Van Klaveren v Otelta Pty Ltd
[2018] VSC 10
•23 January 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 04789
| JAMES JOHN VAN KLAVEREN | Plaintiff |
| v | |
| OTELTA PTY LTD (ACN 115 860 814) AND OTHERS (according to the schedule attached) | Defendants |
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JUDGE: | DALY AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 January 2018 |
DATE OF JUDGMENT: | 23 January 2018 |
CASE MAY BE CITED AS: | Van Klaveren v Otelta Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 10 |
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CAVEATS - Application for removal of a caveat under s 90(3) of the Transfer of Land Act 1958 (Vic) (‘TLA’) – Caveat lodged by defendants pursuant to claim of leasehold interest in the property – Whether any serious question to be tried that defendants had a caveatable interest - No serious question to be tried established - Balance of convenience favours removal of caveat – Caveat not to be used as a ‘bargaining chip’ to secure a claim for damages - Order for removal of caveat made – Costs awarded in favour of plaintiff – Yamine v Mazloum [2017] VSC 601, referred to
PRACTICE AND PROCEDURE – Whether VCAT proceeding concurrently on foot seeks to substantiate the interests alleged in the caveat - Whether this application amounts to an abuse of process in circumstances where the VCAT proceeding results in a finding that the relevant claim is untenable – Relevant claims in VCAT proceeding informally struck out by Tribunal Member – Discretion of court to scrutinise merits of any separate proceeding relied upon by caveator in determining the threshold issue - Yuksels Nominees Pty Ltd v Nguyen & anor [2015] VSC 663, distinguished - VCAT not a ‘court’ within the meaning of s 90(3) of the TLA - No abuse of process - TLA s 89A(7) – Section 7 of Civil Procedure Act 2010 (Vic)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L Virgona | McCluskys |
| For the First and Second Defendants | Mr Elliot Sgargetta, by leave granted 22 January 2018 | |
| No appearance for or on behalf of the Third Defendant (Registrar of Titles) |
HER HONOUR:
The plaintiff, Mr Van Klaveren is the registered proprietor of a property at 10 Stewart Road, Emerald (‘property’). The property has been sold and settlement is due on 29 January 2018. The first defendant, Otelta Pty Ltd (‘Otelta’) is a former lessee of the property. The property was apparently used to run a bed and breakfast business. The second defendant, Sleep Overs Group Pty Ltd (‘Sleep Overs Group ‘) does not appear to have been a party to any agreement with the plaintiff, but apparently was responsible for management of the bed and breakfast business on behalf of Otelta. It is unclear why Sleep Overs Group is said to have a caveatable interest in the property, or indeed should be a party to this proceeding. The Registrar of Titles is also a defendant to the proceeding, but has by letter indicated that he does not intend to appear in the proceeding, and will abide by the decision of the Court.
There is a reasonably lengthy history of disputation between the plaintiff and Otelta regarding the performance of Otelta’s obligations under a series of leases, the first of which was entered into in 2012, and the last in January 2015. Relevantly, the leases included a term that Otelta had an option to purchase the property for $825,000. A proceeding was commenced by Otelta at VCAT in 2016 seeking to dispute the plaintiff’s right to terminate the lease (‘VCAT proceeding’). The VCAT proceeding is still underway, and pleadings have not yet been finalised, to reflect events as they have developed.
Relevantly, on or about 8 May 2017, the plaintiff re-entered the property and took possession of the property. As such, the plaintiff contends that the lease is at an end. While there have been no formal declarations to that effect in the VCAT proceeding or any other proceeding, on 28 September 2017 Senior Member Walker refused an application for an injunction by Otelta to restrain the sale of property. Further, at a directions hearing on 5 December 2017, after the commencement of this proceeding, Senior Member Farrelly indicated quite firmly that any reformulation of Otelta’s claim in the VCAT proceeding to include a claim for relief against forfeiture or any declaration that the lease remained on foot would not be entertained. Despite orders requiring that Otelta file and serve amended points of claim by 22 December 2017, no such amended points of claim had been filed and served until 18 January 2018, shortly before the hearing of this application.
Turning to the current application, the current caveat (a previous caveat having been removed earlier in 2017) was lodged on behalf of Otelta and Sleep Overs Group on 14 September 2017 (‘defendants’), claiming a leasehold interest in the property. The plaintiff’s position is that given that the lease has been determined, there is no serious question to be tried that Otelta (let alone Sleep Overs Group) has the interest in the property claimed by the caveat. Further, it could not be shown that there is any proceeding on foot which seeks to substantiate the interest claimed in the caveat, notwithstanding the existence of the VCAT proceeding.
This proceeding, seeking the removal of the caveat pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) (‘TLA’) was issued on 24 November 2017. On the first return date, 28 November 2017, the hearing of the application was listed for 16 January 2018, on the basis that settlement of a contract of sale of the property was scheduled for 29 January 2018. The first and second defendants were represented at the hearing on 28 November 2017, at which I made orders for the filing and service of affidavits, with the defendants to file and serve their affidavits by 22 December 2017. However, an unsworn affidavit of the director of Otelta, Mr Elliot Sgargetta, was filed and served on or about 10 January 2018.
On 16 January 2018, the solicitor for the defendants was granted leave to cease to act forthwith. Mr Sgargetta attended the hearing, and sought and was granted an adjournment of the hearing to 22 January 2018. On 22 January 2018, I granted leave for Mr Sgargetta to represent the defendants.
The principles governing the applications for removals of caveats are well known and, well settled. These principles are recently summarised by John Dixon J in Yamine v Mazloum,[1] and, for convenience, I adopt the following statements made by his Honour:[2]
[1][2017] VSC 601.
[2]Ibid [15].
1.The court’s power under s 90(3) of the Act is discretionary.
2.Section 90(3) is in the nature of a summary procedure and analogous to the determination of interlocutory injunctions.
3.The caveator bears the onus of establishing that there is a serious question to be tried that it does have the estate or interest in land as claimed. What the statute requires is that the caveator show that there is at least some probability on the evidence before the court that they will be found to have the equitable rights or interest in the land asserted by them in the caveat. The court directs its analysis towards the relationship between the caveat that has been lodged and the interest claimed by the caveator.
4.If the caveator establishes a serious question to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
5.As a general rule, when considering the balance of convenience, the court should take whichever course appears to carry the lower risk of injustice if the court should turn out to have been wrong in the sense of declining to order summary removal of a caveat where the caveator fails to establish its right at trial or in failing to order summary removal of a caveat where the registered proprietors succeed at trial.
6.There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator. The stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that in the circumstances justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.
Relevantly, his Honour also referred to circumstances where upon the application for removal of a caveat the caveator seeks to in effect amend the caveat to establish a different proprietary interest in the property from that claimed in the caveat. His Honour stated as follows:[3]
…the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then fixed up later. Caveats act as an interlocutory injunction, albeit by an administrative act rather than by court order, and can have serious consequences that affect the register of property titles and interests. The courts have recognised wrongly formulated caveats should not easily be tolerated.
[3]At [37].
At the hearing of the affidavits, the plaintiff relied upon three affidavits sworn by his solicitor, Mr Anthony Hill. The first affidavit, sworn 24 November 2017, traversed the history of the dispute between the parties, the history of the VCAT proceeding, and exhibited the formal documents in support of the application, orders made in the VCAT proceeding, and some correspondence between the parties. Mr Hill’s second affidavit, sworn on 10 January 2018, exhibited a copy of the transcript of the hearing at VCAT on 5 December 2017, where Senior Member Farrelly made certain observations concerning Otelta’s claims in the VCAT proceeding. Mr Hill’s third affidavit, sworn on 19 January 2018, exhibited a copy of the transcript of the hearing on 27 September 2017, where Senior Member Walker refused Otelta’s application to restrain the plaintiff from selling the property.
The defendants relied upon an affidavit of Otelta’s managing director, Mr Elliot Sgargetta, provided to the Court in unsworn form dated 10 January 2018. It is not necessary to traverse the entirety of the matters canvassed in that affidavit. The matters of particular relevance to the current application are as follows:
(a) the background to the VCAT proceeding and the history of the dispute between the parties;
(b) Otelta’s contention that in the VCAT proceeding that the lease is a retail lease, and therefore runs until 2 January 2020 under the terms of the Retail Leases Act 2003 (Vic);
(c) the making of and terms of an alleged agreement reached at a compulsory conference at VCAT on 27 September 2016, which was never reduced to writing, allegedly by reason of defaults on the part of Mr Hill;
(d) the next directions hearing in the VCAT proceeding is scheduled for 25 January 2018; and
(e) under the heading ‘Request for the adjournment’ Mr Sgargetta deposed as follows:
I say that the caveat should remain in place, until the conclusion of the VCAT proceedings. The reason I say that is because that [sic] should our application in VCAT be successful, the applicant will be required to honour the exclusive option to buy or [sic] the agreement or pay damages.
My current lawyers who are conscientious in mitigating costs to both parties have appropriately requested twice from McClusky’s [the solicitors for the plaintiff in this proceeding] confirmation that the applicant can satisfy any order as to an award of damages that could be issued in VCAT, however, no reply has been received.
The concern is that should the caveat be removed and we are successful at VCAT that there is prejudice against us.
It is for this reason we say that the caveat should stay and a self-lapsing order should instead be made, that is based on the outcome VCAT proceedings [sic].
In the written outline of submissions filed on behalf of the plaintiff on 15 January 2018, counsel for the plaintiff referred to the statements of principle in Yamine v Mazloum[4] extracted at paragraph 7 above, and went on to submit as follows:
Where there is already a proceeding on foot which the caveator alleges justifies the maintenance of a caveat, it must be shown that the other proceeding does in fact seek to substantiate the interest as set out in the caveat.
[4]Ibid.
The plaintiff submitted that a review of the current status of the VCAT proceeding shows that it cannot be said that the VCAT proceeding is one which is seeking to substantiate the interests alleged in the caveat. While the prayer for relief in the VCAT proceeding claims relief from forfeiture of the premises, and a declaration that the current lease is a retail lease and is valid and on foot, the current status of the VCAT proceeding, given the refusal of the application for an injunction to prevent the sale of the property by Senior Member Walker, and the observations made by Senior Member Farrelly during the directions hearing on 5 December 2017 to the effect that the lease is at an end, demonstrates that all that is left to Otelta is a claim for damages for any alleged breach of the now determined lease. Therefore, there is nothing in the VCAT proceeding which could be said to be seeking to substantiate any leasehold interest as claimed in the caveat.
The plaintiff relied upon transcripts of the hearings at VCAT on 28 September 2017 and 5 December 2017. At the hearing on 28 September 2017, Senior Member Walker heard an application by Otelta for an injunction to prevent the sale of the property, the auction of which was pending. Senior Member Walker refused the application, and counsel for the plaintiff submitted that it is apparent from the reasons given by him orally on the day that Senior Member Walker determined that no lease was on foot, and that Otelta would have been unsuccessful in making an application for relief against forfeiture. During the directions hearing on 5 December 2017, an application by Otelta to file amended points of claim was refused by Senior Member Farrelly, and Senior Member Farrelly gave directions for the filing and service of a further amended points of claim, making it clear during the course of the discussion between the parties, that any claim brought by Otelta against the plaintiff other than for damages would not be entertained. The plaintiffs say that this gives rise to a res judicata or issue estoppel, such that the defendants do not have a proceeding on foot which supports the interest claimed in the caveat.
Further, the plaintiff submitted that, in any event, there is no serious question to be tried which could justify the maintenance of a caveat claiming a leasehold interest, as there is no lease on foot. The plaintiff submitted that any option to purchase contained in a lease cannot be exercised after the lease has come to an end, unless there are express provisions within the lease to the contrary. As for the alleged breach of an oral agreement made at a compulsory conference at VCAT, there is no evidence of any such agreement in writing, and as such, any agreement would not be enforceable by reason of s 126 of the Instruments Act 1958 (Vic).
The plaintiff’s written outline of submissions concluded as follows:
Even if the Court is against the plaintiff on whether there is a serious question to be tried, the Court must be mindful of the content – and the interest claimed – in the current caveat.
It is that interest which must be shown to be arguable on the evidence before the Court.
This Honourable Court has made clear on a number of occasions that a caveat is not to be lodged as a “bargaining chip”, nor should a court readily allow an improperly lodged caveat to be simply “fixed up later”.
Even if it is the case that this Honourable Court finds a serious question to be tried on the basis of the alleged agreement or the exclusive option to purchase, that is not the interest claimed.
It is the leasehold interest which must be substantiated, and that is simply not possible.
In his oral submissions made during the course of the hearing, counsel for the plaintiff submitted, in summary, as follows:
(a) the plaintiff accepts, for present purposes, that the lease dated 2 January 2015 is a retail lease;
(b) Otelta has had ample opportunity to make an application for relief against forfeiture in the VCAT proceeding, including at a directions hearing on 21 July 2017, but has failed to do so;
(c) in regards to Otelta’s alleged entitlement to exercise an option to purchase the property, counsel noted that no equitable interest of that nature had been claimed in the caveat; and
(d) as for the balance of convenience, he noted that Otelta has been out of the property for many months, and no rent had been paid for quite some time before that.
As noted above, the defendants relied upon an affidavit sworn by the director of Otelta, Mr Elliot Sgargetta on 10 January 2018 and detailed written submissions prepared by Mr Sgargetta and served on 19 January 2018, the last business day before the hearing. The submissions annex a substantial amount of documents, including a document dated 18 January 2018 and headed ‘Amended Statement of Claim’. Mr Sgargetta confirmed that this document had been filed with VCAT, and counsel for the plaintiff confirmed that given that the allegations made in the amended statement of claim made claims for relief which both Senior Members Walker and Farrelly had indicated were not available to Otelta, the plaintiff would make an application to strike out the offending parts of the amended statement of claim. Other documents exhibited to the submissions are documents which more appropriately should have been exhibited to an affidavit, but given that the defendants are now effectively self-represented, and given the now pressing urgency of the proceeding, I decided to receive those documents. I also reviewed additional documents forwarded to the Court by Mr Sgargetta after the hearing and prior to completing this ruling.
As a preliminary matter, Mr Sgargetta objected to the Court receiving the affidavits sworn by Mr Hill, the solicitor for the plaintiff, on a number of bases. First, the affidavits were said to be inadmissible because they included hearsay evidence. Secondly, there was no evidence of Mr Hill being authorised by the plaintiff to give evidence on his behalf. Thirdly, it was unfair for the plaintiff to rely upon Mr Hill’s affidavit, as Mr Hill would be able to hide behind legal professional privilege during any cross-examination. Fourthly, the affidavit was inadmissible given it was an originating affidavit. Fifthly, the affidavit was misleading, in that it did not give the whole story. Sixthly, the information was deposed as to information and belief but Mr Hill was giving evidence as a lay witness, not as an expert witness. Seventhly, Mr Hill was not the best person to prove the necessary elements to support the application, and finally, reliance upon the affidavit of Mr Hill would prejudice the defendants’ defence of this proceeding.
The submissions filed by Otelta on 19 January 2018 are very detailed, but the thrust of the submissions concerning the substantive application can be summarised as follows:
(a) they traversed the history of the relationship between the parties since 2012;
(b) they reviewed the matters which are in dispute between the parties, including the existence of a lease, Otelta’s right of re-entry into the property, the enforcement of the obligation under the lease to provide Otelta with first option to purchase the property, and the validity of the plaintiff’s re-entry into the premises, which were said to be all matters which are the subject of the VCAT proceeding, such that the VCAT proceeding should be found to have been brought to substantiate the interest claimed in the caveat;
(c) Otelta maintains that the lease is on foot until 2 January 2020, given the terms of the Retail Leases Act 2003 (Vic);
(d) the refusal of the application for an injunction by Senior Member Walker and the observations made by Senior Member Farrelly at the directions hearing on 5 December 2017 do not amount to a final determination of the issues between the parties;
(e) the plaintiff and Otelta also reached an agreement at a compulsory conference at VCAT in September 2016 that Otelta have an option to purchase the property for $825,000, with settlement to take place within 18 months’ of the signing of the contract of sale, a lease to be entered into to cover the intervening period, and that the solicitors for the plaintiff would prepare the necessary documentation;
(f) Mr Sgargetta submitted as follows:
The caveat seeks to enforce an interest connected with the land itself (it seeks to buy the land and has an option to buy since 2 January 2015 which the Applicant has systematically sought to defeat).
The caveat seeks to protect the interests of the First Defendant to the payment of damages due to the destruction and loss of its business and the forfeiture of its personal properties, consequent to the disruption of the lease over the property in its favour.
The caveat on the property protects the First Defendant’s right of recourse to recoup their losses as the First Defendant knows not of any other property owned by the Applicant.
(g) the plaintiff should not have brought the application to remove the caveat in this Court, but rather should have brought the application in VCAT, given that all matters are currently before VCAT and VCAT is in a better position to act upon the application given that it ‘has primary jurisdiction over the facts and disputes between the parties’.
Mr Sgargetta also made oral submissions during the course of the hearing, the notes of which were provided after the hearing. Mr Sgargetta submitted, among other things:
(a) the trigger for the dispute was the plaintiff’s attempt to sell the property in early 2016 in breach of the terms of the lease entered into on 2 January 2015, and the plaintiff’s subsequent attempts to evict the defendants from the property;
(b) he took no action to re-enter the property in May 2017, forcibly if necessary, on the advice of the local police, which he now regrets following;
(c) he repeated his submissions that this application should be dealt with at VCAT, which is a court of competent jurisdiction;
(d) the refusal of the injunction reinforces the critical importance of maintaining the caveat;
(e) the VCAT proceeding claims an interest in the property, being the lease, and the plaintiff has not sought an order from VCAT that the lease is at an end;
(f) further there is evidence that the plaintiff is in ‘dire financial circumstances’, such that, if Otelta’s damages claim is unsuccessful, the plaintiff won’t be in a position to pay;
(g) the plaintiff was aware of the caveat when he entered into the contract of sale for the property; and
(h) as for the balance of convenience, the Court should take the course which would carry the lower risk of injustice, and maintain the caveat until the hearing and determination of the VCAT proceeding.
In reply, counsel for the plaintiff submitted that:
(a) Senior Member Walker dealt with the question of whether the lease was on foot during the hearing on 28 September 2017;
(b) Mr Sgargetta’s submissions regarding his concerns that the plaintiff could not pay damages highlights the fact that the caveat is an abuse of process; and
(c) he noted that the compulsory conference at VCAT, where an (undocumented) agreement was alleged to have been reached, was attended by solicitors on both sides.
Turning first to the defendants’ submissions concerning the admissibility of Mr Hill’s affidavits, I reject these contentions in their entirety. It is well established that an application for the removal of a caveat is interlocutory in nature,[5] and as such, the rules of Court provide that evidence may be given on information and belief. Indeed, it is common in applications of this nature for the primary deponent to be a solicitor. It would be unusual, albeit not unheard of, for cross-examination to be permitted on what is really a summary procedure. Finally, to the extent that Mr Hill’s affidavits are said to be misleading and/or incomplete, which I do not necessarily accept, the defendants have had ample time to put on evidence of their own version of events, and indeed have taken advantage of that opportunity.
[5]See Mould v Canale & ors [2017] VSC 793, [113].
Counsel for the plaintiff referred me to the decision of T Forrest J in Yuksels Nominees Pty Ltd v Nguyen & anor,[6] where the question of whether a County Court proceeding had been brought by the caveator to substantiate the interest claimed in the caveat was determined as a threshold question. His Honour stated as follows: [7]
If there is already a proceeding on foot to substantiate the caveat, this proceeding is prima facie vexatious and will likely be stayed.
[6][2015] VSC 663 (‘Yuksels’).
[7]At [5].
In that proceeding his Honour found that the relevant County Court proceeding was not a proceeding brought to substantiate the caveat, because the caveator did not seek to establish any proprietary interest in the relevant property, but rather sought to claim damages for breach of an alleged agreement.[8]
[8]At [8].
In the current case the position is somewhat more nuanced. The original points of claim, which at the time this proceeding was commenced were the only pleadings on foot in the VCAT proceeding, include relief from forfeiture as part of the relief being sought, notwithstanding that at the time the VCAT proceeding was first issued Otelta was in possession of the property (such that it was not necessary or proper for it to have claimed that relief at the time). While the plaintiff’s re-entry into the property in May 2017 may well have triggered an entitlement on the part of Otelta to pursue an application for relief against forfeiture, no such application was ever pressed. By the time Otelta made an application for an injunction preventing the sale of the property in September 2017, the application was determined on the basis that, at least in the mind of Senior Member Walker, it was too late for Otelta to bring a claim for relief against forfeiture. However, the claim remained in the prayer for relief.
On 5 December 2017, an application by Otelta to amend its points of claim was refused by Senior Member Farrelly. It was apparent on the basis of the transcript of that hearing that the Senior Member was unwilling to permit Otelta to bring anything other than a damages claim. That is, Otelta would be entitled to maintain its allegations that the lease had been breached by the re-entry of the plaintiff into the property, Otelta’s claims for reimbursement for repairs and improvements, and the alleged breach of the term providing Otelta with an option to purchase the property. However, the Senior Member made it quite clear that, given that the lease was now at an end, claims for declaratory and other relief would not be permitted to proceed. However, the amended statement of claim exhibited to Mr Sgargetta’s submissions, which I am told has been filed with VCAT, seeks relief in the nature of relief against forfeiture, and seeks specific performance of the plaintiff’s obligation to provide the first defendant with an option to purchase the property.
So, what we have here then, is a proceeding on foot which in the only extant documents before VCAT do, on their face, seek to maintain the interest claimed in the caveat, being a leasehold interest. The question is, is the VCAT proceeding, which on its face appears to be seeking to substantiate an interest in the property consistent with the caveat, a proceeding of a nature which would lead to a finding that this proceeding is an abuse of process, in circumstances where VCAT has said the relevant claim is untenable and not able to be maintained? This question is significant, because if I were to find that the VCAT proceeding was a proceeding brought to substantiate the interest in the claims in the caveat, the plaintiff’s application would fall at the first hurdle. If I did not, then the usual test for applications for removal of caveats would apply.
In relation to the threshold question as to whether the VCAT proceeding is a proceeding to substantiate the interest claimed in the caveat, I note that the statement of T Forrest J referred to above states that an application for removal of a caveat is only prima facie an abuse of process in circumstances where there is a proceeding on foot which seeks to substantiate such an interest. However, while I agree with the submissions by Otelta to the effect that the questions of whether a valid lease remained on foot were not finally determined by Senior Member Walker in the application for an injunction, given that an application for an injunction is an interlocutory application, I do agree that the practical effect of the hearing on 5 December 2017 was to strike out those components of Otelta’s claim which sought declarations that the lease was still on foot, and relief against forfeiture, as being unsustainable.
The statements of Senior Member Farrelly during the hearing on 5 December 2017 make it clear that the plaintiff’s oral application that the proceeding be struck out, insofar as it went beyond a claim for damages, would have been granted, save that, given the ‘direct’ remarks that he had made, he did not consider that that was necessary. This is evident from page 14 of the transcript:
Mr Virgona: Could I ask Senior Member for clarity’s sake – and just to ensure that this drama doesn’t continue – that an order be made under s 75(1)(a) striking out the claim for relief against forfeiture, just to reflect what the Senior Member has said now?
Mr Farrelly: Well, I just don’t think that it’s – I don’t think that claim is going to be made.
Mr Virgona: We don’t have a lot of confidence, given what’s transpired.
Mr Farrelly: I know, but I’ve been fairly directive in my comments and – why were we listed today in the first place, probably just for the return of the summons, actually?[9]
[9]The notice from VCAT listing the matter for directions indicated that the listing was prompted by the filing of amended points of claim, and the plaintiff’s opposition to this course.
Further, at pages 16 and 17 of the transcript, the following exchange takes place:
Mr Virgona: There is one other issue in relation to all that, sir. There’s currently a caveat on foot, which is purportedly to some leasehold interest, which is the reason for seeking the order under s 75, that that relief against forfeiture be struck out. Given that the proceeding has been put off now, there is a caveat that will prevent the settlement and there is a proceeding on foot currently in the Supreme Court to remove that. The application has been brought on the basis that this proceeding doesn’t substantiate any leasehold interest and it is just a proceeding pursuing damages where there’s authority that, in those circumstances, the Supreme Court can remove the caveat. The argument that we’re going to have is whether this proceeding ----
Mr Farrelly: I think that’s really a matter for that proceeding, is it not?
Mr Virgona: Well it is but what we have here, on the face of this document ---
Mr Farrelly: When’s that going to be heard?
Mr Virgona: 16 January.
Mr Farrelly: We’ll just get your points of claim in prior to that. I think that’s all you need, isn’t it?
Mr Virgona: Well, depending on whether the comments from the senior member are taken into account ---
Mr Farrelly: Is that the first time that’s appeared?
Mr Virgona: The relief against forfeiture?
Mr Farrelly: Yes.
Mr Virgona: It was in the original document, the original claim, at a point where the tenant was still in possession of the property. It was in relation to the supposed ---
Mr Farrelly: I think I’ll just leave that. I don’t think I’ll strike it out because I don’t see how you can make it. I don’t know how you’re going to make it. How are you going to make a claim for relief against forfeiture?
Mr Knight:I’ll obtain counsel’s advice ---
Mr Virgona: It’s already been decided upon sir.
Mr Farrelly: I mean the short answer is: you can’t. But I think you would be telling that to the Supreme Court, wouldn’t you?
Mr Virgona: We will. We will, yes.
Mr Farrelly: Anyway by – let’s make it by – so when are you up there on what date?
Mr Virgona: 16 January.
Mr Farrelly: The 16th.
Mr Knight:Our submissions are due on 22 December, for the Supreme, so I am happy if the 22nd is made for these as well.
Mr Farrelly: 22 December?
Mr Knight:Yes.
Mr Farrelly: All right. By 22 December 2017 the applicant must file and serve amended points of – what are we up to – yes, amended points of claim which must set out details of the claim brought against the respondent. Details of the claim brought against the respondent, including full particulars of damages sought. I’ll just leave it at that.
It is apparent from the above exchange that the Senior Member refrained from striking out the offending parts of the existing points of claim on the basis that he expected that proper amended points of claim, seeking damages only, would have been filed and served well prior to the return date of this proceeding. The fact that the Senior Member refrained from striking out the offending parts of the pleading means that while technically there is a proceeding on foot to sustain the interest in a caveat, in a practical sense, there is not. It seems to me that Otelta cannot rely upon the failure to provide an amended points of claim within the time specified by the Senior Member, and its non-compliance with the Senior Member’s very pointed remarks about which of its claims would be able to proceed and which would not, in support of a contention that this proceeding is an abuse of process. My view in that regard is bolstered by the terms of s 89A(7) of the TLA, which provides that:
(7)Where notice in writing of the kind referred to in paragraph (b) of subsection (3) is given to the Registrar—
(a)if in the proceedings in question the claim of the caveator is not substantiated to the satisfaction of a court or VCAT—the court or VCAT may make such order in relation to the caveat as the court or VCAT thinks fit and the Registrar shall give effect thereto;
(b)if there is subsequently served upon the Registrar a copy of any notice, or an office copy of any order of the court or VCAT, disclosing that the proceedings in question have been discontinued, withdrawn or struck out or evidence to the satisfaction of the Registrar that those proceedings have been dismissed—the caveat shall lapse as to the land and the estate or interest therein to which the application then relates, and the Registrar shall make all necessary amendments to the Register. [emphasis added]
It is apparent from the above that for the purposes of the Registrar removing a caveat, it is sufficient if he is advised that a claim has been struck out. If the Senior Member had done what was urged upon him by counsel for the plaintiff at the hearing, or if Otelta had filed amended points of claim in a timely fashion and in a manner consistent with the observations made by the Senior Member during the hearing on 5 December 2017, then by the time the matter came before me on 16 or 22 January 2018, there would have been no proceeding on foot which sought to substantiate the interest claimed in the caveat.
I consider that this approach is consistent with the obligations of the Court under the Civil Procedure Act 2010 (Vic) (‘CPA’). If it were the case that in every instance where a party burdened by a caveat purportedly supported by an unmeritorious proceeding was forced to take steps to strike out that claim before being in a position to apply to remove a caveat, no matter what the circumstances, such an inflexible rule would not promote the ‘just, efficient, timely and cost effective resolution of the real issues in dispute.’[10] I doubt that the Court is barred from scrutinising the merits of any proceeding relied upon by a caveator in determining the threshold issue.
[10]Section 7 of the CPA.
In any event, I consider that the matter before T Forrest J in Yuksels[11] can be distinguished from the current case. The authorities referred to by his Honour in the footnote to paragraph 5 of his reasons[12] do not concern applications for the removal of caveats as such. Rather, they refer to the long established principle that parties should not be permitted to bring proceedings based upon the same facts and seeking the same relief in two different venues. In Yuksels,[13] the caveator had brought a proceeding in the County Court, which has the jurisdiction to order removal of caveats pursuant to s 90(3) of the TLA. However, VCAT is not a ‘court’ within the meaning of s 90(3) of the TLA. It is a statutory tribunal. The plaintiff had no choice but to come to this Court to seek the removal of the caveat, so no abuse of process necessarily arises.
[11][2015] VSC 663.
[12]See McHenry v Lewis (1882) Ch 397; Williams v Hunt [1905] 1 KB 512; Reynolds v Reynolds (1977) 2 NSWLR 295, 306.
[13]Ibid.
Accordingly, the application to remove the caveat should not be dismissed on the basis that it is an abuse of process. It is now necessary to turn to the question of whether there is a serious question to be tried that Otelta has the interest claimed in the caveat, that is, a leasehold interest, and where the balance of convenience lies.
As noted above, I do not consider the observations made by Senior Member Walker in the application for an injunction to be determinative of the question as to whether Otelta has a leasehold interest in the property, whether at the time that the caveat was lodged, or at the date of the hearing. However, for the reasons largely advanced by counsel for the plaintiff in his outline of submissions, I would echo the observations made by Senior Member Walker in his ruling and Senior Member Farrelly during the course of the discussion at the directions hearing on 5 December 2017. In his ruling Senior Member Walker stated:[14]
It seems to me that the prospect of the applicant being able to demonstrate that there is still a lease on foot is fairly remote. … If it is a retail lease, as asserted, then the tenant has taken a very long time to assert rights to injunctive relief to protect it and generally if you want injunctive relief you have to act promptly or you meet a defence of laches, which is really what Mr Hill has been submitting. It seems to me that the real claim is for the damages incurred by the applicant for doing up these properties and for the loss of the occupancy of the premises if, indeed, there is a lease that’s been breached.
I think the prospect of success of the applicant, particularly considering the fact that no rental has been paid for a year is so remote that I think the balance of convenience does not favour the granting of injunctive relief and I think the applicant has delayed too long to try and assert a right to reinstate the proceeding, either by way of declaration or by way of a relief against forfeiture both of which are equitable remedies so the application is refused.
[14]At page 27 of the transcript.
Given that the plaintiff’s argument that the lease has been determined, and is no longer on foot, is strong, and that the prospects of success of any application for relief from forfeiture are slim, the question of whether there is a serious question to be tried must be resolved in favour of the plaintiff. I also agree that the weight of the authorities leans towards a finding that any option to purchase the property contained within the lease did not survive the determination of the lease. In any event (and this is also relevant to the balance of convenience), there is no evidence that Otelta is ready, willing and able to purchase the property, which is an essential element of any cause of action seeking specific performance. Further, I agree with the submissions of counsel for the plaintiff that the alleged agreement said to have been reached in September 2016 falls foul of s 126 of the Instruments Act 1958 (Vic).
Finally, while I accept that Mr Sgargetta sincerely believes that Otelta holds a leasehold interest in the property, as at the time the caveat was lodged, and as of today, there is some suggestion that the defendants seek to maintain the caveat in order to provide some security for Otelta’s damages claim at VCAT. The Court has said on many occasions that caveats are not to be used as ‘bargaining chips’,[15] and, similarly, a caveat should not be used to in effect secure a claim for damages in the absence of a serious question to be tried regarding the existence of the proprietary interest claimed in the caveat. It is for that reason I reject Mr Sgargetta’s alternative submission that were I to remove the caveat and allow the sale of the property to proceed, I should only do so on condition that the sum of $85,000 be retained from the proceeds of sale (being the difference between the sum of $825,000 and the sale price).
[15]See, for example, Yamine, [38].
Strictly speaking, given my findings above, it is not necessary for me to consider the question of the balance of convenience, but for completeness, will do so. I accept the submissions that the balance of convenience favours the removal of the caveat, given the pending settlement, and the fact that the plaintiff has not been able to generate income from the property for some time now, indeed, well over a year. Further, the absence of any evidence as to whether Otelta is ready, willing and able to complete the purchase of the property is not only relevant to the question of whether there is a serious question to be tried: it is also relevant to the balance of convenience. Further, while the defendants’ submissions are contradictory in that regard, there seems to be at least some acceptance on the part of the defendants that damages would be an adequate remedy for its claims in the VCAT proceeding.
Finally, while I do not wish to allocate blame for the dilatory conduct of the proceeding to date, at least prior to 5 December 2017, the defendants’ recent non‑compliance with orders in this proceeding and the VCAT proceeding does suggest that the prospects for a quick finalisation of the VCAT proceeding are slim, such that the plaintiff could not be confident that he would be in a position to dispose of the property, which he clearly wishes to do, within a reasonable period of time.
SCHEDULE OF PARTIES
S CI 2017 04789 BETWEEN: JAMES JOHN VAN KLAVEREN Plaintiff - v - OTELTA PTY LTD (ACN 115 860 814) First Defendant SLEEP OVERS GROUP PTY LTD
(ACN 612 184 728)Second Defendant THE REGISTRAR OF TITLES Third Defendant
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