Caveat is a Latin word meaning “let him beware”. While the legal profession uses the word in a range of situations, the one with which most people are familiar is when a caveat is said to be placed on somebody’s title to land.
What is a caveat
A caveat is a tool you can use to protect your interests against a person who owns real property; that is, who owns land. Under the Transfer of Land Act 1893 (WA) you can lodge a caveat with the Registrar of Titles. This means your interest will be noted on the title. If the owner of that land tries to transfer it to someone else such as by selling it, you will be notified of the event and it will not be possible for the transfer to be registered until your interest has been dealt with.
For example, if you and a land owner enter into a contract for renovations of a house on that land and your contract acknowledges your right to do so, you might lodge a caveat for unpaid money. If the owner tries to sell the house, the title can’t be transferred until your disputed payment is settled and the caveat is withdrawn. Otherwise, it might remain against the title
When else might I use a caveat?
A caveat might also be used if you have a contract with someone for the provision of goods and your contract includes a Romalpa or retention of title clause. This clause allows you to enter someone’s property and retrieve the unpaid goods. However, if these goods are affixed to the land (such as when you supply and fit plumbing fixtures) this isn’t practicable so a caveat may be lodged to record your interest in the land until the payment dispute is settled.
Is lodging a caveat that simple?
No. A land owner’s title is protected from people lodging caveats that can’t be justified.
So what should I do?
You need to make sure that the land owner and the person who owes you money are the same person. If this is not the case then you may encounter problems with your lodgement.
In a recent case[1], a landscaper was owed money on a contract he had made with a contractor who had since gone into liquidation before paying for most of the work. The landscaper’s terms and conditions gave him the right to enter the premises and retrieve the goods supplied. However, as some of the goods supplied had become a part of the land, the landscaper lodged a caveat over the land on which he had done the work. Unfortunately, the owner was a third party and not the contractor. Neither the owner, nor the owner’s agent, knew of the Romalpa clause in the contract – this was one of the factors two of the judges commented on when they decided the caveat should not be extended.
If you want to lodge a caveat, or if you’re not sure about your contract or the identity of the owner, it is always best to obtain legal advice. A correctly lodged caveat by a legal professional will ensure the caveat achieves its purpose.
How do I do it properly
You need to complete a caveat lodgement form which is available from Landgate. You may also need to make a statutory declaration setting out the nature of the interest you are claiming – if you don’t lodge a statutory declaration when required, the caveat will have no effect. After the caveat is registered with the Registrar of Titles, the Registrar will contact the landowner to give notice of the caveat
The landowner can then summons you, the caveator, to appear before a judge of the Supreme Court where you will have to explain why the caveat should not be removed. This is where getting legal advice will start to pay off. The process can move quickly and if you are prepared ahead of time, this will help to make the process less stressful.
In the case mentioned above, the landscaper was able to convince the Master of the Court, who heard the first application, that the caveat should be extended. The Master gave a series of orders to ensure that the issue in dispute was brought to trial but the landscaper didn’t follow these steps. The landowner then asked the Court of Appeal to reconsider the extension. Two of the three judges agreed that the caveats should not be extended. This meant, the caveats would cease to have any effect.
The lesson to learn from this is: don’t assume the caveat alone will solve the issue; you still need to take the necessary steps you need to settle the original dispute.
What if someone lodges a caveat on my land?
The Registrar will advise you about the caveat when it is received. It is advisable to obtain legal advice to make sure you are able to take the right steps to have the caveat removed. Alternatively, that legal advice may help you solve the dispute that lead to the caveat being lodged in the first place.
A caveat can be a useful tool in protecting your interest; however, it is not a resolution to your dispute with the landowner about payment for work done or goods received. This dispute still needs to be resolved. What a caveat will do is to give you some peace of mind that your interest in the land will be protected if the landowner tries to sell the land before the dispute is resolved.
A final word
Although it may appear to be relatively simple to lodge a caveat in the first instance, a party who subsequently has a caveat removed may find itself liable to the landowner for any loss suffered as a result of a wrongly lodged caveat. Make sure you take advice as to whether your claimed interest is truly caveatable. If it isn’t, you may be paying damages to the owner for any loss caused by the caveat.
[1] Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171
If you are in the business of selling goods to another party before receiving payment, you probably already have a clause in your standard terms and conditions stating when ownership of the goods transfer from yourself to the other party. It is therefore useful to know what your rights are and how you can enforce these rights under this sort of clause which is known as a Romalpa or “retention of title” clause.
A little history
The Romalpa clause is named after the defendant in an English case from 1976, Aluminium Industrie Vaasen BV v Romalpa Aluminium Ltd[1]. The scenario in that case is one that’s probably familiar to many business people. The vendor, a Dutch company, had supplied aluminium foil to the purchaser, an English company. In their contract there was a clause saying that ownership of the foil didn’t transfer to the purchaser until the purchaser had paid all payments owing to the vendor and, that until the date of payment, the purchasers had to store the foil in such a way that it was clearly still the property of the vendor. If the foil was mixed with other materials to create new objects then the vendor would have ownership of those new objects until full payment had been received. The purchaser had a duty to look after the goods in such a way as to protect the interests of the vendor. If the purchaser sold the objects to a third party but still owed the vendor money then the vendor would get the benefit of any sub-claim against the third party.
When the purchaser got into financial trouble and a receiver was appointed, the vendor asserted its rights under this clause in the contract and claimed that, because of the clause, it had priority over secured and unsecured creditors. The Queen’s Bench and Court of Appeal agreed with the vendor and so the Romalpa clause became a way to protect a vendor’s ownership of goods which had been delivered to the purchaser and used but had not yet been paid for.
A recent example[2]
A landscaping business supplied a quotation to a contractor who was overseeing construction of a tavern in Perth’s southern suburbs. The contractor accepted the quotation which included the following term:
“The ownership of the goods supplied by the contractor to the customer shall remain with the contractor until payment in full has been received by the contractor. If such payment is overdue in whole or in part the contractor shall have every right (without prejudice to any other rights) and is hereby authorised by the client to enter into and upon the premises (between 8am and 5pm) where the goods may be stored or in use (with or without others) to retake possession and remove the same. The customer hereby indemnifies the contractor against any claim, action or damages arising out of any such action against the cost of the same.”
Unfortunately for the landscaper, the contractor went into liquidation leaving a large portion of the goods and services unpaid for. In addition, many of the goods supplied were attached to the land which belonged to a third party, the owner of the site. Because of this, the landscaper could not assert his right to retake possession of the goods he had supplied and instead placed caveats on the owner’s land.
In conventional building arrangements, any contract the contractor enters into with a sub-contractor, binds the contractor but not the owner unless the wording of the contract is such that the owner is also bound.
In this case, the owner was bound so the landscaper had permission to enter the owner’s property and remove the goods that had been supplied as part of the subcontract and for which payment had not been received in full. Because some of the goods had been attached to the land, they had changed in status from personal property to real property which meant that the landscaper could no longer use the Romalpa clause to retake possession in order to retain his title in the goods.
The landscaper lodged two caveats with the Registrar of Titles claiming an interest in the owner’s land. He said that the Romalpa clause meant that he had an interest in the land, and that he had a right to protect his interest which amounted to the price of the unpaid invoices. The landscaper was not able to persuade two of the three judges that the owner of the land was aware of the contact, let alone the Romalpa clause. This meant that the owner was not a party to the contract and could not be bound by the clause.
Lessons to learn
A Romalpa clause is a useful tool for vendors to use to protect their interests when supplying goods to purchasers who will be paying for the goods some time after delivery. It is especially useful when the goods supplied are likely to be used to make different objects or are going to become fixed to the land and are no longer retrievable by the vendor if the purchaser does not pay.
Following this recent case, it is evident that a vendor could still use a caveat to enforce an interest in the land to which goods have been affixed. However, this will only be effective if the original contract under which the payment fell due was made with the owner or the owner’s agent. Because the landscaper’s contract was with the contractor, he couldn’t assert his right under the Romalpa clause by lodging a caveat on the owner’s land.
If you use a Romalpa clause in your standard terms and conditions, you should:
- Make sure you know who you want to be bound by the clause; and
- Check with a lawyer skilled in contract law that your clause is as effective as possible.
If you have a Romalpa clause you want to enforce, it is worthwhile getting expert legal advice just to make sure you comply with your own terms and conditions. If the purchaser challenges your right to enforce the clause it will be useful if you can demonstrate that you have complied exactly with what the contract says.
There may be times when you supply goods that become attached to the land and are therefore not removable if the purchaser doesn’t pay. One way to protect your interests is to lodge a caveat over the purchaser’s land to which you have attached your goods. But a word of caution – this is not the end of the process. If you are going to take this step, it is recommended that you seek legal advice to ensure that you can really achieve what it is that you want to achieve.
A Romalpa clause is a useful tool in contract with purchasers but, as with any tool, it will only be effective if it is used properly.
[1] [1976] 2 All ER 552
[2] Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171
It is fairly common knowledge that in order to make a valid Will, the will maker must be of “sound mind”. But what does that mean exactly?
Being of sound mind, or in legal speak “possessing the necessary mental capacity”, essentially means that the will maker must:
- Understand his or her acts, the nature of those acts and the extent of the dispositions being made under the Will.
- Comprehend the various claims of relatives, friends and others to a share of the estate.
- Not be influenced by any insane delusion.
The will maker does not need to understand each provision in the Will, comprehend the technical legal language in the Will or recall each specific piece of property mentioned in the Will. However, the will maker must understand that he or she is executing his or her own Will, know and approve of the contents of the Will and possess a general idea of the property which forms his or her estate.
The fact that the will maker is of advanced age, physically frail or beginning to suffer the effects of senility or dementia will not necessarily mean that they are not of testamentary capacity. For example, a person suffering from dementia may have difficulty in his or recollection, but still possess the ability to understand the nature and effect of what he or she is doing. Each case will be determined on its individual circumstances.
Where there is doubt about a person’s mental capacity, it may be prudent to have him or her examined by a medical practitioner. If so, the practitioner should address the matters referred to in paragraphs 1 to 3 above. The person who drafts the Will on behalf of the will maker should make his or her own assessment of the testator’s mental capacity, both at the time of taking instructions and the time of executing the Will.
If a person does not possess the required mental capacity, recent amendments to the Wills Act 1970 (WA) have given the Supreme Court the power to make a Will on that person’s behalf in certain circumstances.
For further information or advice on this topic, please contact Chris Dunnell, Senior Lawyer, by email at cdunnell@talbotolivier.com.au or Rob Durey, Principal, by email at rdurey@talbotolivier.com.au
In November 2009, we reported on the case that will likely change the Internet as we know it. For a refresher please click here .
Several weeks of hearings finished in late December 2009 and many legal experts and analysts believed that there would not be a decision for at least 6 months.
However, the Australian newspaper has reported that Justice Cowdroy will release his decision much earlier than expected. The Australian’s report can be accessed here.
According to the Federal Court’s online court record, the judgement is due on 4 February 2010. We along with many others will be following the decision closely.
We will have a full report of the case and what it means for the industry in the coming weeks after the decision.
Virtual shareholder meetings – can a general meeting of shareholders be held by telephone or online?
Director’s meetings are often held by telephone. However, Talbot Olivier has recently advised a client that it could hold a general meeting by telephone. A telephone or even a virtual face to face meeting could have considerable cost and time saving implications for both companies and shareholders. This article explores some of the issues.
Is the technology available?
We can see on the television news and entertainments channels that there is the ability to have online real time face-to-face exchanges, where each party can see the other party’s gestures and expressions. The technology exists for multi party Skype telephone and messaging and for fully integrated video images and sound. Technology providers are currently offering products to enable participants to simultaneously see each other in real time video windows enabling communication that is much more true-to-life.
Is a virtual meeting a “meeting”?
Case law regarding directors’ meetings illustrates an acceptance by some courts that any forum constituting a meeting of the minds will count as a meeting, even if it takes place using technology (such as a telephone or video conference). On the other hand, shareholder meetings are traditionally physical gatherings allowing for face to face confrontation, debate, and deliberation. Clearly a telephone meeting is not face to face in the same room. See below under “Is the technology available?” for details of virtual face to face meetings. However, there has been very little judicial consideration of what amounts to a valid meeting of shareholders. Furthermore, since 2000, Delaware (USA) legislation no longer requires companies to hold their shareholder meetings at a physical location so that a meeting may be held online at the sole discretion of the directors. Shareholders participating on-line are considered to be “physically present”. There are similar provisions in Denmark. So far as we are aware only Delaware and Denmark currently permit virtual meetings.
So what is the current Australian position?
In Australia, there is no express provision allowing a virtual meeting that is to be held at no physical place, although the legislation does expressly provide for a meeting to be held in more than one place. Section 249S of the Corporations Act (“Act”) states that “a company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.” This requirement could be interpreted to extend to an entirely virtual meeting. In this regard, one leading commentator has stated that “the meeting probably need not take a traditional form if the corporation has a small number of shareholders, or the shareholders are confined to a small number of venues designated by the corporation. The limited case law on this topic suggests that such an approach would not expose the meetings to a legal challenge” (Virtual Shareholder Meetings 2004 Duke L. & Tech Rev. 008). To permit telephone meetings for companies with a limited number of shareholders would present less of a practical issue than those with a large shareholder base.
Recent developments in the UK
The Companies (Shareholders’ Rights) Regulations 2009 (SI 2009/1632) (“2009 Regulations”) came into effect in the UK in August 2009. The 2009 Regulations aim to improve shareholder information and participation rights in company meetings. All companies are allowed to conduct meetings in a way that facilitates electronic participation by persons who are not present in the meeting room.
In this regard, section 360A of the UK Companies Act 2006 (inserted by the 2009 Regulations) provides that:
“(1) Nothing in this Part shall be taken to preclude the holding and conducting of a meeting in such a way that persons who are not present together at the same place may by electronic means attend and speak and vote at it.(2) In the case of a traded company the use of electronic means for the purpose of enabling members to participate in a general meeting may be made subject only to such requirements and restrictions as are—
(a) necessary to ensure the identification of those taking part and the security of the electronic communication, and(b) proportionate to the achievement of those objectives.”
It remains to be seen how many UK companies will take up this option beyond the usual facility for satellite meetings via overflow meetings in the event of difficulties with room size.
How do you vote and participate at a virtual meeting?
Section 1322(3A) of the Act provides that a court may deem a meeting to be invalid unless a member has a reasonable opportunity to participate at a meeting held at 2 or more venues.
It would be for the company to put in place procedures to ensure that its members have a reasonable opportunity to participate and vote at virtual general meetings. The relevant Delaware legislation provides that a meeting may be held online provided that:
“(i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder
(ii) the corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and
(iii) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.”
In Australia, such procedures could be relatively easily managed for shareholders in certain small proprietary companies rather than large proprietary companies or listed entities. Voting between a relatively small number of shareholders by telephone could be by name in turn. A more anonymous approach would be for a vote (or a question/answer) to be sent to the chairman or receiving agent through instant messaging.
Nevertheless, the practical problems associated with participation are probably the biggest hurdle for proponents of virtual meetings, particularly for larger listed companies. This and the possible preference for “traditional” meetings could help explain why only a limited number of listed Delaware companies have held virtual meetings since 2000.
Quorum issues
Even with a quorate telephone or online meeting all sorts of problems could arise if one or more shareholders became disconnected during the meeting making the meeting inquorate. It may be preferable in this regard to hold a physical meeting in one location with a conference connection by telephone or webcasting of the physical gathering to other shareholders elsewhere. The meeting would be quorate at all times given the physical location.
Summary
We consider that it may be possible for a proprietary company, particularly one with a small shareholder base, to hold a valid shareholder meeting by telephone or online provided that:
- all shareholders can hear each other and have a reasonable opportunity to participate in discussions on a real time basis;
- a quorum is in place at all times during the meeting; and
- any voting is achieved fairly and accurately.
Whether it may be appropriate or even technologically possible for companies with a large shareholder base to conduct virtual shareholder meetings will be a question of fact depending on the particular circumstances of each company.
For further information or advice on whether a virtual meeting may be appropriate for your company, please contact Paul Kordic, Principal, by email at pkordic@talbotolivier.com.au or Louis van Aardt, Senior Lawyer, by email at Lvanaardt@talbotolivier.com.au
There have been some interesting developments in a legal action that could be the end of the Internet as we know it.
The case is the Australian Federation against Copyright Theft (AFACT) against iiNet. The case concerns copyright piracy through the use of peer-to-peer technology known as BitTorrent.
The case will be the first in Australia, to test the scope of an ISP’s liability for copyright infringement by its customers under the provisions of the Copyright Act 1968.
Background
Briefly, AFACT, (on behalf of the film and television studios), are alleging that iiNet has authorised copyright infringement by failing to take adequate steps to prevent sharing and downloading of movies and television shows via BitTorrent.
The BitTorrent protocol is a peer-to-peer file sharing protocol used to distribute large amounts of data in portions from multiple locations. The main idea behind the protocol is sharing. Users upload files while they are downloading, allowing files to be distributed evenly and efficiently. Unlike other file-sharing protocols the more users transmitting the file the more efficient the process.
The BitTorrent protocol has made it possible to upload and download large files such as movies, video games and music videos. All of these downloads are potentially in breach of the owner’s copyright.
Copyright explained
Copyright is regulated by the Copyright Act 1968 and is a set of exclusive rights given to the owner of a piece of work, whether it be a sound recording, book, movie, computer program etc. The rights include the right to reproduce or copy the work, broadcast the work or communicate the work in public.
If a person infringes these rights, without the owner’s permission, the owner may bring an action for breach of copyright. There are a number of exceptions, however, it is not necessary to outline them for the purposes of this article.
In this case, AFACT are alleging that iiNet knew that copyright breaches were going on but did nothing to prevent copyright infringements by its customers. In effect, iiNet authorised the infringements, because it:
- knew or had reason to suspect that the iiNet customers were infringing copyright;
- took no action in response to notifications sent by or on behalf of AFACT which identified that the iiNet customers were engaging in copyright infringement;
- offered encouragement to its iiNet customers to engage in copyright infringement;
- failed to enforce its own terms of service;
- continued to offer internet service to iiNet customers who were engaging in copyright infringement or whose iiNet services were being used by other iiNet customers to do so’;
- through its own inactivity permitted a situation to develop and continue where iiNet customers engaged in, or continued to engage in, copyright infringement.
Major issues of the case
This case poses a number of interesting questions:
- What, exactly, are ISPs required to do when they become aware that users are potentially infringing copyright?
- How much responsibility will Australian courts put on intermediaries (in this case ISPs) for taking action against copyright infringement?
- What does the requirement that an ISP ‘adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers’ really mean?
We have seen through cases such a as Kazaa and more recently, Cooper, that the Australian courts have been ready to impose liability on people it thought were profiting from copyright infringement.
Potential impacts on the Internet and ISPs
Whether AFACT succeeds or fails in this case, the affect on the Australian’s use of the Internet will be enormous.
Potentially:
- ISPs will disconnect individual users accused of copyright infringement, without proper investigation, for fear of being sued.
- Individuals will not have any avenue of reply or ability to contest or disprove the allegations made by the copyright owners. The only avenue would be to sue their ISP.
- Thousands of individual users are likely to be severely punished for small-scale copyright infringement.
Further, whatever happens, the Federal Government will be considering the current laws regarding copyright infringement for ISPs and will likely change them.
The case is currently in the Federal Court and whoever wins, it will probably be appealed to the High Court, so there is still a while to go before there is clarity. The case is receiving wide media attention, but I have found that http://www.itnews.com.au/ is the most comprehensive.
For further information or advice on this topic, please contact Russell Morley, Senior Lawyer, by email at rmorley@talbotolivier.com.au.
