Chan v Liu
[2020] VSCA 28
•25 February 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2019 0117
| PAUL KWOK FAI CHAN | First Applicant |
| and | |
| JUDY PUI CHU WONG | Second Applicant |
| v | |
| ZHENZHU LIU | First Respondent |
| and | |
| REGISTRAR OF TITLES | Second Respondent |
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| JUDGES: | BEACH, KYROU and KAYE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 21 February 2020 |
| DATE OF JUDGMENT: | 25 February 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 28 |
| JUDGMENT APPEALED FROM: | [2019] VSC 650 (Forbes J) |
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REAL PROPERTY – Caveat – Appeal against dismissal of application to remove caveat under s 90(3) of Transfer of Land Act 1958 – Respondent said to have failed to settle on time – Factual dispute whether parties agreed to extension of time for settlement – Applicants entered into contract to sell property to third party after purporting to rescind contract with respondent – Whether serious question to be tried whether respondent has caveatable interest in property – Whether balance of convenience favoured maintenance of caveat –Strong basis that respondent elected not to rely on performance of contract – Maintenance of caveat precluded applicants to perform contract with third party – Leave to appeal granted – Appeal allowed – Piroshenko v Grojsman (2010) 27 VR 489 considered.
PRACTICE AND PROCEDURE – Ground of appeal on which applicants succeeded not raised with primary judge – Whether applicants precluded from raising new argument on appeal – Discretion to allow new argument – Appeal from interlocutory judgment – No further evidence would have been adduced – Coulton v Holcombe (1986) 162 CLR 1; Doherty v Murphy [1996] 2 VR 553 considered.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr L P Wirth | L H Lee & Co |
| For the First Respondent | Mr N Jones | Katsu Lawyers |
| For the Second Respondent | No appearance |
BEACH JA
KYROU JA
KAYE JA:
The applicants seek leave to appeal the decision of a judge of the Supreme Court, sitting in the Practice Court, dismissing their application, for an order for removal of a caveat of a property owned by them at 357 Burwood Highway, Burwood (‘the property’).[1]
[1]Chan v Liu [2019] VSC 650 (‘Reasons’).
By a contract of sale dated 21 July 2018, the first respondent (‘the respondent’) agreed to purchase the property from the applicants for the sum of $2,450,000. Pursuant to the contract the date for settlement was 22 July 2019. The parties disagree whether, after they had entered into the contract, they agreed to an extension for the date of settlement to 22 August 2019. Settlement did not occur on 22 July 2019 and the applicants sought to rescind the contract. The respondent lodged a caveat, on the basis that the applicants did not validly rescind the contract as the date of settlement had been extended to 22 August 2019.
The judge found, on the facts, that the respondent had established that there was a serious issue to be tried as to whether he had a caveatable interest in the property, and that the balance of convenience favoured maintenance of the caveat until that issue was determined at trial.[2] Accordingly, her Honour dismissed the application.
[2]Ibid [10]–[11].
Factual background
The factual background to the dispute is somewhat detailed. It is set out in an affidavit of the solicitor for the applicants, How Yee Loh, an affidavit of the respondent, an affidavit of his wife Yumei Feng, and two affidavits of Xuehang Cheng. Mr Cheng is a sales consultant in the employment of the agents acting on behalf of the applicants in the sale.
As mentioned, the contract of sale was dated 21 July 2018. It specified a settlement date of 22 July 2019. On 10 August 2018, the respondent lodged a caveat in dealing number AR336734J on the title to the property claiming an interest in the property pursuant to the contract of sale. At the time of the sale, Ms Feng was engaged in most of the discussions with the selling agent on the respondent’s behalf. Within two weeks after the signing of the contract, Ms Feng telephoned Mr Cheng to ask whether the applicants would agree to an extension of the settlement date to 15 September 2019, without imposing a penalty. At that time, the respondent and Ms Feng were expecting some investment funds to return from a business project in about August or September 2019, and they realised they might require more time to complete the purchase of the property.
In response to that request, Mr Cheng spoke with co-employee, Mr Kelvin Chan. According to Mr Cheng’s affidavit, either he or Mr Chan, or both of them, contacted the second applicant, and communicated to her the request that was made by the respondent. The second applicant confirmed to Mr Cheng (or Mr Chan) that she would only agree to extend settlement for one month to 22 August 2019, but she would not extend settlement to 15 September 2019. She told the agent that he could communicate that response to the respondent. Accordingly, Mr Cheng telephoned Ms Feng to convey the agreement by the applicants to extend the settlement date to 22 August 2019 only. Ms Feng responded that she would still prefer that settlement be extended further to 15 September 2019, and Mr Cheng told her that he would again make such a request to the applicants. Subsequently, Mr Cheng telephoned Ms Feng to say that the applicants were not agreeable to the further extension request, but he confirmed the extension of the settlement date to 22 August 2019.
At about that time, Ms Feng instructed solicitors, Katsu Lawyers, to confirm with the agents whether the applicants had agreed to the further extension of the settlement date to 15 September 2019. On 10 August 2018, Ms Judy Zhu, a conveyancing clerk in the employment of Katsu Lawyers, sent an email to the agents seeking confirmation that the applicants had agreed to extend the settlement date from 22 July 2019 to 15 September 2019 without penalty. In response, on the same date, Mr Chan sent an email to Ms Zhu stating:
The vendors have agreed to extend the settlement date to 22 August 2019, please let me confirm with them first whether they are ok to extend the settlement date to 15th of September 2019.
In his affidavit, the respondent deposed:
My wife and I believed that the extension to 22 August 2019 had been confirmed by the Vendors, and it was only our further request to extend settlement to 15 September 2019 that was not agreed to by the Vendors. Although 15 September 2019 would have been more ideal, we were at all times preparing our finances for settlement on 22 August 2019 in reliance of the agent’s representation.
In late November or early December 2018, the respondent gave his architect permission to contact the sales agent to request access to the property, in order that the architect could take measurements for a survey report. The architect subsequently telephoned Ms Feng to advise her that access had been denied by the applicants. Ms Feng then telephoned Mr Cheng to inquire about the reason for the denial of access. Mr Cheng told her that the applicants had purchased another property, and they wanted the respondent to pay an additional 20 per cent in deposit monies to assist them with their new purchase. In their affidavits, Ms Feng and Mr Cheng both state that that was the first time that a request for a further 20 per cent deposit was made by the applicants, and that it was brought up in the context of the respondent seeking access to the property.
At about the same time, the applicants requested the respondent to temporarily ‘lift’ the caveat that he had lodged over the property, in order that the applicants could refinance the property. Accordingly, Ms Feng instructed the respondent’s solicitors to consent to that request. Subsequently, on 21 December 2018, the respondent lodged a further caveat in dealing number AK800831A (‘the second caveat’) on the title to the property.
On 12 June 2019, the respondent’s solicitor sent an email to the applicants’ solicitor confirming that they acted for the respondent, and stating:
We understand from the agent (please see email below) that the vendors had previously agreed to a penalty free extension to 22 August 2019.[3]
The email then requested to be sent ‘DOL’ and ‘PEXA’ invitations in preparation for settlement.
[3]Emphasis in original.
In response, the applicants’ solicitor sent an email on the same date (12 June 2019) to the respondent’s solicitor stating that the applicants would ‘agree to extend the settlement date to 22 August, 2019 penalty free on condition that your client pays a further 20% of the purchase price and signs a section 27 for the release of the deposit monies to enable our clients to pay their existing loan’.
Following that email, the applicants’ solicitor created a PEXA work space with a settlement date of 22 July 2019 and invited the respondent’s solicitor into it. On 3 July 2019, the applicants’ solicitor sent an email to Ms Zhu stating that because the applicants’ solicitor had not received a reply to its email of 12 June, he assumed that settlement would proceed on 22 July 2019.
On 4 July 2019, the applicants’ solicitor sent a further email to Ms Zhu attaching the vendors’ GST withholding notice. The respondent’s solicitor responded by email stating that the respondent was likely to nominate a company to complete the purchase, and that he was just finalising his bank loan.
On 10 July 2019, the applicants’ solicitor sent an email to the respondent’s solicitor seeking an update about the respondent’s nominee. On the following day, 11 July 2019, the respondent’s solicitor responded stating (in effect) that the respondent had had difficulty obtaining finance. The respondent’s solicitor requested that the applicants consider, first, a penalty free extension of one month for settlement to take place on or before 22 August 2019, and, secondly, a deferred payment of $300,000 to be paid to the applicants within 12 months of settlement.
By email dated 15 July 2019, the solicitor for the applicants responded stating that the applicants would consider granting the extension on the conditions that the respondent pay into the applicants’ solicitor’s trust account by 18 July a sum of $5,566.65 as non-refundable compensation for the extra month’s interest cost incurred by the applicants, and $735,000, being 30 per cent of the purchase price.
On 19 July 2019, the respondent’s solicitor sent an email to the applicants’ solicitor attaching a nomination form, and requesting ‘just two weeks’ extension, without penalty’, as the respondent’s application for finance had been approved.
Later on the same day (19 July 2019), the applicants’ solicitor responded by email to the respondent’s solicitor noting that the respondent had had twelve months to settle, and that the applicants were not agreeable to any extension. The email then stated:
If the settlement does not occur on Monday 22 July 2019, we have instructions to issue the default notice, and the [respondent] will need to pay the Vendors interest and other expenses payable under the Contract of Sale.[4]
[4]Emphasis in original.
On 22 July 2019, the respondent’s solicitor unilaterally changed the settlement date within the party’s work space in PEXA from 22 July 2019 to 5 August 2019.
On 22 July 2019, settlement did not take place by 4.00 pm. At 5.19 pm that day, the applicants’ solicitor sent by email to the respondent’s solicitor a notice of default and rescission. The notice stated that unless the default was rectified within 14 days the contract would be rescinded.
On 2 August 2019, the respondent’s solicitor again unilaterally changed the settlement date in PEXA to 22 August 2019.
On 9 August 2019, the applicants’ solicitor wrote to the respondent’s solicitor confirming that the contract had been terminated, and that the deposit had been forfeited. On 20 August 2019, the applicants’ solicitor wrote a further letter to the respondent’s solicitor noting that, as a result of the respondent’s default, the applicants needed to sell the property on the market, and demanding that the caveat lodged on the title to the property be withdrawn.
On 22 August 2019, the respondent withdrew the caveat. On the same date, his solicitor sent to the applicants’ solicitor a courtesy email advising of the withdrawal of the caveat. On the following day, 23 August, the respondent’s solicitor again wrote to the applicants’ solicitor stating that the withdrawal of the caveat was ‘without prejudice to any of the [respondent’s] rights under the contract or at all, which rights are fully reserved’. The applicants’ solicitor responded by email on the same date, stating that the applicants were attempting to re-sell the property as soon as possible in order to mitigate losses arising from the respondent’s default, and requesting that the respondent not do anything to jeopardise or delay the re-sale of the property.
On 27 August 2019, the applicants accepted an offer for the sale of the property for the sum of $2,150,000, with settlement to take place on 26 September 2019.
One week later, on 3 September 2019, the respondent lodged a further caveat on the property in dealing number AS498707V (‘the third caveat’) claiming an interest in the property pursuant to the original contract of sale dated 21 July 2018. On the following day, 4 September, the respondent’s solicitor sent to the applicants’ solicitor a letter containing a ‘notice to complete’, seeking completion of the contract of sale by 19 September 2019.
On 5 September 2019, the applicants’ solicitor sent a letter to the respondent’s solicitor stating that the notice to complete was misconceived and that the contract had been terminated. On 11 September 2019, the applicants’ solicitor sent an email to the respondent’s solicitor stating that the applicants had just received notice of the third caveat, and demanding that that caveat be withdrawn.
The proceeding
The present proceeding was commenced by originating motion dated 16 September 2019. The matter came before the judge in the Practice Court three days later, on 19 September, and her Honour expeditiously delivered judgment on 24 September.
On the hearing of the application, the applicants relied on two principal submissions. First, it was contended that the respondent, having withdrawn the second caveat on 22 August 2019, was prohibited from lodging the third caveat by reason of s 91(4) of the Transfer of Land Act 1958. Secondly, it was contended that, in any event, the respondent did not have the interest claimed in the third caveat.
In support of the second submission, the applicants relied on the respondent’s solicitor’s correspondence of 11 July and 19 July 2019, seeking an extension of time (which the applicants had refused), and on the subsequent unilateral alterations by the respondent’s solicitor to the settlement date in PEXA on 22 July and on 2 August 2019. In addition, it was contended that it should be inferred, from the respondent’s solicitor’s email on 4 September 2019, that the respondent was not ready, willing or able to settle the purchase until that date. Accordingly, at the time of the settlement fixed by the contract of sale, the respondent did not have a right to seek specific performance of the contract. Finally, it was submitted that the Court should exercise its discretion against the respondent on the ground that, when the respondent withdrew the second caveat on 22 August 2019, he was on notice that the applicants were seeking to re-sell the property.
The primary judge’s reasons
In her reasons for judgment, the judge considered that there was a factual dispute as to when, and on what terms, settlement was agreed to be extended beyond 22 July 2019, and accordingly there was a serious question to be tried as to whether the respondent had a caveatable interest.[5] Further, the judge did not accept that, if the applicants wrongfully terminated the contract, the respondent would necessarily be confined to a claim for damages for breach of contract.[6] Her Honour did not consider that s 91(4) of the Transfer of Land Act had the effect of prohibiting the respondent from lodging the third caveat on 3 September 2019.[7] The judge considered that the balance of convenience favoured the maintenance of the caveat. In particular, her Honour considered that if the third caveat were ordered to be removed, the respondent would be deprived of his remedy of relief by way of specific performance. Further, the respondent had already incurred significant costs associated with his acquisition of the property.[8]
[5]Reasons [11].
[6]Ibid [12].
[7]Ibid [16].
[8]Ibid [14].
Proposed grounds of appeal
The application for leave to appeal is based on one ground, namely:
1.The learned primary judge erred in holding that the Purchaser had a prima facie case of an interest in the Property as a purchaser under the Contract sufficient to justify the caveat because:
(a)when the [third caveat] was lodged specific performance of the Contract was not available to the Purchaser; and/or
(b)there was insufficient merit in the Purchaser’s case to warrant a finding of a prima facie case of an extension of time until 22 August 2019 to settle the Contract.
Submissions
In support of ground 1(a), counsel for the applicant submitted that the judge should have found that when the third caveat was lodged, specific performance of the contract of sale was not available to the respondent, for three reasons.
First, it was submitted that on withdrawal of the second caveat on 22 August 2019, the respondent had made an election not to pursue any rights in relation to its alleged extension of time for completion of the contract. If there was a binding extension of time to 22 August 2019, the rescission of the contract by the applicants on 22 July was in breach of the contract. In those circumstances, the respondent was faced with inconsistent rights, namely, either to insist on performance of the contract, or, alternatively, to accept that it was at an end and to sue for damages. Counsel contended that by withdrawing the second caveat, the respondent chose the latter course.
Secondly, counsel submitted, by way of alternative, that the applicants had relied on the conduct of the respondent, in withdrawing the second caveat, to re-sell the property. Accordingly, the respondent’s subsequent assertion that the rescission by the applicants of the contract was ineffective, placed the applicants in jeopardy that they would be in breach of the contract to re-sell the property. Accordingly, it was submitted, the respondent, by his conduct, was estopped from relying on the asserted extension of time to complete the first contract.
Thirdly, it was submitted that in any event a court of equity would not grant specific performance to the respondent in circumstances in which he had delayed and acted in a manner which resulted in the re-sale of the property by the applicants to a third party. In such a case, the grant of a decree of specific performance would interfere with the rights of the applicants under the contract re-selling the property, and accordingly the respondent would be barred in equity from obtaining a decree of specific performance.
In support of ground 1(b), it was submitted that the judge ought not to have been satisfied, on the material, that the respondent had established an arguable case that the time for completion of the contract of sale had been extended to 22 August 2019. Counsel submitted that the following evidence militated against the establishment by the respondent of such an arguable case, namely:
(a) The respondent’s correspondence in June 2019, in which he failed to assert and rely on the extension of the settlement date.
(b) The establishment of the PEXA workspace with a settlement date of 22 July 2019.
(c) The request by the respondent, on 11 July 2019, for a penalty free extension of time for settlement to 22 August, with deferred payment of $300,000 to be paid within 12 months of settlement.
(d) The respondent’s further request, on 19 July 2019, for a penalty free extension of time for settlement of two weeks to 5 August 2019.
(e) The unilateral changes of the settlement date on PEXA on 22 July 2019 (to 5 August 2019) and subsequently on 2 August 2019 (to 22 August 2019).
(f) The absence of any assertion by the respondent, following service of the notice of default on behalf of the applicants, of an extension of time of the settlement date.
(g) The absence of any assertion, following the confirmation of the termination of the contract on 9 August 2019, that the termination was ineffective.
(h) The withdrawal by the respondent of the second caveat on 22 August 2019.
In response, counsel for the respondent contended that the submissions made by the applicants, in respect of ground 1(a) of the proposed grounds of appeal, were misconceived, because they were based on the assumption that the contract of sale had been rescinded by the service of, and non-compliance by the respondent with, the notice of default. It was submitted that because the date for settlement had been extended to 22 August 2019, the service of that notice was of no effect. Accordingly, it was contended, there was no basis for the respondent to elect between inconsistent rights. Rather, the contract remained on foot. Counsel further submitted that the withdrawal of the second caveat was insufficient to constitute an election in any event, as the respondent’s solicitor had advised the applicants’ solicitor that the withdrawal of the second caveat was done without prejudice to the respondent’s rights under the contract of sale.
Similarly, it was submitted that the respondent was not estopped by his conduct from relying on the extension of time for completion of the contract to 22 August. The property was not resold by the applicants until 27 August 2019. In the meantime, by email dated 23 August, the applicants had been put on notice that the respondent had withdrawn the second caveat without prejudice to any of his rights. In those circumstances, the defence of laches was not available to the applicants. Further, the period of eleven days between the email of 23 August 2019, and the lodging of the third caveat on 3 September 2019, was insufficient to give rise to such a defence.
In respect of ground 1(b), counsel for the respondent contended that there was strong evidence supporting the proposition that there was a binding agreement between the parties to extend the settlement date to 22 August. Counsel referred to the affidavit sworn by Mr Cheng, and the email dated 10 August 2018 from the applicants’ estate agent to the respondent’s solicitor confirming that extension of time. Further, the applicants did not swear an affidavit or adduce any other evidence as to the instructions which they gave to their agent.
Finally, counsel noted that none of the contentions made by the applicants under ground 1(a), relating to election, estoppel and laches, were argued before the primary judge, and accordingly the applicants ought not to be permitted to rely on such submissions on this application.
Legal principles
The application by the applicants, for removal of the caveat, was made under s 90(3) of the Transfer of Land Act. It is well established that the power of the court, under that section, to remove a caveat is discretionary.[9] Accordingly, in order to succeed on the application for leave to appeal, the applicants must establish material error by the judge in the exercise of that discretion of the kind described by the High Court in House v The King.[10]
[9]Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126, [39] (Santamaria, Ferguson and McLeish JJA) (‘Carbon Black’).
[10](1936) 55 CLR 499, 504–5; [1936] HCA 40 (Dixon, Evatt and McTiernan JJ).
In Piroshenko v Grojsman,[11] Warren CJ outlined the principles that a court should apply when determining an application under s 90(3) of the Transfer of Land Act, in terms that have been accepted and followed in subsequent decisions.[12] In particular, her Honour, having considered the authorities, concluded that, in order to resist an application for removal of a caveat, the caveator must persuade the court of the following:
(1)there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and
(2)that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.[13]
[11](2010) 27 VR 489; [2010] VSC 240 (‘Piroshenko’).
[12]See, eg, Carbon Black [2015] VSCA 126, [34]–[37]; Lawrence & Hanson Group Pty Ltd v Young [2017] VSCA 172, [36]–[38] (Redlich and Kyrou JJA, Keogh AJA).
[13]Piroshenko (2010) 27 VR 489, 493 [18]; [2010] VSC 240.
Chief Justice Warren qualified those propositions by noting that the discretion, conferred by s 90(3) of the Transfer of Land Act, is expressed broadly, and ‘enjoins the court to make such order as it thinks ‘fit’’.[14] Accordingly, her Honour considered, the test adopted by the court ought not to restrict the power conferred by the statute.[15]
[14]Ibid 491–2 [11].
[15]Ibid.
The decision by the primary judge was based on her conclusions, first, that there was a serious issue to be tried as to whether the respondent has a caveatable interest in the property, and, secondly, that the balance of convenience favoured the maintenance of the caveat until the resolution of that issue. In this application, counsel for the applicants contended, in effect, that the judge erred in reaching each of those conclusions.
Preliminary issue
Before considering the substantive issues raised on this application, it is necessary, first, to resolve the objection by counsel for the respondent concerning the matters relied on by the applicants in support of ground 1(a) of the application for leave.
Having read the written submissions provided to the primary judge, and the transcript of oral argument before her Honour, it is quite plain that the matters relied on by counsel for the applicants, in support of ground 1(a), were not relied on, or the subject of argument, by counsel for the applicants before the primary judge. Specifically, counsel for the applicants did not contend that the withdrawal by the respondent of the second caveat on 22 August 2019 constituted a binding election by the respondent not to pursue his rights to specifically enforce the contract, or was the basis of an estoppel precluding him from seeking such relief, or constituted laches on his part.
Ordinarily, a party may not be permitted to raise a point, or rely on an argument on appeal, that was not put before the court that determined the matter at first instance.[16] In Coulton v Holcombe, Gibbs CJ, Wilson, Brennan and Dawson JJ explained that if that principle were not observed, then the main forum for the resolution of disputes would move from the court of first instance to the appellate court, reducing the proceedings at first instance to ‘little more than a preliminary skirmish’.[17]
[16]Metwally v University of Wollongong (1985) 60 ALR 68, 71; [1985] HCA 28 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ).
[17](1986) 162 CLR 1, 7; [1986] HCA 33 (‘Coulton’).
In Vlahos Pty Ltd v Vlahos,[18] Kyrou JA (with whom Tate and McLeish JJA agreed) identified the reasons, identified by the High Court in Coulton, for the principle that ordinarily binds parties on appeal to agitation of the issues that were the subject of argument and determination at trial. His Honour stated:
The reasons were: the finality of litigation; the difficulty of inducing an appeal court to consider new facts; the undesirability of encouraging tactical decisions to keep an issue in reserve for an appeal rather than presenting it at first instance; and the need to avoid injustice to a party having to meet new factual or legal issues for the first time on appeal.[19]
[18][2017] VSCA 166.
[19]Ibid [51].
That principle has been applied with less stringency in cases in which the decision, that is the subject of appeal, was by way of summary or interlocutory judgment. In Doherty v Murphy,[20] the Court was concerned with an appeal from a decision to enter summary judgment against the appellants. On the appeal, the appellants sought to raise arguments that were not made in the court below. Justice Hansen (with whom Tadgell and Nathan JJ agreed) stated:
In my opinion, without doubting the sense of the approach expressed in Coulton in an appeal from a judgment after a trial, the court should not treat the discretion to receive further evidence in an appeal from a summary judgment as limited by that approach, as the relevant considerations may be different. In my opinion, the discretion should be exercised sensitive to the fact that the affected party has not had the benefit of a trial and the opportunity thus afforded to investigate, and have a determination upon, the facts and the law. These considerations also bear upon the approach to the question whether the appellants should be permitted to argue a ground not taken before the judge.[21]
[20][1996] 2 VR 553.
[21]Ibid 563. See also Schwerin v City of Sale [1997] 2 VR 219, 229 (Tadgell JA, with whom Charles and Callaway JJA agreed); Paradise Constructors & Co Pty Ltd v Poyser (2007) 20 VR 294, 300 [19]; [2007] VSCA 316 (Neave JA, with whom Redlich JA agreed); Total Gas Care Pty Ltd v Barry Bros Specialised Services Pty Ltd [2012] VSCA 303, [16]–[19] (Hargrave AJA, with whom Whelan JA agreed).
In the present case, the decision, concerning the removal of the caveat, had the potential effect of substantially affecting the rights of the respective parties. If the judge had ordered that the caveat be removed, such a decision would, in a practical sense, have rendered nugatory any right of the respondent to insist on specific performance of the contract of sale. Alternatively, the decision by the judge, not to order removal of the caveat, has had the practical effect that the applicants are, and will remain, in default of the contract to re-sell the property until the trial of this proceeding. In that way, the decision of the primary judge had the potential to substantially adversely affect the rights of the applicants under that contract.
Counsel for the respondent quite properly conceded to the Court that if the applicants had raised before the primary judge the matters now contended for by the applicants under ground 1(a), the respondent would not have sought to adduce any further evidence on the application.
It is a matter of concern that the matters, now sought to be argued under ground 1(a), were not the subject of any argument before the primary judge. As a matter of policy, and the orderly administration of justice, it is undesirable that parties be permitted to raise arguments on appeal that were not agitated before the primary judge. Nevertheless, bearing in mind the substantive effect of the decision made by the judge on the rights of the applicants, and the circumstance that, if the points made under ground 1(a) had been contended before the judge no further evidence would have been adduced, we consider that it is appropriate to permit counsel for the applicants to rely on those propositions.
Ground 1(a)
It is well established that, where a purchaser has a right, in equity, to specifically enforce a contract of sale against a vendor, the purchaser thereby has an interest in the land, akin to an equitable interest, which may be protected by a caveat.[22] The critical question in this case is whether there was a serious issue to be tried as to whether the respondent, at the time he lodged the third caveat, had and continued to have such a right under the contract of sale, notwithstanding that he failed to pay the balance of the purchase price on the date fixed by the contract of sale (22 July 2019), as a consequence of which the applicants purported to rescind the contract.
[22]Fairweather v Fairweather (1944) 69 CLR 121, 154; [1944] HCA 11 (Williams J); Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315, 332–3 [53]; [2003] HCA 57 (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ).
Logically, the first step in the case presented on behalf of the respondent was that, in August 2018, the parties mutually agreed that the settlement date, specified by the contract, be extended to 22 August 2019. The factual basis of that proposition, and the legal effect of it, were not the subject of any contention on behalf of the applicants before the primary judge. Nor did counsel for the applicants seek to address it on this application.
The factual basis of the agreement by the parties to extend the settlement date to 22 August 2018 was well established by the affidavits of Ms Feng and Mr Cheng, and by the emails that passed between Ms Zhu and Mr Chan on 10 August 2018. While, in his affidavit, Mr Loh maintained that the applicants had insisted that Mr Chan impose a condition on the extension of time, that proposition was factually refuted by Mr Cheng in his affidavit. Further, and in any event, for the purpose of the summary application before the primary judge, it was appropriate to proceed on the basis that the agent had, at least, ostensible if not actual authority to enter into such an arrangement on behalf of the applicants.
As we have mentioned, the legal effect of the ‘arrangement’, made in August 2018, to extend the settlement date to 22 August 2019, was not the subject of any contention on behalf of the applications either before the primary judge or on this application. In the circumstances, it may be accepted that the respondent has demonstrated that there was a serious issue that that ‘arrangement’ did not constitute a formal variation of the contract of sale (which would have been required to comply with s 126 of the Instruments Act 1958) but, rather, amounted to a waiver of the stipulated settlement date of 22 July 2019, or was the foundation of an estoppel precluding the applicants relying on that date (instead of 22 August 2019) as the specified settlement date.[23]
[23]See, eg, Tropical Traders Ltd v Goonan (1964) 111 CLR 41, 53–5; [1964] HCA 20 (Kitto J); Inness v Waterson [2006] QCA 155, [3]–[6] (Williams JA), [45]–[46] (Keane JA), [56] (Philippides J); Legione v Hateley (1983) 152 CLR 406, 421 (Gibbs CJ and Murphy J), 437–8 (Mason and Deane JJ); [1983] HCA 11.
The matters, which we have just discussed, are essentially the background to the contentions advanced on behalf of the applicants under ground 1(a). The first, and primary submission, made by the applicants, was that, by his conduct between 9 August 2019 (when the applicants’ solicitor informed the respondent’s solicitor that the contract had been terminated) and 27 August 2019 (when the applicants resold the property), the respondent elected not to rely on his rights to specific performance of the contract of sale, but, rather, to confine those rights to a claim for damages for the alleged repudiation of the contract by the applicants.
The critical facts, underpinning that submission, bear repeating. As noted, on 9 August 2019, the applicants’ solicitor wrote to the respondent’s solicitor confirming that the contract had been terminated and the deposit forfeited. The applicants did not make any response to that assertion. On 20 August 2019, the applicants’ solicitor wrote a further letter to the respondent’s solicitor advising (inter alia) that the applicants required to sell the property on the market, and demanding that the second caveat be withdrawn. In response, on 22 August 2019, the respondent withdrew the second caveat, and his solicitors sent an email to the applicants’ solicitors advising them of that fact. On 23 August, the applicants’ solicitor sent a further email to the respondent’s solicitor, reiterating that the applicants were attempting to re-sell the property as soon as possible, and requesting that the respondent refrain from jeopardising or delaying the re-sale of the property. Four days later, on 27 August, the property was sold. It was not until 3 September that the respondent lodged the third caveat, and, on the following day, his solicitor sent the applicants’ solicitor a letter containing a notice to complete the contract.
In those circumstances, the applicants have maintained, under ground 1(a), that the respondent made an election between the remedies available to him, which has had the effect of precluding him from maintaining that he has retained a right to specific performance of the contract of sale.
Under the doctrine of election, a party, who is confronted by two truly alternative or inconsistent rights or sets of rights (such as the right to avoid or terminate a contract and the right to affirm it and insist on performance of it), may lose one of those rights by election by acting in a manner which is consistent only with that party having chosen to rely on the other alternative or inconsistent right.[24]
[24]Sargent v ASL Developments Ltd (1974) 131 CLR 634, 655; [1974] HCA 40 (Mason J) (‘Sargent’); Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622, 633; [1984] HCA 55 (Mason, Brennan, Deane and Dawson JJ); Barooga Projects (Investments) Pty Ltd v Duncan [2004] QCA 149, [15] (McMurdo P), [24] (White J); Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454, 459 (Starke, Lush and Kaye JJ).
Ordinarily, in order to constitute such an election, the words or conduct must be unequivocal. In Sargent, Stephens J stated:
The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other.[25]
[25]Sargent (1974) 131 CLR 634, 646; [1974] HCA 40 (Stephen J). See also Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26, 30 (Brennan J), 38–9 (Deane, Toohey, Gaudron and McHugh JJ); [1993] HCA 27.
Counsel for the respondent submitted that, on this application, the Court should not determine whether the conduct of the respondent, in the circumstances, constituted an election by him between inconsistent competing rights under the contract. In essence, as the application to remove the caveat was interlocutory, it was not the appropriate occasion for the Court to make such a determination. Counsel contended that the Court should do no more than acknowledge that the question, whether there was an election (or estoppel) affecting the rights of the respondent, under the contract of sale, is an arguable issue, but that proposition did not preclude or affect the conclusion that the respondent had established that there was a serious issue to be tried that he had a caveatable interest in the property.
Ordinarily, an application for the removal of a caveat, being in the nature of an application for an interlocutory injunction, is not an occasion for the final determination of disputed factual issues, or of the substantive claims which the caveat seeks to protect.[26] In the absence of detailed argument, we do not consider that it is appropriate or necessary for us to determine conclusively whether, on the evidence, there was a binding election by the respondent which would preclude him from seeking specific performance of the contract of sale. In the circumstances of the case, it is sufficient that we are well satisfied that there are strong grounds for concluding that such an election was made by the respondent as contended for on behalf of the applicants.
[26]Piroshenko, 491 [7]; Carbon Black [38].
As a starting point, it is important to bear in mind the function of a caveat. Section 89(1) of the Transfer of Land Act provides (inter alia) that any person ‘claiming an estate or interest in land’ under any unregistered instrument or dealing (or otherwise) may lodge with the Registrar a caveat forbidding the registration of any instrument ‘affecting such estate or interest’. Thus, essentially, the purpose of the lodgement of the second caveat, in this case, was to protect the right of the respondent to specific performance of the contract of sale of the property. So long as the caveat remained on the title, it prevented the applicants supervening that right, by selling the property to a third party.
On 9 August 2019, the respondent was placed on clear notice that the applicants took the position that the contract had been terminated. The respondent did not seek to rebut that position, nor did he make any response to it. In that context, on 22 August 2019, he withdrew the second caveat, in response to the demand made by the applicants’ solicitor, two days previously, that he do so in order that the applicants be able to sell the property on the market. Pausing there, it is strongly arguable that, in those circumstances, the conduct of the respondent, in withdrawing the caveat, constituted an election by him no longer to claim a right to specific performance of the contract, which was an essential pre-condition to maintaining the second caveat over the title to the property. That proposition was reinforced by the email sent by the applicants’ solicitor to the respondent’s solicitor on the following day, reiterating that the applicants were attempting to re-sell the property. There was no suggestion by the respondent, at that point, or at any time before the property was re-sold on 27 August, that the applicants were precluded from re-selling the property because the respondent had a right to specific performance of the contract of sale to him.
Counsel for the respondent placed significant reliance on the email sent by the respondent’s solicitor to the applicant’s solicitor on 23 August 2019, stating that the withdrawal of the caveat was done ‘without prejudice to any of the [respondent’s] rights under the contract or at all, which rights are fully reserved’. However, the context in which that email was sent militates strongly against the proposition that the respondent thus preserved his right to specific performance of the contract. The only purpose served by the removal of the second caveat was to enable the applicants to re-sell the property. Such a re-sale of the property would be directly inconsistent with any potential right of the respondent to specific performance of the contract of sale. There was no suggestion in the email by the respondent’s solicitor that the rights, that were sought to be preserved, included a right to specific performance of the contract of sale. Nor did the email contain any suggestion that, for any reason, the applicants were precluded from re-selling the property, or that they should not do so.
In those circumstances, we consider that, at the least, there would be a strong basis for concluding that in the circumstances the respondent, by his conduct, had unequivocally elected not to retain his right to specific performance of the contract of sale, but, rather, to treat the contract of sale at an end, and pursue a claim for damages against the applicants.
For the same reasons, it may be concluded that there is significant force in the proposition that the respondent, by his conduct between 9 August and 27 August 2019, was estopped from contending that he continued to have a right to seek specific performance of the contract of sale.
On the face of it, by his conduct, the respondent represented to the applicants that he did not seek to maintain a caveatable interest in the property. Thus, by implication, the respondent represented that he no longer sought to pursue a right to specific performance of the contract of sale. By his withdrawal of the caveat on 22 August, and his conduct at that time, he enabled the applicants to sell the property to a third party. If the respondent were now permitted to depart from the representation that he made to the applicants, the latter would suffer detriment, namely, the loss of the contract of re-sale of the property to the third party, and exposure of them to a claim in damages (or other relief) by that third party. In those circumstances, there would be a strong basis for concluding that the respondent was estopped from asserting a right to specific performance of the contract of sale.
The proposition, that the respondent was also barred by laches or delay from claiming to have a right to specific performance of the contract of sale is, on the face of it, of less moment. It was only faintly pressed, both in the written submissions and oral argument before the Court, and it is not necessary for us to consider it.
However, for the reasons that we have discussed, we would uphold ground 1(a) of the proposed grounds of appeal, to the extent that, based on the matters raised before this Court, we consider that there is a strong basis for concluding that, as a result of the conduct of the respondent between 9 August and 27 August 2019, the respondent was precluded from seeking specific performance of the contract of sale, either on the basis of the doctrine of election, or estoppel.
That conclusion is of critical significance in an assessment of the balance of convenience.
It is recognised that the degree of likelihood of success in the proceeding is a factor that is relevant to an evaluation of that balance.[27] Based on the issues that were argued before the primary judge, her Honour reached the conclusion that the respondent had demonstrated that there was a serious issue to be tried whether he had a caveatable interest, and that the balance of convenience favoured the maintenance of the caveat. In those circumstances, the judge, in the exercise of her discretion, dismissed the application for removal of the caveat. However, based on the matters that were agitated before this Court (but not before the primary judge), and our conclusions in respect of them, it is evident that, while the respondent might have available an argument that the time for completion of the contract was extended to 22 August 2019, nevertheless it is most probable that his right to obtain specific performance of the contract would be defeated by the defences of election and estoppel.
[27]Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148, 154, 156 (Mason ACJ); Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 74 [39].
In determining that the balance of convenience favoured maintenance of the caveat, the judge acted on the basis that removal of the caveat would ‘have the practical effect of leaving the purchaser without the remedy of specific performance when he is otherwise intent on meeting his obligations under the contract if he ultimately establishes that the contract remains valid’.[28] In light of our conclusions concerning the application of the doctrines of election and estoppel, for the purpose of determining the outcome of this application, it is appropriate to proceed on the basis that the prospects, that the respondent would be held to be entitled to the remedy of specific performance, must be particularly limited. On the other hand, as her Honour acknowledged, if the caveat were permitted to remain on the title to the property, the applicants would be precluded from completing the contract to re-sell the property, and the third party purchaser’s rights would also be adversely affected.[29]
[28]Reasons [14].
[29]Ibid.
As we have earlier discussed, the exercise of the discretion to remove a caveat, under s 90 of the Transfer of Land Act, is necessarily dictated by the Court’s conclusion as to two principal considerations, namely, whether the respondent has demonstrated a serious issue to be tried that he has a right to specific performance of the contract of sale, and, secondly, whether the balance of convenience favours the retention of the respondent’s caveat on the title. Those two issues are not mutually discrete. Rather, the exercise of the court’s discretion, under s 90(3), ultimately involves a synthesis of the conclusions reached by the Court in respect of each of those two issues.
In Piroshenko, Warren CJ stated:
In practice, a two-stage test may be a somewhat artificial way of addressing applications under s 90(3). Any assessment of the first limb of the test which depends in part upon a consideration of the practical consequences likely to flow from the maintenance of the caveat in question, cannot but introduce some consideration of the balance of convenience into the assessment of the serious question to be tried, even if that assessment is in a different form to that performed when considering the test’s second limb.[30]
[30]Piroshenko (2010) 27 VR 489, 494 [19]; [2010] VSC 240.
As we have discussed, there is a strong basis for concluding that any right that the respondent had to specific performance of the contract of sale has been precluded by his conduct between 9 August 2019 and 27 August 2019, on the basis of the doctrine of election or estoppel. In those circumstances, this Court’s assessment of the balance of convenience must essentially be conducted on a significantly different basis to the synthesis undertaken by the primary judge. In essence, while the prospects, that the respondent would be held to have a right of specific performance of the contract of sale are limited, on the other hand, the retention of the caveat on the title to the property would have the effect of preventing the applicants from completing the contract of re-sale of the property. Based on those propositions, the conclusion is inevitable that the balance of convenience must favour removal of the caveat.
For those reasons, we would uphold ground 1(a) of the proposed grounds of appeal.
Ground 1(b)
Under ground 1(b) of the proposed grounds of appeal, counsel for the applicants contended that insofar as the parties had arranged, in August 2018, for the settlement date to be extended to 22 August 2019, nevertheless the conduct of the respondent between June 2019 and 22 August 2019 in some way rendered the extension of time nugatory.
It is not entirely clear how the applicants sought to rely on ground 1(b). In the end, counsel for the applicants contended that the conduct of the respondent, during the period between June and 22 August 2019, undermined the proposition that the respondent had acted in reliance on the extension of time, that was previously agreed to by the applicants in the correspondence between the parties in August 2018.
Essentially, the point made on behalf of the applicants, raises a question of fact. Certainly, the conduct of the respondent, during the period in question, does suggest that the parties mutually disregarded the arrangement that had been reached in August 2018 for an extension of the settlement date under the contract to 22 August 2019. On the other hand, as counsel for the respondent submitted, the correspondence between the parties must be considered in light of the exigencies of the situation. In particular, as counsel pointed out, the applicants, in their solicitor’s communications, effectively ignored the arrangement that had been reached between the parties in August 2018. The respondent’s solicitor’s conduct, in response, may arguably be construed as a constructive attempt by the respondent to resolve the situation, without becoming embroiled in a dispute.
In those circumstances, it is not possible to form the conclusion that, based on the matters relied on by the applicants under ground 1(b), the respondent in some way nullified the effect of the arrangement that had been reached between the parties in August 2018 for the extension of the settlement date under the contract to 22 August 2019.
For those reasons we would not uphold ground 1(b).
Summary of conclusions
For the foregoing reasons, we are persuaded that ground 1(a) of the proposed grounds of appeal must succeed. Accordingly, we would grant leave to appeal on that ground, and allow the appeal.
In stating that conclusion, we reiterate that the matters that were argued before us on ground 1(a) were not, in any form at all, contended for before the primary judge. For the reasons that we have earlier stated, we have permitted the applicants to rely on those arguments.
Based on our conclusion, and subject to hearing from counsel, we propose to make the following orders:
(1)The application for leave to appeal be granted on ground 1(a) of the proposed grounds of appeal and refused on ground 1(b).
(2)The appeal be allowed on ground 1(a).
(3)Paragraphs 3 and 9 of the order made by the primary judge on 24 September 2019 refusing the application to remove the caveat be set aside.
(4)In lieu of those orders, the second respondent remove the caveat lodged by the first respondent in dealing number AS498707V on Certificate of Title Volume 8106 Folio 910 being Lot 3 on Plan of Subdivision 026162.
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