Maio v City of Stirling [No 3]
[2018] WASC 276
•21 SEPTEMBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MAIO -v- CITY OF STIRLING [No 3] [2018] WASC 276
CORAM: LE MIERE J
HEARD: 11 DECEMBER 2017
DELIVERED : 21 SEPTEMBER 2018
FILE NO/S: CIV 2706 of 2013
MATTER: Section 140 of the Transfer of Land Act 1893
BETWEEN: GIROLAMO MAIO
GLENYS JOY MAIO
First Plaintiffs
JVR PTY LTD
Second Plaintiff
LINEMARK INVESTMENTS PTY LTD
Third Plaintiff
AND
CITY OF STIRLING
First Defendant
VALMARL PTY LTD
PETER GRAHAM HEARN
Second Defendants
BANK OF QUEENSLAND LTD
Third Defendant
RAINWAVE NOMINEES PTY LTD
Fourth Defendant
FILE NO/S: CIV 1447 of 2017
BETWEEN: VALMARL PTY LTD
First Plaintiff
STEPHEN PATRICK HAUVILLE
KERRIE MARIA HAUVILLE
Second Plaintiffs
PETER GRAHAM HEARN
Third Plaintiff
SILVERVIEW HOLDINGS PTY LTD
Fourth Plaintiff
PRISTINE LAKES PTY LTD
Fifth Plaintiff
AND
GIROLAMO MAIO
GLENYS JOY MAIO
Defendants
Catchwords:
Real property - Lodgement and maintenance of covenants - Application for compensation pursuant to s 140 Transfer of Land Act 1893 (WA) - Application for compensation pursuant to undertaking as to damages - Whether caveats lodged without reasonable cause - Existence of honest belief that caveator had caveatable interest
Legislation:
Prescription Act 1832 (WA)
Property law Act 1969 (WA), s 11
Supreme Court Act 1935 (WA), s 32
Transfer of Land Act 1893 (WA), s 138B, s 140
Result:
Application allowed in part
Category: B
Representation:
CIV 2706 of 2013
Counsel:
| First Plaintiffs | : | Mr H R Robinson |
| Second Plaintiff | : | No appearance |
| Third Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendants | : | Mr M C Hotchkin & Mr L Whitehurst |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No appearance |
Solicitors:
| First Plaintiffs | : | Haydn Robinson |
| Second Plaintiff | : | No appearance |
| Third Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendants | : | Hotchkin Hanly |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No appearance |
CIV 1447 of 2017
Counsel:
| First Plaintiff | : | Mr M C Hotchkin & Mr L Whitehurst |
| Second Plaintiffs | : | Mr M C Hotchkin & Mr L Whitehurst |
| Third Plaintiff | : | Mr M C Hotchkin & Mr L Whitehurst |
| Fourth Plaintiff | : | Mr M C Hotchkin & Mr L Whitehurst |
| Fifth Plaintiff | : | Mr M C Hotchkin & Mr L Whitehurst |
| Defendants | : | Mr H R Robinson |
Solicitors:
| First Plaintiff | : | Hotchkin Hanly |
| Second Plaintiffs | : | Hotchkin Hanly |
| Third Plaintiff | : | Hotchkin Hanly |
| Fourth Plaintiff | : | Hotchkin Hanly |
| Fifth Plaintiff | : | Hotchkin Hanly |
| Defendants | : | Haydn Robinson |
Case(s) referred to in decision(s):
Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249
Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106
Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993)
Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd (2007) 35 WAR 27
European Bank Ltd v Evans (2010) 240 CLR 432
European Bank v Evans (2010) 240 CLR 432
Maio v City of Stirling [2015] WASCA 254
Maio v City of Stirling [No 2] [2015] WASC 189
Maio v City of Stirling [No 2] [2016] WASCA 45
New Galaxy Investments Pty Ltd v Thompson [2017] NSWCA 153
Westpoint Corporation Pty Ltd v Registrar of Titles [2005] WASC 273
LE MIERE J:
Summary
There are two applications before the court. First, by an originating summons in CIV 1447 of 2017 Valmarl Pty Ltd, Stephen and Kerrie Hauville, Peter Hearn, Silverview Holdings Pty Ltd (Silverview) and Pristine Lakes Pty Ltd (Pristine Lakes), who I will refer to collectively as the Applicants, claim against Girolamo and Glenys Maio compensation pursuant to s 140 of the Transfer of Land Act 1893 (WA) (TLA) . Mr and Mrs Maio lodged caveat M690116 (the first caveat) and caveat N286564C (the second caveat) over land known as Lot 604. At the time of lodgement of each caveat Lot 604 was owned by Valmarl as trustee for the Hauville Family Trust as to 33/60 shares and Mr Hearn as trustee for the Peter Hearn Family Trust No 2 as to 27/60 shares as tenants in common.
The second plaintiffs, Stephen and Kerrie Hauville, are the directors and shareholders of Valmarl and are beneficiaries of the Hauville Family Trust. Mr Hauville and Mr Hearn are the directors and shareholders of the fifth plaintiff, Pristine Lakes. Mr Hearn is the director and shareholder of the fourth plaintiff, Silverview, and a beneficiary of the Peter Hearn Family Trust No 2.
Mr and Mrs Maio are registered proprietors of land previously known as Lot 602 which adjoins Lot 604. Mr and Mrs Maio are the defendants in CIV 1447 of 2017. Each of the Applicants claim they have sustained damage as a result of Mr and Mrs Maio lodging the caveats without reasonable cause.
Secondly, Valmarl and Mr Hearn have applied pursuant to the order made on 16 March 2016 by the Court of Appeal that they have liberty to apply to the court for an assessment of the damages, if any, suffered by them and payable by Mr and Mrs Maio and the other plaintiffs in CIV 2706 of 2013 by reason of the maintenance of the first caveat from the date of the order extending the time for compliance with the order for removal of the caveat (26 November 2015) to the date the second caveat lapsed (23 June 2016). The Court of Appeal made the order in CACV 92 of 2015 on appeal from my decision in CIV 2706 of 2013. Mr and Mrs Maio were the first plaintiffs in CIV 2706 of 2013. I will refer to the plaintiffs in CIV 2706 of 2013 as the CIV 2706 Plaintiffs. Valmarl and Mr Hearn were the second defendants in CIV 2706 of 2013. In CIV 2706 of 2013 I dismissed the plaintiffs' claims in respect of certain alleged proprietary rights over Lot 604, which Mr and Mrs Maio claim entitled them to lodge the first and second caveats.
For the reasons which follow I make the following findings. The Applicants have not proved that Mr and Mrs Maio lodged the first caveat without reasonable cause. Mr and Mrs Maio lodged the second caveat without reasonable cause. Each of the Applicants sustained damage by reason of Mr and Mrs Maio lodging the second caveat without reasonable cause. Valmarl and Mr Hearn each suffered damage by the extension of the time for compliance by Mr and Mrs Maio with the order made on 17 November 2015 that they remove the caveat.
It is just that Mr and Mrs Maio should pay to Valmarl compensation of $65,099.64 pursuant to their undertaking as to damages. The damage sustained by Valmarl by reason of the extension of the first caveat includes the damage sustained by Valmarl as a result of the lodging of the second caveat. Accordingly, Valmarl should receive no additional compensation by reason of Mr and Mrs Maio having wrongfully lodged the second caveat.
Mr and Mrs Maio should pay to Stephen and Kerrie Hauville compensation of $9,163.56 for wrongfully lodging the second caveat.
It is just that Mr and Mrs Maio should pay to Mr Hearn compensation of $11,026.46 pursuant to the undertaking as to damages. The damage sustained by Mr Hearn by reason of the extension of the first caveat includes the damage sustained by Mr Hearn as a result of the lodging of the second caveat. Accordingly, Mr Hearn should receive no additional compensation by reason of Mr and Mrs Maio having wrongfully lodged the second caveat.
Mr and Mrs Maio should pay to Silverview compensation of $15,972.91 for wrongfully lodging the second caveat.
The land caveated
In March 1982 the City of Stirling (the City) sold the land on the corner of Cedric and Sanderling Streets, Stirling. Sometime between June 1982 and May 1983 a shopping centre was built on part of the land. The land was subdivided in May 1983. The subdivision resulted in the creation of Lots 602, 603 and 604.
In approving the subdivision the Town Planning Board required the owners of the land to enter into an agreement with the City to ensure a number of planning objectives including access and reciprocal car parking rights between the existing shopping centre on Lot 602 and any future development on Lot 604. The agreement was executed as a deed in May 1983 (1983 Deed). Clause 2 sets out a number of covenants by the owner of the land. The CIV 2706 Plaintiffs say that those covenants granted benefits to subsequent owners of Lot 602 including access and reciprocal car parking rights on Lot 602 and Lot 604.
In August 1983 strata plan 11718 subdivided the land formerly contained in Lot 602 into strata lots. The first, second and third plaintiffs in CIV 2706 of 2013 (Mr and Mrs Maio, JVR Pty Ltd and Linemark Investments Pty Ltd) were registered proprietors or tenants of lots on the strata plan. For convenience I will refer to the strata lots and the land the subject of the strata lots as Lot 602.
Valmarl and Mr Hearn together with Chris Bogle became registered proprietors of Lot 604 in 2006. At the time Valmarl, Mr Hearn, Mr Bogle and the City executed a deed entitled Transferee's Assumption Deed (2006 Deed). In 2010 Valmarl and Mr Hearn acquired Mr Bogle's interest in Lot 604. Valmarl and Mr Hearn mortgaged Lot 604 to the Bank of Queensland. Valmarl and Mr Hearn, the Bank of Queensland and the City executed a deed entitled Transferee's and Mortgagee's Assumption Deed (2010 Deed). By cl 2 of each of the 2006 Deed and the 2010 Deed Valmarl and Mr Hearn agreed with the City that they will observe and perform the provisions of the 1983 Deed on the part of the original owner of Lots 602, 603 and 604. The City lodged a caveat over Lot 604 to protect its interests under the deeds.
Valmarl and Mr Hearn list Lot 604 for sale
In about February 2013 Valmarl and Mr Hearn listed Lot 604 for sale. On 15 April 2013 by contract for sale of land by offer and acceptance Valmarl and Mr Hearn agreed to sell and Doublenet Pty Ltd agreed to purchase Lot 604 for $2,500,000. Mr Betlehem was the sole director and shareholder of Doublenet. The contract was subject to the buyer obtaining development approval from the City of Stirling for a proposed development in accordance with plans to be submitted, and to the seller having Contamination Memorial K593643 removed from the title. On 2 September 2013 Doublenet caused a development application to be lodged with the City of Stirling. The contract was varied a number of times to extend the time for development approval. The final variation extended the time for development approval to 31 May 2014. The development was not approved by that time and the Doubleview contract expired on 1 June 2014.
Plaintiffs commence CIV 2706 of 2013
Meanwhile, on 12 November 2013 the CIV 2706 Plaintiffs had commenced CIV 2706 of 2013. The CIV 2706 Plaintiffs claimed that the 1983 Deed and the 2010 Deed granted to the CIV 2706 Plaintiffs the benefits granted by the 1983 Deed and in particular the rights of access and egress and parking on Lot 604. Alternatively, the CIV 2706 Plaintiffs claimed that Lot 604 was subject to a restrictive covenant in the terms of cl 2 of the 1983 Deed. In the further alternative the CIV 2706 Plaintiffs claimed that together with their tenants, invitees, licensees, customers and visitors they had rights by way of easement acquired by enjoyment or user under the doctrine of lost modern grant or under the Prescription Act 1832 (WA). The CIV 2706 Plaintiffs sought an injunction restraining Valmarl and Mr Hearn and their transferees and successors in title from interrupting or preventing the CIV 2706 Plaintiffs' use and enjoyment of their claimed rights.
The deeds
Clause 2 of the 1983 Deed provides that the Original Owner covenants with the City, as follows:
(a)… not to use or develop Lot 604 without the consent in writing of the [City] …;
(b)not to suffer or allow vehicular access to or egress from Lot 604 from or to Cedric Street;
(c)in carrying out any development of Lot 604 to ensure that … any such development of Lot 604 and the existing shopping centre on Lot 602 have the appearance of a single complex;
(d)not to erect or permit to be erected a fence on or about the common or dividing boundaries of Lots 602 and 604 or … otherwise obstruct or impede the free movement and thoroughfare of persons and vehicles on either of those lots or from one lot to the other;
(e)upon the sale or transfer of either Lot 602 or Lot 604 to grant to the purchaser thereof and the successors in title, tenants, invitees, licensees, customers and visitors of such purchaser and all other persons lawfully entering the lot sold the right to use for the purpose of parking motor vehicles the car parking areas situated on the unsold lot together with full and unrestricted access from one lot to the other and to reserve to the [Original] Owner as owner of the unsold lot and their respective successors in title, tenants, invitees, licensees, customers and visitors and all other persons lawfully entering the unsold lot the right to use for the purpose of parking motor vehicles the car parking areas situated on the sold lot together with full and unrestricted access from one lot to the other … such grant and reservation to contain covenants on the part of the [Original] Owner and the transferee of the sold lot with the [City] as follows -
(i)not to erect or permit to be erected a fence on or about the common or dividing boundaries of Lots 602 and 604 or … otherwise obstruct or impede the free movement … on either of those lots or from one lot to the other;
(ii)not to surrender, revoke or otherwise terminate or attempt to surrender, revoke or otherwise terminate the rights contained in the abovementioned grant and reservation … without the prior written consent of the [City]; and
(iii)not to sell, agree to sell, transfer or otherwise dispose of the lots … to any other person unless that person has first entered into a deed of covenant with the other parties hereto (including the [City]) to observe and perform the provisions of this Deed …;
(f)forthwith to obtain the unconditional written consent to … this Deed of any person entitled to an encumbrance on the subject land; … and
(g)not to sell, agree to sell, transfer, mortgage, charge or assign Lot 604 … unless the person to whom any such right or interest to or in Lot 604 is to be granted has first executed a deed of covenant to be prepared by the [City's] solicitors … whereby that person covenants to observe and perform all the covenants, conditions and stipulations herein contained (including this present covenant) in like manner as if he had been a party to this Deed ….
The 2010 Deed was entered into by the City, Valmarl, Mr Hearn and the Bank of Queensland. The deed recited that Valmarl and Mr Hearn had agreed to execute the deed and by executing the deed they agreed to be bound by the terms of the 1983 Deed.
Clause 2 provides:
The Transferee agrees with the [City] that the Transferee will duly and punctually observe and perform all the provisions of the [1983 Deed] on the part of the Original Owner, to be observed and performed in like manner as if the Transferee had been named as the Original Owner, in the [1983 Deed].
Clause 3 provides:
The Transferee hereby charges [Lot 604] in favour of the [City] for the purpose of securing the due and punctual observance and performance by the Transferee of the provisions of this document and of the [1983 Deed] on the Transferee's part to be performed and observed and authorises the [City] to lodge an absolute caveat pursuant to the Transfer of Land Act 1893 against the certificate of title to [Lot 604] in order to protect the rights and interests of the [City] under this document.
Mr and Mrs Maio's claims in CIV 2706 of 2013
In CIV 2706 of 2013 the plaintiffs, including Mr and Mrs Maio, claimed that:
(a)the 1983 Deed and the 2010 Deed had granted to the CIV 2706 Plaintiffs the benefits granted by the 1983 Deed and, in particular, the rights of access and egress and parking on Lot 604, having regard to the operation of s 11(1), or alternatively s 11(2), of the Property Law Act 1969 (WA) (PLA); alternatively
(b)Lot 604 is subject to restrictive covenants in terms of cl 2(d) and cl 2(g) of the 1983 Deed; alternatively
(c)the CIV 2706 Plaintiffs, their tenants, invitees, licensees, customers and visitors, have rights by way of easements acquired by enjoyment or user under the doctrine of lost modern grant, or under the Prescription Act.
First caveat lodged
On 30 June 2014 Mr and Mrs Maio lodged an absolute caveat over Lot 604. The estate or interest they claimed was:
The benefit of prohibitions on development of the Land and on erecting a fence on the boundary of the Land and the benefit of the use of the car parking areas on the Land and unrestricted access to and from the Land by vehicle and on foot as covenantee.
They claimed that interest by virtue of the 1983 Deed, the 2010 Deed and PLA s 11(1) and s 11(2). The caveat was registered on 8 August 2014.
Rainwave contracts to purchase Lot 604
On 24 July 2014 the Metro North‑West Joint Development Assessment Panel approved the application for development of Lot 604 subject to a number of conditions.
By contract for sale of land by offer and acceptance signed on 8 August 2014 Rainwave Nominees Pty Ltd (Rainwave), as trustee for the Cedric Street Trust, offered to purchase Lot 604 for $2,500,000. The contract was signed by Mr Betlehem, the sole director and shareholder of Rainwave. The contract was subject to the following special conditions:
(a)the title being clear of any caveats lodged by a third party (ie a party not related to the seller and the buyer, with exception of the City) within 90 days of acceptance of the contract; and
(b)the caveat lodged by the City being amended on terms and conditions acceptable to the buyer to allow construction of the proposed building as per the conditions of the Development Assessment Panel approval letter dated 5 August 2014.
Settlement was to occur 30 days from the satisfaction of the special condition. The Development Assessment Panel approval letter which I have referred to attached a determination by the Metro North‑West Joint Development Assessment Panel approving a mixed use commercial and multiple dwelling development on Lot 604 subject to the conditions set out in the Notice of Determination. The development proposed by Rainwave was inconsistent with the benefits which the CIV 2706 Plaintiffs claimed were granted to the owners of Lot 602 and their successors by the 1983 Deed because it restricted access to parking on Lot 604 for the benefit of Lot 602.
On 25 July and 8 August 2014 the solicitors for Valmarl and Mr Hearn wrote to the City requesting that Lot 604 be released from the requirements of the Transferee's and Mortgagee's Assumption Deed and for the City to withdraw its caveat. On 5 September 2014 the City's solicitors replied that the City would now seek to negotiate from the intended purchaser of Lot 604 a replacement deed to constrain fencing or other obstruction across the southern boundary of Lot 604 and that non‑exclusive parking for Lot 602 on portions of Lot 604 should be formalised within the replacement deed and the deed would be with the City only. The City's solicitors stated that the replacement deed would charge Lot 604 in favour of the City and to allow the lodgement of a replacement absolute caveat. Neither Valmarl and Mr Hearn nor Rainwave pursued negotiations with the City in relation to a replacement deed. Counsel for Valmarl and Mr Hearn, Mr Hotchkin, said that they did not do so because they were fully engaged with defending CIV 2706 of 2013.
On 21 November 2014 Valmarl and Mr Hearn agreed with Rainwave to vary the contract of sale by removing the condition that the contract was subject to the caveat lodged by the City being amended on terms and conditions acceptable to the buyer to allow construction of the proposed building in accordance with the development approval and by extending the time for the title to be clear of any caveats lodged by a third party, that is a party not related to the seller and buyer with the exception of the City, to 28 February 2015.
In his affidavit Mr Betlehem says that on 30 May 2015 Rainwave was still a party that had a contract to purchase Lot 604. However, there is no evidence that the time for satisfying the condition relating to the removal of the caveat was extended beyond 28 February 2015. The Rainwave contract expired on 28 February 2015.
CIV 2706 of 2013 is dismissed
On 29 May 2015 I dismissed the CIV 2706 Plaintiffs' claims in Maio v City of Stirling [No 2] [2015] WASC 189. I found that the 2010 Deed, read with the 1983 Deed, was, on its proper construction, not a deed which 'expressly in its terms purports to confer a benefit directly' on the CIV 2706 Plaintiffs within the meaning of PLA s 11(2): see [38] ‑ [43]. I found that PLA s 11(1) had no application: see [35] ‑ [37]. I also found that the 1983 Deed did not give rise to restrictive covenants enforceable in equity because the covantee was the City and the covenants did not touch and concern the land of the City: see [45] ‑ [47]. As to the Prescription Act claim I found that there had been continuous and uninterrupted use of part of Lot 604 by occupiers of and visitors to the supermarket sufficient to give rise to an easement by prescription in favour of the registered proprietor of the land on which the supermarket is located, that is Mr and Mrs Maio: see [67]. However, I found that the use was not 'as of right', but by implied licence or permission from the owners of Lot 604 and that accordingly the claim based on an easement of prescription should be dismissed: see [91] ‑ [92].
I ordered that Valmarl be at liberty to apply for an order requiring Mr and Mrs Maio to withdraw any caveat lodged by them over Lot 604 if Mr and Mrs Maio did not withdraw the caveat on or before 5 June 2015.
Plaintiffs appeal to Court of Appeal
On 8 June 2015 the CIV 2706 Plaintiffs appealed to the Court of Appeal against the whole of the decision dismissing their claims. By their grounds of appeal the CIV 2706 Plaintiffs challenged my findings in relation to the proper construction of the 2010 Deed read with the 1983 Deed and its operation in the context of PLA s 11(2). The CIV 2706 Plaintiffs also challenged my findings on the question of the alleged easement.
Court orders caveat be removed
On 17 November 2015, Mr and Mrs Maio not having withdrawn the caveat, I ordered that on or before 27 November 2015 Mr and Mrs Maio withdraw the caveat over Lot 604.
Court of Appeal extends caveat
Mr and Mrs Maio applied to the Court of Appeal for an interlocutory order staying the operation of the order that they remove the caveat on or before 27 November 2015. On 26 November 2015 the Court of Appeal ordered that the time for compliance by Mr and Mrs Maio with the order to remove the caveat be extended until the date of determination of the appeal or until further order: Maio v City of Stirling [2015] WASCA 254. The Court of Appeal accepted that the appeal was at least reasonably arguable. It follows that the Court of Appeal considered that it was reasonably arguable that the 1983 Deed and the 2010 Deed had granted to the Plaintiffs the benefits granted by the 1983 Deed and, in particular, the rights of access and egress and parking on Lot 504, having regard to the operation of PLA s 11(2), and that the Plaintiffs, their tenants, invitees, licensees, customers and visitors had rights by way of easements acquired by enjoyment or user under the doctrine of lost modern grant or under the Prescription Act.
The order of the Court of Appeal was made on the undertaking of Mr and Mrs Maio to the court that they will pay to Valmarl and Mr Hearn such compensation for Valmarl and Mr Hearn being affected by an extension of the time for compliance by Mr and Mrs Maio with the order made on 17 November 2015 that they remove the caveat as the court may in its discretion consider in the circumstances to be just, such compensation to be assessed by the court or in accordance with such directions as the court may make and to be paid in such manner as the court may direct.
Rainwave contract expires
As I have said, Mr Betlehem gave evidence that when judgment was delivered in CIV 2706 of 2013 the contract between Valmarl and Mr Hearn and Rainwave for the sale and purchase of Lot 604 was still in force. Mr Betlehem says that there had been little activity whilst awaiting the judgment because until that time there was no prospect of having Mr and Mrs Maio's caveat removed from Lot 604. Mr Betlehem said that by January 2016 the representatives of the investors who were prepared to fund Rainwave informed him that they were not prepared to wait any longer and they were placing their money elsewhere. Mr Betlehem decided that he would not further extend the Rainwave contract. He on‑sold intellectual property in the project to recoup some of the costs that he had spent.
Court of Appeal dismisses appeal
On 16 March 2016 the Court of Appeal dismissed the CIV 2706 Plaintiffs' appeal: Maio v City of Stirling [No 2] [2016] WASCA 45. The Court of Appeal did not accept the CIV 2706 Plaintiffs' construction of cl 2 of the 2010 Deed. The court found that the 2010 Deed did not confer proprietary rights on the Lot 602 strata lot holders. The court rejected their contention that cl 2(e) of the 1983 Deed conferred an independent obligation on the Original Owner as owner of Lot 602 and another independent obligation on the Original Owner as owner of Lot 604. The court said:
Accordingly, on the proper construction of the 2010 deed, the promises in the 1983 deed which [Valmarl and Mr Hearn] agreed to perform were those contained in cl 2(a), cl 2(b) and cl 2(c) of the 1983 deed. They do not include cl 2(d) and cl 2(e) of the 1983 Deed [54].
The court rejected the CIV 2706 Plaintiffs' contention that they had enjoyed rights by way of easements over Lot 604 as of right rather than by licence of the owner of Lot 604.
The Court of Appeal ordered that Valmarl and Mr Hearn be at liberty to apply to the court in CIV 2706 of 2013 for an assessment of damages, if any, suffered by them by reason of the maintenance of the caveat from 26 November 2015 to the date the caveat is withdrawn. Mr and Mrs Maio removed the caveat on 15 March 2016.
Mr and Mrs Maio lodge the second caveat
On 29 March 2016 Mr and Mrs Maio lodged the second caveat, in which they claimed the same interest and on the same grounds as in the first caveat.
Plaintiffs apply for special leave to appeal to High Court
On 12 April 2016 the CIV 2706 Plaintiffs applied to the High Court for special leave to appeal from the decision of the Court of Appeal. The CIV 2706 Plaintiffs contended that on its proper construction the 2010 Deed obliged Valmarl and Mr Hearn to perform the obligations of the Original Owner of Lot 604 in the 1983 Deed on the basis that Lot 602 was sold first and Lot 604 was retained and the obligation in cl 2(e) of the 1983 Deed applied to Valmarl and Mr Hearn in 2010. The CIV 2706 Plaintiffs submitted that they were entitled to enforce their claim pursuant to PLA s 11(2). In relation to the alleged right by prescription the CIV 2706 Plaintiffs contended that the Court of Appeal erred in not finding that the CIV 2706 Plaintiffs had used part of Lot 604 as of right.
Second caveat removed
Valmarl and Mr Hearn caused the Registrar of Titles to issue a notice pursuant to s 138B of the TLA. Mr and Mrs Maio applied to this court for an order extending the operation of the caveat. On 14 June 2016 Kenneth Martin J dismissed their application and ordered that Valmarl and Mr Hearn have liberty to apply under s 140 of the TLA in respect of any claim for compensation by reason of the lodging of the second caveat. The second caveat lapsed on 23 June 2016.
High Court dismisses special leave application
The High Court dismissed the CIV 2706 Plaintiffs' application for special leave to appeal on 1 September 2016.
Lot 604 sold
Lot 604 was sold to Cedric Investments Pty Ltd. The only evidence of that sale is the evidence of Mr Hauville that the land was sold to Cedric Investments Pty Ltd and that settlement occurred on 21 July 2016. The only documentary evidence of the sale is a settlement statement addressed to Valmarl and Mr Hearn which states that the sale price was $2,500,000 and that outgoings were adjusted as at 21 July 2016.
The s 140 compensation claim
Counsel for Valmarl, Mr Hearn and the other Applicants (the plaintiffs in CIV 1447 of 2017) presented their claim for compensation under TLA s 140 first. Their counsel, Mr Hotchkin, said that it is not necessary to consider the claim of Valmarl and Mr Hearn for compensation under the undertaking given to the Court of Appeal if compensation is awarded under s 140 of the TLA.
Section 140 of the TLA provides that:
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.
Lodging caveat without reasonable cause - principles
The authorities on TLA s 140 and comparable provisions in other jurisdictions have established the following propositions concerning an application for compensation under s 140 for lodging a caveat without reasonable cause.
1.The applicant must prove the caveator lodged the caveat without reasonable cause.
2.The term 'reasonable cause' embodies subjective and objective elements.
3.The subjective element is the existence of an honest belief that the caveator had a caveatable interest.
4.The objective element is the existence of reasonable grounds for the honest belief.
5.Legal advice that the caveator was entitled to lodge the caveat may be of considerable significance in determining whether the applicant has established that the caveat was lodged without reasonable cause.
See: Bolton v Excell (Unreported, WASCA, Library No 930175, 22 February 1993); Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd (2007) 35 WAR 27 (Brogue Tableau); Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106; New Galaxy Investments Pty Ltd v Thompson [2017] NSWCA 153 (New Galaxy Investments).
The significance and effect of the caveator having given instructions and received legal advice in relation to lodging a caveat has been considered in a number of cases. In Brogue Tableau at [97] Buss JA cited Bolton v Excell as 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. Buss JA expressed the view at [100] that 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.
In New Galaxy Investments the New South Wales Court of Appeal recently considered a claim for compensation pursuant to s 74P of the Real Property Act 1900 (NSW), which provides that a person who, without reasonable cause, lodges a caveat is liable to pay compensation to any person who sustains pecuniary loss that is attributable to the lodgement. New Galaxy Investments Pty Ltd (New Galaxy) lodged caveats over the titles of six properties at Turramurra, claiming an equitable interest in the properties arising by reason of a payment by New Galaxy of $6,000,000 to the agent of the registered proprietors who were vendors of the properties. On its case, New Galaxy made a voluntary payment to the vendors' agent because it expected to acquire title to the properties by novation to it of the contracts of sale between the vendors and Golden Destiny Investments Pty Ltd (Golden Destiny). The first issue was whether New Galaxy had a caveatable interest in the properties by reason of its payment of $6,000,000 to the vendors' agent. Sackville AJA, with whom Gleeson JA agreed, held that the $6,000,000 paid by New Galaxy to the vendors' agent was a voluntary payment made by New Galaxy without the request or the knowledge of the vendors. They held that the payment was not a loan to Golden Destiny or made at the request of Golden Destiny, and that New Galaxy was not in the position of sub‑purchaser from Golden Destiny. Their Honours held that New Galaxy did not have a caveatable interest in the properties. Basten JA held that New Galaxy had a caveatable interest upon payment of part of the purchase price based on its contractual entitlement to novation in accordance with the terms of a short form deed.
The second issue in New Galaxy was whether New Galaxy had an honest belief on reasonable grounds that it had a caveatable interest over the properties. Basten JA, with whom Gleeson JA agreed, held that the vendors and Golden Destiny had failed to establish that New Galaxy did not believe on reasonable grounds that it had a caveatable interest in the land at the time it lodged the caveats. The vendors and Golden Destiny therefore failed to establish that New Galaxy had lodged or maintained the caveats without reasonable cause. Sackville AJA found that New Galaxy did not have reasonable grounds for lodgement of the caveats and it was not necessary to consider whether New Galaxy did not have an honest belief that it was entitled to lodge a caveat.
The trial judge had found that New Galaxy lodged the caveats 'without giving any thought at all to their validity'. Basten JA found that that finding should not have been made. Ms Gai, the active principal of New Galaxy, had given evidence that 'I instructed my solicitors to take steps to ensure that [New Galaxy's] interest is protected'. Basten JA inferred that the solicitors lodging the caveats had instructions from Ms Gai and had the key documents on which she relied in asserting New Galaxy's claims. His Honour said:
To conclude that a solicitor, whose competence in this regard was not challenged, simply lodged caveats without having any regard to whether or not the caveator had a relevant interest to protect, is to make a finding seriously adverse to the competence and professional behaviour of the solicitor [62].
In making conclusions as to the absence of reasonable cause Basten JA referred to two factors. The first was that it is necessary to identify whose state of mind was relevant. The second was:
… in circumstances where the caveator is represented by lawyers who effect the lodgement of the caveats, it should usually be inferred that they received instructions, gave advice and then received instructions to do what they in fact did. To negative those inferences will require specific evidence demonstrating departure from what may be expected [64].
Basten JA held that the available evidence failed to demonstrate that Ms Gai did not believe that New Galaxy had a caveatable interest. His Honour inferred that the solicitor had advised Ms Gai that New Galaxy had a caveatable interest. His Honour had regard to the form of the caveats drafted by the solicitor and drew the following conclusions about the solicitor:
He may have been wrong in law in concluding that the facts set out gave rise to an equitable interest justifying the lodging of caveats. However, it was not established that he probably did not advise Ms Gai in accordance with his understanding of the law, or that he acted without instructions, or that he acted in defiance of his own (assumed) advice that New Galaxy did not have a caveatable interest. The probabilities are the reverse [74].
Basten JA observed that if Ms Gai, and hence New Galaxy, obtained and acted on legal advice, it was not explained why the court should conclude that such conduct was 'without reasonable cause'. His Honour concluded that in those circumstances the vendors failed to establish that New Galaxy did not believe that it had a caveatable interest in the land at the time the caveats were lodged. His Honour observed that as the vendors had not established a prima facie case that Ms Gai, and hence New Galaxy, did not hold a belief that New Galaxy had a caveatable interest it was not to the point that the solicitor and Ms Gai had not given evidence of their professional communications.
Basten JA then went on to consider whether the belief held by Ms Gai was supported by reasonable grounds. His Honour concluded:
There may be circumstances in which a party, believing that it is entitled to lodge a caveat, cannot establish reasonable cause merely on the basis that it had legal advice to that effect. For example, it may not be able to rely upon such advice if it failed to disclose to its lawyers a material fact which might have led to different advice being given. However, there was no submission in this case that the circumstances outlined in annexure B to the caveats were wrong in any material respect, or that some known fact, or fact which should reasonably have been revealed to [the solicitor], had been omitted. The vendors' case was that the facts did not support New Galaxy having any equitable interest in the land in the circumstances revealed, so that any advice that it had such an interest was legally erroneous. For reasons given below, in my view that submission should not be accepted. However, even if that were so, it does not establish that Ms Gai acted unreasonably in relying on her legal advice.
There may be other circumstances in which a party cannot rely upon legal advice that it holds a caveatable interest in land, but none was relied upon either before the trial judge or in this Court [79] ‑ [80].
First caveat - Mr and Mrs Maio had honest belief they had caveatable interest
The CIV 2706 Plaintiffs, including Mr and Mrs Maio, commenced CIV 2706 of 2013 on 12 November 2013. The CIV 2706 Plaintiffs claimed an order that Valmarl and Mr Hearn perform their obligations to the plaintiffs by granting or confirming the grant of the rights of the plaintiffs under the 1983 Deed. The CIV 2706 Plaintiffs stated that their claim was pursuant to the 1983 Deed, the 2010 Deed and PLA s 11. Their solicitor, Mr Robinson, prepared and lodged the writ. By letter of 25 November 2013 the solicitor for Valmarl and Mr Hearn, Mr Hotchkin, wrote to Mr Robinson disputing the CIV 2706 Plaintiffs' claim. Mr Hotchkin said that the CIV 2706 Plaintiffs were not parties to the deed and therefore had no cause of action as referred to in the indorsement to the writ. Mr Robinson replied by letter of 4 December 2013 in which he stated that in his view Mr and Mrs Maio 'fit squarely within the protection provided by s 11'. The first caveat was lodged on 30 June 2014. By that time Valmarl and Mr Hearn had filed defences in the proceedings disputing the rights asserted by Mr and Mrs Maio.
The caveat was lodged on behalf of Mr and Mrs Maio by Mr Robinson. I infer from the fact that the caveat was lodged by Mr Robinson and from its contents that the caveat was drafted by Mr Robinson. I infer that Mr Robinson received instructions, gave advice and then received instructions to lodge the caveat. In the circumstances it is probable that Mr Robinson advised Mr and Mrs Maio that they had a caveatable interest and they instructed him to lodge a caveat in accordance with that advice. I infer that Mr and Mrs Maio obtained and acted on legal advice that they had a caveatable interest. In those circumstances the Applicants have failed to establish that Mr and Mrs Maio did not believe that they had a caveatable interest in the land at the time they lodged the caveats. There is no evidence that anything that occurred thereafter affected the beliefs they held. To the contrary, submissions made by their senior counsel at the trial of the action, on appeal to the Court of Appeal and on their application for special leave to appeal to the High Court indicate that they maintained that belief.
Mr and Mrs Maio did not give direct evidence of their belief that they had a caveatable interest. If the Applicants had established a prima facie case that Mr and Mrs Maio did not hold such a belief, then it may have been necessary for them to lead direct evidence of their belief. However, that stage was not reached. To paraphrase Basten JA, it is not to the point that Mr and Mrs Maio did not give direct evidence of their beliefs or waive privilege in their communications with Mr Robinson, and give evidence of their instructions to Mr Robinson and his advice to them.
First caveat - Mr and Mrs Maio's honest belief was on reasonable grounds
There may be circumstances in which an applicant may establish that a party who lodged a caveat believing that they were entitled to lodge the caveat on the basis of legal advice to that effect did so without reasonable cause. For example, it may be established that the lodging party failed to disclose to their lawyer a material fact which might have led to different advice being given. That is not this case.
The Applicants' case is that the facts and circumstances stated by Mr and Mrs Maio in their caveat and their arguments advanced in CIV 2706 of 2013 do not support the contention that their claim to a proprietary interest in Lot 604 was sufficient to forbid any dealings absolutely on the land rather than being 'subject to claim'. Mr Hotchkin submitted that the submissions made by the CIV 2703 Plaintiffs' counsel at trial go to the merits of the right to enforce an obligation under the deed but do not address the nature of the interest, whether it is caveatable, or whether it is a subject to claim or absolute interest to be protected.
I do not accept Mr Hotchkin's submissions. First, the CIV 2706 Plaintiffs' case was that the deeds and PLA s 11 conferred on them a proprietary interest in Lot 604. Secondly, the interest which they claimed included the benefit of a covenant that a subsequent transferee of Lot 604 would be required to covenant not to transfer its interest in Lot 604 to a subsequent transferee without the subsequent transferee entering into a deed of covenant to observe and perform the provisions of the 1983 Deed concerning the use and development of Lot 604. Thirdly, whilst Mr Robinson's advice was wrong in law that is not sufficient to give rise to the finding that the belief held by Mr and Mrs Maio that they had a proprietary interest in Lot 604 such that the registered proprietor of Lot 604 was not entitled to transfer its interest in Lot 604 to a subsequent transferee without the subsequent transferee entering into a deed of covenant to observe and perform the relevant provisions of the 1983 Deed supported an absolute caveat.
First caveat not lodged without reasonable cause
I find that the Applicants have not proved that at the time Mr and Mrs Maio lodged the first caveat they did not believe that they had a caveatable interest in Lot 604 which justified the lodging of an absolute caveat.
Second caveat - no reasonable grounds for Mr and Mrs Maio believing they had caveatable interest
Mr and Mrs Maio lodged the second caveat shortly before filing their application to the High Court for special leave to appeal from the decision of the Court of Appeal. The caveat was lodged by Mr Robinson on behalf of Mr and Mrs Maio. It claimed the same estate on the same grounds as the first caveat. Shortly after lodging the caveat the Plaintiffs filed their application for special leave to appeal to the High Court from the decision of the Court of Appeal. The CIV 2706 Plaintiffs' summary of argument to the High Court was settled by senior counsel. That argument maintained that Valmarl and Mr Hearn were bound by the Original Owner's obligation in cl 2(e) of the 1983 Deed. I infer that Mr Robinson did not lodge the second caveat after giving advice to Mr and Mrs Maio, or conveying to them the advice of senior counsel, that they did not have the caveatable interest claimed in the second caveat.
It is unnecessary to decide whether or not Mr and Mrs Maio, at the time they lodged the second caveat, had an honest belief that they had a caveatable interest in Lot 604 because I find that there were not reasonable grounds for such a belief. At the time Mr and Mrs Maio lodged the second caveat, a judge of this court and the Court of Appeal had unanimously held that the 2010 Deed did not confer proprietary rights on the Lot 602 strata lot holders. The Court of Appeal rejected the contention that cl 2(e) of the 1983 Deed imposed an independent obligation on the original owner of Lot 604. I infer from the fact that Mr and Mrs Maio's solicitors filed on their behalf an application for special leave to appeal to the High Court and from the submissions presented by their senior counsel that they had advice that an application for special leave to appeal and, if special leave were granted, the appeal, were reasonably arguable. However, that does not found reasonable grounds for a belief that they had a caveatable interest as distinct from an arguable case, in circumstances where the Court of Appeal had unanimously determined that they did not.
Second caveat lodged without reasonable cause
I find that Mr and Mrs Maio lodged the second caveat without reasonable cause. Mr and Mrs Maio are liable to make compensation to any person who sustained damage by reason of the lodging of the second caveat.
Assessing compensation for wrongfully lodging caveats
I will assess the compensation Mr and Mrs Maio are liable to make to the Applicants for wrongfully lodging the second caveat. I will also make a provisional assessment of the compensation Mr and Mrs Maio are liable to make to the Applicants for lodging the first caveat in case the matter should proceed to an appeal and it should be found on appeal that Mr and Mrs Maio wrongfully lodged the first caveat.
Entitlement to compensation - principles
The Applicants' written submissions stated that in order to persuade the court that it is just to award compensation, the Applicants must satisfy the court of the causal nexus between the lodgement of the caveat and the damage said to have been suffered. The applicants referred to the reasons of Jenkins J in Westpoint Corporation Pty Ltd v Registrar of Titles [2005] WASC 273, where at [12] her Honour said that before the court orders compensation it should be satisfied of the following matters:
1.that the applicant sustained the damage, as particularised;
2.that the damage was caused by the lodgement of the caveat;
3.that the damage was reasonably foreseeable as a consequence of the lodgement of the caveat; and
4.it is otherwise just to order the compensation.
The Applicants submitted that that analysis requires a counter-factual exercise as to what would have happened if no caveats had been lodged.
Applicants' counter‑factual analysis
The Applicants say that if the caveats had not been lodged they would have sold Lot 604 no later than 30 October 2014. Settlement of the sale of Lot 604 did not occur until 21 July 2016, that is about 21 months after the date it would have been sold if Mr and Mrs Maio had not lodged their caveats. The Applicants say that as a result of the delay they sustained damage by paying interest on loans, loan service fees, land taxes, rates, Water Corporation fees and a Land 360 Environmental fee for discharging a Contamination Memorandum which they would not have incurred if the caveats had not been lodged by Mr and Mrs Maio and Lot 604 had sold on 30 October 2014. That date is based upon the contract of sale to Rainwave being settled on or about that date.
I am not satisfied, on the balance of probabilities, that the Rainwave contract would have settled on or about 30 October 2014 if Mr and Mrs Maio's caveats had not been lodged or had been withdrawn by that date.
I have referred earlier in these reasons to the contract for sale of land by offer and acceptance signed on 8 August 2014 by which Rainwave offered to purchase Lot 604 for $2,500,000. The Applicants' contention that settlement of the sale to Rainwave would have occurred on or about 30 October 2014 if the caveats had not been lodged and maintained rests on the evidence of Mr Betlehem.
Mr Betlehem was the sole member, director and secretary of Rainwave. Mr Betlehem had undertaken a number of development projects prior to 2009. In 2009 he became bankrupt. He did not successfully complete any development project after that. Rainwave had a paid capital of $1. Rainwave was described by Mr Betlehem as a special purpose vehicle for a proposed development on Lot 604. Mr Betlehem did not claim to have any assets. Indeed he had packed up everything he owned and placed it into a sea container. There is no evidence that he had the capacity to borrow the funds necessary to complete the sale and undertake the development of Lot 604. The evidence is that he did not.
Mr Betlehem gave evidence that he had approached investors about entering into joint venture agreements to undertake the project and had had some discussions with joint venture parties. Mr Betlehem claimed that the caveats lodged by Mr and Mrs Maio prevented him from raising the necessary finance and that he would have been able to do so if it had not been for the caveats. Mr Betlehem was an unimpressive and unreliable witness. At times he was belligerent and argumentative. His evidence that the caveats lodged by Mr and Mrs Maio prevented him from raising the necessary finance and that, if it had not been for the caveats, he would have been able to do so and would have settled the sale and proceeded with the project was unsubstantiated assertion. His evidence about the potential investors was nebulous. I am not satisfied that Rainwave would have completed the contract for sale on or about 30 October 2014 if the first caveat did not prevent dealings with the property. To the contrary, it is more likely than not that Mr Betlehem and Rainwave would not have completed the contract of sale on or about 30 October 2014, or on some other date, whether or not the caveats had been lodged and maintained.
In his affidavit Mr Betlehem says that on 30 May 2015, after judgment was delivered in CIV 2706 of 2013, 'Rainwave was still a party that had a contract to purchase' Lot 604. Again, that was unsubstantiated assertion. The terms of the contract, as varied, extended the time for the clearing of the caveats to 28 February 2015. I find that the Rainwave contract expired on 28 February 2015.
The sale of Lot 604 was effected after the second caveat lapsed. There is scant evidence about the sale. The second caveat lapsed on 23 June 2016. Settlement of the sale to Cedric Investments Pty Ltd occurred on 21 July 2016. The only substantial impediment to a sale, after development approval was granted on 5 August 2014, was the caveats lodged by Mr and Mrs Maio. The proprietors of Lot 604 wanted to sell to Mr Betlehem or a company associated with him. Nevertheless, if Mr Betlehem had not been able to complete the sale, as I find is likely to have been the case even if Mr and Mrs Maio's caveats had not been in place, it is likely that Valmarl and Mr Hearn would have sought another purchaser if they had not been prevented from selling Lot 604 by the caveats lodged by Mr and Mrs Maio.
In the absence of evidence about the marketing of Lot 604 and how the sale of Lot 604 to Cedric Investments came about, I have to do the best I can to assess when the property is likely to have been sold if the caveats were not in place. I will consider that matter when assessing the Applicants' claimed losses resulting from the delay in the sale of Lot 604 as a result of the lodging of each of the caveats and as a result of the first caveat remaining in place in consequence of the extension of time for withdrawing the first caveat granted by the Court of Appeal.
Losses - first caveat not wrongfully lodged, second caveat wrongfully lodged
The only impediment to the sale of Lot 604 after the removal of the first caveat on 15 March 2016 was the lodging of the second caveat on 29 March 2016. The second caveat lapsed on 23 June 2016, and settlement of the sale of Lot 604 occurred four weeks later. I assess that if the second caveat had not been lodged Valmarl and Mr Hearn would have sold Lot 604 and settlement of the sale would have occurred about four weeks after the removal of the first caveat, that is on or about 12 April 2016. Interest on loans, land tax, Water Corporation fees and the Land 360 Environmental fee incurred by the Applicants after 12 April 2016 is damage resulting from the wrongful lodging of the second caveat.
The Applicants gave evidence of what they would have done with the sale proceeds if the sale of Lot 604 had occurred earlier. I accept that Valmarl as trustee of the Hauville Family Trust and Mr Hearn as trustee of the Peter Hearn Family Trust No 2 would have received $1,375,000 and $1,125,000 respectively at settlement.
The losses claimed by the Hauville parties, that is Valmarl, Stephen and Kerrie Hauville and Pristine Lakes, relate to two loans. The first loan was a loan of $885,000 from the Bank of Queensland. The loan was made to Valmarl, which on‑loaned the $885,000 to Pristine Lakes for investment in a childcare business. Valmarl was obliged to pay interest on the loan to the Bank of Queensland. The arrangement between Valmarl and Pristine Lakes was that Pristine Lakes paid to the Bank of Queensland the interest as and when it was due by Valmarl until October 2015 when Pristine Lakes ceased making the repayments and Valmarl made the repayments. From the proceeds of the sale of Lot 604 Valmarl repaid the loan to the Bank of Queensland.
The second loan was a loan from Bankwest to Stephen and Kerrie Hauville. From the proceeds of the sale of Lot 604, Valmarl as trustee for the Hauville Family Trust paid to Stephen and Kerrie Hauville, as beneficiaries of the trust, the balance of the sale proceeds, that is the sum of $490,000. Stephen and Kerrie Hauville applied that money to pay down the Bankwest loan. Valmarl says that the losses caused to it by the delay in the sale of Lot 604 caused by the wrongful lodgement of the caveats consisted of interest on the Bank of Queensland loan paid by Valmarl when Pristine Lakes ceased making interest payments, a loan service fee on the loan and its portion of land tax, rates, Water Corporation fees and the fee paid to Land 360 Environmental. Stephen and Kerrie Hauville say that the loss suffered by them was the additional interest they paid on the Bankwest loan. Pristine Lakes says that the loss suffered by it was the additional interest it paid on the Bank of Queensland loan.
The Hearn parties, that is Mr Hearn and Silverview, claim losses based on interest paid on loan accounts with Citibank and Mr Hearn's portion of land tax, rates, Water Corporation fees and fees paid to Land 360 Environmental. Mr Hearn received the proceeds from the sale of Lot 604 as trustee for the Peter Hearn Family Trust No 2. He distributed approximately $212,320.75 to repay a Citibank personal loan. He distributed the remainder to Silverview which used the funds to pay out a loan from Citibank in the sum of approximately $650,000 and to pay down a further Citibank loan. Mr Hearn says that the losses suffered by him as the result of the delay in the sale of Lot 604 consist of interest on the personal loan to Citibank, his portion of land tax, rates, Water Corporation fees and the fee paid to Land 360 Environmental. Silverview says that the losses suffered by it as a result of the delay in the sale of Lot 604 consisted of the additional interest paid by it on the Citibank loans as a result of the delay in their repayment.
The Applicants provided a schedule of losses summarising the relevant interest payments, land tax, rates, Water Corporation fees and the Land 360 Environmental fee incurred by the Applicants. That summary was not challenged by Mr and Mrs Maio. The summary shows that the payments made by the Applicants after 12 April 2016 were as follows.
Valmarl
$
Interest
28,569.37
Land tax
933.44
Water Corporation fees
276.01
Land 360 Environmental fee
5,368.86
Total
35,147.68
Stephen and Kerrie Hauville
Interest
9,163.56
Mr Hearn
Interest
2,391.02
Land tax
763.76
Water Corporation fees
225.82
Land 360 Environmental fee
4,400.23
Total
7,781.43
Silverview
Interest on first loan
11,229.88
Interest on second loan
4,673.03
Total
15,972.91
I accept that those losses were incurred by each of the Applicants as a result of the delay in the sale of Lot 604 caused by the wrongful lodgement of the second caveat.
Losses - first and second caveats wrongfully lodged
The contract of sale with Rainwave expired on 28 February 2015. I allow a period of approximately four months to market the property, obtain a new purchaser, and effect settlement. I find that if the caveats had not been in place Lot 604 is likely to have been sold and the sale is likely to have been completed on or about 21 July 2015.
The particulars stated in the Applicants' schedule of losses were not disputed by Mr and Mrs Maio. The schedule shows that the following payments were made by the Applicants between 26 July 2015 and the settlement of the sale of Lot 604 on 26 July 2016.
Valmarl
$
Interest
70,897.13
Loan service fees
150.00
Land tax
1,400.22
Water Corporation
886.87
Total
73,184.22
Pristine Lakes
Interest
8,696.85
Total
8,696.85
Stephen and Kerrie Hauville
Interest
31,082.37
Total
31,082.37
Peter Hearn
Interest
7,318.28
Land tax
1,145.68
Water Corporation
725.61
Total
9,289.57
Silverview
Interest on first loan
31,397.04
Interest on second loan
13,076.34
Total
44,473.37
I accept that if the first caveat was lodged without reasonable cause those payments constituted losses sustained by the Applicants as a result of the wrongful lodging of the first caveat.
Damage was reasonably foreseeable
The Applicants submit, and Mr and Mrs Maio deny, that the damage sustained by the Applicants through incurring the additional payments as a result of the delay in the sale of Lot 604 was a reasonably foreseeable consequence of the lodgement of the caveats. Counsel for Mr and Mrs Maio, Mr Robinson, submitted that the damage suffered by the Applicants is too remote.
In European Bank Ltd v Evans (2010) 240 CLR 432 the High Court held that the requirements for causation and remoteness in contract law are only applicable by analogy in an assessment of compensation pursuant to an undertaking as to damages. Their Honours held that in that case the appropriate outcome was to be reached by the following path:
… the first question was 'What is the loss that is now alleged?', the second 'Did that loss flow directly from the order of 18 May 2004?' and the third 'Could the loss sustained have been foreseen at the time of that order?' The inquiry presented by the third question is an inquiry as to whether a loss of the kind actually sustained could have been foreseen? Contrary to the submission by the respondent, Mr Evans, the inquiry is not as to whether the actual loss suffered was foreseen at the time the undertaking was given [29].
Each of the losses claimed by the Applicants flowed directly from the lodgement of the caveats. A loss of the kind actually sustained could have been foreseen. Mr and Mrs Maio claimed a proprietary interest in Lot 604 by virtue of the 1983 Deed, the 2010 Deed and PLA s 11(1) and s 11(2). Valmarl was a party to the 2010 Deed in its capacity as trustee of the Hauville Family Trust. Mr Hearn was a party to the 2010 Deed in his capacity as trustee for the Peter Hearn Family Trust No 2. It is foreseeable that on the sale of property by a trustee the trustee will apply the funds to discharge, in full or in part, a loan to the trustee and that the trustee will distribute part or all of the sale proceeds to the beneficiaries of the trust. It is foreseeable that a beneficiary will apply sale proceeds distributed to the beneficiary to discharge, in whole or in part, a loan to the beneficiary. Furthermore, it is foreseeable that a beneficiary may apply sale proceeds distributed to the beneficiary to the discharge of a loan of a corporate entity controlled by the beneficiary. I find that each of the losses sustained by each of the Applicants was a loss of a kind that could have been foreseen.
It is just to order the compensation
In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 266 ‑ 267 Aickin J made the following statement with respect to interlocutory injunctions:
In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However, the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case.
In European Bank v Evans (2010) 240 CLR 432 at [18] the High Court held that the above statement was applicable to the interlocutory order in that case.
Mr and Mrs Maio lodged the second caveat without reasonable cause. It is just in the circumstances to award the Applicants compensation in the amounts I have assessed earlier in these reasons. If, contrary to my finding, Mr and Mrs Maio lodged the first caveat without reasonable cause then it would be just in the circumstances of this case to award the Applicants compensation in the amounts I have provisionally assessed earlier in these reasons.
Mitigation
Mr and Mrs Maio say that the Applicants suffered no loss, or alternatively failed to mitigate their losses, because they did not accept an unconditional cash offer for Lot 604 from Linemark Investments Pty Ltd to buy Lot 604 on 9 April 2014.
On 9 April 2014 the proprietors of Lot 604 were under contract to sell the property to Doublenet. The agents for Valmarl and Mr Hearn responded to the Linemark offer by stating:
The property is currently under contract. If this changes we will be in touch.
On 24 April 2014 the solicitors for Mr and Mrs Maio responded:
We construe your email to be communication of non‑acceptance of the offer, but for the avoidance of doubt, the offer is withdrawn. If the seller is interested in selling the property to my client then please contact me.
Thereafter the Doublenet contract lapsed. Valmarl and Mr Hearn entered into the Rainwave contract. That contract expired on 28 February 2015. On 29 May 2015 the plaintiffs' claims in CIV 2706 of 2013 were dismissed. On 8 June 2015 the plaintiffs appealed to the Court of Appeal. On 17 November 2015 I ordered Mr and Mrs Maio to withdraw the caveat by 27 November 2015. On 26 November 2015 the Court of Appeal ordered that the time for compliance by Mr and Mrs Maio with the order to remove the caveat be extended to the date of determination of the appeal or further order. Neither Linemark nor Mr and Mrs Maio made any offer to purchase Lot 604 after 24 April 2014. Nor did they invite Valmarl and Mr Hearn to negotiate a sale of the property.
I am not satisfied that Linemark or the defendants made an offer which the Applicants could, or reasonably should, have accepted. I am not satisfied that the Applicants suffered no loss by reason of an offer by Linemark or Mr and Mrs Maio to purchase Lot 604. I am not satisfied that the Applicants failed to mitigate their losses by not selling Lot 604 to Mr and Mrs Maio.
Compensation for wrongfully lodging caveats
In summary, I assess the compensation Mr and Mrs Maio are liable to pay to the Applicants for having wrongfully lodged the second caveat as follows.
Valmarl
$35,147.68
Stephen and Kerrie Hauville
$9,163.56
Peter Hearn
$7,781.43
Silverview
$15,972.91
I provisionally assess the compensation Mr and Mrs Maio are liable to pay to the Applicants for having wrongfully lodged the first caveat, if it should be found that they wrongfully lodged the first caveat, as follows.
Valmarl
$73,184.22
Pristine Lakes
$8,696.85
Stephen and Kerrie Hauville
$31,082.37
Peter Hearn
$9,289.57
Silverview
$44,473.37
Compensation pursuant to Mr and Mrs Maio's undertaking as to damages
Mr and Mrs Maio must pay compensation for any losses caused to Valmarl and Mr Hearn by the maintenance of the caveat from 26 November 2015 to the date the caveat was withdrawn, 15 March 2016. Mr and Mrs Maio say that the appropriate compensation is interest at a rate between the Reserve Bank cash rate of 1.5% and 6% which is the rate applicable under s 32 of the Supreme Court Act 1935 (WA).
In an assessment of damages pursuant to an undertaking to pay damages, the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted. Such damages will be just and equitable in the circumstances of most cases.
If the Court of Appeal had not extended the time for Mr and Mrs Maio to withdraw the first caveat there would have been no impediment to the sale of Lot 604 from that time. I assess that if the time for the withdrawal of the first caveat had not been extended, the sale of Lot 604 would have occurred about four weeks later, that is on or about 24 December 2015. Interest, land tax, Water Corporation fees and the Land 360 Environmental fee incurred by the Applicants after 24 December 2015 is damage resulting from the extension of the time for withdrawing the caveat and could have been foreseen when the Court of Appeal order was made.
The Applicants' schedule of losses show that the relevant interest payments, land tax, rates, Water Corporation fees and Land 360 Environmental fee incurred by the Applicants after 24 December 2015 were as follows.
Valmarl
$
Interest
$57,585.18
Land tax
$1,422.00
Water Corporation fees
745.41
Land 360 Environmental fee
5,368.86
Total
65,099.64
Mr Hearn
Interest
4,978.98
Land tax
1,145.68
Water Corporation fees
225.82
Land 360 Environmental fee
4,423.00
Total
11,026.46
Conclusion
The damage sustained by Valmarl by reason of the extension of the first caveat includes the damage sustained by Valmarl as a result of the lodging of the second caveat. Accordingly, Valmarl should receive compensation pursuant to the undertaking as to damages given by Mr and Mrs Maio to the Court of Appeal, but no additional compensation by reason of Mr and Mrs Maio having wrongfully lodged the second caveat. Mr and Mrs Maio should pay to Valmarl compensation of $65,099.64.
Mr and Mrs Maio should pay to Stephen and Kerrie Hauville compensation of $9,163.56 for wrongfully lodging the second caveat.
The damage sustained by Mr Hearn by reason of the extension of the first caveat includes the damage sustained by Mr Hearn as a result of the lodging of the second caveat. Accordingly, Mr Hearn should receive compensation pursuant to the undertaking as to damages given by Mr and Mrs Maio to the Court of Appeal but no additional compensation by reason of Mr and Mrs Maio having wrongfully lodged the second caveat. Mr and Mrs Maio should pay to Mr Hearn compensation of $11,026.46.
Mr and Mrs Maio should pay to Silverview compensation of $15,972.91 for wrongfully lodging the second caveat.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RK
ASSOCIATE TO THE HONOURABLE JUSTICE LE MIERE21 SEPTEMBER 2018
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