts from the limited materials which is not at all explicative.
First a recapitulation. The contract to buy the land was made on 16 August 2017. The price was $5.5 million. The date for completion was 31 August 2017. Settlement did not occur. That engaged the default interest provisions in the contract of sale. Clause 4 of the Special Conditions obliged the purchaser to pay 10% interest calculated daily on the purchase price for late completion. That was calculated at $1,551.04 per day.
The caveats were lodged on 24 October 2017. I infer that by this time the completion date for the sale had been extended to 27 October 2017 and a Notice to Complete had already been served. The purchaser could not settle on that date, for reasons not apparent on the evidence. On 26 October 2017, Blackstone Waterhouse Zouki Lawyers (‘BWZ’) wrote to the vendor’s solicitors asking for another extension. Their e-mail said:[21]
[21]Exhibit ‘KB-14’ (third document).
We refer to your Notice to Complete.
Our client seeks an extension to comply with the Notice for a period of 10 days from 27 October 2017. Accordingly, settlement will not take place tomorrow at 2pm.
If settlement can occur earlier than 10 days requested we will advise your office immediately.
‘Our client’ is not identified, but one would think it could only be the purchaser, High Country Holdings Pty Ltd a company owned by Mr Bell. What is very strange is that as at 27 October 2017 BWZ were acting for Mr Sayfe as the caveator. The documents show that demands were made on that day on BWZ to remove the caveats, and BWZ were counter-asserting the ground upon which the caveats were lodged (which I have found to be unsustainable). I cannot understand how BWZ could have been acting for both Mr Sayfe as caveator and what I will call Mr Bell’s interests in the sale contract, especially as the caveat compensation claim is made for loss and damage in delaying the sale contract.
But more than that, it adds to the disquiet to see that in response to BWZ’s request for an extension of the completion date, the vendor’s lawyers wrote to BWZ on 30 October 2017 stating:[22]
[22]Exhibit ‘KB-14’ (second document).
We have now received further instructions from our client in relation to your request to extend the Notice to Complete which expired on 27 October 2017.
Our client has advised that she would be only be willing to extend the Notice to Complete until Friday 3 November 2017, and additionally it would only be on the condition that your client pay the following costs in addition to the balance of the Price:
- Interest on the balance of the Price from 31 August 2017 until the actual date of Completion ($96,164.38 to Friday 3 November 2017);
- Refinance fees incurred by our client in making urgent arrangements for the refinance of existing loans over the property (approximately $10,000);
- Any fees charged by the current mortgagee or caveator in having to cancel and rebook the settlement (amounts unknown at this stage); and
- Our additional legal fees in having to cancel and rebook the settlement, as well as further negotiations regarding completion and extending the Notice to Complete (approximately $2,500).
Given that all of the above expenses have been directly caused by your client’s repeated failure to complete the contract, our client believes it is appropriate that your client bear the cost of the damage caused.
What is bizarre is that on the following day, 31 October 2017 (the day that Rigoni made the part lending of $72,000 to the plaintiff and one day before the originating motion was filed by the plaintiff to remove the caveats) BWZ lawyers wrote to their client Mr Sayfe in solicitor–client diction saying (with my underlining):[23]
[23]Exhibit ‘KB-14’ (third document).
Dear Simon,
Please see below correspondence from Vendor’s solicitor advising that they are willing to extend the Notice to Complete until Friday, 3 November 2017 on condition you pay the costs noted below.
We note that time is of the essence. It is imperative that you finalise your loan in time for Settlement.
Should you fail to complete the Contract by the specified time, the Vendor will have the right to terminate the Contract, will be entitled to retain the deposit and can legally place the property back on the market to sell. In the event they sell the property for a lower price they may sue for damages.
In the interim, should you wish to discuss this matter further, please do not hesitate to contact our office on the details below.
That e-mail was forwarded by BWZ to Mr Bell on the same day.
This is strange indeed. It gives the Court’s much unease and apprehension about this part of the claim for compensation. These documents are in evidence from the plaintiff. None of this has been explained, in this, a case which the Court was asked to decide the claim on the papers. The papers are showing that it was the caveator Mr Sayfe being advised about the extension of the completion date and the importance of finalising a loan to effect settlement, and the legal consequences of default under the contract of sale. The e-mail says it is Mr Sayfe who is to pay the costs of an extended completion date. This all points to Mr Sayfe being the purchaser or shadow purchaser or somehow responsible for the purchaser’s obligations. Yet, this compensation claim is being made by the plaintiff. But the plaintiff is not the purchaser as named in the contract of sale. And the presence of the caveats is not shown to have been getting in the way of the Kalkite sale proceeding, especially if the purchaser was in truth Mr Sayfe the caveator.
In the position the Court is in, it appears at least from the e-mail correspondence before me that whoever was named as purchaser, the purchaser or person behind the purchaser’s interests and responsible for its obligations under the contract was Mr Sayfe the caveator. The statement in the e-mail to Sayfe that ‘It is imperative that you finalise your loan in time for Settlement’ suggests strongly that the delay in completion was caused by Mr Sayfe having difficulties with finance to purchase the land.
Settlement for the sale of the Kalkite land was rescheduled for 3 November 2017, that being the day when the caveats were withdrawn. There is no evidence about the giving of the extension. That is, no evidence whether Sayfe or whoever was the true purchaser agreed to meet the vendor’s condition for an extension as stated in the e‑mail of 30 October. Mr Bell says, without explaining his involvement (given Mr Sayfe’s existing involvement):
I have also been advised by the Vendor and believe that the Vendor will look to me to compensate them for refinance fees that they now have to incur as a result of the failure to settle on 27 September 2017 for a sum of approximately $10,000 and legal costs of rescheduling settlement of $2,500.
All I can suppose (and of course that is an impermissible way to proceed) is that Mr Sayfe could not proceed as de facto purchaser, and that brought Mr Bell into the dealing. As I distil from the documents, the sale did not proceed to completion on 3 November 2017. Then, on 13 November 2017, the plaintiffs’ solicitors in this proceeding (that is, SLF Lawyers) wrote to the vendor’s solicitor saying:[24]
[24]Exhibit ‘KB-16’.
Our client has confirmed that its application for finance with its new financier has now become unconditional. They are awaiting this confirmation in writing, and have instructed me that once I am in receipt of this paperwork, that I am instructed to provide you with a copy to satisfy your client that our client will be in a position to settle very shortly.
Our client has also instructed us to:
1. Consent to the payment of your client’s costs thrown away in the sum of $25,000;
2. To pay the interest accruing under the Contract of Sale; and
3. Will complete the Contract of Sale by the 24 November 2017, subject to some small revisions.
We are instructed that loan documents are currently being drafted in that regard.
We agree that a separate Deed may need to be drafted up. We are in the process of discussing some potential additional clauses in that Deed that our client would be seeking from your client, regarding some revisions of the Contract of Sale that we believe the parties may have been discussing between themselves.
We will revert to you shortly regarding the balance of your email, and the revisions that our client may be seeking, once we are in receipt of the unconditional offer of finance.
We would also seek some clarity around the amount of interest that you say is payable to your client since 30 August, so that we can do some calculations on our end.
‘Our client’ in that e-mail is not identified but, without any assistance on this on the evidence or otherwise. I can only suppose that in a ‘falling out’ as counsel put it, Sayfe was no longer active in the land acquisition and Mr Bell came to be the active person on behalf of the purchaser High Country Holdings. Without any reference to the above facts, or explanation, in his second affidavit Mr Bell says ‘I have agreed with the Vendor’s solicitors Minter Ellison for the plaintiff to pay these fees for the period between 27 October 2017 and 3 November 2017 to the Vendor in relation to the Kalkite development, as a condition of their extending the settlement date’.
He says:
The total amount owing to the Vendor of the Kalkite development as a result of the failure of the plaintiff to be able to settle the Rigoni Private Lending loan on time due to the lodgement of the caveats is:
Interest to 3 November 2017 (being 11 days) x $1,551.04
$17,061.44
Vendors refinance fees
$10,000.00
Re-scheduled and delayed legal fees
$2,500.00
Total
$29,561.44
This is questionable. Anything payable to the vendor is for the purchaser’s failure to complete on time. As I follow the facts, the settlement date was extended to 27 October 2017. It was extended again to 3 November 2017. That is an eight day period.
Settlement of the sale is due to occur, Mr Bell says, on or about 15 December 2017. He says he (and this must mean he as director of the purchaser High Country Holdings) has agreed with the vendor’s solicitors to pay those fees for the period between 27 October 2017 and 3 November 2017 (the day the caveats were withdrawn) ‘As a condition of their extending the settlement date’. He says:
19. …Whilst my companies are yet to settle the Kalkite development due to other impediments that have arisen (in respect of which I do not assert any claim against the first defendant in relation to the caveats he lodged), settlement of that sale should now be occurring on or about 15 December 2017.
20. On 15 December 2017, at settlement, my company High Country Holdings Pty Ltd will be liable to pay the fee of $29,561.44 for interest, vendor’s refinance fee and reschedule and delay legal costs, together with additional interest, fees and costs that have arisen due to other delays to the settlement of the settlement of the Kalkite property and development solely.
21. The lodgement of the Caveats by the First Defendant has thus caused the plaintiff and High Country Holdings Pty Ltd, my related entity, loss and damage of a total sum of $33,343.22.
The date of the extended settlement has passed. I have no additional evidence if settlement occurred, and if it did, whether the High Country Holdings paid the $29,561.44.
I am afraid to say the Court does not have confidence in the evidence. It is inadequate in material respects, in a dealing which has strange and unexplained features, and has aroused a sense of a lack of transparency. I am not willing, on the basis of a conclusion that there were no reasonable grounds for the caveat, to take a benevolent attitude and impose liability for compensation just because the purchaser is liable to compensate the vendor for a delayed settlement. The plaintiff is not the purchaser and I think there is a blurring between the plaintiff and High Country Holdings Pty Ltd. Causation is the issue. It is asserted by Mr Bell that the lodgement of the caveats ‘… has thus caused the plaintiff and High Country Holdings Pty Ltd, my related entity, loss and damage of a total sum of $33,343.22’. The caveats were extrinsic to the land dealing. They were lodged over the strata storage units which were security for the loan from Rigoni. It is said that the loan funds of $172,000 (on a $5.5 million deal) were to be used to pay for fees and costs ‘to settle my property purchase for the Kalkite development’. The evidence simply does not permit a conclusion that the inability to obtain that loan (more precisely, $100,000) disabled or impaired the purchaser from completing the contract. That is not demonstrated. The Rigoni loan to the plaintiff was not funding the purchase. Nor was the plaintiff the purchaser. There is no evidence that the ability to complete the sale was dependant on the Rigoni loan, and on the figures it seems highly unlikely. Even though s 118 of the Transfer of Land Act states that the Court may order compensation to ‘any person’ who sustains damage from the lodgement of a caveat without reasonable cause, the applicant is the plaintiff and not High Country Holdings. But in any event the evidence cannot sustain a conclusion that the reason the settlement was not made by High Country Holdings was because of the effect of the caveat on the Rigoni loan. There is no evidence to demonstrate that was so, and it seems highly unlikely. Rather, in the murky facts, the evidence suggests there were ‘other impediments’ explaining the inability to settle, not the least of which was evidence showing that the purchaser, or the person behind purchaser, was to be Mr Sayfe the caveator. The more plausible conclusion is that the settlement was delayed with numerous extensions because of differences or disagreements between Mr Sayfe and Mr Bell which left Mr Bell to proceed with the responsibility for completing the purchase at added expense because of the delay. The caveats per se were not the cause of the delay. Therefore, the evidence cannot sustain a conclusion that it is just that the caveator pay compensation under the second head of the claim.
For those reasons, the application for compensation will be allowed in part, to the extent of $3781.78 but otherwise refused.
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