Doluner v Arthur
[2016] VSC 795
•21 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 04749
| KORALTAY MUSTAFA DOLUNER AND ANOTHER (according to the attached schedule) | Plaintiffs |
| v | |
| JANE DIANA ARTHUR AND OTHERS (according to the attached schedule) | Defendants |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 and 15 December 2016 |
DATE OF RULING: | 21 December 2016 |
CASE MAY BE CITED AS: | Doluner and anor v Arthur and ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 795 |
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REAL PROPERTY – Caveat – Application for removal of caveat – Section 90(3) of Transfer of Land Act 1958 (Vic) – Caveat based on a contract of sale of property – Serious question to be tried – Whether contract of sale validly rescinded – Whether vendors estopped from relying upon rescission notice – Difficulties in resolving factual disputes on an interlocutory basis – Caveator’s case not strong – No undertaking for damages proffered – Balance of convenience favours the removal of the caveat.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Parker | Pauline Madden Conveyancing and Legal Lawyers |
| For the Defendant | Mr P Little | Dangerfield Exley Lawyers |
HER HONOUR:
This application concerns a contract of sale between the plaintiffs (‘vendors’) and the first defendant with respect to a property at 97-121 Murray Road, Rockbank (‘property’). The contract of sale was executed on 6 July 2016, and included the following terms:
(a) the purchase price was $7,487,500, with a deposit of $2,246,250; and
(b) the deposit was payable in four instalments, with the final instalment of $2,147,500 due on 15 September 2016.
Significantly, the contract of sale was unconditional. It was not subject to the purchaser obtaining finance to pay the deposit or settle the purchase of the property.
On 8 August 2016, the first defendant nominated the second defendant, Sandilands Establishment Pty Ltd as trustee of the Sandilands Family Trust (‘Sandilands’) as the purchaser of the property (‘purchaser’).
On 5 September 2016 the parties executed a variation to the contract of sale (‘Variation’). The Variation provided for a price increase of $250,000, the execution of a guarantee by the third defendant, Ms Rebecca (‘Ruby’) Janssen, and provided for the balance of the deposit of $2,147,500 to be paid by 15 September 2016, with final settlement due by 5 March 2017. The Variation included the following statement:
Caveat can be lodged after discharge of the mortgage or the caveat will need to be withdrawn and relodged at the Purchasers’ expense.
The construction of this rather ambiguous term is of some significance to the question of whether there is a serious question to be tried.
The deposit sum is thirty per cent of the total purchase price. It is common ground that the purchaser has paid the vendors the sum of $350,000. It is also common ground that the purchaser failed to pay the balance of the deposit due on 15 September 2016. On the following day, the solicitors for the vendors issued a Notice of Default and Rescission (‘Rescission Notice’), providing the purchaser until 4 October 2016 to remedy the default. The balance of the deposit was not paid on that date, and, as contended for by the vendors, the contract of sale was at an end.
On 5 October 2016, the purchaser, through its solicitors, lodged a caveat on the title of the property. The estate claimed was a ‘Freehold estate’, the grounds of claim relied upon the contract of sale of 6 July 2016, and the caveat sought to prohibit all dealings with the property.
On 18 November 2016, the vendors issued this proceeding and issued a summons seeking the removal of the caveat. In their statement of claim, the vendors seek that the defendants pay the balance of the deposit, or alternatively, damages for breach of contract, along with the removal of the caveat.
The principles governing applications for the removal of a caveat are uncontroversial, and need not be rehearsed at any great length here. The party seeking to defend the caveat must establish that there is a serious question to be tried that the caveator has the interest in the relevant property claimed by the caveator, and that the balance of convenience favours the maintenance of the caveat.
As I noted in Kearsley v Robson:[1]
… the burden on the caveator is quite substantial. While it is not necessary for the caveator to show that they would, as a matter of certainty, be able to establish a proprietary interest in the relevant property at trial, the evidence must disclose a cogent and plausible claim on the part of the caveator, not merely an arguable case.
[1][2011] VSC 50, [18].
The vendors relied upon an affidavit sworn by the second plaintiff, Ms Bilgen Doluner, sworn on 15 November 2016. In her affidavit, Ms Doluner deposes as to formal matters, and exhibits the relevant documents, being the contract of sale, the nomination form nominating Sandilands as the purchaser, the Variation, the guarantee executed by Ms Janssen, the Rescission Notice, and the caveat itself. Further, she exhibited an email from the solicitors for the purchaser dated 5 October 2016, which stated as follows:
Thank you for all your efforts with this matter over the last couple of days.
With all rights reserved I am instructed that our client would like to discuss the possibility of negotiating fresh terms and conditions pursuant to a new Contract of Sale with your client.
This obviously will not involve the complications we have been working against concerning surety for the deposit monies.
I expect to have instructions to come back to you prior to the end of the week.
Ms Doluner also exhibited a letter sent by her solicitors to the solicitors for the purchaser on 20 October 2016, demanding the removal of the caveat. She deposed that as at the time of her swearing of her affidavit (15 November 2016), her solicitor had received no response to that letter.
The purchaser relied, at first instance, on affidavits sworn by Ms Janssen and Mr Peter Harris, both sworn on 7 December 2016. Ms Janssen deposed, in summary, as follows:
(a) she is the sole director and shareholder of Sandilands;
(b) she asserts that the Rescission Notice was wrongfully issued, and Sandilands and the first defendant will be issuing a counterclaim to seek specific performance of the contract of sale;
(c) she and Mr Harris run a property development and consulting business called ‘Cirque Group’. Mr Harris assisted Sandilands to purchase the property, with a view to subdividing the property and on‑selling the subdivided lots. All of the negotiations concerning the purchase of the property were conducted through her or Mr Harris, not Ms Arthur (the original purchaser, and the first defendant);
(d) on 24 May 2016 she and Mr Harris met with Ms Doluner, who at that meeting introduced her to Mr Deep Sidhu, of Goldbank Real Estate Group (‘Goldbank’), as the vendor’s real estate agent. They met again at the property on 6 June 2016 to discuss the terms of the purchase of the property;
(e) from that time she and Mr Harris, but in particular Mr Harris, dealt with Mr Sidhu about matters concerning the transaction, including delays to obtaining the executed version of the Variation, access to the property, and obtaining necessary documentation from the vendors;
(f) on 7 July 2016, she registered Sandilands;
(g) Sandilands decided to obtain funding from Prequin Securities (‘Prequin’). By 9 August 2016, Prequin agreed to fund the purchase of the property. Ms Janssen deposed:
They offered to lend $2.8 million with various forms of security including a requirement to lodge a caveat on the title of the property.
(h) by around 9 August 2016, she and Mr Harris discussed some variations to the contract of sale. These were put to Mr Sidhu in writing on or around 17 August 2016. She received the Variation from the vendors’ solicitor on or about 25 August 2016. Payments pursuant to the Variation were made by 30 August 2016;
(i) she deposed as to correspondence and discussions between her, Mr Sidhu, and the solicitors acting for both the vendors and Sandilands regarding the execution of the Variation, and the re‑execution of the nomination form;
(j) she deposed as follows:
On 9 September 2016, I telephoned Mr Deep Sidhu on at least two occasions as we had not received an executed version of the Variation. Sandilands’ lender, Prequin Securities, need (sic) the variation before it could start to process the loan to Sandilands. Prequin Securities had to organise a valuer to attend the property to carry out a valuation.
(k) the executed version of the Variation was sent to Sandilands on 12 September 2016. Also on that day, she wrote to Mr Sidhu asking that the vendors provide further information as required by Prequin;
(l) Ms Janssen deposed further as follows:
On around 14 September 2016, I spoke to Mr Deep Sidhu and said that the Vendors still have not given us the requisite documentation and the money was due on 15 September 2016 and it is unlikely Sandilands’ lender will be able to process the loan in time. I said it was unreasonable for the Vendors to expect payment on time since that did not provide an executed Variation until yesterday afternoon and they still have not provide (sic) the proof of loan to be paid out. Mr Deep Sidhu said Ms Bilgen Doluner told him that if you gave her access to the funds by signing the Section 27 Statement and that she will not issue the Rescission Notice.
Ms Janssen deposed that on 15 September 2016 she signed the Section 27 Statement to enable the release of the funds paid towards the deposit to date to the vendors. On the following day, the vendors’ solicitors sent through the rate notices for the property. Also on that day, the vendors’ solicitors issued the Rescission Notice. The vendors’ solicitors refused to withdraw the Rescission Notice. At about this time, Prequin engaged a valuer to value the property, but the vendors refused access to the property.
Ms Janssen exhibited further correspondence regarding the Rescission Notice and the arrangements for the payment of the final instalment of the deposit. On Tuesday, 4 October 2016, the vendors’ solicitor offered to withdraw the Rescission Notice if Sandilands would pay the required amount plus an additional $11,375.75. The purchaser’s solicitors requested an extension of time to Friday, 7 October 2016, and stated that ‘our clients wish’s (sic) to bring forward the final settlement of the contract to eight (8) weeks from this Friday’. The vendors rejected this offer.
Ms Janssen exhibited further correspondence between the purchaser’s solicitors and the vendors’ solicitors whereby the purchaser made further offers to purchase the property, and raising the vendors’ suspicions regarding the relationship between her and Mr Harris and Mr Sidhu. On 19 October 2016, the vendors’ solicitors rejected the purchaser’s offer to purchase the property.
At paragraph 55, Ms Janssen deposed as follows:
Sandilands is ready, willing and able to pay the balance of the deposit due under the Contract. Further, Sandilands and Ms Jane Arthur will Counterclaim and seek specific performance of the Contract. On about 5 October 2016, Sandilands lodged a caveat (AN154202S) on the title of the Property to protect its interests.
The purchaser also relied upon an affidavit sworn by Mr Peter Harris who deposed, in summary, as follows:
(a) he confirmed that he runs a property development and consulting group with Ms Janssen, and that he assisted Sandilands with the project to purchase and develop the property;
(b) he and Ms Janssen dealt with Mr Sidhu regarding the purchase of the property. He spoke to Mr Sidhu about two or three times per week about the transaction; and
(c) he deposed as follows:
On or about 4 August 2016, I texted Mr Deep Sidhu and advised that the Sandilands’ lender may wish to payout any mortgage over the Property and take security over the Property. I asked whether the Vendors had any borrowings on the Property. I subsequently spoke to Mr Deep Sidhu on or about 8 August 2016 to discuss the matter of security and I again asked him to find out from the Vendors what their mortgage amount was as Sandilands’ lender was considering paying that out as part of the funding process. I told Mr Sidhu that the lender wanted to be the only security on title and that this approach would work for the Vendors. Mr Sidhu said he would find out the mortgage amount and discuss the security matter with Ms Bilgen Doluner directly.
…..
Mr Sidhu and I spoke on a number of occasions leading up to the (sic) 15 August 2016 about the proposed variation of the Contract. I told Mr Deep Sidhu that the Sandilands’ lender required the Vendors’ mortgage to be paid out and the lender sought security over that amount of the Vendors’ current mortgage. Mr Sidhu responded to me on each occasion that the Vendors said yes and it would be ok.
On 16 August 2016, I sent an email to Mr Deep Sidhu about some of the items that we discussed about the variation to the Contract being, inter alia, ‘I understand Bilgen is prepared to vary contractual terms on the following conditions. 1. An additional amount of $250,000 will be paid at settlement. 2. A deposit of $200,000 to be paid by close of business on 18 August, 2016. 3. A further $100,000 deposit to be paid by close of business on Thursday August 25. 4. The balance of deposit, as well as repayment of the 1st mortgage on the property to be paid within a further 4 weeks. 5. Settlement of the property to be finalised within 8 months of the signing of the original contract of sale.
..…
Between late August 2016 and early September 2016, I met and or talked with Mr Deep Sidhu regularly. During these discussions followed up that the Vendors were happy and agreeable with everything, that we had not yet received the executed variation to the Contract yet, that we had paid the agreed additional payments and that he confirmed that we were paying out the mortgage with security over the title. On each occasions (sic) Mr Sidhu told me that the Vendors knew about this and it was ok.
On or about 13 September 2016, I spoke to Mr Deep Sidhu with respect to the delays with the funding that was due to the late arrival of documents required by our lender from the Vendors. Mr Deep Sidhu asked me how long I thought it would take to finalise the matter, I said I had been told 7 to 14 days. He advised me he would go and see Ms Bilgen Doluner to discuss the matter.
On or about 15 September, 2016, I spoke to Mr Deep Sidhu and he told me he had met with Ms Bilgen Doluner and she said it would be ok if they received the Section 27 Statement and she would not issue a rescission notice as a result of the delay. Mr Deep Sidhu asked me to have the Section 27 Statement ready to hand to him. He told me that he met with Ms Bilgen Doluner and that the Section 27 Statement was all she required and everything would be ok. Later that day, and based on what Mr Deep Sidhu told me that Ms Bilgen Doluner would not issue a rescission notice if in receipt of the Section 27 Statement, Ms Rebecca Janssen signed the Section 27 Statement and handed it to Mr Deep Sidhu. We were in Sydney at this time.
On the 16 September 2016, the Vendors’ conveyancer issued a rescission notice contrary to the arrangement between the Vendors and Sandilands.
On or about the same day, I telephoned Mr Deep Sidhu to ask him what was going on as the Vendors agreed to the arrangement that the Vendors would not issue the rescission notice as Sandilands provided the Section 27 Statement. Mr Sidhu told me Ms Bilgen Doluner agreed not to issue the rescission notice but that the Vendors’ conveyancer must have changed her mind. He also told me that he had not yet provided the Vendors with the Section 27 Statement, or told Ms Bilgen Doluner that he had it, as he was still in Sydney. He told me that he was seeing Ms Bilgen Doluner on his return and that he would give it to her then and to get it sorted out.
On or about 20 September 2016, Sandilands’ conveyancers wrote a letter to the Vendors’ conveyancers that advised that the Section 27 Statement handed to her clients’ real agent (sic) by Ms Rebecca Janssen could be used subject to the rescission notice being withdrawn.
I held a number of other discussions with Mr Deep Sidhu between about 20 September 2016 and about 10 October 2016 that included discussions about arranging access for the lender’s valuer to obtain entry to the Property to value the Property for the Sandilands’ lender and I provided updates on the progress of the finance. Mr Deep Sidhu told me that he tried to ring Ms Bilgen Doluner and the first plaintiff for many days to get permission for Sandilands’ lender’s valuer to come onto the Property. The Vendors never gave permission. In the end the valuer attended the Property and valued with (sic) Property without the Vendor’s permission. The Vendors did not allow the valuer to carry out his valuation. As a result, he could not do a valuation until 29 September 2016 when he attended the Property. The Sandilands’ lender would not proceed until it obtained a valuation.
On about 10 October 2016 and following a telephone call between Mr Steven Dangerfield, who was Sandilands’ solicitor, regarding payment of money to the Vendors, and the Vendors’ conveyancer, I discussed with Ms Ruby Janssen about the Venders (sic) alleged anger and that they sought more money. it was discussed and agreed between us to make an additional offer to placate the Vendors’ anger and demonstrate that we were seeking to bring resolution to the matter. Sandilands’ solicitor then sent an email on 11 October 2016 to that effect.
Ms Rebecca Janssen and I have never met or ever dealt with Goldbank Real Estate Agency prior to meeting Mr Deep Sidhu on or about 24 May 2016 and there is no arrangement or agreement with Mr Deep Sidhu or Goldbank Real Estate Agency as alleged.
Ms Doluner swore a further affidavit on 9 December 2016. She deposed that her solicitor informed her that on 7 October 2016, being two days after the lodgement of the caveat, the purchaser made a further offer to purchase the property, with a purchase price of $8 million, a cash deposit of $800,000, and settlement within twelve weeks of the date of the contract. She deposed that she and her husband have other prospective purchasers who are very interested in purchasing the property on similar terms to the contract of sale which was the subject of the Rescission Notice. She deposed that those prospective purchasers have indicated that they are not willing to purchase the property while the caveat remains in place.
Ms Doluner also deposed as to her family’s circumstances:
(a) she and her husband purchased the property over twenty years ago. She and her husband and children live in one house on the property, and her parents live in another house at the property;
(b) she and her husband intend to downsize and buy a separate home for her parents nearby; and
(c) the property secures a registered mortgage to Westpac in the sum of $1.2 million. She and her husband must remain employed to maintain the mortgage. They intended to use the proceeds of the deposit to discharge the mortgage, which would enable her to ‘semi-retire’, as she finds her current role stressful. While the caveat remains in place her family are unable to make plans for the future.
In response to Ms Janssen’s affidavit, Ms Doluner deposed as follows:
(a) she denied that she told Mr Sidhu that if Ms Janssen signed the Section 27 statement she would not issue the Rescission Notice, and exhibited an email sent by the purchaser’s former solicitors to the vendors’ solicitors on 15 September 2016, which made no reference to this alleged agreement, and sought an extension of time to pay the balance of the deposit to 30 September 2016;
(b) she denied the allegation that the vendors refused access to the valuer to inspect the property, and exhibited an exchange of text messages between her and Mr Sidhu on 28 September 2016, the day before the inspection;
(c) in response to Ms Janssen’s assertion that there was no business or ‘suspicious’ relationship between her or Mr Harris and Mr Sidhu, she exhibited a copy of a photograph extracted from Mr Sidhu’s Facebook page captioned ‘Successful seminar by Goldbank Group and Cirque Group’;
(d) in response to Mr Harris’ affidavit, Ms Doluner denied that Mr Sidhu had discussed with her the purchaser’s lender paying out the Westpac mortgage and taking a security over the property, and deposed that, if he had, she would have told him this was unacceptable; and
(e) she denied that she agreed to refrain from issuing the Rescission Notice if she received the Section 27 statement, and exhibited a copy of a lengthy email sent by Mr Harris to Mr Sidhu dated 22 September 2016. In this email, Mr Harris expressed concern about the current circumstances with respect to the property, noted the benefits of the Variation to the vendors, and apologised for the process being ‘far from perfect’, noting the finance market had changed dramatically since the time of the contract of sale. Mr Harris expressed concern about the impact of the Rescission Notice upon the purchaser’s attempts to obtain funding, and appealed to Ms Doluner to withdraw the Rescission Notice. Mr Harris also sought a meeting with Ms Doluner to ‘realign, bring things into perspective and create a confidence between us again that all is well and will be finalised quickly from this point’. The email makes no suggestion that the issue of the Rescission Notice was invalid, or that it was a term of the Variation that the vendors allow the purchaser’s lender to take security over the property.
The application came on for hearing on 12 December 2016. During the course of the oral submissions of counsel for the purchaser, and close to the end of the sitting day, counsel for the purchaser sought leave to tender documents from the purchaser’s lender which would show that the purchaser was ready, willing and able to complete the contract of sale. Accordingly, I adjourned the hearing of the application to 15 December 2016, and granted leave for the filing and service of further affidavits concerning this issue.
In the short period between the close of business on 12 December 2016 and the resumed hearing on 15 December 2016, there was a flurry of activity, with no less than seven further affidavits being filed and served on behalf of the parties. The first in time was an affidavit sworn by the solicitor for the vendors, Ms Pauline Madden, exhibiting correspondence between her and the purchaser’s solicitor on 4 October 2016 and 5 October 2016. In an email sent on 4 October 2016 at 6.02pm, the purchaser’s solicitor, Mr Dangerfield wrote:
My further instructions are that our client will pay your client an additional $50,000 to your client on Friday and will complete settlement of the Contract eight (8) weeks from this Friday.
However our clients (sic) lender requires a registered first mortgage for $1M to replace your clients (sic) current mortgage for the eight (8) week period until settlement takes places (sic).
Ms Madden replied on 5 October 2016 as follows:
I have approached my clients on the basis of the emails received from you to date especially in relation to the extra consideration being offered both at the time of further payment and at the time of settlement in now proposed 10 weeks time from Friday. From my understanding of your client’s proposal I have outlined to them that by way of either an ‘assignment of the existing mortgage with their consent’ or a new mortgage – not in their names but with their consent to use their property as security for $1m of the money to be paid to them as a further payment by the Purchaser.
My view would be that the assignment would not be appropriate as in fact that would make the Vendors a party to the mortgage as they are now with Westpac. Then on the basis of another mortgage but using their land as security – default by the Purchaser would mean that their land would be sold to repay the Lender – is not palatable. This Purchaser is in default now and has defaulted on significant payments. This has not set them in a good light for my clients to agree to virtually a guarantee for the Purchaser’s performance with little confidence given the performance to date.
As has been accepted that this is not a Terms Contract – it is suggested to work together to accept what it is not – for your client’s benefit. Possibly for the Vendors benefit in 10 weeks time.
I have instructions to inform you that the Contract is at an end as at 4 October, 2016.
Also on 12 December 2016, Mr Sidhu swore an affidavit which was filed and served on behalf of the purchasers. Mr Sidhu deposed as follows:
I am a real estate agent and work for Goldbank Real Estate Group (‘Goldbank’). The plaintiffs (‘the Vendors’) engaged Goldbank to be the real estate agents for the sale of the property at 97-121 Murray Road, Rockbank being the property in dispute.
Prior to listing this property, I did not know Peter Harris or Ruby Jansen (sic).
I have worked in full interest of the Vendor to finalise this transaction.
In about mid-September 2016, Peter Harris telephoned me and said that the delay in the payment of the deposit was because they did not get a signed copy of the variation of the contract from the plaintiffs until (sic) day or so ago and he wanted more time. The deposit was due on 15 September 2016. He said that Ruby will sign the Section 27 Statement and release $350,000 held on trust by Goldbank to the Vendors together with the remainder of the deposit. I then discussed this (sic) Ms Bilgen Doluner on the telephone and told her what Mr Peter Harris told me. She said it would be ok and she would agree to not issue a Rescission Notice or extend the due date for the balance of the deposit monies if the deposit funds held on trust were released. A little later I rang Mr Peter Harris and told him that I spoke to Ms Bilgen Doluner and she said that if you signed the Section 27 Statement she would agree not to end the Contract. He said ok great, we will authorize the release of the deposit on this basis. Within a day or two I received a signed Section 27 Statement from Ms Ruby Janssen.
On 28 September I attended the property with the Valuer and a person who I knew to be Bilgen Doulner’s (sic) Father said to me that he had advised Bilgen not to settle the subject sale of the property on the basis that the sale price was to (sic) low.
In September 2016, I was attending a property conference in Sydney as did Mr Peter Harris and Ms Ruby Janssen. When we learnt, we were both were (sic) attending Mr Peter Harris asked if we wanted to do a joint seminar. I said yes and we did a seminar together. I organised a photograph with them and put it on my facebook. There is no business arrangement between Goldbank and Cirque Group or with Sandilands.
On 13 December 2016, Mr Michael La Motte, the managing director of Prequin, deposed, among other things, as follows:
Prequin Securities is a private lender for property developments and it provides funding for property developments throughout Australia.
Since about June 2016, I worked with Mr Peter Harris (‘Mr Harris’) on the funding of the purchase of the property located at 97-121 Murray Road, Rockbank in the State of Victoria (‘Property’). Ms Janssen kept me informed about the purchase of the Property and provided all the relevant documentation including the contract and variation. She also told me of the vendors’ rescission notice.
We completed our due diligence on the value of the Property and its future potential for development. We believed it was a good development and back in August 2016 we agreed to lend $2,900,000 for between 6 months to 12 months with security by way of a caveat or a first mortgage and the vendors of the Property were required to pay out their current mortgage.
We were ready to process the loan and earmark the money from August 2016 but the processing was significantly delayed as we did not receive an executed variation agreement until about 12 September 2016. Further, as part of our normal final evaluation process we must obtain an expert valuation on the Property. His valuation report, that was very favourable for the Property, was provided on or about 29 September 2016. Again this caused further problems as Monday, 3 October 2016 was a public holiday for us in Western Australia and in South Australia which was the location of the original source of the loan.
By about the 5th October 2016, the loan funds were on-hand and ready to be allocated. They had been separately earmarked ready to go. …
…
Based on Sandilands’ offers to the vendors in October 2016, we were and are still prepared to fund the purchase of the Property. Especially for the October 2016 offers, our preference was to obtain a mortgage over the property.
On 14 December 2016, Mr Jason Fischman, a finance consultant of Fischman Capital Group Pty Ltd (‘FCG’), and based in Western Australia, deposed, among other things, as follows:
FCG sources the funds from other lenders. It mainly funds property developments anywhere in Australia.
I first started discussions with Mr Peter Harris (‘Mr Harris’) on the funding of the purchase and development of the property located at 97-121 Murray Road, Rockbank in the State of Victoria (‘Property’) on or about early September 2016. The initial discussions were for funding which was due in mid-2017. Mr Peter Harris and Ms Ruby Janssen were preparing the funding in advance to settle under their contract obligations. I understand full settlement of the land was due in 2017. On 16 September 2016, FCG offered a mandate to obtain $8 million to purchase the Property within a short period of time subject to security provided by Ms Ruby Janssen and Mr Peter Harris. The funder was ready to commence a lending process that included funding of land and development costs subject to the lender’s normal due diligence process including a full valuation of the Property. At the time I told Mr Harris that the funder would be prepared to settle earlier subject to all due diligence being completed.
The funder was ready to embark on the process of funding until mid-October 2016 and we are still able to obtain a funder to purchase the Property for $8.0 million now if the contract was still on foot subject to the lender’s criteria being fulfilled.
Also on 14 December 2016, Mr Steven Dangerfield, the purchaser’s solicitor, swore a further affidavit deposing as to correspondence between him and Ms Madden between 5 October 2016 and 18 October 2016, and an email he received from Mr Sharma of Goldbank, the real estate agent of the Vendors. This correspondence included a letter from the vendor’s solicitor dated 10 October 2016 rejecting an offer made by the purchaser, and a further email from her dated 11 October 2016 which suggested that the vendors had concerns about Goldbank.
The vendors also relied upon two further affidavits sworn by Ms Doluner on 15 December 2016. In the first of these affidavits, Ms Doluner deposed as follows, in response to Mr Sidhu’s affidavit:
… I deny that I agreed or told Mr Sidhu that I would not issue a rescission notice and that I would extend the time for paying the final instalment of the deposit. To the contrary, Mr Sidhu actually said to me words to the effect that he was going to suggest that I served a rescission notice upon the defendants in order to try and get them to pay the balance of the deposit.
I believe the reason that Mr Sidhu has assisted the defendants by providing evidence in this proceeding for them and has been untruthful in his evidence is because I have made a complaint against him to Consumer Affairs Victoria as I believe he is not a licensed real estate agent.
Ms Doluner exhibited a copy of the complaint, which was lodged on 20 October 2016. This followed correspondence between Ms Madden and Goldbank between 5 October 2016 and 13 October 2016, during the course of which Ms Madden demanded that the $50,000 held on trust by Goldbank on account of commission be returned to the vendors.
In the second affidavit sworn by her on 15 December 2016, Ms Doluner exhibited, on a confidential basis, a written offer to purchase the property received by her the previous day. While I shall not disclose the prospective purchaser or the precise terms of the offer, the offer is on the letterhead of a well-known real estate agency, and the terms of the offer are not identical, but are at least comparable to the terms of the contract of sale and the later offers made by the purchaser.
As can be seen from the above, there are a number of factual disputes between the parties which are not capable of resolution on a summary basis, including, but not limited to:
(a) whether Mr Sidhu told the purchaser that the vendors would be prepared to extend the time for the payment of the final instalment of the deposit, and, if he did, whether he did so on the instructions of Ms Doluner;
(b) whether Mr Sidhu told the purchaser that the vendors would allow the property to be used as security for sums advanced to the purchaser for the payment of the balance of the deposit, if he did, whether he did so on the instructions of Ms Doluner, and whether this agreement was recorded in or evidenced by the Variation;
(c) whether the vendors prevented the purchaser’s lender’s valuer from inspecting the property;
(d) whether any delay by the vendors in providing an executed variation and other documentation required by the purchaser’s lender frustrated the ability of the purchaser to pay the deposit in full by the due date, and the date required by the Rescission Notice;
(e) whether the later offers made by the purchaser amounted to an acknowledgement that the contract of sale had come to an end as of 5 October 2016 (the date the caveat was lodged); and
(f) whether at all material times (or at least from 7 October 2016) the purchaser was ready, willing and able to complete the contract of sale.
Counsel for the vendors submitted that there is no serious question to be tried, because the contract of sale was validly rescinded as at 5 October 2016. Further, the remedy of specific performance would not be available to the purchasers, as they are in breach of a fundamental term of the contract of sale which they seek to enforce, being the payment of the deposit. The contract of sale was unconditional, and as such, the purchasers (including the original purchaser, the first defendant) took upon themselves the risk that they would be unable to pay the deposit. The Variation made no provision for the purchaser’s lender to take security over the property, as contended for by the purchaser. Indeed, it would be commercially absurd for the vendors to agree to a third party to take security over the property in circumstances where the vendors could not guarantee the obligations of the purchaser: if the purchaser defaulted, the vendors would run the risk that the third party would seek to sell the property to realise its security. The evidence relied upon by the purchaser could not satisfy the Court that the purchaser was ready, willing and able to perform the contract of sale, or meet any undertaking for damages.
Further, the contentions of the purchaser that the Rescission Notice was invalid is unparticularised, and inconsistent with the contemporaneous conduct of and correspondence between the parties. Finally, the vendors were never going to agree to the means proposed by the purchaser for securing funding for the payment of the deposit, that is, allowing the property to be used as security in favour of a third party.
Counsel for the purchaser submitted that there is a serious question to be tried, as the Rescission Notice was invalid, and therefore the purchaser is entitled to specific performance of the contract of sale. The Rescission Notice is invalid, because the vendors delayed in returning the executed variation to the purchaser, agreed not to issue a rescission notice if the purchaser signed a Section 27 statement (which it did), delayed in providing information (mortgage payout details and confirmation that rates were up to date), and delayed in allowing the valuer access to the property. These delays impeded the ability of the purchaser to raise funds for the payment of the final instalment of the deposit. As such, the vendors prevented the purchaser from remedying the default, and breached their duty to cooperate with the purchaser. Alternatively, the vendors are estopped from relying upon the Rescission Notice because the vendors, through their agent, Mr Sidhu, represented to the purchaser that the vendors would not issue the Rescission Notice if the $350,000 paid to date was released from the real estate agent’s trust account to the vendors. Counsel for the purchaser relied upon the decision of the High Court in Legione v Hateley[2] in support of his submission that the conduct of the vendors, which was unconscionable, would give rise to a right to relief from forfeiture.
[2](1983) 152 CLR 406.
Turning to the balance of convenience, counsel for the vendors submitted that the balance of convenience favoured the removal of the caveat. If, contrary to his submissions, there was a serious question to be tried, the case is very weak. There is evidence that there are other prospective purchasers, who will be deterred by the presence of the caveat. The property is encumbered by a mortgage, which the funds from the deposit are required to discharge. The plans of the vendors and their family are in limbo while they are prevented from dealing with the property. The evidence before the Court regarding the purchaser’s ability to pay the outstanding balance of the deposit, settle the purchase of the property, or meet any undertaking for damages is unsatisfactory.
Counsel for the purchaser submitted that the balance of convenience favours the purchaser. In paragraph 12 of his written submissions, the relevant factors said to favour the maintenance of the caveat are said to be as follows:
(a) The Vendors’ conduct that triggered the breach;
(b)The Vendors’ conduct that it would not issue the rescission notice if the Purchaser released $350,000 that was being held on trust;
(c)The caveat is necessary to protect the Purchaser’s interest. The Vendors will sell to a higher bidder and to wrongfully seek to claim 30% by way of a deposit;
(d)The Purchaser paid a significant amount of money to date ($350,000);
(e)The Property is unique for the Purchaser in relation to the particular development it proposes. The purchaser would lose significant profit by not being able to develop it;
(f)Damages is an inadequate remedy for the Purchaser;
(g)The Vendors overstated their case;
(h)The Vendors overstated their claim;
(i)The prejudice suffered against the Defendants is very significant as the Vendors seek 30% of the contract price by way of loss ($2,147,500 at 11.5% interest) (notwithstanding it alleges it has an offer greater than the offer from 7 October 2016);
(j)The Vendors’ (sic) ought not to profit from their conduct; and
(k)A lot of the material necessary for the trial has already been provided.
Counsel for the purchaser submits that, given most of the material is before the Court by reason of this application, the status quo ought to be preserved and the dispute be set down for a speedy trial.
In my view, the caveat ought to be removed. Taking the purchaser’s case at its highest and best (which I doubt I am actually required to do), while there would be, if every factual dispute and legal issue was resolved in favour of the purchaser, a serious question to be tried, the purchaser’s case is rather weak. The assertion that the vendors agreed to allow the property to be used as security for a loan to the purchaser can only be made good if the reference to the caveat in the Variation is construed as evidencing that agreement, given the requirements of s 126 of the Instruments Act 1958 (Vic). While this clause of the Variation is ambiguous, such as to make evidence of the surrounding circumstances admissible at trial, it does seem to me to be a strain on the language of that clause to construe it in the manner contended for by the purchaser. The caveat referred to in the Variation could simply refer to a caveat lodged or to be lodged by the purchaser in its capacity as purchaser of the property, not a caveat to be lodged by a third party. Mr Harris’ email of 18 August 2016 (see paragraph 17(c) above) makes no reference to any caveat, or any security being taken by the purchaser’s lender, although it does refer to the vendors’ mortgage being repaid.
The question of what Mr Sidhu told Ms Janssen and Mr Harris regarding what the vendors agreed to with respect to the payment of the outstanding balance of the deposit, and whether Mr Sidhu acted with the actual or ostensible authority of the vendors is a matter that can only be resolved at trial, although any assertion on the part of the purchaser that Mr Sidhu was the agent of the vendor for the purpose of negotiating the terms of the contract of sale and any variations to that contract is complicated by the fact that both parties had engaged solicitors, and the terms of the solicitors’ correspondence did not appear to reflect what was said by Ms Janssen, Mr Harris, and Mr Sidhu to have been agreed by the parties. To the extent these alleged representations are said to estop the vendors from relying upon the Rescission Notice, I agree with the submissions made by counsel for the vendors that the most likely remedy available to the purchaser is the return of the $350,000 paid to date, rather than specific performance of the contract of sale, given the purchaser’s non‑compliance with a fundamental term of the contract of sale, and the principle that the Court will do the minimum required to do equity to the parties.
Further, it also seems to me that while the purchaser’s contentions that the vendor’s conduct impeded the ability of the purchaser to meet the deadline for the payment of the balance of the deposit are arguable, they do not strike me as compelling. While the evidence is that Ms Janssen was aware of the need for the purchaser’s lender to conduct a valuation by early September 2016, the evidence also suggests that Ms Doluner was only contacted about arranging access to the property the day before the inspection, being 29 September 2016. The valuer’s report was provided to the lender that day: that fact, and the fact that the following Monday was a public holiday in Western Australia and South Australia is unlikely to be sheeted home to the vendors. Further, Mr La Motte’s evidence that ‘By about the 5th October 2016, the loan funds were on-hand and ready to be allocated. They had been separately earmarked and ready to go’, is inconsistent with the purchaser’s solicitors’ request for an extension of time to 7 October 2016. Further, Mr La Motte did not give unambiguous evidence to the effect that Prequin would be prepared to lend these funds to Sandilands on an unsecured basis, referring to its ‘preference’ to obtain a mortgage. Similarly, the evidence of Mr Fischman that his firm is able to obtain a funder to purchase the property for $8 million is qualified by the statement ‘subject to the lender’s criteria being fulfilled’.
The weaknesses in the purchaser’s case, as outlined above, mean that it only barely clears the hurdle of there being a serious question to be tried, and that finding is largely made because of the difficulties in resolving factual disputes on an interlocutory basis. Further, the weaknesses in the plaintiff’s case is relevant to the determination of where the balance of conveniences lies. The balance of convenience favours the removal of the caveat. The evidence on behalf of the vendors is that they are very keen to sell the property, and their future plans are dependent upon selling the property. There are other prospective purchasers waiting in the wings. While the proceeding could be listed with some expedition, it would be unlikely to be heard before March to April 2017. Significantly, no undertaking as to damages has been proffered, and there is no evidence of the ability of either the original purchaser, Sandilands, or Ms Janssen to meet an undertaking for damages. Ms Janssen’s own evidence is that Sandilands was only incorporated in July 2016, presumably as a special purpose vehicle for the development of the property.
Finally, I do not accept the submissions made on behalf of the purchaser that damages would be an inadequate remedy in the event that the vendors are found to have invalidly rescinded the contract of sale. The property is no doubt sought after by developers, being what appears to be from the contract of sale to be a substantial parcel of land in the Urban Growth Zone, but I doubt that it is unique. The evidence is that Sandilands planned to subdivide and on-sell the land, and no doubt it has undertaken its own inquiries into the financial feasibility of the project, as have its proposed lenders, as is apparent from the evidence. However, there is no evidence as to how extensive these investigations have been. Proving any loss of profit occasioned by any alleged breach of contract on the part of the vendors is not an exceptional or uncommon task confronted by plaintiffs in this Court.
Accordingly, I shall allow the application, and seek submissions from the parties on the form of orders, the question of costs, and future directions for the conduct of the proceeding.
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SCHEDULE OF PARTIES
KORALTAY MUSTAFA DOLUNER First Plaintiff BILGEN DOLUNER Second Plaintiff - and - JANE DIANA ARTHUR First Defendant SANDILANDS ESTABLISHMENT PTY LTD AS TRUSTEE OF THE SANDILANDS FAMILY TRUST Second Defendant REBECCA JANE JANSSEN Third Defendant REGISTRAR OF TITLES Fourth Defendant
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