Ehrenfeld v CrossCity Enterprises Pty Ltd
[2007] WASC 308
•19 December 2007
EHRENFELD -v- CROSSCITY ENTERPRISES PTY LTD [2007] WASC 308
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 308 | |
| Case No: | CIV:1888/2007 | 7 NOVEMBER 2007 | |
| Coram: | JOHNSON J | 18/12/07 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Application to extend operation of caveat granted | ||
| B | |||
| PDF Version |
| Parties: | DANIEL EHRENFELD CROSSCITY ENTERPRISES PTY LTD (ACN 081 957 397) REGISTRAR OF TITLES |
Catchwords: | Application to extend operation of caveat Whether plaintiff has equitable interest in the land Conditional contract |
Legislation: | Transfer of Land Act 1893 (WA), s 138A, s 138C |
Case References: | Bahr v Nicolay (No 2) (1988) 164 CLR 604 Brown v Heffer (1967) 116 CLR 344 Central Trust and Safe Deposit Co v Snider (1916) 1 AC 266 Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Eng Mee Yong v Letchumanan [1980] AC 331 Fernandes v Houstein (1963) 4 FLR 355 Gange v Sullivan (1966) 116 CLR 418 Howard v Miller [1915] AC 318 Jandric v Jandric [1999] WASC 22 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 Lee v Mavaddat [2007] WASC 18 Legione v Hately (1983) 152 CLR 406 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Re CM Group Pty Ltd's Caveat [1986] Qd R 381 Stern v McArthur (1988) 165 CLR 489 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CROSSCITY ENTERPRISES PTY LTD (ACN 081 957 397)
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Application to extend operation of caveat - Whether plaintiff has equitable interest in the land - Conditional contract
Legislation:
Transfer of Land Act 1893 (WA), s 138A, s 138C
Result:
Application to extend operation of caveat granted
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr S J Davis
First Defendant : Mr D K Barker
Second Defendant : No appearance
Solicitors:
Plaintiff : Taylor Linfoot & Holmes
First Defendant : Chalmers Legal Studio
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Brown v Heffer (1967) 116 CLR 344
Central Trust and Safe Deposit Co v Snider (1916) 1 AC 266
Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Eng Mee Yong v Letchumanan [1980] AC 331
Fernandes v Houstein (1963) 4 FLR 355
Gange v Sullivan (1966) 116 CLR 418
Howard v Miller [1915] AC 318
Jandric v Jandric [1999] WASC 22
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lee v Mavaddat [2007] WASC 18
Legione v Hately (1983) 152 CLR 406
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Re CM Group Pty Ltd's Caveat [1986] Qd R 381
Stern v McArthur (1988) 165 CLR 489
(Page 3)
1 JOHNSON J: The plaintiff seeks, by originating summons, an order extending the operation of a caveat over proposed Lot 76 on Strata Plan 38579 (the new Strata Plan), being Unit 30, Wills Building, 82 King Street, Perth (the property). The first defendant applied for removal of the caveat under s 138A of the Transfer of Land Act 1893 (WA) (the Act). In accordance with s 138C of the Act, the plaintiff made application to this court and obtained an interim order extending the caveat until the application could be finally determined.
2 The caveat seeks to protect the plaintiff's interest as purchaser of the property under a contract between the plaintiff and the first defendant. The property purchased under the contract is a lot proposed on a Strata Plan which reflects a re-subdivision of the Wills Building. Although the new Strata Plan was lodged, the Registrar of Titles has yet to issue the new title in respect of proposed Lot 76. On that basis, the first defendant says that whatever rights the plaintiff may have, they do not extend to an interest in Lot 76 sufficient to support a caveat. That is because, according to the first defendant, there is nothing which the court could specifically order the first defendant to do which, if done, would convert the first defendant's entitlement under the contract to receive the purchase monies in exchange for a conveyance of title to the proposed lot.
The evidence
3 The plaintiff has filed two affidavits in support of the application which set out certain objective facts and also contain the plaintiff's account of his dealings in relation to the proposed purchase of Unit 30.
4 On 24 November 2005 the plaintiff entered into a contract to purchase Unit 30, described as Part Lot 66 under the Strata Plan (the first contract). In about February 2006 the plaintiff's attention was drawn to an anomaly. Unit 30, described in the Strata Plan as Lot 66, is located on the 4th and mezzanine 4th floors of the Wills Building. However, the Strata Plan showed that Unit 30 included, in addition, 29 square metres of space on the 6th floor which was inaccessible to the owner of Unit 30 because it was the balcony to Unit 70, the penthouse unit, and could only be accessed through the penthouse.
5 Following discussions between the parties, on 27 March 2006 a second contract was entered into for the sale and purchase of Unit 30, now described as 'Proposed Lot 76' on a proposed Strata Plan which re-subdivided the building by transferring from Unit 30 to the penthouse unit the area representing the balcony. A three-page document described as Strata Plan 38579 is annexed to the second contract and contains a
(Page 4)
- drawing of the 4th floor which indicates the portion described as 'PT76' which is the proposed Lot 76.
6 Clause 3 of the second contract incorporates what is described as the '2002 General Conditions' into the contract. This is a reference to the 2002 Revision of the Joint Form of General Conditions for the Sale of Land issued by the Law Society of Western Australia and the Real Estate Institute of Western Australia. The second contract also contains a number of special conditions. Clauses 6 and 7 are relevant to this application. Clause 6 is in these terms:
This contract is at an end if the re-subdivision for proposed Lot 76 is not completed and Strata Plan is not in order for dealing by 27 March 2007.
- Clause 7 states:
Settlement date: 28 days after the Strata Plan of re-subdivision is in order for dealing.
8 The plaintiff alleges that, prior to the signing of the second contract, Mr Oliver, on behalf of the first defendant, said to him words to the effect that the re-subdivision procedure would be a formality involving a '6 to 8 week process'. According to the plaintiff, Mr Oliver drew up the second contract, as he had the first, and advised the plaintiff that the new contract would have to include an 'end date'. They agreed on 27 March 2007, a date which, according to the plaintiff, Mr Oliver told him was 'way beyond the time within which the strata plan for re-subdivision would be in order for dealing'.
9 When the second contract was executed, the plaintiff asked Mr Oliver to transfer the $10,000 deposit paid under the first contract to be held as the deposit under the second contract.
10 In approximately April 2006, Mr Stanley arranged for the plaintiff to be issued with a passkey to the Wills Building and invited the plaintiff to engage consultants and commence his design and fit-out of the unit. According to the plaintiff, he was told by Mr Stanley not to be concerned about any costs he incurred prior to settlement because 'he would always do the right thing and that the deal was done'.
(Page 5)
11 The plaintiff nominated Peter Young of Accord Settlements to be his settlement agent. During the months after the second contract, the plaintiff and Mr Young both followed up with Mr Oliver and the first defendant's settlement agent, Envoy Settlement Agency on the progress of the re-subdivision of Lot 66. In approximately June 2006, about two months after the second contract was signed, Mr Oliver advised the plaintiff that the first defendant was taking the opportunity afforded by the re-subdivision to 'tidy up' some other unrelated matters concerning other strata titles in the building. Mr Oliver stated that he did not believe this would cause undue delay.
12 The new Strata Plan, a copy of which was put before the court, is described on the first page as a 'plan of re-subdivision of Lots 42, 64, 66, 70 and common property on Strata Plan 38579'. The nature of the changes to lots other than the existing Lot 66 are not relevant to the resolution of this application. The plaintiff acknowledges that the first page of the three-page document annexed to the second contract was the first page of the re-subdivision Strata Plan and now notes that there is a reference on that page indicating that two other lots, apart from Lots 66 and 70, are included within the proposed plan. However, the plaintiff states that he did not notice this at the time the copy of the proposed plan was provided to him by Mr Oliver on 27 March 2006 as an attachment to the second contract. Nor did he notice that the proposed plan appears to date from 23 September 2004, some months before he signed the first contract. The plaintiff maintains his position that the first time he became aware that it was proposed that the plan of re-subdivision would deal with any matters other than the excision of the 29 square metre area of Lot 66 on the 6th floor of the building and its inclusion in Lot 70 on the 6th floor was when he was advised of this by Mr Oliver in June 2006. The plaintiff states that there was no mention of the fact by Mr Stanley, Mr Oliver, Mr Scanlan, one of the directors of the first defendant, or Mr Acott, the first defendant's consultant who was dealing with the re-subdivision, in any meeting with the plaintiff, nor by Mr Oliver at the time the plaintiff signed the second contract.
13 The plaintiff deposes to the fact that by email dated 28 September 2006 he was advised by Mr Young that Mr Oliver had told Mr Young on the previous day that he believed approval of the plan of re-subdivision was 'imminent'. On 7 February 2007 the plaintiff received an email from Mr Young attaching a letter of 6 February 2007 from Envoy Settlement Agency. The letter referred to certain 'consents that may be missing' and expressed the author's hope that 'we can settle asap'. According to the plaintiff, he became concerned that settlement of the second contract
(Page 6)
- might not take place by 27 March 2007, as provided for in the second contract in cl 6.
14 On or about 14 February 2007 the plaintiff spoke to Mr Stanley and expressed his concern about the pending date in the special condition, cl 6. The plaintiff states in his affidavit that Mr Stanley said to him words to the effect that 'we have a firm deal, regardless of the date in the contract, and that as the majority shareholder of the Vendor I can guarantee you that'. Mr Stanley is also alleged to have said that he felt a moral obligation to complete the transaction and that it was no fault of the plaintiff that it had not been completed.
15 The plaintiff also had conversations with Mr Oliver in which the plaintiff expressed his concerns about the date in cl 6. Mr Oliver confirmed that Mr Stanley had told him that he was going to honour the contract regardless of the date.
16 On 23 February 2007 Mr Oliver sent a letter to Mr Stanley and to Mr Scanlan of the first defendant noting that the transaction in relation to Unit 30 would come to an end on 27 March 2007 if the strata plan was not in order for dealing. Mr Oliver also states that the plaintiff had been in constant contact with him asking for information about the progress of the sub-division of lots so that he could arrange settlement. Mr Oliver then refers to the fact that he had now been told that further signatures were required to allow the subdivision to happen and that the plaintiff had expressed concern that it was only a few weeks until 27 March 2007. Mr Oliver then states:
[The plaintiff] has asked for the clause six (6) on the contract be waived and given the hold ups are on the Vendor side not purchaser side, this would seem to be a reasonable request.
17 Mr Oliver concludes by asking Mr Stanley and Mr Scanlan to advise him of their thoughts so that he could prepare a waiver letter for the first defendant to sign.
18 In his affidavit, the plaintiff states that the indication in Mr Oliver's letter that he had asked for special condition 6 to be waived was not entirely accurate because Mr Stanley had already indicated to him that the first defendant would not rely on special condition 6 and the plaintiff was simply pressing for written confirmation.
19 By 7 March 2007 the plaintiff had not received written confirmation and emailed Mr Oliver making it clear that he required by close of
(Page 7)
- business the following day, a signed letter of waiver to confirm the verbal undertaking Mr Oliver had given to him. In that email the plaintiff makes specific reference to the assurance given by Mr Stanley referred to above.
20 From that time onwards, the plaintiff kept notes of his various conversations in relation to the purchase of the property. In his affidavit the plaintiff makes the following assertions:
In various telephone conversations on 14 March 2007:
(a) I was informed by Mr Acott and Mr Oliver in separate conversations that four 'consents' were missing, including one from Mr Stanley.
(b) Mr Acott indicated that he thought the entire process should only have taken three to four months from commencement.
(c) Mr Acott said words to the effect that he understood Envoy Settlements were dealing with the consents but he had recently discovered that nothing had been done to obtain consents within the last month.
(d) Mr Oliver indicates that his company was not only the selling agent in respect of the Property but also the strata manager of the whole building and Mr Stanley had asked him to try to obtain necessary consents from the various strata title holders. Mr Oliver indicated that his company had not been formally engaged to do this work and would not be paid for it, and that it was responsibility of the officers of the first defendant to do this work.
21 On 15 March 2007 the plaintiff spoke to Mr Acott who informed him that the new Strata Plan of re-subdivision of Lots 42, 64, 66, 70 and common property on Strata Plan 38579 had been 'in order for dealings' since 1 September 2006. The plaintiff deposes to the fact that this was the first occasion on which he had heard of this. It is apparent from the copy of the Strata Plan that it was lodged on 25 July 2006 and indicates that the plan was 'in order for dealings' as at 1 September 2006 and had been approved by the Western Australian Planning Commission on the same date.
22 On 22 March 2007 the plaintiff's solicitor, Mr Linfoot, wrote to the first defendant alleging default under the second contract and stating that the plaintiff was ready, willing and able to settle. On 2 April 2007 a caveat was lodged to protect the plaintiff's interest under the second contract.
(Page 8)
23 The plaintiff deposes to the fact that he had not received from the first defendant any notice purporting to terminate the second contract. However, on 21 September 2007 Mr Linfoot received a letter from the first defendant's solicitors attaching a notice asserting that the second contract terminated by operation of law on 29 September 2006 and alternatively purporting to terminate the second contract by the notice. A letter dated 25 September 2007 was sent to the first defendant's solicitors by Mr Linfoot on behalf of the plaintiff advising that the plaintiff did not accept that the Notice had the effect of terminating the second contract. The letter also states that the plaintiff does not accept that the first defendant has the right to terminate the second contract for the reasons set out in the notice or for any other reasons. The final paragraph of the letter asserts that the contract remains in force, that the plaintiff is ready, willing and able to proceed to settlement and that the first defendant remains in breach of the second contract.
24 On or about 10 October 2007 the plaintiff received a receipt dated 29 September 2007 in respect of the deposit paid under the second contract. This was the deposit that the plaintiff had paid under the first contract which he had asked Mr Oliver to transfer and be held as deposit under the second contract. That request was made on 27 March 2006 and agreed to by Mr Oliver.
25 The plaintiff makes it clear in his affidavits filed in support of the application that he is ready and willing to proceed to settlement of the second contract.
26 The application by the owners of the Wills building for the re-subdivision of Strata Plan 38579 was registered in December 2002. The application was lodged by Envoy Settlements who also acted for the first defendant in relation to the first and second contracts. Under re-subdivision Lots 42 and 64, as well as several other Lots, were to vest in the first defendant and Mr Scanlan appears to have signed not only the defendant's consent to the proposed allocation of unit entitlement but also the application on behalf of the strata company as a member of the council.
27 The affidavit of Ronald Arthur Acott is the only affidavit filed on behalf of the first defendant. Mr Acott describes himself as a consultant retained by the first defendant to advise on the subdivision of Lots 42, 64, 66 and 70 on Strata Plan 38579. Mr Acott confirms that the plan of re-subdivision of Strata Plan 38579 is not solely for the purpose of
(Page 9)
- excising from Lot 66 that part of the Lot located on the 6th floor. Three other Strata Lots are dealt with in the plan of re-subdivision.
28 Mr Acott states that, in order to register the plan for re-subdivision, the Certificate of Title for the four affected Strata Lots have to be produced to Landgate. The Strata Manager, Mr Oliver has had the carriage of obtaining production of the required Certificates of Title. The Certificates of Title for Lot 66 and the penthouse have been available for production to Landgate since April 2007.
29 According to Mr Acott, the plan of re-subdivision alters approximately half of the unit entitlements of the Strata Lots within the Wills Building and all lot owners whose unit entitlement is affected by the re-subdivision are required to consent to its registration. As at February 2007, the consents of the then lot owners whose unit entitlement was affected by the plan of re-subdivision had given their consent to its registration. However, if a lot whose unit entitlement is affected is sold or refinanced, the consent of the new owner's mortgagee or caveator would be required.
30 Mr Acott states that the plan of re-subdivision is in order for dealing subject to Form 3 and 7 and the Transfer or Disposition of Common Property and lots. Form 3 is the certificate of the licensed valuer containing the new schedule of unit entitlements of all lots within the strata scheme. Form 7 is the consent of the Perth City Council required under s 23 of the Strata Titles Act 1985 (WA).
31 Mr Acott asserts that neither he nor the first defendant can compel production to Landgate of the Certificates of Title that have not yet been produced and proposed Lot 76 cannot be registered until all Certificates of Title have been produced along with Forms 3 and 7 and the Transfer or Disposition of Common Property and Lots.
The application
32 On an application to extend the operation of a caveat, the caveator must satisfy the court that its claim has or may have substance: s 138C(2)(a). This has been interpreted as an onus on the caveator to satisfy the court that:
(a) there is a serious question to be tried as to whether a caveatable interest exists; and
(b) the balance of convenience favours the retention of the caveat.
(Page 10)
33 See Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 48, 50 per Owen J; Eng Mee Yong v Letchumanan [1980] AC 331, 337 (Lord Diplock).
34 The interest claimed by the plaintiff to require protection by caveat is an equitable estate or interest as purchaser of the fee simple of Lot 76 defined as part of Lot 66 on Strata Plan 38579. In Fernandes v Houstein (1963) 4 FLR 355 the court held that the interest of a purchaser under an uncompleted agreement for the sale of land has an interest in the land which may be protected by a caveat.
35 Further, the plaintiff relies on the decision of Malcolm CJ in Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 in which it was held that a purchaser under an uncompleted conditional agreement for the sale of land has an interest in the land which may be protected by a caveat (at 432).
36 At the time the caveat was lodged, the plaintiff's attempts to obtain any response from the first defendant or its agents were met by a wall of silence. However, as noted above, on 21 September 2007 the plaintiff's solicitor received a notice from the first defendant asserting that the second contract terminated by operation of law on 29 September 2006 and alternatively purporting to terminate the second contract by the notice. It is apparent from the date referred to in the notice that the basis for termination by operation of law is special condition 7 which required settlement to take place 28 days after the strata plan of re-subdivision was in order for dealing. The affidavit evidence of Mr Ehrenfeld indicates that the strata plan of re-subdivision was in order for dealing on 1 September 2006 and 28 days after that date would be 29 September 2006. In the Notice reference is made to the fact that to register the plan required for the creation of the strata lot four certificates of title, one of which is in the name of the first defendant, were required to be lodged at Landgate. The first defendant concedes that it was an implied term of the contract, in order to give it business efficacy, that the seller request production of the certificates of title by all other proprietors. This, it said, it did and produced the certificate of title of the unit owned by the first defendant. However, by 25 April 2007, the latest date for settlement contemplated by the contract, a date 28 days after 27 March 2007, not all the certificates of title of the other proprietors of land affected by the re-subdivision had been produced.
37 No evidence was placed before the court about the actions taken by or on behalf of the first defendant to ensure that all Certificates of Title
(Page 11)
- were produced. In particular, there is no evidence as to whether the first defendant did more than make an initial request.
38 The first defendant notes that the contract does not provide for the event of the other certificates of title not being produced. Therefore, it is said, on the close of business on 29 September 2006, the title for the strata lot not having issued, the contract was frustrated and by operation of law terminated.
39 In the notice the first defendant asserts in the alternative that, in the event of the contract not having been frustrated, then the buyer and seller were entitled at any time after 29 September 2006, but before title to the strata lot issued, to terminate the contract and the first defendant purports to terminate the contract.
40 I note that the first defendant does not specifically rely on special condition 6 as the basis for termination. However, cl 6 is referred to in the recitals.
41 It is also curious that, despite purporting to terminate the contract, the first defendant has not returned the plaintiff's deposit and, in fact, very recently acknowledged its receipt.
42 From the plaintiff's point of view, the primary problem with the suggestion that the first defendant should terminate the contract on the bases outlined is that, despite reassurances to the plaintiff that the re-subdivision would take only a short period of time, the first defendant has taken little and insufficient action to ensure that the re-subdivision took place in a timely fashion. Most significantly, the first defendant failed to inform the plaintiff of any relevant factor relating to the re-subdivision or settlement, including that the new Strata Plan was ready for dealing or that there was any difficulty with issue of the proposed strata lot. Neither did the first defendant respond to any of the plaintiff's attempts to obtain information or to confirm statements made to the plaintiff. By failing to communicate relevant and significant matters to the plaintiff, the first defendant deprived the plaintiff of the opportunity to address any deficiencies in the information or materials required for the approval of the re-subdivision.
43 A suggestion was made from the bar table that the first defendant might have acted in this way in order to ensure that the contract fell through so that the unit could be sold for a higher price as a result of the increases in the property market. The only evidence to support this assertion is a note made by the plaintiff of a conversation on 12 March
(Page 12)
- 2007 with Mr Stanley in which Mr Stanley said that he was concerned about his partner not paying him the money he had advanced to him if he sold the unit to the plaintiff as agreed. Mr Stanley said his partner told him to let the contract date pass and then they could sell it for more. He said that he did not want to get in a dispute with his partner about this.
44 The alleged conduct of the first defendant is certainly consistent with the account given by the plaintiff of his conversation with Mr Stanley. In my view, the circumstances do allow an inference to be drawn that there is some advantage to the first defendant in failing to communicate effectively with the plaintiff, in bringing an application for re-subdivision which affects properties other than proposed Lot 67 and thereby requiring the production by others of certificates of title, and in failing to advise the plaintiff of the fact that the strata plan was ready for dealing.
45 It is further submitted by the plaintiff that this evidence also suggests that the first defendant has breached its 'best endeavours' obligation under cl 13(4)(b) of the General Conditions.
46 There are other concerns about the first defendant's conduct including the fact that, as the proposed strata plan attached to the second contract is dated 23 September 2004, the first defendant must have known even before entering into the first contract that there was an error in the strata plan as a result of which the sixth floor space was included in Lot 30 despite the fact it could not be accessed through Lot 30.
47 On behalf of the plaintiff it is said that there is a serious question to be tried as to whether special condition 6 can still be relied upon by the first defendant, given its verbal waiver. Whether cl 6 can be relied upon is a matter of fact to be resolved at trial. However, it is not clear whether the first defendant is in fact relying on cl 6 and I note that the waiver does not extend to special condition 7 which is clearly relied upon, as is evident from the Notice.
48 The plaintiff further relies on the proposition that, even if the first defendant does purport to terminate the second contract, the first defendant could not be allowed to rely on this termination because to do so would permit it to take advantage of its own wrongs. In this context, reliance is placed on the decision in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 544, 567, approving the following extract from Gange v Sullivan (1966) 116 CLR 418, 441:
(Page 13)
- Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end. Accordingly ... we are prepared to treat non-fulfilment of the condition as rendering the contract voidable rather than void.
49 It is the case that the fulfilment of special conditions 6 and 7 are, to a substantial degree, within the control of the first defendant as owner of Lot 66. Indeed, as counsel for the plaintiff points out, the first defendant appointed a consultant to deal with the re-subdivision. The plaintiff maintains that there is evidence that the first defendant has not done what is reasonably necessary to enable the condition to be fulfilled. That evidence can be summarised as follows:
• That in June 2006, Mr Oliver on behalf of the first defendant, advised that the first defendant was taking the opportunity afforded by the re-subdivision to 'tidy up' some other unrelated matters concerning other strata titles but that he did not believe this would cause undue delay;
• By letter dated 6 February 2007 Envoy Settlement Agency advised that 'certain consents may be missing';
• The plaintiff was informed by Mr Acott and Mr Oliver in separate conversations that four 'consents' were missing, including one from Mr Stanley;
• Mr Acott indicated that he thought the entire process should only have taken three to four months from commencement;
• Mr Acott said words to the effect that he understood Envoy Settlements were dealing with the consents but he had recently discovered that nothing had been done to obtain consents within the last month;
• Mr Oliver indicated that his company was not only the selling agent in respect of the property but also the strata manager of the whole building and Mr Stanley had asked him to try to obtain necessary consents from the various strata title holders. Mr Oliver indicated that his company had not been formally engaged to do this work and would not be paid for it, and that it was the responsibility of the officers of the first defendant to do this work;
(Page 14)
- • The plaintiff was not advised until 15 March 2007 when he spoke to Mr Acott that the new strata plan of re-subdivision had been in order for dealings since 1 September 2006;
• On 22 March 2007 the plaintiff's solicitor wrote to the first defendant alleging default under the second contract but no response to the letter was received;
• No response was received to the plaintiff's request for written confirmation of the waiver of special condition 6.
50 I have reached the conclusion that, on the information presented to the court, it is clearly arguable that the first defendant has failed to meet its 'best endeavours' obligation under cl 13(4)(b) of the General Conditions and has also failed to meet the implied promise referred to in Perri v Coolangatta Investments Pty Ltd (at 541, 545, 557, 566)to do all that was reasonable to effect the re-subdivision and the creation of Lot 76. To conclude, in these factual circumstances, that it could not even be argued that the first defendant failed to take all reasonable steps or failed to meet its best endeavours would be to allow the first defendant to take advantage of its own wrongs. Indeed, counsel for the first defendant concedes that this issue is arguable and relies solely on the issue which I will now address.
51 The first defendant maintains that the plaintiff's interest in the proposed strata lot is commensurate with what a Court of Equity would specifically enforce and relies on the decision of the Privy Council in Central Trust and Safe Deposit Co v Snider (1916) 1 AC 266, 272 in support of that proposition. It is said that, in this case, whatever rights the plaintiff may have, they do not extend to an interest in Lot 66 sufficient to support a caveat as there is nothing which the court could specifically order the first defendant to do, which if done would convert the first defendant's entitlement under the contract to receive the purchase monies in exchange for a conveyance of title to the proposed lot.
52 In Central Trust and Safe Deposit Co v Snider the Privy Council observed (at 271 - 272) that, where a person agrees for valuable consideration to settle a specific estate he becomes a trustee of it for the intended objects, and all the consequences of a trust will follow. However, the Privy Council emphasised (at 272) that it must be remembered that this principle is but the logical consequence of the power of a Court of Equity to grant, and its practice in granting, specific performance of a contract to convey or settle real estate. Support for this proposition was found in a prior consideration of the issue in Howard v Miller [1915] AC 318 where the court concluded that, though the
(Page 15)
- purchaser of real estate might, before conveyance, have an equitable interest capable of registration, such interest was in every case commensurate only with what would be decreed to him by a Court of Equity in specifically performing the contract and could only be defined by reference to the relief which the court would give by way of specific performance. That proposition was adopted by the High Court in Brown v Heffer (1967) 116 CLR 344, 349 (Barwick CJ, McTiernan, Kitto and Owen JJ).
53 It is submitted on behalf of the first defendant that the facts of this case are distinguishable from the facts in Legione v Hately (1983) 152 CLR 406, Stern v McArthur (1988) 165 CLR 489 and Kuper v Keywest Constructions Pty Ltd, the authorities on which the plaintiff relies. The first defendant submits that in each of those cases what could have been ordered to have been done by a seller would have led to a conveyance of title to a purchaser. In particular, in Kuper v Keywest Constructions Pty Ltd, all that had to be done when the caveat was lodged was for the seller to request registration of the Strata Plan, which is something the first defendant cannot in this case do, as Strata Plan 38579 is under the control of the owners of the Wills Building.
54 I accept that the circumstances in Legione v Hately and in Stern v McArthur differ from those which apply in this case. The contract in Legione v Hately provided for the conveyance of the land on the payment of the balance of the purchase price on 1 July 1979. A condition of the contract stated that time was of the essence, but that a party could not enforce his rights and remedies under the contract unless written notice was given specifying the default and stating the intention to enforce those rights and remedies unless the default were made good within a period of not less than fourteen days of the notice and the other party failed to remedy the default.
55 The purchaser did not settle on the due date. On 26 July 1979 the vendor served a notice specifying as defaults the purchaser's failure to pay, inter alia, the residue of the price. On 14 August the vendor claimed that the contract had been rescinded in consequence of the notice. A later tender of the residue of the price was refused. The purchaser commenced an action claiming specific performance of the contract of sale and the vendor counterclaimed for a declaration that the contract had been validly rescinded. The court held that specific performance may be granted in favour of a purchaser who has breached an essential term of a contract for the sale of land. However, it was made clear that the grant of such relief is exceptional: per Gibbs CJ and Murphy J at 423, 425, 429.
(Page 16)
56 In the course of his judgment, Brennan J referred (at 456) to the principle that the only rights which the purchaser acquired in the land were her rights under the contract and her interest in the land, being an equitable interest, was commensurate with the relief which equity would give her by way of enforcing the executory contract of sale - usually by a decree of specific performance.
57 Apart from confirming the principle on which the first defendant relies, it is the case that the contract being considered was not conditioned on anything other than the payment of the purchase price. However, Gibbs CJ and Murphy J considered (at 429) that relief could be granted against forfeiture of interest in property (providing forfeiture is unjust in the circumstances) as a preliminary to an order for specific performance in favour of a purchaser, notwithstanding that the purchaser was in breach of a time stipulation made essential by the contract. Further, Mason and Deane JJ expressed the following view (at 446):
A competing view - one which has much to commend it - is that the purchaser's equitable interest under a contract of sale is commensurate not with her ability to obtain specific performance in the strict or primary sense, but with her ability to protect her interest under the contract by injunction or otherwise … .
58 However, it is the case that Mason and Deane JJ accepted as correct the statement in Brown v Heffer, as did Gibbs CJ and Murphy J (at 446).
59 In Stern v McArthur, the contract for the sale of land provided for the payment of the balance of the purchase price by monthly instalments together with interest. As in Legione v Hately¸the contract did not require a party to comply with a condition, the fulfilment of which involved an act on the part of a third party.
60 Deane and Dawson JJ observed (at 522) that the extent of a purchaser's interest is to be measured by the protection which equity will afford to the purchaser which would include remedies other than specific performance, and including an injunction. This, of course, is a variation on the statement of principle in Brown v Heffer and widens the circumstances in which an equitable interest might be established.
61 In Stern v McArthur, Gaudron J considered the decision in Legione v Hately and observed (at 536) that it was decided in that case that a less restrictive view should be taken of the power to grant specific performance to a purchaser even though the contract had been rescinded
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- following the breach by the purchasers of an essential term. Gaudron J observed (at 537):
There is reason to accept that if, at law and in equity, a contract has been rescinded it may be necessary to reinstate the contract as a preliminary to the grant of specific performance. On this basis, as Mahoney JA observed [one of the judges of the Court of Appeal], 'termination of the contract should be set aside as on relief against forfeiture'. However, there is a degree of circularity in the notion that it is necessary to grant relief against forfeiture of an interest in land as a preliminary to the grant of specific performance. The interest in land forfeited by a purchaser under a contract of sale is merely an equitable interest commensurate with the ability to protect the interest under the contract by obtaining specific performance: Legione at 446-447 and 456-457; Bahr v Nicolay [No 3] (1988) 164 CLR 604 at 610-612, 645-647. The issue raised by a purchaser who seeks specific performance of a contract which has been rescinded is not whether relief should be granted against forfeiture of the interest arising under that contract, but whether specific performance remains an available remedy notwithstanding rescission.
63 In Kuper v Keywest Constructions Pty Ltd, the other case on which the plaintiff relies, Keywest was the registered proprietor of certain land upon which it was erecting a block of home units. The Kupers entered into two agreements for the sale of land by way of Offer & Acceptance relating to Units 9 and 10 in the proposed strata plan. At the time of entering into the agreements, no strata plan had been registered at the Titles Office and the Town Planning Board had not approved the strata
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- plan. Some 14 months after the agreement was entered into, Keywest wrote to the Kupers informing them that the contract had been terminated due to non-compliance with the General Conditions which were incorporated into the agreement. The Kupers lodged a caveat, describing the land being caveated as 'portion only' of the relevant Lot number, diagram and Certificate of Title. Keywest requested the Kupers to withdraw the caveat and register a new caveat limited to Units 9 and 10 so that the settlement of other lots could take place. However, the Kupers could not sign the withdrawal of caveat until after the proposed settlement date of the other lots because they were overseas at the time and unaware of the correspondence requesting them to sign the withdrawal. Keywest then brought proceedings and an order was made declaring that Keywest was entitled to compensation under s 140 of the Transfer of Land Act 1893. The Kupers appealed against the order alleging, inter alia, that the caveat did correctly identify the estate or interest of the land which it was sought to protect and claiming specific performance of the contracts.
64 Malcolm CJ, with whom Pidgeon and Seaman JJ agreed, held that the identity of the portion or the land the subject of the caveat was directly related to the interest claimed and was a sufficient description of the portion of the land sought to be affected by the caveat. The court also considered whether the Kupers had an interest in the land which could be protected by caveat. However, before addressing that issue, Malcolm CJ considered the nature of Keywest's obligation under a contract involving the sale of units under a proposed strata plan.
65 Malcolm CJ held (at 427) that, as a matter of construction, it was an implied term of each of the contracts that Keywest would do all things necessary on its part to enable the Kupers to have the benefit of the contract. Malcolm CJ also held (at 427 - 428) that it was a condition of each contract that Keywest would do everything on its part to comply with the requirements of the Strata Titles Act 1985 and that the Kupers would on completion of the sale be entitled to a transfer of an estate in fee simple in the units and a share in the common property. That condition arose by virtue of the provisions of the Strata Titles Act 1985 and a clause of the General Condition which obliged a vendor to seek all necessary approvals to the development and expeditiously complete, or cause to be completed, the development.
66 Malcolm CJ then addressed the issue of whether the Kupers had an interest in the property which could be protected by caveat. After citing the statement in Brown v Heffer, referred to above, his Honour considered the statement of Mason v Deane JJ in Legione v Hately
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- (at 446) and of Deane and Dawson JJ in Stern v McArthur, both of which are referred to above. Malcolm CJ then considered (at 430) the line of cases which rest on the proposition that, where a contract for sale of land is conditioned upon the approval of some authority, such as approval of a subdivision, the purchaser has no equitable interest in the land sufficient to support a caveat until the contract becomes unconditional. As his Honour observed (at 430), a number of these decision were reviewed by Dowsett J in Re CM Group Pty Ltd's Caveat [1986] Qd R 381, 383 - 389 in the light of later decisions including Legione v Hateley. Dowsett J also considered the authorities cited for the 'competing view' referred to by Mason and Deanne JJ in Legione v Hatley (at 446) before concluding (at 389) that, on those authorities, a purchaser under a conditional contract of sale would have an equitable interest in the land where the equitable interest was sufficient to be protected by way of injunction. Dowsett J also noted that the difficulty with the narrow approach was that it compels a purchaser under such a contract to go to the trouble and expense of seeking a discretionary remedy by way of injunction with the necessity to show threat of breach of contract when it was clearly intended that such purchaser have the benefit of the caveat procedure. Nevertheless, Dowsett J felt compelled to follow the Queensland authorities which upheld the more restricted view: at 390.
67 As Malcolm CJ observed (at 431), since Dowsett J decided CM Group Pty Ltd's Caveat, the High Court decided Stern v McArthur and Deane and Dawson JJ adopted a broad approach to the measure of the purchaser's interest on the basis that it is to be measured by the protection equity will afford, including an injunction. The High Court also decided Bahr v Nicolay (No 2) (1988) 164 CLR 604 where the court was concerned with a contract which was conditional upon the execution of a formal document in circumstances which carried a necessary implication that each party would sign a contract in accordance with the agreement. Mason CJ and Dawson J stated (at 611 - 612) that, in cases of that kind, the court will not only order that proper steps be taken by the defendant in accordance with his promise to secure fulfilment of the condition but will also order specific performance generally, subject to fulfilment of the condition. Their Honours added (at 612):
The existence and extent of the purchaser's equitable estate or interest in the property the subject of the contract of sale is commensurate with his ability to specifically enforce the contract. If the vendor's obligation to transfer title is subject to a contingency then, as stated above, any order for specific performance will be expressed to be subject to that contingency. In that event, the purchaser, though entitled to specific performance, has a contingent equitable estate or interest in the land until the contingency is
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- fulfilled. Whether the making of the formal contract in the present case is such a contingency as to make the appellants' equitable interest, if any, in lot 340, arising under cl 6, a contingent interest is a question which we need not pursue.
68 Wilson and Toohey JJ (at 638) and Brennan J (at 645 - 647) considered that the relevant interest was an equitable interest in the land.
69 Having considered these authorities, Malcolm CJ held (at 432) that, in appropriate circumstances, a court would be prepared to protect a purchaser's interest under a contract at the so-called inchoate stage, both by granting specific performance in the sense of requiring the vendor to do all things necessary to be done to procure registration of the strata plan, as well as restraining the vendor by injunction from dealing with the land inconsistently with the purchaser's right to specific performance of the contract, both in the special sense and, subject to fulfilment of the condition, in the ordinary sense.
70 Although the conclusion drawn by Malcolm CJ is based on a less restrictive interpretation of the principle in Brown v Heffer, I note that it is not expressed consistently with the approach taken by Mason CJ and Dawson J in Bahr v Nicolay (No 2) (at 611 - 612) and is more akin to the view expressed by Mason and Deane JJ in Legione v Hateley (at 446).
71 Nevertheless, there is a clear line of authority which accepts the existence of an equitable interest in land in relation to conditional contracts. It appears from the texts on equitable remedies that this issue remains the subject of debate. In Meagher, Gummow & Lehanes Equity Doctrines & Remedies (4th ed, 2002), the authors, Meagher, Heydon and Leeming, having stated the strict interpretation, posit the question, 'What if the agreement for lease is subject to an unfilled condition, not being one the lessor is obliged to perform?', and give the example of consents by authorities under relevant legislation. The authors state [at 2-205]:
The contract cannot be specifically performed until the consent has been received, and the lessor may be obliged by order to do what the lessee reasonably requires of him to bring about fulfilment of the condition; in the meantime, the lessee may enforce by injunction the obligation of the lessor to do nothing to the prejudice of the lessee … This may be said to be specific performance in the 'loose sense'.
72 The authors refer in some detail to the views expressed on the issue by Meagher JA in Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639, 654 - 655. Meagher JA referred to what is described as a 'famous footnote' to Sir Frederick Jordan's Chapters in
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- Equity in New South Wales (6thed, 1947) 52 footnote (e). The text to which the footnote refers sets out the strict interpretation of the principle referred to above. The footnote is reproduced in the judgment and is in these terms:
Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties.
Meagher JA's comment in relation to the footnote is this: 'Great as is the homage we all owe to Sir Frederick Jordan, one must state that the footnote is nonsense'. However, his Honour does observe (at 654) that the statement has been approved by the High Court on about four occasions and refers to those four judgments which include Legione v Hateley and Stern v McArthur. Meagher's comment with respect to that fact is that this 'does not convert it into sense' and adds that the footnotes has been accorded a chillier welcome by Gummow J, writing extra-judicially, in 'The Equity of Sir Frederick Jordan' (1991) 13 Syd LR 263. Meagher JA observes that the footnote, in its expanded form, means that a contract of sale of land to which a minister's consent is required would effect a total assignment of the beneficial interest in the land, a proposition which he indicates a considerable number of authorities demonstrate is the opposite of truth.
73 In my view, it can be seen from the content of the debate, and not only from the decisions made in the various authorities, that the less restrictive approach is said to apply to situations where the condition is to be carried out by a third party. Indeed, it is this factor that has led to the strongest criticism of the approach. On that basis I am unpersuaded by the first defendant's submission that, because this case can be distinguished from the facts in Legione v Hartley, Stern v McArthur and Kuper v Keywest Constructions Pty Ltd, the narrow interpretation of the principle must apply. Indeed, it is apparent from the reasons of Malcolm CJ in Kuper v Keywest Constructions Pty Ltd that approvals were still required before legal title could pass to the Kupers and his Honour identified the nature of Keywest's obligation as being, inter alia, the obligation to seek all necessary approvals to the development. In my view, it cannot be said that Kuper v Keywest Constructions Pty Ltd can be distinguished on its facts. In any event, apart from the particular facts, the reasoning in all three cases makes it clear that it is not only in cases where an act on the part of the vendor is sufficient for title to pass that an equitable interest may be said to arise.
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74 I might add that the less restrictive approach would overcome the wholly undesirable situation where a vendor makes little or no attempt to ensure that the necessary action on its part is carried out or where the vendor actively attempts to ensure that the necessary conditions are not met. The more restrictive approach would allow a vendor to benefit from its own wrongdoing, something which the law also prohibits: see Perri v Coolangatta Investments (at 544, 567)
75 I have been unable to identify any more recent High Court decisions in which this issue has been addressed. In those circumstances, I am of the view that this issue is well and truly arguable and there is, therefore, a serious question to be tried on whether a caveatable interest exists.
76 Further, there is, in my view, a certain tension between the principle that prohibits a party from benefiting from its own wrongdoing and the narrow interpretation of an equitable interest preferred in some authorities. It is not for the court on an application of this nature to resolve the issue but I consider the existence of the two competing principles is, of itself, a sufficient reason for the caveat to continue whilst the substantive issues are resolved.
77 As to the balance of convenience, this issue was not pressed on the part of the first defendant. There is a wealth of authority stating that the jurisdiction to remove a caveat should not be exercised unless the case is one in which it is clear that the estate or interest sought to be protected cannot be made out. A reasonably arguable case will result, in the ordinary course, in an order that the caveat remain and the disputed question be left for trial: Jandric v Jandric [1999] WASC 22 [25]; Lee v Mavaddat [2007] WASC 18 [35] - [36]; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd, 50.
78 For these reasons I consider that it is appropriate to order that the caveat remain in place until further order.
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