Beware lodging caveat 'without reasonable cause'

Section 118 of the Transfer of Land Act 1958 and s.74P of the Real Property Act 1900 (NSW)  provide for payment of compensation to a party who has suffered “damage” (TLA) or “pecuniary loss” (RPA) where a person lodges a caveat “without reasonable cause”. In New South Wales s.74P also extends to a caveator who, without reasonable cause, refuses or fails to withdraw a caveat after being requested to do so. 

See: s.74P(1)(c).

As to the meaning of "reasonable cause" in Bedford Properties Pty Ltd v Surgo [1981] 1 NSWLR 106 Wootton J said at 109:

The drastic nature of the power is relevant in considering what is "reasonable cause" for its use, just as the dangerous character of a thing is relevant to deciding what is reasonable care in handling it. 

Before exercising such a power, a person can reasonably be expected to get proper advice, and be reasonably sure of his ground. 

If he does not, he may find that he has acted at his peril. 

This is all the more so when he knows, as Mr Richards knew, and indeed intended, that his action will prevent an important transaction involving a large sum of money.

In the recent case of  Arkbay Investments Pty Ltd v Tripod Funds Management Pty Ltd [2014] NSWSC 1003  http://www.austlii.edu.au/au/cases/nsw/NSWSC/2014/1003.htmlw

Robb J said it was "salutary to record" Wootton J’s observations in deciding that a caveat had been lodged without reasonable cause and had caused pecuniary loss.

In Arkbay there was no evidence that when the caveator lodged the caveat it had an honest belief on reasonable grounds that it had an interest in the relevant property. His Honour held that the lodging of the caveat had caused loss by reason of a delay in the settlement date for sale of the property.

At [17] Robb J said:

"The onus is on the plaintiffs to show that the caveator acted without reasonable cause. For there to be reasons not necessary that the caveator actually have a caveatable interest, but it is necessary that the caveator have an honest belief based upon reasonable grounds that the caveator has such an interest. Wootton J in Bedford Properties noted at 108  that an honest belief on the part of the caveator based on reasonable grounds may not be sufficient to provide a reasonable cause for lodging or maintaining a caveat, if the caveat is lodged "not for the protection of his interest but for an ulterior motive and without regard to its effect on transactions to which the caveator had agreed."

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

Amending the "interest" claimed in a caveat

There is a translation key(widget)  on this blog for ease of reading for non-English speaking members of the public or professionals. http://roberthaybarrister.blogspot.com.au/

Mistakes are often made in describing the interest claimed in a caveat. Is it possible to amend the caveat to claim the correct interest?

Macaulay J considered this issue in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530. where the interest claimed was "estate in fee simple" when it should have been "an equitable interest as a chargee".

The power to amend a caveat is derived from the discretionary power in s.90 of the Transfer of Land Act 1958 for the court to "make such order as the court thinks fit".

After considering Midwarren Estates Pty Ltd v Retek and Stivic [1975] VR 575 where Menhenitt J was of the view that s.90(3) did not authorise an amendment of the estate claimed, His Honour said at [101]:

"Having referred to these authorities, and canvassed these views, I do nonetheless recognise that the power expressed in s 90(3) is wide and unqualified. Ultimately, the better view may be that although the power is to be construed as being wide enough to amend the estate or interest claimed, in appropriate circumstances, nevertheless when exercising its discretion the court should generally be less inclined to amend the interest or estate claimed than to amend the grounds of the claim or the scope of the protection asserted."

In refusing the application to amend the interest claimed His Honour at [104]-[105]  identified four factors relevant to the exercise of the discretion:

(a)    the amendment sought is to the interest claimed and not just the grounds of claim or the scope of the protection;

(b)    the circumstances in which the error was made;

(c)   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) and can have powerful and serious consequences; wrongly formulated caveats should not easily be tolerated;

(d)    the overall merits of the claim for a caveatable interest of the kind which is sought by the amendment; in other words, it should have regard to all of the same considerations which arise on the application of removal for a caveat in the terms sought.

His Honour refused the application.

See also Martorella v Innovision Developments Pty Ltd [2011] VSC 282.

 My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/