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- Smith v Arabesque Pty Ltd[2006] QSC 292
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Smith v Arabesque Pty Ltd[2006] QSC 292
Smith v Arabesque Pty Ltd[2006] QSC 292
SUPREME COURT OF QUEENSLAND
CITATION: | Smith v Arabesque Pty Ltd [2006] QSC 292 |
PARTIES: | MARK KEITH SMITH Plaintiff/Respondent (Applicant in BS 6853 of 2006) V ARABESQUE PTY LTD Defendant/Applicant (Respondent in BS 6853 of 2006) |
FILE NO/S: | No BS 5512 of 2004 BS 6853 of 2006 |
DIVISION: | Trial Division |
PROCEEDING: | Applications for (a) dismissal of claim for delay in prosecution (b) leave to lodge a second caveat |
ORIGINATING COURT: | Supreme Court |
DELIVERED ON: | 6 October 2006 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 28 September 2006 |
JUDGE: | Robin A J |
ORDER: | Applications dismissed |
CATCHWORDS: | Uniform Civil Procedure Rules r 5(3), r 389, Land Title Act 1994 s 129 – inordinate delay by plaintiff in breach of express undertaking to prosecute claim expeditiously did not justify striking out where no order to take a specific step had been breached – circumstances in which plaintiff was refused leave to lodge a second caveat which would have replaced a specific undertaking (no longer operative) of the defendant to retain a fund representing (inter alia) a 5% interest in the land |
COUNSEL: | Applicant/Plaintiff – Mr S Monks |
SOLICITORS: | Applicant/Plaintiff – Colavitti Lillas |
- The defendant Arabesque Pty Ltd applies to strike out the claim for want of prosecution. Mr Smith by his amended originating application (the amendment fixing up an erroneous reversal of the parties’ roles in the document originally filed) seeks leave under s 120 (more correctly s 129) of the Land Title Act 1994 to:
“lodge a Caveat in respect of Lot 4 on RP 817122 in the County of Carlisle, Parish of Bassett, being all that land contained in Title Reference 50044594, upon substantially the same grounds as those relied upon in Caveat No 707781428 lodged on or about 4 June 2004.”
He seeks also leave under r 377 of the UCPR to file an amended claim and a statement of claim in the claim proceeding. Counsel agreed that the amendment aspect, revealed (by an unfiled affidavit sworn on the date of the hearing) to be identification of an “equitable interest in the land” claimed all along as:
“A.as the proprietor of 5% thereof; or, alternatively
B.by way of lien or charge securing payment of the sum of $51,800 together with interest thereon at 9% per annum from 1 January 1996 until payment or judgment whichever is the earlier under section 47 of the Supreme Court Act 1995 (Qld) at the rates specified by Practice Direction from time to time”
(a declaration that the defendant holds 5 per cent on constructive trust remains)
ought to be pursued at a later date.
- The parties’ dispute has a long history. The court was told that land is a valuable development site on the water at Shoal Point in Mackay. It is common ground that in 1993 or 1994 (depending on whether the statement of claim or defence is correct) the plaintiff became involved in an attempt to procure a development approval. The plaintiff pleads he was to get $200,000 plus out of pocket expenses for services required for three to six months (a rather optimistic estimate of the time needed to obtain a development approval); the defendant then alleges an agreement to pay reasonable expenses and an agreement to pay $200,000 if development approval (of the land as a resort) were obtained and the plaintiff found a purchaser of the land for more than $5 million. In the statement of claim filed with the claim on 24 June 2004, Mr Smith pleaded:
“The Varied Agreement
- In or about August 1993, it became apparent to the Plaintiff and Defendant that:
(a)an Environmental Impact Study would need to be conducted in relation to the land;
(b)the development application process would take a substantially longer time and could require an additional 18 to 24 months.
- As a consequence of the matters in paragraph 7, the Plaintiff and Defendant (through Mr Dittman) varied the agreement, and the Defendant made certain oral representations, as follows:
(a)the Plaintiff would carry out the development approval process for the extended period;
(b)the Defendant represented that it would pay the Plaintiff the amount of $200,000 plus out of pocket expenses;
(c)the Defendant represented that it would give the Plaintiff a 5% interest in the land;
(“the varied agreement”)
- The Defendant, through Mr Dittman, repeated the oral representation in paragraph 8(c) on several occasions between August 1993 and May 1995.
Misleading conduct
- The representations in paragraphs 8(c) and 9 (“the representations”) were representations as to future matters within section 51A Trade Practices Act 1974 (Cth), in relation to which the Defendant did not have reasonable grounds.
Particulars
The facts from which it can be inferred that the Defendant did not have reasonable grounds are:
(i)the Defendant took no steps to register the Plaintiff’s name on the title in relation to the land or otherwise secure the transfer of the Plaintiff’s interest to him;
(ii)the matters referred to in paragraphs 16, 17 and 18 below.
- In the premises of paragraph 10, the Defendant has engaged in misleading or deceptive conduct in breach of section 52 of the Act.”
All of those allegations are denied. I find that part of the pleading extremely confusing, and although 8(c) can arguably be taken as pleading a variation of the agreement, in context it rather suggests a representation on which the plaintiff relied (as para 12 pleads) rather than a contractual obligation. I acknowledge the possibility both could apply in the sense of the latter constituting the former. The claim supported Mr Smith’s caveat claiming a 5 percent interest by way of a constructive trust lodged on 4 June 2004 and followed Arabesque Pty Ltd’s notice requiring a proceeding to be started under s 126(2) of the Land Title Act 1994.
- Mr Smith had got wind of Arabesque’s interest in selling the land to a company called Girroma Pty Ltd.
- Arabesque’s application for removal of the caveat was filed on 22 July 2004 and resolved by a consent order made by Justice Atkinson on 22 July 2004. The caveat was ordered removed under s 127(1). Each of the parties gave two undertakings, Arabesques to:
- deposit into its solicitors trust account an amount equal to 5% of the Purchase Price (as defined in the Contract) within 7 days of receipt by the Applicant or payment by Girroma Pty Ltd to or at the direction of the Applicant pursuant to the Contract dated 6 July 2004 until the amount held equals $500,000.
- not charge, mortgage or otherwise encumber its land or deal in any way with its interest in its land unless it gives 14 days’ written notice to the Respondent through its solicitors of its intention to so deal with the Land”; and
Mr Smith:
- giving the usual undertaking as to damages within the meaning of rule 264 Uniform Civil Procedure Rules;
- undertaking to take all reasonable steps to expedite the prosecution of his claim in proceedings BS5512 of 2004”.
- The basis of the application to strike out is Mr Smith’s utter disregard of his second undertaking after January 2005. After a year’s delay, notice of intention to take a step as required by the UCPR was given, but no step was taken. No authority was identified indicating the approach the court should or could take to this situation. Having given the second undertaking, Mr Smith is more at risk of suffering dire consequences than a dilatory litigant who ignores the corresponding undertaking set out in r 5, which has been referred to from time to time in applications to strike out or dismiss for want of prosecution. Mr Smith is not in breach of any order requiring him to take some specific step. I accept that it is open to Arabesque to make its application without waiting until the delay reaches two years.
- The parties have presented detailed submissions dealing one by one with the now familiar list of factors to be considered in relation to r 389 and strike out applications in Tyler v Custom Credit Corporation Limited [2000] QCA 178. Opposed views as to the significance of each factor were presented.
- Far and away the most crucial issue in the claim concerns the denied agreement/representation as to the 5 per cent interest. This will come down to Mr Smith’s evidence against Mr Dittman’s. The former says that Mrs Dittman (a director of Arabesque – her husband was not a director until a later time) indicated Mr Dittman had full authority to bind Arabesque, an assertion the company denies. She has suffered from a serious health issue which will almost certainly preclude her giving useful evidence. An elderly gentleman, Mr Hodge, who lives or lived on the land, did not want it sold and has had differences with those behind Arabesque resulting in litigation, deposed in July 2004 to Mr Dittman’s having acknowledged to him Mr Smith’s 5 per cent interest, in lieu of being paid wages, etc., just a week after alledgedly stating in the hearing of a number of witnesses that Mr Dittman had never said anything about the matter. If the claim ever comes to trial, Mr Hodge will be in the latter part of his eighties and, as Ms Magee (for Arabesque) says, any opportunity to cross-examine him may well have lost a good deal of utility. That is a significant disadvantage for Arabesque. Complaint was made, too, of the destruction of solicitors’ files for both parties. It is not clear just when this happened. No positive basis could be put forward for arguing that anything significant had been destroyed.
- Ms Magee relied heavily on the particular consideration mentioned by McPherson JA in Cooper v Hopgood & Ganim [1999] 2 QdR 113 at 124 of the importance of allowing ordinary members of the community to get on with their lives without having the continuing threat of litigation and its consequences (psychological as well as commercial) hanging over them. I accept that this is important. However, the claim has been a consideration in this way only for 27 months. If Mr Dittman is right, and the 5 per cent is an invention, no concern would have been felt until mid 2004, when the claim was mentioned for the very first time.
- It may strain credulity that a commercial man as successful as Mr Smith has been (according to his affidavit of assets calculated to show the value of his undertaking) would put not a line in writing, nor make any approach to Arabesque seeking to have the 5 per cent interest transferred or secured to him. In an affidavit sworn 20 July 2004, which is in large part the same as his statement of claim, he says took no steps because he was aware he could protect his interest by lodging a caveat, etc. when Arabesque decided to sell. He says “oral legal advice in 1995” was to this effect and that accordingly, he had decided not to make any demand … “especially as I believed that (Arabesque) would not agree to any transfer” (paras 33-34). He says there was an acrimonious separation around May 1995; it is common ground that Mr Smith worked until then. One wonders how many solicitors in such circumstances would advise playing a waiting game.
- Troubling as Mr Smith’s delay is, verging as it does on being contemptuous of the court and Arabesque, I am not persuaded, when the factors are balanced out, that the penalty ought to be the drastic one of depriving Mr Smith of any possibility of remedy. Money claims or contractual claims he might have made are long since statute barred, a fortiori most claims under the Trade Practices Act, which features prominently in the statement of claim. The “constructive trust” aspect is apparently premised on a twelve year limitation period.
- Mr Smith appears to have persisted in this approach of doing nothing until the other side did or threatened to do something once he gained the valuable protection of Atkinson J’s order, which effectively provided him with a security that any judgment he might obtain would prove worthwhile.
- While I decline to strike out his claim, he should be put on terms as to the future conduct of the proceeding. I think the circumstances sufficiently special to warrant the making of guillotine orders so that the cost of non-compliance would be a striking out of the claim. Ms Magee told the court that her client’s desire is to get the matter to trial quickly, if it is not disposed of now, rather than leave it lingering in the hope that it might somehow go away. I will hear the parties about suitable directions. (It has not seemed necessary to note the contention of Arabesque, which appears to be supported by a certain amount of documentary material, that any arrangements Mr Smith did make were made by him as agent for a company called Kalcoin Pty Ltd (and/or some other named company). This material lacks the strength to persuade the court that Mr Smith should be denied a trial.)
- I turn to the application for authorisation of a second caveat. If authorised, it would be the third caveat based on the same ground. Mr Smith was spurred into action by notice given to his solicitors pursuant to the undertaking before Atkinson J on or about 20 April 2006 of the plaintiff’s intention to deal with the land. Eight days earlier, Girroma Pty Ltd had terminated the contractual arrangements made by it. On 15 May 2006, Arabesque agreed to sell a 51 per cent interest in the land to a company called Villaquest Pty Ltd and entered into a joint venture agreement with it, with a view to achieving subdivision and sale of the land. The second caveat was lodged on 20 June 2006. A s 126(2) notice followed, to which Mr Smith responded that his existing claim was to be recorded as the action commenced to support the first caveat. This seems to me a proper approach. It was not legally or practically effective to prevent Arabesque’s filing an application for removal of the new caveat. On 10 August 2006, when the application was returnable, orders were made by consent including removal of the caveat.
- The sale of the 51 per cent interest in land was completed, the registered proprietor of the interest transferred being a related entity of Villaquest, Jamie Pickering Pty Ltd. A proper application under s 129 of the Land Title Act for the court’s permission to lodge a second caveat (certain errors and omissions excepted) was filed on 17 August 2006, the original return date of 13 September 2006 being vacated. There is a serious question whether the new registered proprietor should have been made a party, in addition to Arabesque. No doubt the Registrar would give it written notice of lodgement of the caveat under s 123.
- The court’s power under s 129(2) revolutionizes the law about caveats. Formerly, there could be no second caveat. Judges have proved amenable to exercising the jurisdiction. See for example Field v Gaborit [2002] QSC 466 and Oversea-Chinese Banking Corporation Limited v Becker [2004] 1 QdR 409; compare Landlush Pty Ltd v Rutherford [2003] 1 QdR 236. The second mentioned decision indicates, as one would expect, that the applicant for leave must show that the order is appropriate in all the circumstances, relevant factors said to “ordinarily include the reason why the first caveat was allowed to lapse, any delay and explanation for the delay and any prejudice suffered by the caveatee ...”. It was a case where “the caveator’s interest in the land was clearly established”.
- Here, I do not find the case for a new caveat in the least persuasive. In its favour is the unexpected turn of events whereby the circumstances in which Mr Smith obtained what I have regarded as “security” for his claim unexpectedly disappeared. Arabesque’s undertaking was expressly linked to those circumstances. In hindsight, it can be seen that the possibility of a replacement purchaser coming on the scene was always there. No protection was sought by Mr Smith against a threat to his “security” from such a quarter. That seems to me a case of poor judgment by him or his advisers at this time.
- The ability of Arabesque and its co-venturer to deal with the land is obviously important to them. A caveat would largely destroy that ability so far as Arabesque is concerned and it may well embarrass the co-venturer, too. On the other side, Mr Smith may be seen as effectively abandoning any hope of ever becoming the registered proprietor of the land. Before Justice Atkinson, he agreed to the replacement of that interest by provision of a fund. Interests in land have traditionally been regarded as special, and damages as an inadequate substitute. That was the rationale for the remedy of specific performance. Even if Mr Smith had not indicated preparedness to take his satisfaction in money, a question arises as to the appropriateness of freezing very valuable land (which others wish to develop and sell) in the interests of a person claiming a 5 per cent undivided interest (which will be converted to money, in any event, if the project of development and sale is carried through). It is not suggested that it is important to Mr Smith to live on the land or to use it. Above all, Mr Smith can be charged with laches or delay of massive proportions, not limited to the delay since the time of the first caveat. There is a reasonable explanation for application under s 129 not being made right away. Contrary to my view of the unimportance of delay from the mid 1990s until mid 2004 to the outcome of Arabesque’s “strike out” application, I regard it as an important factor telling against the s 129 application. For some reason, Mr Smith has shown scant interest in becoming registered proprietor of any interest in the land. I do not know whether Ms Magee is right about a related lack of enthusiasm to bear a share of rates, taxes and other outgoings.
- The application under s 129 is refused. I seriously entertained the notion of providing Mr Smith with an alternative “security”, along the lines of the arrangements agreed to before her Honour which boded to (but never did) generate a fund. Section 129 contains no express power in the court to impose terms corresponding with that in s 127. The court has the advantage of two applications being before it. No doubt a combination of orders could be made, if it seemed appropriate, to replicate in some way Arabesque’s first undertaking of July 2004. Pressed by me to consider her client’s offering something in that regard, Ms Magee indicated at first that, if the court were minded to make an order under s 129, an undertaking would be given. That smacked of bargaining with the court in a way that might have upset some. My impression was that ultimately, an alternative outcome along those lines was offered to the court in principle. No detail was gone into about what the undertaking would contain. In the end, I am not persuaded that any such undertaking should be expected of Arabesque. Mr Smith lost his chance by not seeking in 2004 an undertaking which would cover more eventualities.
- Although there will be no caveat holding up dealings in the land, the claim will proceed. Its outcome may be that Mr Smith establishes an interest in the land. In that event it may or may not be possible for that interest to be transferred to or vested in him. If it is not, some form of monetary equivalent may well be awarded to him.
- I record that Mr Smith offered the customary undertaking as to damages which is regularly taken from caveators whose asserted interest is contentious, and whose caveats may occasion loss to others.
- As to costs, my inclination is to order Mr Smith to pay costs of both applications. The one on which he enjoyed success was reasonably brought on the basis of his ignoring his undertaking to the court (which is pleased to note the apology he gives in a recent affidavit). The court is justified in marking its displeasure by an adverse costs order.