Deputy Federal Commissioner of Taxation v. Corwest Management Pty. Ltd. and Registrar of Titles.

Members: Burt CJ
Wickham J

Brinsden J

Tribunal:
Supreme Court of Western Australia (Full Court)

Decision date: Judgment handed down 9 June 1978.

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Brinsden J.: This is an appeal from the order of Jones J. made the 26th September 1977 in which he ordered and declared as follows:

• (1) Caveat No. B387792 be removed forthwith and the appropriate entry be made in the register book by the Registrar of Titles (the second respondent).
• (2) The said caveat was lodged without reasonable cause.
• (3) Further consideration of the application to stand adjourned sine die with liberty to all parties to apply.

There were also orders made in relation to costs and liberty to apply was given.

This order was made upon the hearing of an originating summons issued on behalf of the first respondent (hereinafter called ``Corwest'') against the appellant and the second respondent which claimed that the appellant had no interest in the land and premises described in annexure A to the said caveat registered at the Titles Office to support a caveat forbidding absolutely any dealing affecting the said lands lodged by the appellant and registered by the second respondent. The relief sought was an order that the caveat be removed forthwith and the appropriate entry be made in the register book of the second respondent, for a declaration that the caveat was lodged without reasonable cause whereby the plaintiff suffered damage, and for an order that the respondent do compensate the plaintiff for such damage at an amount to be assessed.

The summons was taken out under sec. 138 of the Transfer of Land Act 1893-1972 which provides that the registered proprietor or any person claiming under any transfer or other instrument signed by the proprietor may if he think fit, summon the caveator to attend before the Supreme Court or a Judge in Chambers to show cause why such caveat should not be removed, and such Court or Judge may upon proof that such caveator has been summoned, make such order either ex parte or otherwise as to such Court or Judge may see fit. It is apparent that the relief sought in the originating summons for the removal of the caveat was relief sought pursuant to this section. The balance of the relief sought relating to the declaration and compensation was relief sought apparently pursuant to the provisions of sec. 140 of the same Act which provides:

``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.''

It is at least open to doubt whether the originating summons does contain an effective claim under sec. 140, but in any event even if it can be so construed it is perhaps unfortunate that the two claims were joined in the one summons, because this I think had the effect of leading to the error to which I will subsequently refer.

Corwest at the time the caveat was lodged by the appellant, was the registered proprietor of the lands and it claimed before his Honour that it was not only the registered proprietor but that it owned the lands beneficially. In order however to understand the matters raised in this appeal, it is necessary I think to trace the history concerning the lands and the relationship of various parties to them. The value of the lands, according to an affidavit of one Ian Fraser, is not less than three million dollars. The lands were previously registered in the name of Corser Homes Pty. Ltd. (Corser). On the 12th April 1977, while Corser still remained the registered proprietor, the appellant issued an income tax assessment against Corser in the sum of $203,933.27 which became payable on the 16th May 1977. On the 21st April 1977 Corwest and Corser entered into a deed of trust whereby Corwest constituted itself the trustee in relation to the said land, of which the beneficiary was Corser. On the same date a transfer to give effect to the said deed of trust was executed

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by Corser and Corwest, and the transfer was registered at the Titles Office on the 27th April 1977 and from that time onwards Corwest became the registered proprietor of the lands. On the 29th April Corser changed its name to Kierad Pty. Ltd. (Kierad). On the 3rd May 1977 a deed of assignment was executed in Darwin by an attorney on behalf of Corwest and on behalf of and in the name of Corser (though by this time Corser had changed its name to Kierad) whereby in consideration of the sum of $3,831,114.00 by way of purchase price, Corser as beneficial owner, assigned to Corwest all its interest in the said lands to which it was absolutely entitled under the trust, so that Corwest held the same in fee simple for its own benefit, absolutely discharged from the trust but subject only to the encumbrances shown in the second schedule of the trust deed.

The assessment of income tax due and payable on the 16th May 1977 was not paid by Kierad, so on the 24th June 1977 the appellant issued its writ and on the 2nd August obtained judgment in the sum of $207,933.36. On the 15th August 1977 a memorandum of the judgment pursuant to sec. 19 of the Imperial Statute 1 and 2 Vic., (C.110) adopted by 31 Vic., No. 8, was registered at the Supreme Court of Western Australia. The following day the appellant lodged the caveat. In that caveat the appellant claimed an estate or interest as holder of an equitable charge as to the estate or interest of Corwest in the said lands by virtue of the judgment of the Supreme Court of Western Australia entered up against Kierad on the 2nd August 1977 in action No. 1587 of 1977, between the appellant as plaintiff and Kierad as defendant and a deed of trust dated the 21st April 1977 made by Corwest. In support of the lodgment was also lodged a declaration by one Rodney Wayne Todman, a Commonwealth public servant employed by the appellant as a senior investigator attached to the investigation section of the office of the appellant. There is no doubt that the caveat and the declaration in support set up an estate or interest by reason of the appellant being entitled to an equitable charge pursuant to the judgment and its registration over the land in respect of which it was alleged that Kierad was the beneficial owner in equity. Therefore when the matter came on before his Honour, the hearing ordinarily would have been confined to the estate or interest set up by the appellant in the caveat and the declaration in support. Corwest had a ready answer to the claim so set up by producing the deed of assignment which if taken at face value (and as the evidence then stood before his Honour that was the only way it could be taken) by the time the judgment was obtained, Kierad had ceased to have any beneficial interest in the lands. It appears, however, that the case as fought before his Honour involved consideration that the estate or interest could be supported in another way. It was argued that the appellant had a Crown lien which created an equitable charge, quite irrespective of the judgment, and arising out of the issue of the notice of assessment on the 12th April 1977. It was said that the amount of the assessment from that date was a debt due and owing by Kierad to the Crown and the Crown lien attached to, and its equitable charge subsisted over, all the property of Kierad at that time which included the legal and beneficial ownership of the lands. It was further said that when Kierad became only the beneficial and not the legal owner of the lands under the trust deed, and when by the deed of assignment Corwest purchased Kierad's beneficial interest and thus became the absolute owner of the lands free of the trust, Corwest took the lands subject to the appellant's prior existing equitable charge. His Honour considered this alternative claim apparently without objection, but ruled against it, as he did in respect of the claim set up under the judgment.

The appellant now appeals against the order. The grounds of the appeal are lengthy and I set them out hereunder:

``1. The learned Judge was wrong in fact and in law in finding that the Deed of Assignment dated the 3rd day of May 1977 made between a party described in the said Deed as Corser Homes Pty. Ltd. (Corser Homes) as assignor and Corwest Management Pty. Ltd. as assignee stands as a valid and effectual instrument and the transaction which it evidences is a fatal obstacle to the Appellant's claim of an interest in the caveated land. His Honour should have found:

• (1) that the deed was ineffectual to affect the Appellant's claim to an

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  estate or interest in the lands referred to in Caveat No. B387792;
• (2) that at the date of execution of the deed Corser Homes had ceased to exist;
• (3) that the deed (which purports to be signed by an attorney for Corser Homes) was signed in the Northern Territory by the attorney of a company which had ceased to exist;
• (4) that the deed purports to affect lands in Western Australia and that the law governing its execution is that of Western Australia and not its place of execution and that its execution was defective in that it was not signed by the attorney in the presence of any witness;
• (5) that the deed was a nullity as against the Appellant.

2. Having found that as at the 12th day of April 1977 the Appellant in right of the Crown in right of the Commonwealth of Australia had an equitable charge over the said lands (then the property of Corser Homes) by virtue of the Crown lien which arose on the issue to Corser Homes of the notice of assessment of income tax on that date his Honour was wrong in holding:

• (a) that the charge was affected by the Imperial Statute 2 and 3 Victoria C.11 adopted in Western Australia by 31 Victoria No. 8;
• (b) that registration of the judgment obtained by the Appellant against Kierad Pty. Ltd. (formerly Corser Homes) was necessary to preserve the charge against purchasers and mortgagees (meaning the Respondent Corwest) and that as against that Respondent the charge did not subsist;
• (c) that the charge by virtue of the judgment against Kierad (formerly Corser Homes) arose at the earliest on the 2nd day of August 1977.

His Honour should have held:

• (1) that neither the charge which arose on the issue of the income tax assessment to Corser Homes nor the subsequent judgment were affected by the above adopted Statute which did not purport to affect and is incapable of affecting the rights of the Crown in the right of the Commonwealth of Australia;
• (2) that neither the above adopted Statute nor the Transfer of Land Act of Western Australia purported or was capable of derogating from, destroying, modifying or qualifying the rights of the Crown in the right of the Commonwealth of Australia or of controlling the legal rights and duties between the Commonwealth and its people;
• (3) that at the date of execution of the said deed the Respondent Corwest had full knowledge of the issue of the assessment under the Income Tax Assessment Act on the 12th day of April 1977 and the estate or interest of the Respondent Corwest in the said lands is subject to the lien or charge of the appellant over the said lands.

3. The learned Judge's finding that Corwest was a purchaser for value without notice was against the evidence and the weight of the evidence.

4. The learned Judge was wrong in so far as he found that the Appellant (First Defendant) had no reasonable cause for lodging the Caveat the subject of the proceedings.''

The appellant has also filed further affidavits, namely an affidavit by Simon Andrew Lugard Fraser, the official liquidator of Kierad, sworn the 4th May 1978 and the annexures to which that affidavit refers and a further affidavit of Rodney Wayne Todman sworn the 5th May 1978 and the annexures to which that affidavit refers. We are invited to read these affidavits which the appellant says should be received by us by reason of the provisions of O. 63 r. 10(1) of the Rules of the Supreme Court, which provides among other things, that further evidence may be given without special leave in any case as to matters which have occurred after the date of the decision from which the appeal is brought. The appellant contends that the information contained in the affidavits is of that quality, but alternatively insofar as we may be of the opinion that it is not, sought leave to aduce the further

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evidence. Corwest opposes the admission of this further evidence, but we decided during the hearing that we should permit counsel to refer to it and reserve our decision on its admissibility, and if the decision should be in favour of admissibility, then we gave Corwest leave to file affidavits in reply.

Section 138 is paralleled in legislation to a number of jurisdictions, as for example New Zealand, New South Wales, Manitoba and Victoria. In
Scott v. Broadlands Finance Limited (1972) N.Z.L.R. 268 at 271 , Perry J., when discussing the jurisdiction given to a Court pursuant to sec. 143 of the Land Transfer Act, which is in similar terms to our sec. 138, stated his views in these terms:

``However, there is strong authority that a caveat should not be removed unless it is patently clear that the caveator has no rights. That was the view taken by Stout C.J. in
Plimmer Bros. v. St. Maur , Re Caveat No. 2538 (1906) 26 N.Z.L.R. 294, 296 :

• `In my opinion the caveat cannot be set aside unless the claim to the estate appears to be without any validity. If there is a reasonable question to argue the Court should not remove the caveat, but permit the matter to be litigated.'

This view was repeated by him in the Court of Appeal in
Waimiha Sawmilling Co. Ltd. (In Liquidation) v. Waione Timber Co. Ltd. (1923) N.Z.L.R. 1137, 1151 . Referring to the fact that the Judge in the Supreme Court had removed the caveat he said:

• `In this case the caveat was removed; and, so far as I know, a caveat has never, until this case, been removed where there has been a reasonable question to argue.'

There was also the view which had been taken by Prendergast C.J. in
Re Stewart & Co. , Ex parte Piripi Te Maari (No. 2) (1892) 11 N.Z.L.R. 745, 749 where he said:

• `It is sufficient to say that I am by no means satisfied that the caveators will not be able to make out a case for relief'.''

In the case referred to by Perry J. of Waimiha Sawmilling Co. Ltd. v. Waione Timber Co. Ltd. Stout C.J. further said at p. 1151-2 of that report, that in making the statement which he made in Plimmer Bros. v. St. Maur he believed he was stating the universal practice. In
Ex parte Muston & Anor. re Anderson (1903) 3 S.R.N.S.W. 663 Owen J. referred to some remarks made by him in an earlier case of In re Hitchcock 17 W.N. 62 in which he said:

``The effect of a caveat is nothing more than a statutory injunction to keep the property in status quo until the Court has an opportunity of discovering what are the rights of the parties.''

The matter was also put plainly in In
re Peychers' Caveat (1954) N.Z.L.R. 285 where it was held that the summary removal of a caveat under sec. 143 of the New Zealand Act is proper only where it is patently clear that there was no valid ground for the lodging of a caveat in the first place, or patently clear that the interest, which, in the first place justified the lodging of the caveat, no longer existed. In Victoria in
Evandale Estates Pty. Ltd. v. Keck , (1963) V.R. 647 at 652 Hudson J. said that in respect of the power to order removal of a caveat under sec. 90(3) of the Victorian Act the jurisdiction so to do should not be exercised if there was any substantial issue of fact to be tried, without giving the respondent an opportunity of having the issue determined in an action brought by him. In
Gasiunas v. Meinhold (1964) 6 F.L.R. 182 Joske J. recognised the general practice that a summons under sec. 90(3) was not a suitable procedure for dealing with contested questions of fact and that it was contrary to practice to deal with such questions on such a summons which should be left for determination if and when the respondent brought an action. In that case, his Honour reserved his decision on the submission that he should not entertain the action by reason of the general practice and embarked on hearing the evidence. As the case developed however, it became clear that there was no disputed question of fact so he felt able to decide whether the caveator had the estate or interest claimed in the summons. A Canadian authority,
McGreevy v. Murray (1912) 1 D.L.R. 285 , is to the same effect.

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These authorities establish that the jurisdiction granted by sec. 138 should not be exercised so as to remove a caveat unless the case is one in which it is patently clear that the estate or interest sought to be protected cannot be made out and that degree of clarity will not emerge if there are disputed questions of fact, when the respondent should be left to proceed by way of action to establish the claimed interest or estate.

What are the limits of the jurisdiction given to the Court under sec. 138? In the early case of Ex parte Muston, already referred to, the Full Court of New South Wales took the view that on an application under sec. 97 of the New South Wales Act to remove a caveat, the Court could either remove the caveat or let it remain but could do nothing else. In that case the Court was invited to consider a question of title and reached the view that no such question could be entertained. In the words of Owen J., with whom the other members of the Court agreed:

``The words in sec. 97, subsec. (3), in my opinion, relate only to an order for the removal or continuance of the caveat, and do not enable the Court to make an order or declaration that one or other of the parties has the better title. The caveator must bring an action of ejectment, or go to the Court of Equity;''

A similar view was taken in the Queensland case of
Re Oil Tool Sales Pty. Ltd, ; Classified Pre-Mixed Concrete Pty. Ltd. (1966) 9 W.N.11 . Douglas J. after citing In re Hitchcock expressed the view that the only effect of a caveat was to prevent any dealing with land pending the discovery of what the claims of the parties were in relation to it. He did not think that the legislature ever intended that a claim should be fully litigated on an application to remove a caveat. Nor did he think it appropriate that there should be a summary determination as to whether there is an actionable right in respect of specific performance or not. His Honour referred to In re Mitchell ex parte Muston and also
Ex parte Solling (1893) L.R. of N.S.W.(L). 399 . Applying these authorities to the interpretation of sec. 138, I reach the conclusion that it would not be appropriate under that it would not be appropriate under that section for a Judge on hearing an application for the removal of a caveat to make a declaration that the caveat was lodged without reasonable cause. Apart from the lack of jurisdiction, such a declaration would serve no cause unless there was an application before the Court under sec. 140 and all the other elements which a plaintiff is obliged to prove under that section have been proved - see Gibbs J. in
Forster v. Jododex Australia Pty. Ltd (1972) 127 C.L.R. 421 and Barwick C.J. in
Gardner v. Dairy Industry Authority of N.S.W. 18 A.L.R. 55 at 60 (on the subject of when it is or is not appropriate for a Court to give relief in the form of a declaration).

In this case it seems to have been assumed by all the parties that where a Court reaches the conclusion that a claim to an interest or estate the subject of a caveat has not been made out, it necessarily follows that the caveat was lodged without reasonable cause. In my respectful view that is not the law. In
Young v. Rydalmere Credits Pty. Ltd. (1964-5) N.S.W.R. 1001 there is a clear example of the converse where it was held that a caveator had lodged a caveat without reasonable cause, even though the caveator did have the interest or estate in the land as claimed in the caveat. At pp. 1013 to 1014 Macfarlan J. said this:

``The terms of the caveat show, I think, that the caveat claims a `caveatable' estate or interest. In so far as the requirements of the Real Property Act are concerned he is entitled to lodge the caveat. But that, of course, is not to say that the caveator has, either at law or in equity, the interest which he claims. He may in fact be quite wrong about the interest which he claims. On the other hand the fact that he may be right in his understanding of his interest does not conclude the matter either. The Real Property Act provides machinery with respect to the use of caveats, and when the machinery is invoked a caveat is said to be lodged. Section 98, as I see it, implies the existence of that machinery and that in accordance with its process a caveat has been lodged but then defines a further field of inquiry as to whether the caveator undertook the use of that machinery without reasonable cause. I cannot feel any doubt about the meaning of the phrase `reasonable cause'. It consists of two words and whether the

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words are considered separately or together their meaning is, I think, well understood by lawyer and layman, alike. Whether there has been an absence of reasonable cause requires, I think, a consideration of the circumstances existing both before and at the time when the caveat was lodged. In those circumstances did the defendant lodge the caveat with reasonable cause, or without?''

The ingredients of the claim under sec. 140 are these. There must firstly have been a caveat lodged, secondly it must have been lodged without reasonable cause and thirdly damage must have been sustained thereby. Unless the plaintiff can prove all these three factors, then he cannot succeed in a claim under sec. 140. Macfarlan J. in the case to which I have just referred at p. 1013 pointed this out. The enquiry which the Court is obliged to assume in relation to the ingredient concerning reasonable cause is not as I see it limited to whether or no the caveator has made out the claim of an interest or estate in the subject land as protected by the caveat. There may be circumstances in which, though the estate or interest protected by caveat has not been made out, a Court could still find the caveat not to have been lodged without reasonable cause.

I have already mentioned that I do not think the declaration made by his Honour can be supported under sec. 138. The question is whether the declaration can then be supported under sec. 140. It is to be noted that in the originating summons the declaration sought was that the caveat had been lodged without reasonable cause whereby the plaintiff suffered damage, but the declaration made by his Honour merely states that the caveat was lodged without reasonable cause. I cannot find in the reasons any express finding of his Honour that the plaintiff has suffered damage, and the fact that he was not prepared to make a declaration to that effect is, I think, conclusive that he did not find on the material before him any evidence justifying a conclusion that damage had been sustained. In his reasons for judgment his Honour says that in respect of the matter of damage sustained by Corwest, it was his opinion that no declaration or order should be made at present, as there was not sufficient evidence and therefore those matters should be stood over for further argument. In short on the material before his Honour. Corwest had failed to prove all the necessary ingredients of sec. 140 to enable it to obtain an order for compensation. I do not think therefore that the declaration his Honour made ought to have been made under this section in circumstances where Corwest had not proved all the matters which condition its right to compensation. If his Honour's reasons are to be interpreted on the basis that the matter was stood over to enable the parties to call further evidence on the question of damage, then I am still of the view that the declaration ought not to have been made unless and until damage was proved.

It seems to me therefore that the order made by his Honour in the form of the declaration. cannot be sustained and the appellant asks us to set it aside. I would therefore allow the appeal and set aside the declaration made by his Honour that the caveat was lodged without reasonable cause.

I have had the opportunity of reading the reasons prepared by the Chief Justice and by Wickham J. in respect of that part of the appeal as relates to his Honour's order that the caveat be removed forthwith. I agree with those reasons and have reached the conclusion that the appeal should be dismissed to the extent that it seeks to have his Honour's order made in respect of the caveat set aside.