New South Wales Supreme Court CITATION : Hillpalm Pty Limited v Wilson [2009] NSWSC 362 HEARING DATE(S) : 29 April 2009 JUDGMENT DATE : 29 April 2009 JURISDICTION : Equity Division JUDGMENT OF : Ward J EX TEMPORE JUDGMENT DATE : 29 April 2009 DECISION : Defendants ordered to pay compensation to plaintiffs. CATCHWORDS : REAL PROPERTY - Torrens title - caveats against dealings - whether caveats lodged without reasonable cause for purposes of s 74P(1)(a) of the Real Property Act 1900 - held that caveats lodged without reasonable cause - defendants ordered to pay compensation to plaintiffs LEGISLATION CITED : Property Law Act 1974 (Queensland) Real Property Act 1900 CATEGORY : Principal judgment Godfrey Constructions v Kanangra Park (1972) 128 CLR 529 CASES CITED : In re a Caveat; Ex parte Canowie Pastoral Co [1931] SASR 502; Vandyke v Vandyke (1976) 12 ALR 621 Hillpalm Pty Limited (First Plaintiff) Interhealth Investments Pty Ltd (Second Plaintiff) PARTIES : Patrick Shaun Wilson (First Defendant) Vetsearch Pty Ltd (Second Defendant) Registrar-General (Third Defendant) FILE NUMBER(S) : SC 3023 of 2008 Mr G A Moore (Plaintiffs) COUNSEL : In person (First and Second Defendants) Submitting appearance (Third Defendant) Joe Weller (Plaintiffs) SOLICITORS : In person (First and Second Defendants) K O'Keefe (Third Defendant) - 11 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WARD J WEDNESDAY 29 APRIL 2009 3023/08 - HILLPALM PTY LIMITED & 1 ORS v PATRICK SHAUN WILSON & 2 ORS JUDGMENT 1 HER HONOUR: This matter has come before me for hearing today on the application of two companies, Hillpalm Pty Limited and Interhealth Investments Pty Limited, by way of an amended summons seeking orders for damages and other relief in respect of the lodgement by the first and second defendants respectively of a series of caveats over six properties owned by the first plaintiff and over two properties which were formerly owned by the second plaintiff. The third defendant, the Registrar General, as I understand it has filed a submitting appearance. 2 On 3 June 2008, orders were made by White J, as duty judge, restraining the defendants from recording caveats on certain of the properties. On 17 June 2008, his Honour continued those orders on the giving of the usual undertakings as to damages until further order. Since then the defendants have unsuccessfully sought orders transferring this matter to the Supreme Court of Queensland under the cross-vesting jurisdiction of this court (an application which was ruled upon by Austin J on 7 August 2008) and orders staying the New South Wales proceedings pending determination of the Queensland proceedings (an application which was ruled upon by Hammerschlag J on 16 September 2008). 3 The background to the various interlocutory applications brought by the defendants is that there are on foot in the Supreme Court of Queensland proceedings in which claims have been brought against Ms Joanne Hambrook (the sole director of the plaintiff companies) and various other corporate entities. The claims, as I understand it, are made pursuant to the Property Law Act 1974 (Queensland) and were described by Austin J in his ex tempore judgment in August last year as relating essentially to a de facto relationship dispute. 4 Before me, however, the application is a discrete one. It is not disputed that over a period of time varying from December 2004 to March 2008 (in respect of the properties owned by the first plaintiff) and over a period of time from 20 December 2004 to 15 June 2007 (in respect of the properties owned by the second plaintiff), a series of caveats was lodged. Those caveats were lodged variously by each of the first and the second defendants over the properties owned by the first plaintiff (C/T Folio Identifier 154/801121, 156/801121, 151/630766, 152/630766, 530/1003396 and 2/1084992) and by the first defendant over the two properties owned by the second plaintiff (C/T Folio Identifier 1/628862 and 101/771752). 5 The interests claimed under the caveats were variously described but in most cases were the same or substantially similar. One of the caveats which was lodged by the first defendant over the six properties owned by the first plaintiff claimed a caveatable interest by way of equitable mortgage for work carried out (Caveat AD 3904637), but the balance of the caveats seem to relate to claims for equitable interests or as beneficial owner pursuant to a trust or constructive trust. The constructive trust seems, variously, to be one which is said to arise between the first defendant and the majority shareholder or director of the first or second plaintiff or one said to arise under or in relation to a claim based upon a shareholder's agreement entered into between the second defendant and the two other current shareholders of the first plaintiff. 6 In at least two of the caveats it would seem that the statutory declaration supporting the caveat has been signed by Mr Wilson describing himself as a solicitor (Caveat AC 575543W). 7 Other than in relation to the caveat which was the subject of the application before White J on 3 June last year (Caveat AD 961507Y) to restrain the Register General from recording the caveats, the various caveats lodged by the respective defendants have successively lapsed following lapsing notices issued on behalf of the first and second defendants (although in one case (Caveat AD 512480A) it appears there was a departmental dealing recorded to remove the caveat). 8 On the lapse of the various caveats - and this is not disputed - further caveats were then lodged claiming the same or substantially similar interests. Those further caveats were lodged without the leave of the court as was clearly required under section 74O of the Real Property Act 1900. 9 A declaration is sought that the caveats in question were lodged without reasonable cause within the meaning of section 74P of the Real Property Act. The plaintiffs seek to recover damages to compensate them for the pecuniary loss attributable to the lodgement of the caveats. 10 In the case of the six properties owned by the first plaintiff, the losses claimed relate solely to the legal costs and expenses associated with the issue of the lapsing notices of or the removal of the caveats - against the first defendant, the sum of $5,323.87 is sought and against the second defendant the sum of $18,196.02 is sought. 11 In the case of the second plaintiff, however, not only are damages claimed in relation of the legal costs associated with the lapsing or removal of the caveats (in the sum of $12,337.73), but a claim is also made for loss and damage sustained, it is said, as a result of the fact that the two properties in question had been listed together for auction shortly before the lodgement of the first of the caveats over those properties (caveat AB183827R over Lot 101/771752; caveat AB240921 over Lot 1/628862) and the effect of lodgement of that caveat was that the auction had to be cancelled and that those properties (Lot 1/628862 and Lot 101/771752) were not able to be sold until dates in 2006 and 2007 respectively. 12 During the period of time between the scheduled auction (which did not proceed) on 28 January 2005 and the sale of those respective properties, it is said that the second plaintiff incurred costs in the upkeep, maintenance, insurance and rates in respect of the properties and has paid interest on loans associated with the properties. Those losses have been itemised in the exhibit to Ms Hambrook's affidavit: Wasted auction/advertising costs $20,718.92 Vehicle fuel expenses (1/3) $ 7,665.62 Utilities $ 3,496.39 Bank charges $ 1,298.30 Groundkeeping/repairs/maintenance $ 3,578.41 Insurance $ 2,194.69 Rates $ 4,494.81 Accounting expenses $12,853.65 Interest on loan accounts between postponed auction and actual sale $93,757.14 13 Included in counsel's submissions, but not pressed today, was also a claim for capital loss on the sale of the two properties owned by the second plaintiff. 14 As I understand it, the loss and damage claimed by the second plaintiff in total, after giving credit for rent received in respect of the properties over the period in question (that rental income being $19,800) is a sum of $142,595.66 (not including legal costs). 15 Mr Wilson has represented himself throughout these proceedings, although it appears he has solicitors acting for him in the Queensland proceedings and when he has lodged caveats he has in most cases nominated an address for service being a solicitor within the state. Mr Wilson sought and I gave leave for his personal assistant, Mr Chris Wakeling, to sit with him at the bar table and to provide assistance during the hearing today. 16 Mr Wilson has frankly conceded before other judges of this Court and again before me today, that he and the second defendant had lodged multiple caveats without the leave of the court, saying that he considered he had no option but to put the caveats on those titles. When the matter was before White J last year, and it was pointed out to Mr Wilson that reliance on the shareholder agreement gave rise to no caveatable interest, his answer was to the effect that he believed he was being "ripped off badly". Before Austin J, Mr Wilson said that he had to lodge the caveats in order to protect himself and to get information as he was in the dark. 17 The first issue I have to determine is whether or not the caveats were lodged without reasonable cause. It is clear on the authorities (In re a Caveat; Ex parte Canowie Pastoral Co [1931] SASR 502; Vandyke v Vandyke (1976) 12 ALR 621) that a shareholder in a company has no caveatable interest in land belonging to the company and, indeed, the shareholders' agreement relied upon by the second defendant in a number of the caveats discloses no equitable interest. Any claim for breach of the shareholders' agreement which the second defendant may have is not a caveatable interest. 18 Insofar as Mr Wilson is claiming an interest under a constructive trust said to arise from a de facto or business relationship, that relationship is one with Ms Hambrook and not one with the corporate entity being the registered proprietor of the properties over which the caveats had been lodged. I do not see that any claim against Ms Hambrook of that kind gives rise to any equitable interest in land owned by those companies. Insofar as there was, in one caveat, a claim for an equitable mortgage in respect of work carried out or allegedly carried out by the first defendant over some of the properties, there is no evidence to support that caveat. 19 Each subsequent caveat claiming the same or essentially the same interest, must necessarily have been lodged without reasonable cause since it was lodged without the leave of the court in contravention of section 74O. 20 I should note that in deciding in relation to the initial caveats lodged over the respective properties whether they were lodged with reasonable cause, there is no evidence that any legal advice was obtained by Mr Wilson or the second defendant in relation to the lodgement of the caveats. Further, there is evidence which suggests that the lodgement of the caveats was for an improper purpose, namely in order to obtain information. This seems to be inconsistent with Mr Wilson or the second defendant having an honest and reasonable belief in the existence of a caveatable interest. 21 Accordingly I am prepared to make the declaration sought to the effect that the caveats in question were lodged without reasonable cause for the purposes of s 74P of the Real Property Act. 22 Insofar as the claim for compensation is concerned, the onus is on the plaintiffs to establish that they have sustained pecuniary loss by reason of the lodgement of the caveats. 23 It seems clear in this respect that the legal costs incurred in seeking the removal of each of the caveats are losses which are recoverable by way of compensation under section 74P. There was some issue taken by the defendants as to the itemisation of the legal expenses, in particular in so far as an account in January 2005 had referred to the Supreme Court of Queensland claim. It seems to me that, given the nature of the caveatable interest claimed by the defendants in obtaining legal advice in relation to that caveat, it would be necessary for the legal advisors to have considered the validity of, or at least to have had regard to, the Supreme Court of Queensland claims. In so as far as I have reviewed the balance of the invoices attached to the exhibits, it seems to me that there was an attempt made by the lawyers, if there had been time referable to more than one matter, to allow a deduction for that across the files. So in those circumstances, I would allow the sum claimed by the first plaintiff in respect of legal costs against the second defendant for $18,196.02 in full, and the sum claimed by the first plaintiff in respect of legal costs against the first defendant for $5,323.87 in full, as well as the sum of $12,337.73 claimed by the second plaintiff against the first defendant for legal costs. 24 Mr Wilson has filed submissions in court in which he made a number of submissions against the making of a compensation order against the defendants. First, he says that the delay in the sale of the two properties formerly owned by the second plaintiff was not due to the lodgement of the caveats. He says, by way of submissions (and I note there was a factual dispute about this, as to which Ms Hambrook was cross-examined in the witness box by Mr Wilson) that the properties had been on the market for 6 to 12 months prior to the proposed auction. Again, by way of submission, he says the auction was a last resort; that no buyer would have bought at the auction for the amount indicated in the appraisals of value given by the real estate agent; and that the marketing program by the real estate agent was misconceived. 25 As to the Hillpalm properties he says, in effect, that he had little money to protect his interests and hence was driven to lodging caveats to protect those interests. He accuses Ms Hambrook of selling a large number of horses without accounting to him for those monies (although it is difficult to see how this relates to any compensation claim by the plaintiffs) and he accuses Ms Hambrook of registering false mortgages over the properties. He said in his submission: It was my view whether right or wrong that I had to attempt to preserve the Hillpalm Pty Limited real property which I had worked so hard to acquire and develop and so I utilised caveats as I believed, perhaps wrongly, that I did have a caveatable interest in the real property. 26 It seems Mr Wilson used the caveat process on several occasions in order to avoid having to incur costs either to seek an injunction to prevent the sale of the real property pending determination the de facto relationship claim or to establish his claimed equitable interest in the properties. 27 The evidence from Ms Hambrook was that she followed advice from Ray White Commercial as to the best means of selling the two properties owned by the second plaintiff; that she was advised to do so together and to market them in conjunction with the Magic Millions carnival; and that the auction was cancelled after the lodgement of the caveats on the basis of the advice she had obtained from the auctioneers and from her lawyers to do so, because of the fact that there had been a caveat placed on title of one of the two properties. 28 There was a suggestion put to Ms Hambrook in the witness box that there were other lower offers she could have accepted at the time. Ms Hambrook appeared to concede that there were some lower offers of which she was aware but suggested that these were in some way connected with Mr Wilson or with his companies (and hence spurious). There is no evidence on those issues and I cannot determine that factual dispute. 29 Mr Wilson submitted that the second plaintiff could have sold the properties, subject to the caveats being removed. This is, of course, a course of action which would have been available to the second plaintiff, although it may be that the second plaintiff's advice would have been that in those circumstances the likely sale price would have been reduced. 30 In any event, whether or not the second plaintiff could have sought to have sold the two properties at auction in January 2005 on a subject to caveat basis, I am satisfied that the reason the auction was cancelled in January 2005 was due to advice reasonably relied upon by Ms Hambrook that the auction could not proceed in those circumstances. 31 The auctioneer was no doubt conscious of the obligation of vendor to confer good title on completion, and I have been referred in this regard to the judgment in Godfrey Constructions v Kanangra Park (1972) 128 CLR 529. Mr Wilson says that he would have removed the caveat if he was asked, but he added to that the proviso "if he was given the information he sought". 32 Mr Wilson further submits there is no guarantee that the properties would have been sold if they had been auctioned on that date, they having been on the market for some time. Ms Hambrook's response to that in evidence was that she would have sold for the best price available at auction at the time. 33 It seems to me that by the first defendant's conduct, the second plaintiff was deprived of the opportunity to test the effectiveness of the marketing strategy, as to which the real estate agents were very positive at the time. 34 In terms of the expenses and damages that have been sought I am of the view that the auction and advertising costs thrown away as a result of the cancellation of the auction in the sum of $20,718.92 are clearly recoverable, (as are the legal expenses claimed by the second plaintiff of the $12,337.73). 35 In relation to the balance of the expenses incurred in respect of the properties then owned by the second plaintiff, apart from Mr Wilson putting to the witness that the costs were (as variously described) "unsustainable", "excessive", or "totally untenable", it would seem that what was also suggested was that there was some overstatement of expenses in relation to vehicle or fuel expenses because some of vehicles had been used for other purposes. It appears, however, that those amounts have been apportioned by Ms Hambrook and there is nothing to suggest that that apportionment is in any way incorrect. 36 Of the other expenses such as amounts payable by way of utilities and rates as well as the bank charges, insurance, and interest expenses, these are supported by the invoices which are included in the exhibits to Ms Hambrook's affidavit. 37 The submission that was put to me on behalf of the plaintiffs was that it was in fact the defendants who put beyond the power of the second plaintiff the ability to see if the properties could be sold at auction and that on the balance of probabilities I should conclude that the properties, having been properly advertised in a positive auction marketing process, would have sold, as indeed it appears they were, albeit some time later when there arose a window of opportunity at which time the caveats had lapsed and the properties could be sold without being subject to the caveat. 38 There was some dispute in relation to one if not both of the properties as to whether it was sold at a time when it was subject to a caveat or not. I suspect some of that confusion may have arisen because it would appear that there was a caveat lodged after the property had sold but before the purchaser had had the opportunity to register the transfer. 39 I am satisfied that the second plaintiff was deprived of the opportunity to sell as it had proposed to do at auction in January 2005. In that regard, I note that in circumstances where damages are sought for loss of an opportunity it is a matter for the court to value what that opportunity is considered to be worth. On the balance of probabilities I would accept it is likely that the two properties would have been sold at or around that time. I am prepared, however, to apply a discount of 10 per cent for the expenses other than the wasted auction/advertising costs and the legal expenses, to reflect the possibility that there may been a greater delay in selling the properties than had been anticipated in January 2005. 40 I grant the relief claimed in paragraphs 1, 2, 3, 4, 5, 6 and 7 of the amended summons. In terms of the relief sought in paragraph 8 of the amended summons, I will order that compensation be paid by the first defendant to the second plaintiff in the sum of $131,641.76. 41 I order that the defendants pay the costs of the plaintiffs of this application. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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