Disputes occur from time to time when a Vendor who has entered into a Contract to sell his property refuses to complete the Contract. These types of disputes normally occur when the Vendor perceives that they have an opportunity to sell the property that they have contracted to sell at a higher price.
If a Vendor refuses to honour the terms of a Contract the Purchaser is left with the alternative of an action for specific performance of the Contract, or an action for damages, or an action for damages and specific performance.
If the Purchaser wishes to have the property conveyed to him and there is a risk that the Vendor will sell the property to another party, the Purchaser’s options are to apply to the Court to obtain an injunction to prevent the sale of the property until the Court determines whether the Vendor is obliged to transfer the property to the Purchaser, or alternatively to lodge a Caveat with the Registrar of Titles claiming an interest in the land and forbidding the Registrar of Titles from registering any transfer until the Caveat is removed.
If an Application is made to the Court and an injunction is granted, the Court would normally require the party seeking the injunction to provide an undertaking to be responsible for any damages that the Vendor might suffer if the Claim for specific performance is not successful.
If a Purchaser lodges a Caveat to prevent the Vendor from completing a sale to another party and subsequently is unsuccessful with the claim for specific performance, the Purchaser will be at risk that he may be liable to compensate anyone else who suffers loss or damage as a result of his Caveat.
Section 130 of the Land Title Act 1994 Queensland is in the following terms:
130 Compensation for improper caveat
(1) A person who lodges or continues a caveat without reasonable cause must compensate anyone else who suffers loss or damage as a result.
(2) In a proceeding for compensation under subsection (1), a court of competent jurisdiction may include in a judgment for compensation a component for exemplary damages.
(3) In a proceeding for compensation under subsection
(1), it must be presumed that the caveat was lodged or continued without reasonable cause unless the person who lodged or continued it proves that it was lodged or continued with reasonable cause.
If an action is commenced by the Vendor against the Purchaser Caveator for compensation, the Purchaser Caveator has the onus of proving that the Caveat was lodged with an honest belief based on reasonable grounds that he was entitled to lodge a Caveat forbidding the registration of any instrument affecting the land (Carlos Jimenez and Kim Michelle Jimenez v Shannon Kyle Bugg) 2011 QDC 142 – Devereaux SC DJC P44.
The fact that the Caveator was subsequently found not to have a caveatable interest will not of itself make the Caveator liable for compensation.
Issues in determining whether the Caveator had reasonable cause to lodge the Caveat will depend upon the factual circumstances, whether the Caveator sought and obtained proper legal advice, and the motive behind the lodging of the Caveat.
The person seeking compensation must allege and prove actual damage. Compensation can be sought for:
• Loss incurred as a result of not being able to complete the intended sale;
• Legal expenses incurred as a result of the action to remove the Caveat;
• Holding costs until the property is sold (insurance, electricity, interest, lawn mowing).
Section 130 of the Land Title Act 1994 specifically provides that the Supreme Court may include in a Judgment for compensation a omponent of exemplary damages. Exemplary damages are normally awarded as punishment to a party where they have acted maliciously or fraudulently.
As the terms of Section 130 of the Land Title Act 1994 provide that compensation can be claimed against a person who lodges a Caveat, most Lawyers will not personally sign a Caveat but will require their client to sign the Caveat. The clear intention of the legislature is to ensure that Caveats are only used to prevent dealings with titles when there is a genuine dispute between parties with merit and not fanciful ideas as to perceived rights.
