Westpoint Corporation Pty Ltd v The Registrar of Titles
[2005] WASC 273
WESTPOINT CORPORATION PTY LTD -v- THE REGISTRAR OF TITLES & ANOR [2005] WASC 273
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 273 | |
| Case No: | CIV:2167/2003 | 7 NOVEMBER 2005 | |
| Coram: | JENKINS J | 14/12/05 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | The plaintiff lodged caveat I584816 without reasonable cause The plaintiff to pay compensation to the second defendant in the sum of $250,216.99 | ||
| B | |||
| PDF Version |
| Parties: | WESTPOINT CORPORATION PTY LTD (ACN 009 395 751) THE REGISTRAR OF TITLES MONTEATH PROPERTIES PTY LTD (RECEIVER & MANAGER APPOINTED) (IN LIQ) (ACN 009 458 093) |
Catchwords: | Conveyancing Caveats Compensation for lodging caveat without reasonable cause |
Legislation: | Fair Trading Act 1987 (WA) Strata Titles Act 1985 (WA) Supreme Court Act 1935 (WA), s 32 Trade Practices Act 1974 (Cth) Transfer of Land Act 1893 (WA), s 140 |
Case References: | Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 Carroll v Azolia Pty Ltd [2000] WASC 95 Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64 Haines v Bendall (1991) 172 CLR 60 Hungerfords v Walker (1989) 171 CLR 125 John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 Manser v Spry (1994) 181 CLR 428 Randall v Raper (1858) EB & E 84 Total Liban SA v Vitol Energy SA [2001] QB 643 Travel Compensation Fund v Tambree t/as R Tambree & Associates [2005] HCA 69 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 Clairs Keeley (a firm) v Treacy (2004) 29 WAR 479 Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 George v Rockett (1990) 170 CLR 104 Hawkins v Clayton (1988) 164 CLR 539 Hooke v Holland [1984] WAR 16 Kuligowski v Metrobus (2004) 208 ALR 1 McKellar & Anor v Singh [1999] WASC 145 Monitronix Ltd v Michael (1992) 7 WAR 195 Nelson v Kimberley Homes Pty Ltd [1989] ANZ ConvR 123 Re Smith; Ex parte Rundle (No 2) (1991) 6 WAR 299 Sanctuary Park Estate Toodyay Pty Ltd v Griffin Plant Hire Pty Ltd [2003] WASC 174 Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 Thorpe v Bristile Pty Ltd (1997) 80 FCR 330 Todd v Novotny & Anor [2000] WASC 308 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190 Young v Rydalmere Credits Pty Ltd [1964] NSWR 1001 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
THE REGISTRAR OF TITLES
First Defendant
MONTEATH PROPERTIES PTY LTD (RECEIVER & MANAGER APPOINTED) (IN LIQ) (ACN 009 458 093)
Second Defendant
Catchwords:
Conveyancing - Caveats - Compensation for lodging caveat without reasonable cause
(Page 2)
Legislation:
Fair Trading Act 1987 (WA)
Strata Titles Act 1985 (WA)
Supreme Court Act 1935 (WA), s 32
Trade Practices Act 1974 (Cth)
Transfer of Land Act 1893 (WA), s 140
Result:
The plaintiff lodged caveat I584816 without reasonable cause
The plaintiff to pay compensation to the second defendant in the sum of $250,216.99
Category: B
Representation:
Counsel:
Plaintiff : Mr N D C Dillon
First Defendant : No appearance
Second Defendant : Mr G H Murphy SC
Solicitors:
Plaintiff : Halga James
First Defendant : No appearance
Second Defendant : Blake Dawson Waldron
Case(s) referred to in judgment(s):
Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459
Carroll v Azolia Pty Ltd [2000] WASC 95
Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64
Haines v Bendall (1991) 172 CLR 60
Hungerfords v Walker (1989) 171 CLR 125
(Page 3)
John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Manser v Spry (1994) 181 CLR 428
Randall v Raper (1858) EB & E 84
Total Liban SA v Vitol Energy SA [2001] QB 643
Travel Compensation Fund v Tambree t/as R Tambree & Associates [2005] HCA 69
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189
Case(s) also cited:
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106
Clairs Keeley (a firm) v Treacy (2004) 29 WAR 479
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630
George v Rockett (1990) 170 CLR 104
Hawkins v Clayton (1988) 164 CLR 539
Hooke v Holland [1984] WAR 16
Kuligowski v Metrobus (2004) 208 ALR 1
McKellar & Anor v Singh [1999] WASC 145
Monitronix Ltd v Michael (1992) 7 WAR 195
Nelson v Kimberley Homes Pty Ltd [1989] ANZ ConvR 123
Re Smith; Ex parte Rundle (No 2) (1991) 6 WAR 299
Sanctuary Park Estate Toodyay Pty Ltd v Griffin Plant Hire Pty Ltd [2003] WASC 174
Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257
Thorpe v Bristile Pty Ltd (1997) 80 FCR 330
Todd v Novotny & Anor [2000] WASC 308
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190
Young v Rydalmere Credits Pty Ltd [1964] NSWR 1001
(Page 4)
1 JENKINS J: The second defendant seeks an order that the plaintiff lodged a caveat without reasonable cause and claims compensation from the plaintiff pursuant to the Transfer of Land Act 1893 (WA) ("the Act"), s 140 for the lodgement of the caveat without reasonable cause.
2 On 8 August 2003 the plaintiff lodged caveat numbered I584816 over the second defendant's land which is described as lots 18 – 36 (inclusive) on strata plan 36747 and being the whole of the land in certificates of title volume 2171 folios 818 – 836 (inclusive) ("the land"). The caveatable interest claimed by the plaintiff was as a "grantee of a restricted covenant".
3 The plaintiff applied for an extension of the caveat. On 30 August 2004 I published my reasons for dismissing that application.
4 These reasons should be read together with the reasons that I gave at that time in Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189. I do not intend to repeat the facts unless it is necessary for me to do so to explain my reasons with respect to this application.
Legal Principles
5 The Act, s 140 states:
"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."
6 The principles to be applied in an application under s 140 in order to determine whether the relevant caveat was lodged without reasonable cause are well established. In John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171 at 32 – 33, I summarised them in the following manner:
"In Bolton v Excell, unreported; FCt SCt of WA; Library 930175; 22 February 1993, Malcolm CJ stated the following principles were applicable to applications under s 140. First, the onus is on the party claiming damages to prove that the caveat was lodged without reasonable cause. Secondly, the test to be applied in determining whether a caveator has reasonable cause to lodge a caveat for the purposes of the act, section 140,
(Page 5)
- is not whether the caveator had a caveatable interest at that time the caveat was lodged, but whether the caveator had an honest belief based on reasonable grounds that he or she had such an interest. Thirdly, that belief is to be judged as of the date that the caveat was lodged.
Thus, the test contains both subjective and objective elements. The subjective element is whether the caveator had an honest belief that he or she had a caveatable interest in the land. The objective element of the test is whether the belief was based on reasonable grounds. The caveator's belief and the determination of whether it was based on reasonable grounds are to be determined against the background of all the relevant facts and circumstances."
7 The principles to be applied in an application under s 140 in order to determine what, if any, compensation should be ordered as a consequence of the unreasonable lodgement of a caveat emerge from the wording of the section. Thus, s 140 requires a Judge to find:
1. proof of damage;
2. a causal connection between the act of lodging the caveat and the damage; and
3. that it is "just" to award the claimed compensation.
8 In respect to point 2, the High Court in Travel Compensation Fund v Tambree t/as R Tambree & Associates [2005] HCA 69 considered the proper approach to issues of causation in cases involving statutory compensation. The Justices were not entirely in agreement on this issue. However, they agreed that the starting point for resolving causation issues is an examination of the relevant enactment, its subject, scope and purpose; at [30] per Gleeson CJ, at [49] per Gummow and Hayne JJ, at [54] per Kirby J at [79] per Callinan J. Primarily, their Honours were in disagreement over the role that value judgments had to play in determining issues of compensation.
9 In the case of s 140 Parliament has expressly provided that the Judge must consider what compensation is "just" in all the circumstances. This requirement can not result in a finding that compensation be paid where the damage has not been caused by the lodgement of the caveat. However, it may proscribe the outer limits of statutory liability: Travel Compensation Fund v Tambree t/as R Tambree & Associates (supra) at [56] per Kirby J.
(Page 6)
10 Further, in respect to point 3 in particular, I am of the view that it is only "just" to award compensation where the damage was reasonably foreseeable. The lodging party need not actually foresee the damage but it is at least necessary that a reasonable person in the lodging parties position ought to have foreseen the possibility of that particular sort of damage.
11 Finally, in my view, by using the term "compensation" Parliament intended that the amount ordered under s 140 should, so far as it is possible to do so with money, put the party who is seeking compensation in the same position as it would have been in had the caveat not been lodged: Manser v Spry (1994) 181 CLR 428 at 434; Haines v Bendall (1991) 172 CLR 60 at 63.
12 Thus, before I order compensation I should be satisfied of the following matters:
1. that the second defendant 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.
Did the Plaintiff have a Caveatable Interest in the Land?
13 The first issue for determination is whether the plaintiff had a caveatable interest in the land. It is clear from my reasons for decision dated 30 August 2004 that the plaintiff did not have a caveatable interest in the land.
Did the Plaintiff have an Honest Belief that it had a Caveatable Interest in the Land?
14 I maintain the view expressed in my reasons for decision dated 30 August 2004 that the plaintiff's delay in lodging the caveat and its conduct in supporting the amalgamation of the stage two lots into one lot to be sold to a developer without any conditions endorsed on the strata plan or title is inexplicable in light of its claim of a caveatable interest of the nature claimed. One view is that the delay and conduct is inconsistent with an honest belief that the plaintiff had a caveatable interest in the land. However, I stop short of finding that the plaintiff did not have an honest
(Page 7)
- belief that it had a caveatable interest in the land at the time it lodged the caveat. It would be a serious matter to make such a finding against a party. Given that the onus of proof is on the second defendant and given that Mr Carey, the directing mind of the plaintiff, has deposed that he believed that the plaintiff had a caveatable interest, I am not prepared to make this finding against the plaintiff.
Did the Plaintiff have a Belief based on Reasonable Grounds?
15 The hearing of the application for an extension of the caveat took two days and I received a large amount of affidavit material from both parties as well as extensive submissions on the legal issues. In my reasons for decision I was satisfied on more than one ground that there was not a serious issue to be tried between the parties as to whether the plaintiff had a caveatable interest in the land. In summary, I found:
(a) The alleged post contract representations could not be said to have induced the plaintiff to enter into the contract of sale dated 15 July 1999 for the purchase of the plaintiff's property being the land comprised in certificate of title volume 2171 folio 816;
(b) the sample written material provided to Mr Carey did not constitute a warranty that the development would be implemented in accordance with that material;
(c) even if the oral representations alleged by the plaintiff were made by the second defendant they could not give rise to a restrictive covenant at law;
(d) the plaintiff's claims in respect to the land did not constitute a claim to an equitable interest in the land;
(e) the registration of the Bank of Western Australia Ltd's ("the Bank") first mortgage over the land extinguished the plaintiff's claim to a restrictive covenant.
16 In my view the findings that I made in respect to the application to extend the caveat are sufficient in themselves to support a further finding that the plaintiff did not have a belief at the time that it lodged the caveat, based on reasonable grounds, that it had a caveatable interest in the land.
17 I also note that I found that there were differences between the bases for the plaintiff's caveatable interest as alleged in the caveat and supporting statutory declaration on the one hand and the plaintiff's draft statement of claim on the other hand. In particular the statutory
(Page 8)
- declaration relied, in part, on claims under the Trade Practices Act (1974) (Cth) and the Fair Trading Act 1987 (WA). These claims were not referred to in the draft statement of claim. Neither were they relied upon at the hearing of the application to extend the caveat. This is an additional reason to doubt whether, at the time of the lodgement of the caveat, the plaintiff had reasonable grounds for believing that it had a caveatable interest in the land.
18 I acknowledge that the lack of a serious issue to be tried as to whether a party has a caveatable interest in land may not, in every circumstance, inevitably lead to a finding that the party did not have a belief based on reasonable grounds at the time that it lodged the caveat: Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 at 436. However, the absence of a serious issue to be tried is, in my opinion, a very persuasive factor in the determination of this issue. This is because the finding of the absence of a serious issue to be tried is a finding that there was not even a serious issue worthy of determination at a trial.
19 The plaintiff says that in determining this issue I should take into account the dicta of Kirby J in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 at 463 to the effect that the facility of a caveat should not be circumscribed by the imposition of a liability to pay compensation because of "some technical default". Those comments do not apply to the facts of this case as the legislation under consideration is different and the bases for my findings of an absence of a serious issue to be tried amount to much more than "some technical default". In this case there was not a serious issue to be tried because the plaintiff failed to persuade me that either the evidence or the law supported its claim.
20 The plaintiff seeks to establish that Mr Carey believed that as a consequence of representations made to him by the second defendant and the contract entered into in alleged reliance of the representations, that the plaintiff was entitled to register a caveat to protect its alleged interest as a grantee of a restrictive covenant. In order to establish this belief the plaintiff relies upon parts of the statutory declaration of Mr Carey dated 8 August 2003 and affidavit material filed by it in support of the application to extend the caveat. The plaintiff submits that in the absence of any evidence to deny or challenge this material I should find that the second defendants have not proven that the plaintiff did not have reasonable grounds for its belief that it had a caveatable interest in the land.
(Page 9)
21 The evidence relied upon by the plaintiff goes to prove that Mr Carey and, thus, the plaintiff had a belief that the plaintiff had a caveatable interest in the land. However, there is nothing in that material to indicate that Mr Carey verified his belief by obtaining legal advice on the issue or the nature of any legal advice that he obtained in respect to the issue. Whilst I acknowledge that Mr Carey is a well qualified and experienced property developer that did not qualify him to determine that the plaintiff had reasonable grounds to believe that it had a caveatable interest in the land. Neither does it mean that I must accept that his belief as to the existence of a caveatable interest was based on reasonable grounds.
22 The plaintiff further submits that I am prevented from finding that the plaintiff did not have reasonable grounds to lodge the caveat by my finding in respect to an earlier application by the second defendant for an indemnity costs order in respect to the application to extend the caveat. In dismissing that application:
"In my view, the application was weak. I'm not prepared to say that the matter was unarguable and on that basis I am not prepared to make a costs order on an indemnity basis."
23 There may well be similarities between the test for granting an indemnity costs order and the test for granting an application for compensation under the Act, s 140. However, in no way can they be said to be the same test applied for the same purpose. For example, on this application the issue is whether there were reasonable grounds for a belief that the plaintiff had a caveatable interest at the time it lodged the caveat not just whether it had a reasonably arguable case to establish a serious issue to be tried as to the existence of a caveatable interest. I do not find myself bound by my decision with respect to the indemnity costs application in coming to my decision with respect to this application. Indeed, given that the tests are not the same and are not for the same purpose it would be wrong of me not to separately consider the merits of this application but rather to simply find that my decision with respect to the cost's application bound me in respect to this application.
24 After considering all these matters I am satisfied that the second defendant has discharged its onus of proof in respect to this issue. It has satisfied me that the plaintiff did not have a belief, at the time it lodged the caveat, based on reasonable grounds that it had a caveatable interest in the land.
(Page 10)
Compensation
25 The second defendant claims compensation in respect to the following items:
|
|
|
|
| $18,575.40 |
|
| $14,634.59 |
|
| $2,611.10 |
|
| $3,181.99 |
|
| $1,298.00 |
|
| $165.00 |
|
| $193,474.91 |
|
| $12,739.00 |
|
| $13,101.03 |
| $259,781.02" |
On 12 August 2003, four days after the lodgement of the caveat, the second defendant put the plaintiff on notice that it would hold the plaintiff liable for damages in respect of Items 1 – 3 and 7 – 9.
26 I will consider each item in turn.
Land Tax
27 As a consequence of the delay in settlement caused by the lodgement of the caveat, the second defendant was liable to pay land tax for the period between 13 August 2003, when settlement of the sale of the land was scheduled to occur, and 14 September 2004, when it did occur. I note that the latter date is some two weeks after the delivery of my judgment. It is reasonable to allow the second defendant this period to arrange for the settlement to take place.
(Page 11)
28 In respect to this item and others, the second defendant relies upon the affidavits of Ronald Derek Gamble sworn 27 September 2004 and 11 March 2005.
29 I am satisfied on the basis of that affidavit material that the second defendant paid land tax in the sum of $18,575.40 in respect to the land for the period between the scheduled settlement date and the actual settlement date. I am satisfied that the second defendant was required to pay this land tax because of the deferral in settlement caused by the lodgement of the caveat. The plaintiff was aware that settlement would be deferred by the lodgement of the caveat. The plaintiff's counsel faintly suggested that the second defendant was not entitled to compensation for liabilities that arose after the lodgement of the caveat. Whilst the liability to pay compensation should be determined as at the date of lodgement of the caveat that does not mean that foreseeable future losses should not be compensated for. The liability to pay land tax was a direct result of the lodgement of the caveat. The additional land tax liability was clearly foreseeable as a consequence of the deferral of settlement. It is just that the plaintiff pays compensation to the second defendant in the amount of $18,575.40.
Shire of Busselton Rates
30 The second defendant has adduced evidence that the total council rates paid by the second defendant with respect to the land between the scheduled settlement date and the actual settlement date was $14,634.59. Again, the second defendant was liable to pay this sum because of the delay in settlement occasioned by the lodgement of the caveat. The liability was foreseeable. I am satisfied that it is just that the plaintiff pays compensation to the second defendant in this amount.
Busselton Water Rates
31 The second defendant has not received invoices for water supply with respect to the land for the period 1 July 2004 to 1 October 2004. Thus, it is not possible for me to award compensation in respect to this period. The second defendant has adduced evidence that it paid $2,611.10 for water supply with respect to the land from the scheduled settlement date to the actual settlement date. The second defendant's liability to pay this sum was occasioned by the delay in settlement caused by the lodgement of the caveat. The liability was foreseeable. It is just that the plaintiff pays compensation to the second defendant in that amount.
(Page 12)
Harbour Bed Sub-Lease Rent
32 The second defendant has adduced evidence that as at the date the caveat was lodged the second defendant was a party to a sublease with respect to the harbour bed adjacent to the land. It is implicit in this evidence that the second defendant's liability under the sublease terminated or was to be transferred at the date of settlement. Mr Gamble has deposed that the total amount of rent paid by the second defendant with respect to the land pursuant to the sublease for the period between the scheduled settlement date and the actual settlement date was $3,181.99. The liability was foreseeable. It is just that the plaintiff pays the second defendant compensation in this sum.
Expenses in obtaining Mortgagee Consents
33 Mr Gamble deposes that pursuant to the requirements of the Strata Titles Act 1985 (WA), he was required to obtain, on behalf of the second defendant, the consent of each of the mortgagees registered with respect to any of the lots on strata plan 36747 to the sale of the land to the third party. At the hearing of the application for the extension of the caveat I received evidence regarding the consent that had been given at the time the caveat was lodged. All relevant parties, including the plaintiff (except as the alleged grantee of a restrictive covenant), had given their consent to the amalgamation of the land for the purpose of its sale to a third party. However, Mr Gamble has deposed, that two mortgagees of other lots only became registered mortgagees of those lots after the scheduled settlement date. Consequently the second defendant incurred further expenses in obtaining consents from the mortgagees of those lots before settlement could occur on the actual settlement date. Those expenses were the legal fees and disbursements of those mortgagees in the sum of $1,298.00. I am satisfied that these fees were incurred as a consequence of the lodgement of the caveat. However, I am not satisfied that they flowed directly from the lodgement of the caveat in that I do not know whether the plaintiff was obliged to pay these fees or whether it voluntarily did so. This issue also affects the foreseeability of the liability. I am not satisfied that it is just that the plaintiff pay compensation to the second defendant in this sum.
Fire Hazard Reduction Work
34 Mr Gamble has deposed that in his capacity as receiver and manager he received an invoice from Peter Harrison & Co dated 30 December 2003, for fire hazard reduction work carried out to Shire specifications on the land for the 2003/2004 season. It is not clear to me from looking at
(Page 13)
- the invoice and Mr Gamble's affidavit that this work was done after the scheduled settlement date. Mr Gamble deposes that this cost would not have been incurred by the second defendant had settlement occurred on the scheduled settlement date. However, the invoice merely says that it was work done for the 2003/2004 season and implicitly work done prior to 30 December 2003, as indicated by the date of the invoice. It may well be that this work was done, or some of it was done in July and August prior to the lodgement of the caveat. Consequently, I am not prepared to allow this claim.
Interest on Bank Loan
35 Mr Gamble has deposed that pursuant to the terms of the facilities provided to the second defendant by the Bank and the Bank's mortgage over the land default interest on the amount outstanding to the Bank has been accruing since the scheduled settlement date at various rates between 15.85 per cent and 16.35 per cent. The second defendant says that it incurred the liability to pay interest as a consequence of standard finance transactions entered into in the normal course of its business prior to the lodgement of the caveat. Further, it says that as a consequence of the lodgement of the caveat settlement was deferred and it was unable to discharge some of its liability to the Bank through payment of the proceeds of the sale of the land to the Bank so as to avoid the accrual of further interest on that amount. Mr Gamble has identified the proceeds of the sale of the land as being $1,010,000.00. He has provided a schedule calculating the compound interest on this amount from the scheduled settlement date to the actual settlement date. This amounts to $193,474.91.
36 The second defendant also relies upon the affidavit of Wayne Leslie Robins sworn 11 March 2005, wherein he has deposed that the second defendant held a business cheque account with the Bank and that in accordance with its general terms and conditions for business lending the Bank has debited interest at default rates to the account on the amount outstanding from the date of lodgement of the caveat to 14 September 2004 at the rates relied upon by Mr Gamble.
37 The plaintiff opposes the grant of compensation in this amount on a number of bases. The first is that interest should be assessed on the same basis the court awards interest on judgment debts. It submits that to succeed in a claim over and above that rate, the claimant must establish the party said to be liable knew the claimant would have interest at the increased rate or ought reasonably to have known that it would have
(Page 14)
- interest at the increased rate: Hungerfords v Walker (1989) 171 CLR 125 at 152; Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64.
38 Secondly, it submits that compensation should not be awarded for unpaid liabilities and it is clear that the second defendant has not paid this interest.
39 Thirdly, it submits that if the second defendant receives compensation in this amount the only party to benefit will be the Bank. The plaintiff says that the purpose of the Act, s 140 is to compensate "any person who may have sustained damage". It says that the section does not contemplate that a non-party may receive compensation through proceedings commenced and maintained by another party.
40 Fourthly, it submits that the only loss to the Bank is in being unable to invest the proceeds of sale by lending the money to other customers or by investing it in some other way. It says that the Bank would have only recovered interest of between 4 and 8 per cent and its net profit would be less than that. In this respect the plaintiff relies upon the affidavit of Graeme John Rundle sworn 23 February 2005.
41 As to the first basis, in Hungerfords v Walker (supra) a majority of the High Court found that expenses incurred arising from money being withheld as a result of a breach of contract or negligence is a pecuniary loss suffered by a plaintiff as a result of a defendant's conduct and therefore is an element of the loss for which the plaintiff is entitled to be compensated by an award of damages. The facts and the principles flowing from the case are not directly applicable to this case which is not a case of a breach of contract or negligence. However, the principle to which I have just averted would seem to be generally relevant to a claim for compensation under the Act.
42 Brennan and Deane JJ at 152 said:
" … there is no acceptable reason why the ordinary principles governing the recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."
(Page 15)
43 Their Honours held that the quantum of damages which represents appropriate compensation for the loss of the use of the plaintiff's money plainly fell to be assessed by reference to (amongst other things) the rates of interest paid by the plaintiff upon borrowings which would have probably been avoided, retired or offset but for the defendant's wrong.
44 Earlier on the same page their Honours said that the injury sustained by the plaintiffs by reason of the loss of the use of the relevant money was as foreseeably caused by the breach of the defendants' duty of care as would have been the case if the defendants had wrongfully deprived the plaintiffs of the use of their money by locking it in a foolproof safe and withholding the key.
45 In my view, the delay in settlement caused by the lodgement of the caveat directly caused the second defendant to incur liability to pay interest at default rates on the amount of the debt to the Bank represented by the proceeds of sale of the land. That interest would not have been incurred if settlement had taken place on the scheduled date and the second defendants had been able to repay that portion of the debt to the Bank represented by the proceeds of sale.
46 This sequence of events was clearly foreseeable by somebody in the plaintiff's position. As at the date of lodgement of the caveat the plaintiff was aware that the second defendant was in financial difficulties, that a receiver and manager had been appointed by the Bank to recover its debt and that the imminent sale of the land was in order to achieve that result. Mr Rundle, in his affidavit, recognises that the interest rates payable by the second defendant were penalty rates of interest. Given the plaintiff's experience in significant property development projects it must have been well aware of such penalty rates of interest and that they would have applied or were likely to have applied to the second defendant's debt to the Bank.
47 Given its impecunious position there can be no reasonable suggestion that the second defendant could have avoided the penalty rates of interest by borrowing money elsewhere at lower rates.
48 In Hungerfords v Walker (supra) the majority upheld the Full Court of South Australia's decision to allow damages to be assessed on the basis of a compound interest rate of 20 per cent with some reduction for a matter of fact peculiar to that case. Hungerfords is certainly not authority for the proposition that it is only in exceptional circumstances that a party is entitled to an award of interest on compensation greater than the rate
(Page 16)
- prescribed under the Supreme Court Act 1935 (WA) ("the Supreme Court Act")for interest on judgment debts. Rather, the majority of the High Court accepted that damages should be assessed for loss of use of money according to the actual loss to the plaintiff and whether that loss was foreseeable or within the reasonable contemplation of the parties.
49 I have perused Duke Group Ltd (in liq) v Pilmer (supra) and cannot find anything in that case which is helpful.
50 As to the award of compound interest, it seems that the prohibition against the award of compound interest in the Supreme Court Act, s 32 does not restrict the award of compound interest for loss of use of money withheld as a consequence of the defendant's wrong: Hungerfords v Walker (supra) at 131 – 132.
51 The remaining bases for objection are in essence based on two assertions. The first is that a party is not entitled to compensation for debts incurred, but not paid. The second flows from the first assertion, in that it is the Bank which would be compensated by an award under this head and not the second defendant. It is said it is improper to make an award that favours a third party and if such an award is made it should compensate the third party for its actual loss, not for the debt incurred by the second defendant.
52 In respect to the first assertion I am persuaded that the second defendant is entitled to compensation in respect to liabilities it has incurred even if they have not been satisfied.
53 In Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 536 Brennan J said:
"The loss or damage includes, of course, economic loss or damage which the plaintiff suffers. A plaintiff may suffer economic loss or damage in a number of ways: by payment of money, by transfer of property, by diminution in the value of an asset or by the incurring of a liability."
54 Further, in Hungerfords (supra) the majority were not concerned as to whether the interest incurred had been paid or whether it remained a debt owed to the lender. It seems that the court was prepared to include such interest in an award of damages whether or not it had been paid.
55 The second defendant also relies upon Total Liban SA v Vitol Energy SA [2001] QB 643, where an acting Judge of the High Court of
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- England reviewed a number of authorities relating to this issue and concluded there was no rule of law that liability without payment did not constitute a recoverable loss on a clam for breach of contract. The principal authority relied upon in coming to this conclusion was Randall v Raper (1858) EB & E 84 wherein three Justices determined that a mere liability could be the foundation of an award of damages although the amount of the liability must be assessed. In Randall's case as in the case of Total Liban the situation was rather worse for the plaintiff than it is here for the second defendant. In both cases the relevant liability was an unliquidated claim for damages whereas in this case the amount of liability is fixed by the terms of agreement between the Bank and the second defendant and so is easily ascertained.
56 In respect to the second assertion, it is implicit in what I have said so far that it is the second defendant's liability to the Bank which should be the subject of compensation. The purpose of the compensation is not to compensate the Bank for its loss. Thus, questions as to what the Bank would have done with the money had it been paid and the return it would have got on it are not relevant to the question of whether the compensation should be paid and the amount of it.
57 Taking all these matters into account the second defendant has satisfied me that it incurred $193,474.91 interest as a consequence of the delay in settlement because of the lodgement of the caveat. I am satisfied that if the delay had not occurred the second defendants would have paid the proceeds of sale to the Bank and it would not have incurred this interest on that amount of its debt to the Bank which represented the proceeds of sale. I am satisfied further that this interest was no more than the market price for the debt owed by the second defendants to the Bank and the loss was foreseeable. It was damage flowing naturally and directly from the plaintiff's act in lodging the caveat without reasonable cause: Hungerfords v Walker (supra) at 139 per Mason CJ and Wilson J. Therefore it is just to allow this portion of the claim.
Receiver's Fees
58 Mr Gamble has deposed that pursuant to cl 14 of the mortgage between the second defendant and the Bank, the second defendant is liable to the Bank for all costs, charges and expenses in connection with the Bank's enforcement of the mortgage. He says that that includes the costs and expenses of the receivership. He has identified in his time sheets that part of his professional work as receiver and manager of the second defendant which relates to dealing with the caveat. He estimates
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- that the total professional fees incurred by him in dealing with issues surrounding the caveat in the period from the scheduled settlement date to the actual settlement date were $12,739.00.
59 The plaintiff says that this amount should not be awarded to the second defendant because the receiver was acting merely as the manager of the second defendant. It says that effectively the claim is for costs incurred by the second defendant itself: Carroll v Azolia Pty Ltd [2000] WASC 95 at [10].
60 Clause 14.1(b) of the mortgage states:
"The Mortgagor must pay or reimburse the Bank on demand for:
…
(b) the costs, charges and expenses of the Bank in connection with … exercise or non-exercise of rights (including in connection with the contemplated or actual enforcement or preservation of any rights under the Transaction Documents), … in connection with the Transaction Documents or the Mortgage Property; and
…"
61 Clause 14.2(b) states the mortgagor agrees that the costs, charges and expenses referred to in clause 14.1(b) include those payable to any "Receiver" appointed under the "Transaction Documents". "Transaction Documents" is defined to mean the mortgage. "Receiver" means a person appointed as receiver or as receiver and manager under the mortgage.
62 As to the terms of the appointment of the receiver cl 13.2 and cl 13.8 of the mortgage state as follows:
"At any time after an Event of Default, the Bank may appoint a person or persons as receiver or receiver and manager of the Mortgage Property. Each of the powers set out or referred to in clause 13.1 is to be construed as if the reference to the Bank were a reference to the Receiver and may, subject to clause 13.3, be exercised by the Receiver, whether or not the Bank has previously rescinded any rights under this mortgage.
…
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- A Receiver is the agent of the Mortgagor unless the Bank notifies the Mortgagor that the Receiver is to act as the agent of the Bank. The Mortgagor is solely responsible for anything done or not done by the Receiver, and for the Receiver's remuneration."
63 The issue comes down to whether under the Act, s 140 a party is entitled to recover the costs of its agent directly incurred as a consequence of the lodgement of the caveat.
64 I do not see why as a matter of principle such costs should not be recoverable. I have not found any dicta in the case of Carroll v Azolia Pty Ltd (supra) that purports to prohibit recovery. If the caveat had not been lodged the work of the receiver in respect to the caveat would not have had to have taken place and the second defendant would not have had to incur a liability to remunerate Mr Gamble for that work. The work of the receiver in respect to the caveat was foreseeable as was the liability of the second defendant to pay those costs under a standard mortgage. I allow this claim in the sum of $12,739.00.
Legal Costs
65 The second defendant claims $13,101.03 being its legal costs and disbursements as a consequence of the delay in settlement and the obtaining of additional mortgagee consents to the sale of the land.
66 The plaintiff objects to the allowance of this claim because it says that the schedule of legal costs said to support it is too general, does not identify the solicitors providing the services, appears to replicate some costs and refers to various persons whose role in the matter is unknown.
67 At the hearing of this application I suggested that the schedule could be referred by me for taxation. The second defendant requested me not to do this but rather to discount the sum claimed if I thought that there was merit in some of the plaintiff's submissions.
68 In my view there is merit in some of the plaintiff's submissions. The legal practitioners providing the services are not identified and so it is not possible for me to determine whether the amount claimed is fair and reasonable. Further, without seeing supporting documents I do not know whether the work performed was reasonably necessary. There is also some work which appears to have been duplicated. The delay in settlement may explain some of that duplication. However, there remains a question mark over the costs claimed for some of the duplicated work.
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69 The plaintiff goes so far as to say that I should find that the second defendant has not proven that any compensation should be payable to it in respect to legal costs. I do not accept this view. Mr Gamble has deposed to the fact that these legal costs and disbursements were incurred by the second defendant as a result in the delay in settlement and the obtaining of additional mortgagee consents to the sale of the land. The schedule, although it has some defects, is sufficient to satisfy me that these legal costs were incurred.
70 In my opinion, given the deficiencies I have identified in the schedule it would be just to allow the second defendant $5,000 in respect to its legal costs relating to the delayed settlement due to the lodgement of the caveat.
Conclusions
71 The plaintiff lodged caveat I584816 against the title to land located at Port Geographe, Busselton in the State of Western Australia more specifically referred to as lots 18 – 36 (inclusive) on strata plan 36747 and being the whole of the land comprised in certificates of title volume 2171 folio 818 – 836 (inclusive) without reasonable cause.
72 The plaintiff must pay compensation in the sum of $250,216.99 to the second defendant with respect to damage sustained by the second defendant as a result of the plaintiff lodging the caveat without reasonable cause.
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