Farvet Pty Ltd v Frost [1996] QSC 213 [1997] 2 Qd R 39

IN THE SUPREME COURT OF QUEENSLAND AT ROCKHAMPTON No. 4 of 1995. BETWEEN: FARVET PTY LTD ACN 010 936 124 Plaintiff AND: PETER JOHN FROST First Defendant AND: JOSEPH CODIANNI, TANEA LEE CODIANNI, GIANFRANCO GORZA and CHRISTINE GARY GORZA Second Defendants JUDGMENT - DEMACK, J. DELIVERED on the Thirty First day of January, 1996. CATCHWORDS: Torrens System - Caveat - Compensation for caveat lodged improperly and without reasonable cause - Land Title Act. s.130. Beca Developments Pty Ltd v. Idamenev (No.92) Pty Ltd. (1990) 21 N.S.W.L.R. 459 applied. Statutes - Interpretation - Headings of section part of Act and of section - Acts Interpretation Act, ss.14(2),, 35C(1). COUNSEL: K.J. McGhee Second Defendants SOLICITORS: Messrs Bedford & Associates Second Defendants HEARING DATE: 28th November, 1995 -- 1 of 30 -- -- 2 of 30 -- IN THE SUPREME COURT OF QUEENSLAND BUNDABERG No. 4 of 1995 BETWEEN: FARVET PTY LTD ACN 010 936 124 Plaintiff AND: PETER JOHN FROST First Defendant AND JOSEPH CODIANNI, TANEA LEE CODIANNI, GIANFRANCO GORZA and CHRISTINE GARY GORZA Second Defendants JUDGMENT - DEMACK J. DELIVERED on the Thirty-First day of January, 1996 On 3 May, 1995, the plaintiff filed a writ in the Bundaberg District Registry claiming:- "1. A declaration that the exercise of a certain power of sale granted by the Plaintiff (as mortgagor) to the First Defendant (as Mortgagee), whereby the First Defendant purported to sell to the Second Defendants land described as Lot 5 on Registered Plan 179913, Count of Cook, Parish of Kalkie is invalid and of no force and effect; 2. An order that the sale of the land described as Lot 5 on Registered Plan 179913, County of Cook, Parish of Kalkie by the First Defendant to the Second Defendants be set aside;" -- 3 of 30 -- 2 All defendants entered appearances to the writ in May, but no further steps were taken in the proceedings until the second defendants applied to the Chamber Judge at Brisbane on 11 August, 1995 for the following orders:- "1. That the Respondent, Farvet Pty Ltd ACN 010 936 124 show cause why Caveat No. 700488999 lodged by it should not be removed. 2. That Farvet Pty Ltd ACN 010 936 124 pay Joseph Codianni, Tanea Lee Codianni, Gianfranco Gorza and Christine Gay Gorza compensation pursuant to Section 130 of the Land Title Act 1994. 3. That in the event the Respondent is able to show cause why Caveat No. 700488999 should not be removed then: (a) Farvet Pty Ltd ACN 010 936 124 do give security for the second Defendant's costs of the action as follows:- (i) by paying into Court within twenty- eight days the sum of $2,950.00 dollars; (ii) by the payment into Court not less than twenty-eight days prior to the date fixed for the hearing of this action the further sum of $5,800.00 dollars; and (iii)thereafter such further sums not exceeding a further $8750.00 dollars making thereby a total of $17,000.00 dollars at such times and in such amounts as the Court shall order from time to time after the commencement of the hearing. (b) Further, that the action commenced the 3rd day of May, 1995 be certified for speedy trial." On 11 August, 1995, Williams J. ordered that Robert -- 4 of 30 -- 3 Douglas Waugh and Janice Maree Franke, directors of the plaintiff company give security for costs, that the action be tried speedily in Rockhampton and that the necessary pleadings and interlocutory steps be completed within specified times. In the light of subsequent events it is not necessary to refer to the statement of claim but the defence and counter- claim of the second defendant is relevant, and, although it is long it is necessary to quote it fully:- " 1. The Second Defendants admit the allegations in sub-paragraph 7 of the Statement of Claim. (That the second defendants completed the purchase of the subject land on 16 January, 1995). 2. The Second Defendants further admit that by a contract in writing dated the 9th day of December 1994 made between the Second Defendants as purchaser and the First Defendant as vendor the Second Defendants agreed to buy and the First Defendant agreed to sell certain vacant land identified in the said contract as Lot 5 on R.P. 179913, County of Cook, Parish of Kalkie being the whole of the land contained in Certificate of Title Volume 6214 Folio 50 for a price of TWO HUNDRED AND FIFTY-FIVE THOUSAND DOLLARS ($255.000.00). 3. At all material times the First Defendant was identified in the said contract as the mortgagee in possession of the said vacant land exercising power of sale under Bill of Mortgage No. K218181X. 4. At the trial of this action the Second Defendants will refer to the said contract for the true meaning and effect of its term and incorporate the same in this pleading. 5. At all material times the Second Defendants intended to develop a Child Care Centre on the said vacant land. 6. At all material times the projected development -- 5 of 30 -- 4 date for construction of the said Child Care Centre was the end of May 1995. 7. The said projected completion date depended on transfer by mid February 1995 of the said vacant land to the Second Defendants. 8. The estimated annual net income from the 1st of June 1995 from the said Child Care Centre was ONE HUNDRED AND NINETY-NINE THOUSAND FIVE HUNDRED AND NINE DOLLARS ($199,509.00). 9. The said estimated annual net income of ONE HUNDRED AND NINETY-NINE THOUSAND FIVE HUNDRED AND NINE DOLLARS ($199,509.00) represents both a reasonable income and a reasonable return on expenditure to establish and operate the said Child Care Centre. 10. Further, the Second Defendants admit that at all material times the First Defendant was the registered mortgagee of the said land. 11. In the premises Section 78 of the Land Title Act 1994 granted the First Defendant a power under Section 83 of the Property Law Act 1974 to exercise a power of sale over the said land. 12. On the 6th of February 1995 the Plaintiff lodged Caveat Number 700488999 forbidding registration of any instrument affecting the said vacant land on the grounds that the Plaintiff then was not in default under Mortgage Number 601498067 (K218181X), or alternatively that the Plaintiff was entitled to be treated by the First Defendant as being not in default thereunder. 13. At the trial of this action the Second Defendants will refer to the said Caveat for its true meaning and effect. 14. The aforesaid Caveat has prevented:- -- 6 of 30 -- 5 (a) transfer of the said vacant land to the Second Defendants; and (b) the Second Defendants from establishing their proposed Child Care Centre. 15. The Second Defendants do not admit the allegations in paragraph 2 and 3 of the Statement of Claim. (The terms of the Bill of Mortgage). 16. Further, the Second Defendants do not admit the First Defendant improperly and in bad faith exercised a power of sale conferred upon him as alleged in paragraph 8 of the Statement of Claim. 17. If the First Defendant exercised the said power of sale improperly and in bad faith, which is not admitted, then the Plaintiff's failure until the 6th of February 1995 to lodge the aforesaid Caveat caused, or contributed to, the Second Defendant's entry into and completion of the said contract. 18. It was only by its lodgement of the said Caveat that the Plaintiff gave notice of its alleged claims. 19. Further, the Plaintiff's failure to lodge the said Caveat before the 6th of February 1995 and the notice identified in the preceding paragraph both induced the Second Defendants to believe that at all material times the First Defendant's said power of sale was both proper and in good faith. 20. Acting in reliance on that said belief and not otherwise the Second Defendants borrowed and expended monies to complete the said sale. 21. In the premises the Second Defendants have lost, or alternatively been deprived of, the chance -- 7 of 30 -- 6 to earn an net SIXTEEN THOUSAND SIX HUNDRED AND TWENTY-FIVE DOLLARS AND SEVENTY-FIVE CENTS ($16,625.75) per month on and from the 1st day of June 1995. 22. The Second Defendants without any prospect for return have paid and continue to pay since the 6th of February 1995 interest, bank charges and government duties on the said borrowed monies. 23. Particulars of the payments referred to in the preceding paragraph to the 16 of August 1995 are as follows:- (a) interest -$13,109.65; (b) bank charges -$ 2,218.25; and (c) government duties -$ 10.95 Total -$15,338.85 24. As well the Second Defendants without any prospect for return have paid and continue to pay expenses necessitated by their said proposed development of the said vacant land. 25. Particulars of the expenses referred to in the preceding paragraph to the 15th of April 1995 total SEVEN THOUSAND SEVEN HUNDRED AND SIXTY DOLLARS AND FIVE CENTS ($7,760.05). 26. In the event the aforesaid contract is set aside the Second Defendants will suffer a loss of the aforesaid sums. 27. The Second Defendants deny the allegation in sub- paragraph 1(b) and paragraph 9 of the Statement of Claim. 28. Save as aforesaid the Second Defendants deny each and every allegation contained in the Statement of Claim. AND by way of counter-claim the Second Defendants, Joseph Codianni, Tanea Lee Codianni, Gianfranco Gorza -- 8 of 30 -- 7 and Christine Gay Gorza say as follows:- 29. The Second Defendants repeat and rely on paragraphs 1 to 28 inclusive of their defence. 30. Although the aforesaid contract of sale was completed as admitted the aforesaid Caveat has prevented the Second Defendants being registered as owners of the aforesaid vacant land. 31. By being prevented from being registered as owners of the said vacant land the Second Defendants have been and are required to pay interest, bank charges and government duties on monies used to complete the contract to purchase the said vacant land as well as expenses towards developing the said Child Care Centre without being able to use the vacant land for the purpose they intended. 32. In the alternative, or as well, by being prevented from being registered as owners of the said vacant land the Second Defendants have lost either income or the chance to earn income from their Child Care Centre development. 33. Particulars of the sums identified in the two preceding paragraphs are:- (a) interest, bank charges, government duties averaging @ $2,191.26 per month; (b) expenses to establish a Child Care Centre - $7,760.05; (c) monthly net loss of income since the 1st of June 1995 - $16,025.75; and (d) loss of the chance to earn income - for 5 years @ $199,509.00 per annum. AND the Second Defendants claim:- 1. That the Plaintiff do show cause why Caveat number 700488999 lodged by it with respect to all land described as Lot 5 on R.P. 179913 in the Count of Cook, Parish of Kalkie being the whole of the land contained in Title Reference 16214050 (formerly Certificate of Title Volume 6214, Folio 50) should not be removed. 2. Possession of the said land. 3. In the alternative damages. 4. (a) Under paragraph 33 hereof - $2,191.26 average per month since the 16th of January 1995 + -- 9 of 30 -- 8 $7,760.05 + $16,025.75 per month on and from the 1st June, 1995 + 5 years @ $199,509.00 p.a.;or (b) alternatively pursuant to sub-section 130 (1) of the Land Title Act 1994 - $2,191.26 average per month since the 16th of January 1995 + $7,760.05 + $16,025.75 per month on and from the 1st of June 1995 + 5 years @ $199,509.00 p.a.. 5. Damages pursuant to sub-section 130 (2) of the Land Title Act 1994. 6. Interest pursuant to the Common Law Practice Act 1867 in such sum and at such rate as to the Court may seem meet. 7. Further or other relief. 8. Costs." The matter was not listed for trial in the October sittings at Rockhampton as Williams J. had hoped when he made the orders of 11 August, 1995, because none of the parties appeared at the Callover for that sittings. The matter was set down for hearing on 28, 29, 30 November, 1995. On 27 November, 1995 the solicitors who had been acting for the plaintiff sought and obtained leave to withdraw from the action. Previously the Central Registrar had received a facsimile letter from a director of the plaintiff Mr Waugh, dated 22 November, 1995. It reads:- "ACTION: FARVET PTY LTD Dear Sir This letter is to confirm the telephone conversation between yourself and Director of Farvet Pty Ltd Mr D Waugh that, (a) Farvet Pty Ltd will not be contesting the lifting of the caveat on the disputed property. -- 10 of 30 -- 9 (b) Farvet Pty Ltd will not be appointing Legal Council to represent the Company on 28/11/95. (c) This situation has been brought about by ill health of Mr Waugh and the lack of finance to fight this action. Yours faithfully Dough Waugh." I have set out the documents in the case fully because when the plaintiff did not appear on 28 November, 1995, the second defendants sought judgment on their counter-claim. Based upon the evidence, Mr McGhee for the second defendants, submitted that the plaintiff had lodged the caveat solely for the purpose of frustrating the second defendants' plans to erect a child care centre on Lot 5. Two important issues are raised by this claim. First, has s.130 (3) of the Land Title Act 1994 ("L.T.A.") shifted the onus of proof when damages are sought because a caveat has been lodged or continued without reasonable cause? Second, has s.130 introduced a change in the issues to be proved? The first point, as far as I have been able to ascertain, has not previously been considered, so I shall offer my opinion. Section 130 (L.T.A.) reads:- "Compensation for improper caveat 130. (1) A person who lodges or continues a caveat without reasonable cause must compensate anyone else who -- 11 of 30 -- 10 suffers loss or damage as a result. (2) In a proceeding for compensation under subsection (1), the Supreme Court may include in a judgment for compensation a component for exemplary damages. (3) In a proceeding for compensation under subsection (1), proof that a caveat was not lodged or was not continued without reasonable cause rests on the person who lodged or continued the caveat." A similar provision was found in s.103 of the Real Property Act 1861 ("R.P.A.") in these terms:- "Any person lodging a caveat with the Registrar-General without reasonable cause shall be liable to pay such damages as may be recovered in an action at law by any person aggrieved thereby" There is little reference to s.103 (R.P.A.) in the reported cases in Queensland, see e.g. Queensland Estates Pty Ltd v. Co- ownership Land Development Pty Limited (1969) Qd.R.150, at p.158. The equivalent provision in Victoria, Transfer of Land Act 1958 (Victoria), s.118, was considered by Hayne J. in Commonwealth Bank of Australia v. Baranyay (1993) 1 V.R. 589, and, at p.601, he said:- "I turn then to consider the bank's claim under s.118. That section provides that: "Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damages thereby such compensation as the Court deems just and orders." It is clear that the onus is on the bank to show that the caveator acted without reasonable cause:Kaihu Valley Railway Co. Ltd v. Kauri Timber Co. Ltd. (1889) 11 N.Z.L.R. 403 and Young v. Rydalmere Credits Pty Ltd. (1963) 80 W.N. (N.S.W.) 1463, at p.1472. Is it enough for -- 12 of 30 -- 11 the bank to show that Baranyay had no caveatable interest or must it show more? Authority suggests that more must be demonstrated. (See Deputy Commissioner of Taxation v. Corwest Management Pty Ltd (1978) W.I.R. 129, at pp. 141-2; Hook v. Holland (1984) W.I.R. 16, at p. 19 and Bedfords Properties Pty Ltd v. Surgo Pty Ltd [1981] 1 N.S.W.L.R.106, at p. 108.) Without in any way seeking to give an exhaustive definition of the circumstances covered by the very general expression "without reasonable cause" it would seem to me to be likely that the foundation for reasonable cause will often be as Wootten J. said in the Bedford Properties Case "not the actual possession of a caveatable interest but an honest belief based on reasonable grounds that the caveator has such an interest." However, as his Honour went on to say, honest belief on reasonable grounds may not always be enough to show reasonable cause for lodging a caveat, e.g. in the case where a caveat is lodged not for protection of the caveator's interest but for an ulterior motive and without regard to the effect on transactions to which the caveator had agreed: cf. Young's Case." In 1988 the New South Wales Parliament amended the Real Property Act 1900 (N.S.W.), by deleting s.98, which was in similar terms to the Victorian s.118, and substituting s.74P(1), which added the word "wrongfully", so that compensation is payable by a person "who wrongfully and without reasonable cause lodges a caveat." This change was considered by the Court of Appeal in Beca Developments Pty Ltd v. Idamenev (No. 92) Pty Ltd(1990) 21 N.S.W.L.R. 459 ("Beca Developments"). The Court had difficulty ascribing meaning to the word "wrongfully". However, it recognised that the onus of proof lay on the claimant for compensation (expressly by Clarke J.A., p.469D - "the claimant for compensation should satisfy two tests" - and by Waddell A. - J.A. at p.480G - "a person seeking compensation must establish" - and impliedly by Kirby P.). Also the explanation of "reasonable cause" formulated by Wootten J. in Bedford Properties Pty Ltd v. Surgo Pty Ltd -- 13 of 30 -- 12 (1981) 1 N.S.W.L.R.106, at 108 was accepted as correct. Consequently, it may be confidently said that under s.103 (R.P.A.) the person claiming damages had to show that the person lodging the caveat acted without reasonable cause. The foundation for reasonable cause must be, not the actual possession of the caveatable interest, but an honest belief based on reasonable grounds that the caveator had such an interest. Has s.130 (L.T.A.) changed this? Subs. 3 says that "in a proceeding for compensation under subs 1, proof that a caveat was not lodged or was not continued without reasonable cause rests on the person who lodged or continued the caveat." Read for the first time that seems to shift the onus of proof upon the caveator. If that were so it would be an amazing thing. As Kirby P. said in Beca Developments, at p.462:- "It is clear that Parliament intended to add a further pre-condition to the recovery of compensation under the Act which went beyond the mere establishment that the caveat was lodged "without reasonable cause". That provision had existed in s.98 of the Act for nearly a century. The want of a lawful caveatable interest would normally be embraced by the expression "without reasonable cause". Therefore, by taking the trouble to add the new qualifying adverb "wrongfully", Parliament must be taken to have intended to conserve the compensation provided for cases where the court concluded that the caveator had engaged in some deliberate wrong-doing. The lack of a "reasonable cause" might emerge as an objective fact later revealed when the interests of the caveator were subjected to the cold light of judicial analysis. I can well understand a legislative policy which said that this, of itself, should not be sufficient to render the caveator liable to pay compensation to a person, even one who has sustained pecuniary loss as a consequence of the lodgment of the caveat. The facility -- 14 of 30 -- 13 of the caveat is one of the most valuable provided by the Act. It should not be circumscribed by the imposition of a risk of liability to pay compensation under the Act simply because of some technical default on the part of the caveator. That could have an undesirable chilling effect on the proper lodgment of a caveat later found to be unjustified but at the time of lodgment bona fide believed to be necessary to protect a legitimate and then apparent interest of the caveator." (Emphasis added) Indeed if it was intended that the onus of proof be shifted it could have been expressed more conventionally thus, "The lodging and continuing if a caveat is presumed to be without reasonable cause unless the person lodging and continuing the caveat proves otherwise." Such a provision would probably ease the work load of the Supreme Court, but it otherwise has "an undesirable chilling effect." It would discourage challenging the accuracy of a record that must be kept free from defects. Fortunately, when subs. 3 is looked at more closely it has a very limited effect. It refers to "a proceeding for compensation under subs. 1." Subs. 1 gives to a person who suffers loss or damage because a caveat is lodged or continued the right to seek damages from the caveator. It does not say, as other comparable sections say, that this right is to be pursued in a Court, but subs. 2 supports the view that this is implied. It has always been the case that a person who pursues a claim in a Court must prove that claim. There is nothing in the wording of subs. 1 to suggest otherwise, so that the two propositions which I have referred to in respect of claims under s.103 (R.P.A.) apply to s.130 (1) (L.T.A.). In other -- 15 of 30 -- 14 words, in a proceeding under that subsection, the claimant for compensation must prove that the caveat was lodged or continued without reasonable cause. Thus, in the ordinary course of an application under s.130 (1), there is no need for anyone to prove that a caveat was not lodged or was not continued without reasonable cause. Indeed the caveator, in respect of the claim for compensation, would not be required to prove any issue. However, if in a particular case because of the exigencies of the pleadings an onus falls upon the caveator, then subs. 3 applies. This might have been thought to be obvious, but in these days when there is an emphasis on plain English it must have seemed necessary to state the matter plainly. Since writing the above, I have received the explanatory notes for the 1994 Queensland Acts. The note for clause (s.) 130 (3) (L.T.A.) reads:- "Under the clause, in an action for compensation, the onus of proving that the caveat was not lodged or continued without reasonable cause is placed on the person who lodged the caveat." This explains very little. As I have written, a proceeding brought under s.130 (1) (L.T.A.) involves the claimant asserting that the caveat was lodged or continued without reasonable cause. In the ordinary course of litigation, a person who makes an allegation must prove it, and the issue to be proved is the lodging or continuing of a caveat without reasonable cause. That is a different issue from the issue that the caveat was not lodged or continued without reasonable cause. -- 16 of 30 -- 15 Consequently, I adhere to the view that the onus that has always been upon a claimant for compensation under s.103 (R.P.A.) in respect of a caveat lodged or continued without reasonable cause is also upon the claimant under s.130 (1) (L.T.A.). I am unable to find in the structure of s.130 (1) (L.T.A.) the mere imposition of a liability upon the person lodging or continuing the caveat, and not the creation of a right given to the person suffering loss or damage. The sub- section clearly gives a right to the person who suffers damage because the caveat is lodged or continued. This means that the sub-section creates a right a claimant may pursue in court. Section 130 (1) (L.T.A.) follows the same sentence structure as s.103 (R.P.A.), although s.103 (R.P.A.) also expressly gave a right to damages to "be recovered in an action at law". As I have said previously the right to compensation given in s. 130 (1) (L.T.A.) by implication is one that can be pursued in a court, and s.130 (2) (L.T.A.), confirms that implication by giving the Supreme Court power to award exemplary damages. It seems best to assume that s.130 (2) (L.T.A.) does not mean that the Magistrates Court and the District Court may hear a claim for damages, but cannot award exemplary damages. But what of the heading to s.130 with its reference to "improper" caveats? The heading is now part of the Act, (s.14 (2) (a) of the Acts Interpretation Act (A.I.A.)). It is also part of the section (s.35C (1)) (A.I.A.). Has the heading introduced a second test, similar to that expressed in the New South Wales by the addition of "wrongfully " ? -- 17 of 30 -- 16 Twenty years ago such a question would not have been asked. The reason is stated succinctly by Pearce and Geddes in Statutory Interpretation in Australia 3rd ed. (1988) p.13:- "Each section of an Act has with it a brief note that is intended to indicate the subject matter of the section. In earlier Acts these were in the form of marginal notes. More recently, headings to sections or sidenotes have replaced marginal notes in most jurisdictions. These are inserted by the draftsman of the Act. They are not debated by the parliament and may not be the subject of formal amendment. All of the Interpretation Acts, with the exception of the South Australian Act, provide that headings or notes to section (including footnotes, which are discussed in para (g) below) are not to be treated as part of an Act." In R. v. Martyr (1962) Qd. R. 398 both Philp J. and Townley J. refused to place any reliance on the marginal notes to the draft Criminal Code. Since the amendment to s.14 (2) (A.I.A.) in 1991, which declared that the headings of sections are part of the Act, Lee J. in R. v. Slade (1995) 1 Qd. R.390 has referred to the marginal notes/headings to the sections to determine whether they passed through Parliament unaltered. He was encouraged upon this course by the following passage in the judgment of Street C.J. in The Ombudsman v. Moroney (1983) 1 N.S.W.L.R. 317, at p.324:- "When, having passed through Parliament, the Bills are presented for Royal assent, the formal printed documents set out marginal notes. If a clause in a Bill accompanied by a marginal note passes through Parliament unamended and that marginal note is printed on the formal Bill to which Royal assent is in due course given, I see every reason to regard it as legitimate source upon which to draw as an aid to construction of the section. The process of authenticating the marginal note, by checking that the -- 18 of 30 -- 17 section as enacted and the appended marginal note are identical to the clause in the Bill and its appended marginal note, does not involve an inadmissible excursion into the parliamentary history of the enactment. Although the establishing of this identity might, in a philosophical sense, involve negative history, in the sense of indicating that no change was made, this is not parliamentary history of the character to which reference is made in cases which preclude reference to parliamentary history. The process of authenticating the marginal note is permissible and proper to be undertaken in determining whether reference can be made to it as an aid to construction. The oft-repeated authoritative statements that marginal notes are inadmissible guides to construction are generalities based upon the danger of taking them at face value. If this danger be wholly removed by authenticating the marginal note, then the reason underlying the inadmissibility principle(see per Lord Reid),supra) is displaced and that principle ceases to apply to the marginal note in question." The purpose for which Lee J. used the marginal notes to the Draft Criminal Code was, of course, different from the purpose for which Philp J. and Townley J. refused to refer to them. However, even when the limited purpose for which Lee J. used them is recognised, it is hard to see how that deals with the problem to which Pearce and Geddes refer, namely, that the marginal notes are not debated, or at least that is how the Courts have understood the matter. With the greatest respect to Street C.J., it seems to me that the course he proposes does require a full examination of the course of the Parliamentary debate, to see if the text of the marginal notes/headings was debated, even formally. I recognise that when Parliament declared that the headings of sections are part of an Act it brought headings into the legislative debate. What it has not yet done is -- 19 of 30 -- 18 declared the effect that a heading has upon the wording of its section. It has made an appropriate declaration in respect of the examples which are now frequently appended to sections. If the example and the provision in the section are inconsistent, the section prevails (s.14D (C)) (A.I.A.). If the heading to s.130 (L.T.A.) was intended as no more than an indication of the subject matter of the section, "compensation for lodging caveat without reasonable cause" would have been apt. That heading served s.103 (R.P.A.), for one hundred and thirty-three years, and it filters the words of s.130 (1) (L.T.A.) even more precisely than it did when it did when it was in the Real Property Act. Section 103 (R.P.A.) referred to "damages" whereas the heading spoke of "compensation". S.130 (1) (L.T.A.) speaks of "compensation", as did the heading to s.103 (R.P.A.). The drafter has clearly put before Parliament a heading which adds a word not in the section. Section 10 (A.I.A.) declares that "every section of an Act has effect as a substantive enactment without introductory words." That provision is little changed since it was found in s.4 of the Acts Shortening Act 1867. It reflects the practice described by Pearce and Geddes in the following passage:- "An Act is made up primarily of sections. This is the traditional division of an Act and it stems from the practice of Parliament debating Bills clause by clause. This in turn arose from the fact that each clause used to be formally enacted and was preceded by the enacting words that now appear only at the beginning of an Act. (The clause in a Bill changes on its passing into the section -- 20 of 30 -- 19 of an Act.) A section should be able to stand on its own although obviously it will be only part of the tale being set out in the Act. It usually, although not invariably, contain only one sentence. It may be subdivided successively into subsection, paragraphs, subparagraphs, clauses and subclauses (but if the latter two stages are reached it has usually become unintelligible)." By virtue of s.35 C (1) (A.I.A.), the heading is part of the section, and by virtue of s.14 (2) (a) (A.I.A.) it is also part of the Act. It is difficult to avoid the conclusion that the words in the heading may enlarge the words in the section because, being part of the section, they, too, are part of a substantive enactment. This would mean that the claimant under s.130 (1) (L.T.A.) would need to prove that the caveat was lodged and continued improperly and without reasonable cause. Such a construction is consistent with the purpose of the Act which permits the lodging of caveats as a means of maintaining the reliability of the Register. As Griffith C.J. observed in Municipal District of Concord v. Coles (1905) 3 C.L.R. 96, at p.108, "The lodging of a caveat is really in the nature of the initiation of Litigation." The purpose of such litigation is to determine the interests properly recorded in the Register. Potential caveators should not be deterred from pursuing honest claims as Kirby P. observed in the passage I have quoted from Beca Developments. What meaning should be given to "improper"? "Improper" does not ordinarily have the same meaning as unlawful, but in the context of s.130 (L.T.A.) some assistance, in my opinion, -- 21 of 30 -- 20 can be found in the judgments in Beca Developments. They help to focus attention on the issues involved in lodging a caveat. The words of Kirby P. which I have already quoted include the phrase "some deliberate wrong-doing." His Honour's reasons continued after the passage I have quoted:- "Because I believe that this construction gives a more appropriate meaning to the additional word "wrongfully" and preserves what I take to be the compensation on a technical ground, I prefer the meaning of s 74P (1) which Clarke JA has advanced. On the other hand, I recognise that it will usually be a matter of inference for the court as to whether the caveator lodged the caveat "wrongfully" and "without reasonable cause". The evidence relevant to each issue will often merge. The more patent is the lack of "reasonable cause" for the lodgment of the caveat (including in the terms lodged) the more readily will a court be prepared to infer that the caveator's act was "wrongful" giving rise to an entitlement in the part sustaining pecuniary loss to recover the compensation for which s. 84P (1) provides." Beginning with the proposition which I have already said was established under s. 109 (R.P.A.), the person claiming damages under s. 130 (L.T.A.) must show first of all that the caveator did not have an honest belief based on reasonable grounds that a caveatable interest existed. The additional issue raised by the word "improper" is directed to the reasons why the caveator lodged the caveat. It means that more must be proved than that there could be no honest belief on reasonable grounds that a caveatable interest existed. Knowing that, the caveator must be shown to have lodged and maintained the caveat for some improper purpose. These then are the matters which the second defendants must allege and prove:- -- 22 of 30 -- 21 1. an absence of an honest belief on the part of the caveator on reasonable grounds that a caveatable interest existed. 2. the lodging and maintaining of the caveat for an improper purpose. It is necessary now to turn to the pleadings and the evidence. The defence and counterclaim put in issue the plaintiff's contention that the first defendant improperly and in bad faith exercised a power of sale of the subject land (para. 16). This is the basis upon which the plaintiff asserted its caveatable interest in the land. At a trial the issues in relation to that would be litigated between the plaintiff and the first defendant. In the present circumstances where the plaintiff has failed to appear, the plaintiff's statement of claim contains the basis of its assertion of a caveatable interest. Briefly, it alleges that the mortgage instrument dated 1 March, 1990, contained a term that the money borrowed would be repaid "when the plaintiff was in a financial position to do so". There was thus no default justifying the exercise of the power of sale . On the return of the summons on 11 August, 1995, the plaintiff placed material before the Chamber Judge through an affidavit sworn by its solicitor. Mr McGhee tendered that -- 23 of 30 -- 22 affidavit in the hearing before me. It shows that the plaintiff and the first defendant entered into an agreement on 5 March, 1993, whereby the money secured by the mortgage instrument of 1 March, 1990 was to be repaid within 18 months of 5 March, 1993. No notation was made upon the mortgage instrument to that effect, but as between the plaintiff and the first defendant, there could be no doubt that the plaintiff knew it was in default. There is an assertion that the present directors of the plaintiff were not its directors on 5 March, 1993, but the evidence shows that Robert Douglas Waugh was appointed a director on 12 February, 1993. Notice of that default was given, and from the material in the solicitors affidavit, the notice was received in late September, 1994. The second defendants allege that it was only after the settlement of the sale of the land by the first defendant to them that the plaintiff lodged its caveat. This pleading is found partly in the plaintiff's statement of claim which alleges a contract of sale dated 9 December, 1994, which was completed on 16 January, 1995. The second defendants plead the caveat was lodged on 6 February 1995. The grounds stated in the caveat were:- "The caveator is presently not in default under the Mortgage Number 601498067 (K218181X) or alternatively, the caveator is entitled to be treated by the mortgagee Peter John Frost as being not in default thereunder." In view of the agreement of 5 March , 1993, it is hard to see how those matters could be asserted in support of an honest -- 24 of 30 -- 23 belief on reasonable grounds that a caveatable interest existed. I am satisfied that when the plaintiff lodged the caveat on 6 February, 1995, its officers did not have an honest belief on reasonable grounds that a caveatable interest existed. As to the question of improper purpose, the plaintiff's solicitor's affidavit to which I have referred shows that the solicitor was consulted by Robert Douglas Waugh, on 4 October, 1994 about the first defendant's notice of exercise of power of sale. The solicitor's affidavit also annexes correspondence between the plaintiff and the first defendant. This includes a letter from the plaintiff's solicitor to the first defendant's solicitor dated 28 October, 1994 to the effect that it did not accept that the first defendant had lawfully taken possession of the property. It reiterated earlier advices that if any attempt was made by the first defendant to purport to see the property proceedings would be instituted. On 14 December, 1994, the plaintiff's solicitors wrote to the Bundaberg City Council referring to an application lodged for town planning consent for the construction of a "long day care centre" on the subject land. It asserted that the first defendant had no authority to lodge such an application. On 18 January, 1995, the plaintiff's solicitors wrote to a real estate agent asserting that the agent had erected a sign on the subject land indicating that it had been sold. It spoke -- 25 of 30 -- 24 of seeking declarations and an injunction. The following day the plaintiff's solicitors wrote to the first defendant's solicitors demanding an acknowledgment by 20 January, 1995 that the notice of exercise of power of sale was invalid and speaking of seeking injunctive relief. From these letters it is clear that the plaintiff was aware that there was a proposal to build a day care centre on the subject land. In spite of threats of legal proceedings, no caveat was filed until more than a fortnight after the plaintiff was aware that the subject land had been sold. It does not need to be emphasised that a caveat puts a prospective purchaser on notice. Letters written to the vendor threatening legal action do not put a purchaser on notice. It is difficult to accept that any person having a genuine caveatable interest, and being legally represented, would delay so long in lodging a caveat. The long delay in subsequently issuing the writ and the inactivity following the issue of the writ complete a picture of there being an improper purpose behind the lodging and continuing of the caveat. On the evidence, the improper purpose was the delaying of the second defendant's proposed child care centre while a similar child care centre was built on an adjoining block of land. The plaintiff is not involved in the construction of the other child care centre. However, Robert Douglas Waugh is also secretary of Reagh River Pty Ltd and principal executive officer and a director of Remar Pty Ltd. These companies were -- 26 of 30 -- 25 involved in building child care centres. He is also one of two directors of Franke Investments Pty Ltd which owns the land on which the child care centre was built. Thus, on the evidence, a director of the plaintiff, Robert Douglas Waugh stood to gain an advantage through the plaintiff's caveat. It seems that this Robert Douglas Waugh was the same person as "Dough Waugh", who sent the facsimile letter to the Central Registrar on 22 November, 1995. The fact that Robert Douglas Waugh apparently used the plaintiff to advance his own interests cannot be sheeted home to the plaintiff because the plaintiff is a distinct legal entity. However, the plaintiff is responsible for the delay in lodging the caveat and the inactivity after its lodgment. Waugh's conduct merely puts the plaintiff's impropriety in context. I am satisfied then that the second defendants have proved both the unreasonableness of the lodging and continuing of the caveat and the impropriety of the lodging and continuing of the caveat. The damages which are sought are in two broad categories, first, costs associated with the purchase of the land for a child care centre, and, second, loss of profits from the centre. I am satisfied, on the basis of the letter from the plaintiff's solicitors to the Bundaberg City Council, dated 14 December, 1994, that the plaintiff was aware that the prospective purchaser of the subject land was interested in constructing a child care centre. The letter refers to "long -- 27 of 30 -- 26 day care centre" but that seems to be a typographical error. Also the affidavit of Mr Murphy, who claimed knowledge of Mr Waugh's involvement with Reagh River Pty Ltd, Remar Pty Ltd and Frank Investments Pty Ltd shows that Mr Waugh was in a position to know what was being proposed. I am satisfied, then, that the second defendants can recover the various items claimed under the first category I have mentioned. As to the second category, Mr and Mrs Gorza have gone ahead and are constructing a child care centre in North Bundaberg. This is not what they had intended when they became involved in the purchase of the subject land, but it may be expected to yield a comparable return. Mr & Mrs Codianni have not become involved in this project. They own vacant land which they had intended to sell and then to use the proceeds as their contribution to the construction of the child care centre on the subject land. In fact they have not sold the vacant land, and so are not putting their capital to any alternative project. From the date of the lodging of the caveat until the date of the letter from Mr Waugh which stated that the plaintiff would not attempt to sustain the caveat any longer is a period in excess of nine and a half months. That is approximately the same length of time between the date when the second defendants expected to open their child care centre on the subject land -- 28 of 30 -- 27 and the date when Mr & Mrs Gorza expect to open their child care centre. In the circumstances where there is power to award exemplary damages, I am satisfied that the second defendants should recover one year's loss of profits. In the course of investigating the viability of a child care centre, the second defendants received information from Mr Murphy which showed that the difference between income and expenses in the first twelve months of operation of the child care centre could be $199,509.00. I am not satisfied that it has been shown that this document was the plaintiff's document, as Mr McGhee submitted. However, it came from the group of people and companies involved in building and conducting child care centres in regional cities, and gives an indication of industry expectations. Because of the component of exemplary damages, it is not a matter of precise proof. I shall allow $200,000.00 for loss of profits. Returning to the first category of damage, in paragraph 23 of the defence and counter-claim an amount of $15,338.85 was claimed in respect of interest, bank charges and government duties. Up to the date of trial this amount had increased and I shall allow the amended figure of $20,645.63. Paragraphs 24 and 25 refer to expenses in relation to the application for town planning consent. These have been thrown away by the lodging of the caveat. I shall allow this item in the amended figure of $7,855.55. There will be judgment for the second defendants against -- 29 of 30 -- 28 the plaintiff for $228,501.18, together with costs, including reserved costs if any. -- 30 of 30 --