GUSTIN v TAAJAMBA PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HANDLEY, SHELLER and POWELL JJA 31 May 1994, 31 May 1994 [1994] NSWCA 117 EQUITY — undertaking as to damages — whether laches and delay disentitled successful party to damages — held: The delay relied on was insufficient to attract the Court's discretion to refuse equitable relief. REAL PROPERTY ACT — caveat — recovery of damages against caveator under s98 — whether caveator had "reasonable cause" to maintain caveat — held: Interlocutory relief obtained by a caveator and payment of substantial funds into Court established "reasonable cause" within s98; (2) damages were therefore not recoverable under s98. EQUITY — interest — party ordered to pay monies into Court — party later unsuccessful — interest awarded should ordinarily be at rates payable on funds in Courts. Ex parte Hill [1883] 2 Ch D 644; Victorian Onion and Potato Growers Association v Finnigan (1922) VLR 819; Lamshed v Lamshed (1963) 109 CLR 440 referred to. ORDERS 1. Appeal allowed in part. 2. Vary the Master's assessment by disallowing the damages awarded by the Master for the period after 13 October 1986. 3. The cross claimant should have the costs of the inquiry before the Master and the further costs in the Equity Division since the order of Needham J of 13 October 1986. 4. The appellant should have the costs of this appeal and the respondent is to have a certificate under the Suitor's Fund Act if qualified. 5. The Master's order with respect to interest is set aside. In lieu thereof the defendant is to have interest on the damages awarded by the Master for half the average rate payable on monies in Court for the period up to 13 October 1986, and interest after that date at the rate or rates from time to time payable in respect of moneys in Court. 6. Orders should also be made for the payment out of the monies in Court. 7. The parties should bring in short minutes before Handley JA in private chambers. Handley JA This is an appeal by Mr Robert Gustin from decisions of Master McLaughlin of 3 December and 16 December 1991 in which he assessed damages pursuant to an order made by McLelland J on 2 December 1991 referring such assessment to the Master for trial pursuant to Pt3 of Schedule D of the Supreme Court rules. In order to understand the appeal, it is necessary to set out in some detail the history of the proceedings prior to the order of McLelland J. On 10 September 1985 contracts were exchanged between the parties for the sale by the respondent to the appellant of the land and buildings at 229 Broadway, Sydney for a price of $220,000. On 2 December 1985 the vendor, the present respondent, gave a notice to complete requiring completion by 18 December 1985. The contract was not completed on that day and the following day the respondent purported to rescind for breach. 2 UNREPORTED JUDGMENTS On 20 December caveat W129676 was lodged by the appellant on the title forbidding any dealings with the land to protect his interest under the contract of sale. On 24 December 1985 the appellant commenced proceedings in the Equity Division for specific performance and secured an ex parte interlocutory injunction restraining dealings with the land by the vendor. That injunction was granted by Reynolds J as vacation judge. The injunction was directed to continue up to and including 11 February 1986. The injunction was continued by consent on 11 and 25 February. On the latter day an express undertaking as to damages was taken from the appellant for the first time both in respect of the continuation of the injunction and the period since it was originally granted. On 5 March 1986 Cohen J ordered the appellant to pay the balance of purchase money of $198,000 into Court. The proceedings came on for final hearing before Needham J on 4 and 7 April 1986. On 13 October 1986 he delivered his reserved judgment, held that the contract had been validly rescinded and dismissed the plaintiff's proceedings. On the defendant's cross claim he granted declarations that the contract had been validly terminated and the deposit forfeited, he ordered the appellant to remove the caveat and granted associated relief. The vendor had also claimed damages in the cross claim. It had sought loss of bargain damages but his Honour found that this claim could not be supported. However, he did not finally dispose of the cross summons but stood it over to permit the respondent to make a revised claim if it considered that it could establish a claim in excess of the deposit. At that stage, no application was made for an order that the appellant pay damages pursuant to its undertaking or for wrongful lodgement of the caveat. On 28 October a consent order was made for payment out of Court of the sum of $188,000 with the balance to be retained presumably against the costs payable by the plaintiff who was not a resident of Australia. On 10 November 1986, the appellant appealed as of right from the decision of Needham J. Under normal circumstances the order of Needham J would have been the final order in the proceedings, all earlier and later orders being interlocutory. In this case the matter is complicated by the order standing over part of the cross claim for further consideration. On 1 December 1986 this Court granted the appellant interlocutory relief pending the determination of that appeal. This included orders restraining the vendor from selling or otherwise dealing (save as to leasing) with the land. The orders were continued subject to the appellant paying into court the sum of $165,000 within twenty one days. This money was not paid in until 29 June 1987 but no effective steps were taken in the meantime to terminate the orders granting interlocutory relief. The appeal was heard in June 1988 and the Court's reserved judgment was delivered on 6 October dismissing the appeal with costs. Following that judgment no application was made to this Court for any further or other relief. However, while the appeal was pending, the respondent filed a notice of motion in the Equity Division on 26 August 1987 seeking directions for the assessment of damages pursuant to the undertaking as to damages and further or other relief. That matter came before Justice Needham on 1 September, 2 November, 9 November, 23 November and 7 December 1987. Thereafter nothing effective was done until 28 October 1988. On that day the solicitors for the appellant wrote to the list clerk in the Equity Division seeking to have the URJ GUSTIN v TAAJAMBA PTY LTD (Handley JA) 3 proceedings re listed before Needham J. The matter was re listed on 17 November but was then stood over generally with liberty to restore on seven days notice. In the meantime, Clarke JA on motion by the appellant made orders by consent for payment out to him of the moneys in Court, in excess of $112,000, and adjourned the motion until 13 February 1989. On that day it came before Samuels JA who was informed by counsel for the appellant that the question of damages had still to be argued before Needham J. Counsel for the respondent sought an order remitting the motion to Needham J but his Honour considered that there was no need for such an order and dismissed the motion with no order as to costs. Nothing effective was done thereafter until 23 January 1991 when the respondent filed a motion for directions which came before a Deputy Registrar on 26 February. Thereafter steps were taken to prosecute the remaining issues. The call over sheet submitted to Registrar Berecry on 21 May states that the matters then in issue comprised "the question of damages consequent upon the usual undertaking given in support of an interlocutory injunction which was discharged at final hearing and upon appeal and caveat ordered removed". On 2 December 1991 McLelland ordered that all outstanding matters in these proceedings be referred to Master McLaughlin. The issues submitted to the learned Master were firstly whether any damages should be ordered to be paid by the plaintiff pursuant to his undertaking as to damages and if so what those damages should be and secondly whether the plaintiff ought to be ordered to pay damages pursuant to s98 of the Real Property Act for lodging a caveat with the Registrar General without reasonable cause. The Master awarded damages against the plaintiff on both causes of action and assessed those damages on the basis of the loss of rental income during the relevant periods. So far as the plaintiff's undertaking as to damages is concerned, the period was from 24 December 1985 to 13 October 1986. The period for the assessment pursuant to s98 of the Real Property Act was from 13 October 1986 to 16 November 1988. The first point that should be mentioned is that the orders of Master McLaughlin may have been interlocutory so that an appeal only lay to this Court by leave. No objection was taken to the competency of the appeal but in any event the case is one in which it would have been proper to grant leave. No point was taken based upon the apparent absence of any undertaking given to the Court when the ex parte injunction was granted on 24 December 1985. There may have been no point to take bearing in mind the form of the undertaking given on 25 February 1986. Mr Willmott for the appellant challenged the assessment pursuant to the undertaking on the ground that the laches and delay of the defendant in seeking to enforce the undertaking disentitled it to this form of equitable relief. Laches and delay may be a discretionary defence to a claim to enforce an undertaking as to damages. See Ex parte Hill (1883), 23 ChD 644 and Victorian Onion and Potato Growers Association v Finnigan (1922) VLR 819. However, in the present case there is no basis for declining to enforce the undertaking on this ground. Although an inquiry as to damages pursuant to the undertaking was not sought from Needham J on 13 October 1986, such an order was sought in the notice of motion of 26 August 1987. The delay in commencing the proceedings therefore is of the order of ten months. In the meantime on 1 December 1986 an order had been made requiring the plaintiff to bring money into Court and the claim for an inquiry was lodged shortly after the money was paid in on 29 June 1987. A delay 4 UNREPORTED JUDGMENTS of only ten months in the commencement of proceedings is far too short to attract the discretionary defences of laches and delay in a case such as this. The claim for such damages was pursued with less than diligence and I have already recited the history of the proceedings. Laches and delay after proceedings have been commenced can constitute a discretionary defence. So much was established by the decision in Lamshed v Lamshed (1963) 109 CLR 440. However, in the present case the delay from 1989 until 1991 is relatively modest and during this period substantial funds were held in court as security for the damages. No steps were taken on behalf of the plaintiff to have the claim dismissed for want of prosecution and in the circumstances I am satisfied that there is no substance in the claim that equitable relief should be refused on the ground of the defendant's laches and delay after the notice of motion was filed on 26 August 1987. In addition there was a challenge on quantum, but following discussion between members of the Court and Mr Willmott, the only point taken on behalf of the appellant on quantum was abandoned and there is no need for me to deal further with it in these reasons. The second part of the appeal concerned the challenge to the Master's award pursuant to s98 of the Real Property Act as it stood at the time the caveat was lodged on 20 December 1985. The section then provided: "Any person lodging any caveat with the Registrar General without reasonable cause shall be liable to make any person who may have sustained damages thereby such compensation as may be just, and such compensation shall be recoverable in proceedings in any court of competent jurisdiction lodged by the person who has sustained damage from the person who lodged the caveat." The Master held: "In my view s98 requires that the first defendants establish only that there was no legal right in the plaintiff to lodge the caveat. I am satisfied that that fact has been established by the dismissal by Needham J of the proceedings brought by the caveator." With all respect to the learned Master the section only entitles a person to recover damages against the caveator where the caveat has been lodged without reasonable cause". In my opinion the caveator did have reasonable cause to lodge and maintain his caveat while his proceedings were pending in the Equity Division or this Court. He applied and obtained ex parte interlocutory relief on 24 December 1985 and in doing so necessarily persuaded the judge that there was a substantial question to be tried in the proceedings. Thereafter, until the dismissal of the proceedings by Needham J on 13 October 1986 an interlocutory injunction remained in force either by consent or because the defendant in the proceedings chose not to apply for the injunction to be discharged. This establishes either directly or by admission that throughout this period the maintenance of the interlocutory injunction was justified. The proceedings were heard by Needham J on a final basis over two days in April 1986 and his Honour then reserved judgment for a period of some six months. Although the proceedings were dismissed, this history demonstrates that there was reasonable cause for lodgement of the caveat. Following the appeal to this Court commenced on 10 November 1986, the plaintiff again moved for interlocutory relief which was granted on terms on 1 December 1986. This remained in force until the appeal was dismissed on 6 October 1988. URJ GUSTIN v TAAJAMBA PTY LTD (Handley JA) 5 Once again, the grant of such interlocutory relief either by judicial decision or as a matter of admission by the respondent, demonstrates that there was a substantial question to be determined on the appeal. Apart from the history of the proceedings there was no other evidence to establish that the caveat had been lodged without reasonable cause. Indeed, as Powell JA pointed out in argument, for most of the relevant times the plaintiff had substantial funds in Court. In the absence of other evidence this demonstrates that the plaintiff then believed that he had reasonable cause to maintain the proceedings and equally that he had reasonable cause to maintain the caveat. There is no evidence that the plaintiff at any stage thought or was advised that he had no reasonable cause for lodging and maintaining the caveat. It is true that he did not give evidence and did not expose himself to cross examination. Nevertheless, in my view there is simply no evidence that this caveat was lodged or maintained without reasonable cause and in all the circumstances the failure of the other party to give evidence and to expose himself to cross examination cannot make up for the total absence of evidence on the issue. It follows in my opinion that the appeal to this extent succeeds and that part of the award which relates to the period from 13 October 1986 to 6 October 1988 must be set aside. There is finally the period of forty days between the dismissal of the appeal on 6 October and 16 November 1988 when the withdrawal of caveat form was submitted to the respondent. I am prepared to assume that the maintenance of the caveat during this period would be capable of falling within 898. However there is no evidence that the respondent suffered any damage during this period. The dismissal of the appeal entitled it to commence negotiations for the immediate sale or leasing of the property. There is no evidence that the caveat interfered with the ability of the respondent to carry on such negotiations, or delayed the settlement of any sale or lease. In these circumstances the Court should not award damages in respect of this period. At all times since 29 June 1987 there has been at least $112,000 in Court. Substantial monies were also held in Court from 6 March 1986 or shortly afterwards until shortly after 28 October 1986. In my opinion the orders for interest should reflect the presence of the monies in Court and the fact that they were earning interest. See Forsyth v Blundell (1973) 129 CLR 477 at 504 to 606. Interest on the damages pursuant to the undertaking for the period from 24 December 1985 to 13 October 1986 should be payable at half the average rate payable on funds in Court during that period. This is to reflect the fact that those damages accrued progressively. Thereafter interest should be paid on such damages without rests at the rates from time to time payable on funds in Court. If any of the costs of the proceedings before Needham J and of the earlier appeal to this Court have not yet been paid, the moneys in Court should be ordered to be paid out to the solicitors for the respondent to the extent necessary to pay those costs and any interest thereon. The moneys in Court should also be paid out to the solicitors for the respondent to the extent required to satisfy the damages and interest thereon ordered by this Court. The balance of the moneys in Court should be paid out to the appellant. 6 UNREPORTED JUDGMENTS It seems to the Court that the costs of the proceedings before Master McLaughlin and the costs of the appeal to this Court should be more or less equal and that there is no need to retain funds in Court to meet any balance due to the respondent under those orders. The parties may agree otherwise. In my view the Court in principle should make the following orders. 1. Appeal allowed in part. 2. Vary the Master's assessment by disallowing the damages awarded by the Master for the period after 13 October 1986. 3. The cross claimant should have the costs of the inquiry before the Master and the further costs in the Equity Division since the order of Needham J of 13 October 1986. 4. The appellant should have the costs of this appeal and the respondent is to have a certificate under the Suitors Fund Act if qualified. 5. The Master's order with respect to interest is set aside. In lieu thereof the defendant is to have interest on the damages awarded by the Master for half the average rate payable on monies in Court for the period up to 13 October 1986, and interest after that date at the rate or rates from time to time payable in respect of moneys in Court. 6. Orders should also be made for payment out of the monies in Court. I would propose that the parties be given leave to bring in short minutes of these orders before myself in private chambers. Sheller JA I agree. Powell JA While I agree with the orders which, in principle, have been proposed by Handley JA, and the reasons which he has given for doing so, I would wish to add a few brief observations of my own. First, it is to be noted that a great deal of the time devoted to the hearing of this appeal has been wasted due to the fact that, because of the inadequacy of the appeal books, and the consequent lack of information as to what has occurred, in the past, in these proceedings, it has been necessary for the Judges who constitute the Bench, on this occasion, to devote a great deal of time scrabbling through each of the Court of Appeal files and, as well, through the Equity file, in a desperate endeavour to ascertain what, in fact, has occurred at various times in the years which have passed since these proceedings were commenced as long ago as December 1985. I regret to say that the history of events which has been exposed as the result of that search is not one which leaves one with a particularly flattering impression of the knowledge, or ability, of some of those who, at various times, have appeared for one or other of the parties in these proceedings. That this should be so is due to the fact that that history reveals that those concerned have, at times, exhibited a regrettable lack of understanding of the rules of practice and procedure to be followed in proceedings in the Court - and, in particular, in proceedings in the Equity Division of the Court - and, as well, a lamentable lack of knowledge - or of understanding - of what were, at the relevant time, the provisions of the Real Property Act 1900 ("the Act") which bore upon the matter at hand. Contrary to what we were told when the hearing of the appeal commenced, it seems now to be clear that, when, in December 1985, application was made to the late TO'L Reynolds J for the grant of an ex parte injunction, no undertaking as to damages was proffered to, or extracted by, his Honour - or, if it had been, it was not recorded in the form of order settled by the Court. URJ GUSTIN v TAAJAMBA PTY LTD (Powell JA) 7 The undertaking as to damages which is now conventionally sought in relation to the grant of ex parte and interlocutory, injunctions - and also, now, in relation to the making of orders to extend the operation of a caveat - is a procedure of comparatively modern origin, being said (see Smith v Day [1882] LR21 ChD 421, 424 per Jessel MR) to have been invented by Knight Bruce LJ when Vice Chancellor, the first reported case in which such an undertaking was sought, and given, being Novello v James ([1854] 5 De GM and G 876; 43 ER 1111). So far as I am aware, the first reported case, in this State, in which such an undertaking was sought, and given, was Cooper v Smyth ((1883) 4 NSWLR (Eq) 39) the form of undertaking then sought by Faucett J being the then common English form set out in Seton on Decrees (4 Ed 171). Although it would appear that, at least in the early stages of its history in England, the undertaking was expressly sought, and expressly given, it has been said (see Kerridge v Foley (1968) 88 WN 63, 66 per Sugerman JA (as he then was)) that, at least from an early stage, the practice was that the undertaking was always implied, unless the contrary appeared, and the Registrar was accordingly required to insert it in the formal order (see, for example, Attorney General v Albany Hotel Co [1896] 2 Ch 696, 699 and 700 per North J; Howard v The Press Printers Ltd (1904) 74 LJ Ch 100, 101 per Farwell J, 104 per Romer LJ, 105 per Cozens Hardy LJ; Seton's Judgments and Orders 6 Ed Vol 1 at 521; 7 Ed Vol 1 509), and, although it is said not to have been the practice before 1904 (see Howard v The Press Printers Ltd (supra), as from December 1904 (Howard The Press Printers Ltd (supra) at 105 (note); Practice Note [1904] WN (Eng) 127; Oberrheinische Metalwerke GMBH v Cocks [1906] WN (Eng) 127) a similar practice as to a cross undertaking has existed in any case in which a defendant has given an undertaking in lieu of an injunction. In contrast to the position which has obtained for so long in England, the position in this State is that, except for a period of about four years between 1971 (see Practice Note 92 WN 822) when there was introduced a practice pursuant to which an undertaking as to damages was deemed to have been given, and February 1975 (see Practice Note No 6) when that practice was rescinded, the practice has been that the undertaking is to be given expressly, either by the party, or by his her or its legal representative, and that, unless it be so given, the Registrar has no authority to include it in the formal order, when settled and entered. Over the course of the 110 years since the practice was first introduced in this State, the form of the undertaking has varied, the original form being that adopted by Faucett J in Cooper v Smyth (supra), that form later being varied by Harvey CJ in Eq (see Parker's Practice in Equity 2 ed (1949) 27), still later versions being substituted in 1971 (92 WN 822) and 1975 (Practice Note No 6) - the current form was substituted in 1984 (see SCR Pt28 R7(2)). The form of order which the first defendant sought, and was granted, in relation to the caveat exposed a similar lack of knowledge on the part of the parties' advisers as to the then provisions of s97 of the Act 1900. Although, prior to the coming into force of the provisions of the Real Property (Amendment) Act 1976, the appropriate form of order to be made pursuant to s97 of the Act was one directed to the Registrar General - who, thus, needed to be joined as a party defendant to the proceedings - to remove the relevant caveat, as from that time, the appropriate order was one directed to the caveator - not the Registrar General who, thus, no longer needed to be joined as a party defendant - to withdraw the relevant caveat within a time limited in the order, in default of 8 UNREPORTED JUDGMENTS which, upon the lodging with the Registrar General of an office copy of a minute of the order, the caveat was, by virtue of the Act, deemed to have lapsed. The second point which ought to be noted is that, if the Master's judgment adequately reflected the submissions which had been advanced before him, and the authorities to which his attention was directed, then he can hardly be criticized for falling into error. I say this since, in the event assumed, the Master's attention would not have been directed to the judgment of Wootten J in Bedford Properties Pty Ltd v Surgo Pty Ltd ({1981] 1 NSWLR 106), in which case his Honour - whose views, I believe, reflected the views of the then Judges of the Equity Division, and which views were thereafter uniformly applied within the Equity Division - held, first, that, on an application seeking damages pursuant to the provisions of s98 of the Act, as it then stood, the applicant proprietor bore the onus of showing that the respondent had acted without "reasonable cause"; and, second, that "reasonable cause" could be established, not only by showing that the caveator had a caveatable interest, but also by showing that the caveator had an honest belief, based on reasonable grounds, that he had such an interest. One adds, that, notwithstanding the repeal of s98 of the Act, and its replacement by s74 P of the Act, upon the coming into force of the provisions of the Real Property (Caveats) Amendment Act 1986 on | September 1988, a like approach has been taken to the phrase "wrongfully and without reasonable cause" in s74 P(1) of the Act (see Beca Developments Pty Ltd v Idamineo (No 2) Pty Ltd ((1990) 21 NSWLR 459). In this case, as Handley JA has pointed out, the first defendant contented itself with founding its application upon what might be called "the ultimate fate of the litigation" and did not choose to tender any evidence going to the plaintiff's bona fides in lodging his caveat. Not only does "the ultimate fate of the litigation" not establish a lack of bona fides on the part of the plaintiff, but the various matters to which Handley JA has referred - as, for example, the plaintiff's willingness to pay the whole of the balance of the purchase price into Court pending the outcome of the proceedings - would provide ample evidence of the plaintiff's belief in the rightness of his actions in lodging, and seeking to maintain, his caveat. As I have previously indicated, I agree with the orders which, in principle, have been proposed by Handley JA and the reasons which he has given for doing so. Handley JA: The orders of the court will therefore be as I have proposed and the parties will bring in short minutes in due course. 1. Appeal allowed in part. 2. Vary the Master's assessment by disallowing the damages awarded by the Master for the period after 13 October 1986. 3. The cross claimant should have the costs of the inquiry before the Master and the further costs in the Equity Division since the order of Needham J of 13 October 1986. 4. The appellant should have the costs of this appeal and the respondent is to have a certificate under the Suitor's Fund Act if qualified. 5. The Master's order with respect to interest is set aside. In lieu thereof the defendant is to have interest on the damages awarded by the Master for half the average rate payable on monies in Court for the period up to 13 October 1986, and interest after that date at the rate or rates from time to time payable in respect of moneys in Court. URJ GUSTIN v TAAJAMBA PTY LTD (Powell JA) 9 6. Orders should also be made for the payment out of the monies in Court. 7. The parties should bring in short minutes before Handley JA in private chambers. 5 Counsel for the Appellant: M WILLMOTT Instructed by: NEEDS CHAN AND MONAHAN Counsel for the Respondent: M OAKES 10 Instructed by: AG ROBINSON CREAIS