City of Fremantle v Moltoni (No 1) Pty Ltd
[2009] WASC 261
•11 SEPTEMBER 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CITY OF FREMANTLE -v- MOLTONI (NO 1) PTY LTD [2009] WASC 261
CORAM: McKECHNIE J
HEARD: 11 AUGUST 2009
DELIVERED : 11 SEPTEMBER 2009
FILE NO/S: CIV 1651 of 2009
BETWEEN: CITY OF FREMANTLE
Plaintiff
AND
MOLTONI (NO 1) PTY LTD (ACN 079 113 698)
First DefendantREGISTRAR OF TITLES
Second Defendant
Catchwords:
Caveat - Extension - Whether caveator's claim has or may have substance - Contract - Whether terminated by inaction - Continuation of caveat - Balance of convenience - Practice and procedure - Material non-disclosure on ex parte application - Whether claim should be denied
Legislation:
Transfer of Land Act 1893 (WA), s 138C
Result:
Caveat continued until further order
Category: B
Representation:
Counsel:
Plaintiff: Mr J C W Skinner
First Defendant : Mr M C Hotchkin
Second Defendant : No appearance
Solicitors:
Plaintiff: Jackson McDonald
First Defendant : Hotchkin Hanly
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Custom Credit v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Navarak Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95
Parola v Parola [2009] WASC 190
McKECHNIE J:
How this claim arises
The genesis of this dispute arose in 1992 when the City of Fremantle granted Moltoni (No 1) Pty Ltd ('Moltoni') consent to place inert landfill on land which the company owned in Spearwood. That land is an estate in fee simple being Lot 123 on Diagram 6305 and being the whole of the land comprised in Certificate of Title Volume 1757 Folio 96 and abutting Longford Road in Spearwood within the district of the City of Fremantle. Most of the land sits on top of the Salentina Ridge.
In 2002 Moltoni wished to develop the land. It applied to the Western Australian Planning Commission for approval to subdivide the land in two stages and subdivision was approved by letter dated 8 December 2003. Stage One of the development comprised approximately 80% of the land and has been completed. Immediately adjoining Stage Two is an area of vacant land owned by the City, the Western Australian Planning Commission and Main Roads WA. The City land is a licensed landfill site.
The boundary between the Moltoni land (on the eastern side) and the neighbouring land is approximately mid‑way down an embankment. The embankment is approximately 20 metres high and has an approximate gradient of 1:1.5 and 1:1.7 (vertical:horizontal).
In November 2004 Moltoni and the City entered into a Deed. The Deed recited, amongst other things, that 'in order to facilitate the subdivision of the land, the Council of the City resolved to initiate an amendment to District Town Planning Scheme No 3 to rezone the land in accordance with Amendment No 62 ('the rezoning')':
F.As a condition of the Rezoning of the Land and the City recommending clearance of Stage One of the subdivision of the Land to the WAPC, the City requires the entry of Moltoni into this Deed to ensure that any land fill grade issues arising from the deletion of the former Fremantle Eastern Bypass ('the Bypass') from the Metropolitan Region Scheme are satisfied prior to the issue of new titles in respect of the second stage of the subdivision.
G.Moltoni has agreed to enter into this Deed with the City to ensure that prior to the creation and transfer of any lots within the second stage of the subdivision of the Land to be created on the subdivision of Lot 9002 on Deposited Plan 42137 ('Stage Two') that any requirements of the City in relation to the filling and treatment of the Land and/or requirements to notify prospective purchasers of lots within the Second Stage that any ongoing fill operations on the Land are completed to the satisfaction of the City.
A structure plan for the area, including the Moltoni land, was contemplated:
H.The City has appointed consultants to prepare a structure plan for land which includes the Land which will address issues such as location of roads, infrastructure and drainage for the structure plan area ('the Structure Plan').
I.Moltoni has also requested that it be permitted to use that portion of Lot 9002 on Deposited Plan 42137 as is shown hatched on the sketch hereto as Annexure A ('the Drainage Land') as a temporary drainage sump to provide drainage to the lots within Stages One and Two until such time as the Structure Plan has been adopted which identifies the most appropriate location for any drainage for the lots within Stage One and Stage Two.
Recitals J and K are as follows:
J.The City has agreed to Moltoni's request subject to the entry of Moltoni into this Deed with the City to enable the City to lodge an absolute caveat over the Drainage Land to ensure that the Drainage Land is only used for the purposes of drainage and the ceding of the Drainage Land in the event that the Structure Plan identifies the Land as the only feasible area of land to provide drainage to lots within Stages One and Two.
K.Moltoni enters into this Deed to satisfy the City's requirements.
The operative part of the Deed set out Moltoni's covenants for filling and treating of the land bank, for the maintenance of fill and the use of drainage land and the ceding of drainage land. By par 6:
CHARGE AND CAVEAT
Moltoni CHARGES the Land in favour of the City with the performance of its obligations undertaken hereunder and with the payment of all or any monies payable or which may become payable by Moltoni to the City and for the purpose of securing the same authorises the City to lodge an absolute Caveat at the Department of Land Information against the Certificate of Title to the Land or any part thereof in order to protect the rights and interest of the City under this Deed.
On 24 February 2009, solicitors for Moltoni wrote to the City stating 'our client considers that your client has repudiated the Deed by failing to take any steps to adopt the Structure Plan within a reasonable time. We are instructed to accept the repudiatory breach and hereby give notice that our client considers the Deed to be terminated'.
Apparently suiting action to the deed, Moltoni contacted the Registrar of Titles resulting in notice to the City that the caveat would lapse. These proceedings were then instituted.
The City's position is succinct. It relies on the express term in the Deed for the maintenance of its caveat. Moltoni's position is slightly more complex but still simple. It says that it was an implied term of the contract that the City would act to prepare a structure plan within a reasonable time. The passage of time is now so unreasonable that by failing to act, the City has repudiated the Deed. The facts as to repudiation are so clear that the City's claim for continuation of the caveat has no substance.
Moltoni also argues that in any event the balance of convenience requires the lifting of a caveat, albeit with conditions to protect the City.
Does the City's claim have substance?
The court's powers under the Transfer of Land Act 1893 (WA) s 138C are enlivened if satisfied that the caveator's claim has or may have substance.
For the purposes of this application, I am prepared to accept that it is highly likely a term such as that proposed by Moltoni would be implied into the Deed. Neither the Deed nor the caveat were to last in perpetuity. The Deed provided a resolution of a problem that might arise with respect to the embankment and drainage when the subdivision of Stage 2 proceeded.
Moltoni has no control over the structure plan or the pace of that plan but agreed to carry out work in accordance with the structure plan and to maintain the integrity of the escarpment until such time as the structure plan had been adopted or the lot transferred from Moltoni to a third party.
For the purposes of this application I accept that there may come a time where the circumstances are such that the City, by failing to progress the structure plan, may be taken to repudiate the agreement which formed the Deed. Moltoni argues that that time has arrived. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, Mason CJ pointed out:
There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way. But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the party's obligations and not in any other way (634).
If the present case would fall into the second, not the first, category outlined by Mason CJ, the City has said that it intends to carry out the contract.
In the joint judgment of Deane and Dawson JJ:
It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his contractual obligations at all. What Lord Dunedin described (Forslind) as the assumption of 'a shilly‑shallying attitude in regard to the contract' and what Lord Shaw of Dunfermline called 'procrastination ... persistently practised' can, in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time. In that regard, the law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind which is directly in point to the circumstances of the present case:
'If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: "My rights under this contract are being completely ignored and my interests may suffer by non‑performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him." ... In business over and over again it occurs -- as, in my opinion, it occurred in the present case -- that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: "This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me."'
Lord Shaw went on to point out that 'the question whether the stage has been reached when procrastination or non‑performance' constitutes repudiation is essentially one of fact. That question will, as has been said, only be properly answered in the affirmative when procrastination or non-performance has marked the stage of conveying to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it (658 ‑ 659). (footnotes omitted)
The evidence so far adduced on either side shows that there has been a significant delay in the progress of the structure plan since the execution of the Deed. The Council of the City only formally resolved to proceed with the structure plan in November 2008 and it would appear that the plan is still some considerable way off adoption. Counsel for Moltoni submits, on the basis of Mr Moltoni's affidavit, that the inaction by the council over a year, including the failure to respond to requests by Moltoni, demonstrate that in accordance with Laurinda, the contract has been repudiated by the City. Mr Garbett's affidavit, on behalf of the City, details steps that have been taken during the period, including the engagement of consultants, other matters and the need to resolve various issues. I am inclined to agree with counsel for Moltoni's characterisation of the City's position as expressed in Mr Garbett's affidavit, in part, as circular or chicken and egg. However, whether the implied condition as to production of the structure plan has been breached in such a way as to repudiate the contract is a matter of disputed fact which can only be resolved after trial. While the arguments and facts on the part of Moltoni have weight, so also do the arguments and facts on behalf of the City. In an interlocutory hearing I am unable to finally resolve those issues, nor do I need to. The case for repudiation is not so clear as to justify removal of the caveat. At this stage I am required to find a serious issue to be tried, or, in the language of the statute be 'satisfied that the caveator's claim has or may have substance'.
There is no question as to the caveator's rights under the Deed to maintain the caveat if the Deed continues in force. The City has advanced sufficient facts and arguments in response to Moltoni's proposition for repudiation of the contract to persuade me that its claim has substance.
Should the caveat continue?
(a) Material Non‑Disclosure
Moltoni submits that a discretion should be exercised not to continue the caveat in part because of material non‑disclosure in the ex parte application before Kenneth Martin J.
Of course, interim orders may be made ex parte: Transfer of Land Act s 138C(3). On 24 March 2009 Landgate wrote to the City, care of its solicitors, advising that the caveat would lapse at midnight on the lapse date which would be Wednesday, 15 April 2009. It was obvious that Moltoni was represented by solicitors because their letters on the subject were annexed to the affidavit of Mr Garbett sworn 7 April 2009.
On 7 April 2009 the plaintiff's solicitors, Jackson McDonald, filed the affidavit, the originating summons and chamber summons. The certificate of undertaking on urgent application certified:
1.This application is of such an urgent nature that it is required to be listed immediately.
2.All documents necessary for the Judge's/Master's order accompany the application.
3.Notice of the application has not been given to the defendant.
4.The estimated length of the hearing is 15 minutes.
The chamber summons sought the following orders:
1.The time for service and hearing of this summons be abridged.
2.The requirements of Order 59 Rule 9 be waived.
3.The operation of caveat number K451727C be extended until further order of this Honourable Court.
4.The costs of this application be reserved.
5.This order be extracted forthwith.
The matter was listed for hearing on 9 April 2009 at 9.15 am. It was in fact heard on that date when Kenneth Martin J ordered:
1.The operation of Caveat number K451727C be extended until further order of the Court.
2.The plaintiff's costs of today be reserved.
3.The directions hearing be adjourned to a date to be fixed.
At the time of the filing of the chamber summons there was still a week to run before the caveat would lapse. No explanation has been advanced as to why the City's solicitors thought it necessary to proceed without notice to the defendant or to proceed without conferral. Conferral is not an empty step or one on which exemption should be lightly sought.
When solicitors choose not to serve an application on an interested party, especially in circumstances where solicitors have already been retained by that party, then the obligation for full and complete disclosure is very high.
The affidavit by Mr Garbett is, in the circumstances, extremely thin. As is clear by subsequent affidavits, including Mr Garbett's second affidavit, there are many more factors to be considered than the simple matter of the Deed.
One such matter, for example, is Moltoni's financial position, a matter adverted to quite clearly in correspondence between the parties going back some years. While it is true that the affidavit contains two letters from Moltoni's solicitors advancing their contention that the Deed had been repudiated, there is no evidence from the City in this application that Moltoni's assertion was clearly put before the court in the ex parte application. In the letter of 5 February 2009 from solicitors for Moltoni, reference is made to the fact that the caveat has 'placed the Moltoni group of companies into a serious financial position, which is now urgent'. It is unknown if this matter was brought to the attention of the judge hearing the ex parte application. It certainly should have been. Counsel for the City at this hearing was not counsel before Kenneth Martin J and could offer no assistance on the point.
In Parola v Parola [2009] WASC 190 Beech J discharged an application for the continuation of a caveat in part because of material non‑disclosure.
I entirely agree with his Honour's comments at [48] and [50].
The lack of notice and any non‑disclosure have to be seen in the light of the general practice of the court in relation to applications for extension of caveats generally. The general practice - although not one adopted on this occasion - is generally when no notice has been given (and often when notice has been given) for caveats to be extended for a short time. At the resumed hearing programming orders are made, including for the filing of affidavits and, depending on the urgency of the matter, for the matter to be subsequently listed for hearing. If the defendant's solicitors had been served in adequate time, programming or other orders might have been agreed.
The fact that there is such a procedure does not excuse material non‑disclosure as Parola v Parola itself demonstrates. In the present case, after an appearance was entered and the defendant's responsive affidavit filed, a registrar made comprehensive case management directions on 30 June 2009. The parties have now put before me everything that they would wish to advance by way of evidence and submissions. I do not know if there was material non‑disclosure and it is the City's burden to satisfy me that everything material was properly disclosed.
Even in the case of material non‑disclosure there is a discretion to extend the operation of a caveat. In the present case, at least some of the matters which are material were before Kenneth Martin J in the letter of the defendant's solicitors. As the documents were not voluminous, I would assume that he read them. In the circumstances I would not regard non‑disclosure as so egregious as to require refusal to extend the caveat on that account alone. Nevertheless, I would not have this case used as any qualification to the principle outlined by Beech J in Parola v Parola and record again my disquiet about the lack of notice to the defendant and the apparent lack of courtesy when it was known that Moltoni was represented by solicitors. There is no question that Moltoni could have or would have done anything adverse to the City if notice had been given.
Notice and conferral should have taken place.
(b) The balance of convenience
The satisfaction that the caveator's claim has or may have substance enlivens the powers under the Transfer of Land Act s 138C(2) which includes the power to extend the operation of the caveat or make such other orders as the court thinks fit concerning the caveat or the land in respect of which the caveat was lodged.
In the much quoted decision of Custom Credit v Ravi Nominees Pty Ltd (1992) 8 WAR 42, Owen J made the observation that, in the statutory context of a caveat, it will be an unusual case when the balance of convenience favours removal (62). This statement is not a proposition of law but an observation as a matter of fact and does not envisage a two step process: Navarak Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 at [29].
Moltoni has submitted evidence through the affidavits of Mr Pitman and Mr Moltoni as to the prejudice it is suffering by the City's maintenance of the caveat essentially because of its poor cashflow position. Part of the difficulties relate to the value of the land. The Moltoni group bankers wrote to the group on 7 May 2009:
We also note that the caveat lodged by the City of Fremantle remains in place and this would also need to be withdrawn prior to the Bank advancing any further funding.
The City disputes the extent to which the caveat is responsible for any financial difficulty being experienced by Moltoni. On the relatively limited information available, I would incline to the view that the real difficulty for Moltoni arises in the inability to proceed with the subdivision rather than by the caveat itself. However, for present purposes I will accept that the caveat has played a contributory part to Moltoni's present financial position. Moltoni proposes an alternative form of security, perhaps a bank guarantee, for their obligations under the Deed. The City is not presently warm to this offer.
One of the issues that caused the Court of Appeal in Navarak to remove the caveat was the fact that there were third parties who had entered into contracts to purchase land free of encumbrances and that Navarak had been encouraged to assume that the caveat would be lifted to permit settlement. While the presence of third parties is not, of course, an essential prerequisite to finding the balance of convenience favours Moltoni in this case, it is an example of the sort of matter that might tip the balance of convenience.
In the end, it seems to me there are two matters which have substance on Moltoni's side. The first is the financial distress being experienced by Moltoni, part of which I am satisfied relates to the caveat. The second is the delay in the adoption of a structure plan over which Moltoni has no control. This is a matter of considerable substance. As against that, the purpose of a caveat is, in general terms, to give protection to the caveator, as in this case, by securing the obligation for future action with a charge over the land. This is a significant factor in the balance of convenience favouring the caveat.
Conclusion
At this stage, notwithstanding the considerable delay by the City in progressing the structure plan to a point where it can be approved, I am not prepared to say that the balance of convenience favours removal of the caveat. However, because the progress of the structure plan is integral to the Deed which supports the caveat, that situation may change over time. Therefore, I am prepared to extend the caveat until further order of the court, thereby giving Moltoni the opportunity to apply again should the delay alter the balance of convenience.
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