Amendment vs removal of caveats: Ren v Shi [2012] VSC 271

I was recently involved in the matter of Ren v Shi [2012] VSC 271 which was a hearing before Justice McMillan in the Supreme Court of Victoria. The plaintiff was seeking to remove a caveat from a property, and the defendant alleged that the caveat ought to remain on the title as, although defective, it was said to be capable of amendment.

The defect in the caveat was largely in the section 'estate or interest claimed'. The caveat claimed an 'estate in fee simple' (i.e. stating that the caveator was the owner of the land), whereas it appeared that the interest that the caveator had could only be, at its highest, an equitable charge (at [34] to [37]). Also, the document (written in Chinese) said to give rise to the interest was translated as follows (at [33]):

The plaintiff’s translation reads “[Mr] Xiao agrees to use his family assets to guarantee the repayment of the debt owed to [Mr]Shi”. In contrast, the defendant’s translation reads “[Mr] Xiao agrees to use his family assets as security for the repayment of the debt owed to [Mr] Shi”.

Power to amend a defective caveat

s90(3) of the Transfer of Land Act 1958 (Vic) (the TLA) provides:

(3) Any person who is adversely affected by any such caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit. [emphasis mine]

s90(3) TLA has been construed widely, giving the Court a discretion not only to remove a caveat, but also to amend the caveat to cure certain defects on the face of the caveat. There had been ongoing debate about whether or not the power to amend a caveat extends to amending the 'estate or interest claimed'.

In Ren v Shi, the McMillan J noted the factors that a Court must consider when faced with a defective caveat and an application to amend, including (at [21]):

(a) Whether the amendment is to the estate or interest claimed and not just the grounds of claim.

(b) The circumstances in which the error was made, including whether the caveator was represented by lawyers at the time.

(c) “The Court should not readily act in a way which might encourage the belief that the caveats can be imprecisely formulated and then ’fixed up later’.”

(d) The overall merits of the claim.

These factors developed from the decision of Macaulay J in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530 (Gangemi) and were fleshed out by Dixon J in Martorella v Innovision Developments Pty Ltd [2011] VSC 282 (Martorella). Much earlier, in Midwarren Estates Pty Ltd v Retek & Stivic [1975] VR 575, Menhennit J held that the 'estate or interest claimed' could not be amended. However, Macaulay J in Gangemi and Dixon J in Martorella held that the 'estate or interest claimed' section in a caveat could be amended, but in considering the four factors set out above, special circumstances had to exist for such an amendment to be allowed (see Martorella at [65]).

The reasons for the limitation are discussed by Dixon J in Martorella in detail between [51] and [66]. A succinct summary is set out by Dixon J in Martorella at [55]:

A person proposing to deal with the land is entitled to assume that the claim expressed is the only one made, for the express mention of one ground is to the exclusion of the other. If a caveator enjoyed more, or different, rights in land than claimed in the caveat, it is proper and appropriate to lodge another, or a different, caveat notifying such interests.

For instance, it would be unfair for a registered proprietor to issue proceedings against a caveator, knowing that the caveator doesn't have the particular interest claimed, only to have the Court cure the defective caveat to the benefit of the caveator and to the detriment of the registered proprietor.

Removal of a caveat

McMillan J went on to discuss the considerations for the exercise of the Court's discretion to order the removal of a caveat. The basis for the removal of a caveat is the same as for an interlocutory injunction, as noted by Warren CJ in Piroshenko v Grojsman (2010) 27 VR 489 (Piroshenko) at [7] (also in Ren v Shi at [30]):

Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief. In so far as their registration is an administrative act, it is when application is made for their removal that the onus falls on the caveator to satisfy the two-stage test used by the court when deciding whether to exercise its discretion to grant injunctive relief. ... This two-stage approach requires the caveator to establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question, and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial.

Australian Broadcasting Corporation v O’Neill [2006] 227 CLR 57 clarified the proper test for a Court exercising its discretion to grant an interlocutory injunction. As a result, the trial division of the Supreme Court of Victoria recently reformulated the test for the removal of caveats, particularly with respect to the first arm of the test, being whether there is a 'serious question to be tried'. The test is as follows (Piroshenko v Grojsman [2010] VSC 240 at [18] and Ren v Shi at [31]):

1. there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and

2. that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.

If there is a 'serious question to be tried', then the Court goes on to consider the 'balance of convenience'. The 'balance of convenience' test has had a similar re-expression as a result of the Court of Appeal in Bradto Pty Ltd v State of Victoria [2006] VSCA 89 rejigging the 'balance of convenience' test for interlocutory injunctions. This has been expressed as 'the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ (see Bradto at [35] and Ren v Shi at [38]).

Ultimately, McMillan J held that the caveat ought not be amended ([25]), and even if it was amended, the Court would order its removal as there was no serious question to be tried (at [37]), nor would the balance of convenience favour the retention of the caveat (at [38]).

Ren v Shi is a good summary of the factors which influence the exercise of the Court's discretion under s90(3) TLA. It also discusses the circumstances in which a Court will award compensation for a caveat lodged without reasonable cause under s118 TLA, and when an award of indemnity costs ought to be made against a caveator, but these topics are beyond the scope of this post.

Caveats - how does someone remove a caveat (part 2)

In my previous post on this topic I discussed the formal requirements for seeking a Court order to remove a caveat from a title. In this post I have discussed below the considerations a Court has when faced with an application to remove a caveat from a title.

Owners corporations - part 1: what do they do?

I was recently involved in a dispute between an owners corporation, an owners corporation manager and a lot owner. The lot owner was claiming that the owners corporation manager had not acted in good faith when carrying out its duty as a manager, and that the owners corporation had breached its duty of care towards the lot owner. The dispute related to repairs to the water services for the lot owner, those water services being part of the shared services of the owners corporation. The lot owner claimed damages in relation to those breaches.

This is the first part of a short series on owners corporations. The series is intended to give the basics of owners corporations, discuss what their duties are and what the consequences are if the duties are breached.

The discussion below is a general discussion introducing owners corporations, what they do and how they delegate their functions.

Caveats - how does someone remove a caveat (part 1)

When a caveat is lodged on a title to land, the consequences are severe: generally speaking, the registered proprietor is prevented from disposing of the land the subject of the caveat (see s91 Transfer of Land Act 1958 (Vic) (the TLA).

A person may seek to have a caveat removed by several means, including (by way of summary):

• by the Registrar issuing a notice requesting the caveator either to give notice abandoning the claim or  issuing proceedings to substantiate the claim (s89A TLA);
• by a person lodging a dealing on the title and 30 days have passed since the registrar gave notice to the caveator that the caveat will lapse (s90(1) TLA); or
• By application to the Court to have the caveat removed (s90(3) TLA).

This post and the discussion below concerns application to a Court under s90(3) TLA. Application to the Court is probably the quickest and most certain way to seek to have a caveat removed or substantiated. By way of observation, the provision by the caveator of a notice under s89A TLA that proceedings have been issued to substantiate a claim is not a very high hurdle, and will probably result in delay pending the determination of the proceedings.

Caveats - accuracy of information and amendment

In my previous posts I discussed what is a caveat and what interests a caveat protects. When a person lodges a caveat, the document is quite simple in appearance but it has a great effect upon a registered proprietor's ability to deal with their land.

I have included a link here to the DPI approved caveat form.

The section which is headed 'Estate or Interest claimed' requires a caveator to state the interest which the caveator is seeking to protect. The section which is headed 'Grounds of claim' requires a caveator to state how the estate or interest claimed arises. These sections attract a lot of attention in litigation because a failure to get these details right could render the caveat defective and lead to a Court order that it be removed.

A Court has a discretion to order the removal of an unintelligible caveat. The Court also has a discretion to amend an unintelligible caveat so that it reflects what is actually claimed by the caveator. So how does a Court decide whether to remove or amend a caveat that is unintelligible? I have discussed these issues below in further detail.

Caveats - which interests in land are caveatable interests?

In my previous post on this topic, I noted that the following phrase in s89(1) of the Transfer of Land Act 1958 (Vic) (TLA) determines what interests are capable of protection by a caveat: 'any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise'. I then discussed what is an interest in land for the purpose of this provision.

The interest in land must arise from 'any unregistered instrument or dealing or by devolution in law or otherwise'. In Victoria, there is a divergence of views on what interest in land is afforded protection by a caveat.

I have discussed the divergence of views below.

Caveats - a caveatable interest must be an 'interest in land'

I noted in my previous post on this topic that the following phrase in s89(1) of the Transfer of Land Act 1958 (Vic) (TLA) determines what interests are capable of protection by a caveat: 'any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise'.

Several things are apparent from this sentence. Firstly, the interest to be protected must be an 'interest in land'. Secondly, the interest in land must arise from 'any unregistered instrument or dealing or by devolution in law or otherwise'.

This article and the discussion below concerns what is an interest in land within the meaning of s89(1).

Caveats - the basics

I am involved in a trial in respect of the removal of a caveat. In that matter the parties are debating whether or not the particular instruments executed by them give the caveator an interest in land capable of supporting a caveat.

Rather than let all of my good research go to waste (i.e. into the pile of authorities sitting on my shelving awaiting filing), I have decided to publish a series on caveats to discuss what is a caveat, what protection does the caveat afford, what is a caveatable interest, when may a caveat be registered on a title and how to remove a caveat.

This article below discusses the basics - what is a caveat.