Foothills Developments Pty Ltd v Lone Star Developments Pty Ltd
[2005] WASC 38
FOOTHILLS DEVELOPMENTS PTY LTD -v- LONE STAR DEVELOPMENTS PTY LTD & ORS [2005] WASC 38
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 38 | |
| Case No: | CIV:1035/2005 | 3 MARCH 2005 | |
| Coram: | MASTER SANDERSON | 14/03/05 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Operation of caveat extended | ||
| B | |||
| PDF Version |
| Parties: | FOOTHILLS DEVELOPMENTS PTY LTD (ACN 056 589 014) LONE STAR DEVELOPMENTS PTY LTD (ACN 109 385 766) VINCENZO CERAVOLO MARIA GRAZIA CERAVOLO THE REGISTRAR OF TITLES |
Catchwords: | Transfer of Land Act Application to extend operation of caveat Turns on own facts |
Legislation: | Sale of Land Act 1970 (WA), s 5 Transfer of Land Act 1893 (WA), s 138C |
Case References: | Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 American Cyanamid Co v Ethicon Ltd [1975] AC 396 Baker v Jessup [2000] ANZ Conv R 170 Castlemaine Tooheys Ltd v State of South Australia (1986) 161 CLR 148 CLR 1 Dainford Ltd v Lam (1985) 3 NSWLR 255 Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 Foran v Wight (1989) 168 CLR 385 Grover & Anor v Taylor & Ors, unreported; SCt of WA; Library No 918901; 6 June 1991 Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997 Hamdan v Widodo & Anor [2004] WASC 123 Jandric v Jandric & Anor [1999] WASC 22 KLDE Pty Ltd (In Voluntary Liq) v Commissioner of Stamp Duties for the State of Queensland (1984) 155 CLR 288 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 Leros Pty Ltd v Terara Pty Ltd (1991) 174 CLR 40 McNally v Waitzer (1981) 1 NSWLR 294 Olympic Holdings Pty Ltd & Anor v Lochel & Anor [2004] WASC 61 Porter v McDonald & Registrar of Titles [1984] WAR 271 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASCA 30 R v Poggioli (1923) 32 CLR 222 Roadshow Entertainment Pty Ltd v CEL Home Video Pty & Anor (1997) 42 NSWLR 462 The Commonwealth of Australia v The State of New South Wales & Anor (1923) 33 CLR 1 Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
AND
LONE STAR DEVELOPMENTS PTY LTD (ACN 109 385 766)
Second Plaintiff
VINCENZO CERAVOLO
First Defendant
MARIA GRAZIA CERAVOLO
Second Defendant
THE REGISTRAR OF TITLES
Third Defendant
Catchwords:
Transfer of Land Act - Application to extend operation of caveat - Turns on own facts
(Page 2)
Legislation:
Sale of Land Act 1970 (WA), s 5
Transfer of Land Act1893 (WA), s 138C
Result:
Operation of caveat extended
Category: B
Representation:
Counsel:
First Plaintiff : Ms F C E Davis
Second Plaintiff : Ms F C E Davis
First Defendant : Mr J G Kitto
Second Defendant : Mr J G Kitto
Third Defendant : No appearance
Solicitors:
First Plaintiff : Halperin Fleming Meertens
Second Plaintiff : Halperin Fleming Meertens
First Defendant : Kitto & Kitto
Second Defendant : Kitto & Kitto
Third Defendant : No appearance
Case(s) referred to in judgment(s):
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Case(s) also cited:
American Cyanamid Co v Ethicon Ltd [1975] AC 396
Baker v Jessup [2000] ANZ Conv R 170
Castlemaine Tooheys Ltd v State of South Australia (1986) 161 CLR 148
CLR 1
(Page 3)
Dainford Ltd v Lam (1985) 3 NSWLR 255
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Foran v Wight (1989) 168 CLR 385
Grover & Anor v Taylor & Ors, unreported; SCt of WA; Library No 918901; 6 June 1991
Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997
Hamdan v Widodo & Anor [2004] WASC 123
Jandric v Jandric & Anor [1999] WASC 22
KLDE Pty Ltd (In Voluntary Liq) v Commissioner of Stamp Duties for the State of Queensland (1984) 155 CLR 288
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Leros Pty Ltd v Terara Pty Ltd (1991) 174 CLR 40
McNally v Waitzer (1981) 1 NSWLR 294
Olympic Holdings Pty Ltd & Anor v Lochel & Anor [2004] WASC 61
Porter v McDonald & Registrar of Titles [1984] WAR 271
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASCA 30
R v Poggioli (1923) 32 CLR 222
Roadshow Entertainment Pty Ltd v CEL Home Video Pty & Anor (1997) 42 NSWLR 462
The Commonwealth of Australia v The State of New South Wales & Anor (1923) 33 CLR 1
Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189
(Page 4)
1 MASTER SANDERSON: This is the plaintiffs' application for the extension of caveat number J95572. The application is made pursuant to s 138C of the Transfer of Land Act 1893 (WA). That section is in the following terms:
"138C. Powers of Supreme Court
(1) A caveator who is served with a notice under section 138B(1) may apply to the Supreme Court, in accordance with rules of the Court, for an order extending the operation of the caveat.
(2) On the hearing of an application under subsection (1), the Supreme Court -
(a) if satisfied that the caveator's claim has or may have substance -
(i) may make an order extending the operation of the caveat for such period as is specified in the order;
(ii) may make an order extending the operation of the caveat until the further order of the Court; or
(iii) may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;
(b) if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and
(c) may make such ancillary orders in relation to the application as it thinks fit.
(3) An interim order under this section may be made ex parte unless the Court orders otherwise.
(4) The applicant shall ensure that the Registrar is served with a copy of each order made by the Court on an application under subsection (1)."
(Page 5)
2 Both the plaintiffs and the first and second defendants have filed a number of affidavits sworn by various individuals in support of and in opposition to this application. Were this matter ever to get to trial, there may be some argument on the facts. However, for the purposes of this application, counsel for the first and second defendants was prepared to accept that the facts were as set out by the plaintiffs. That concession was made only in the context of this application. Counsel accepted that at this stage disputes of fact cannot be resolved. Furthermore, both parties took exception to various paragraphs of the affidavits. Both parties were content to note their objections without actually moving to strike out what was said to be the offensive paragraphs. In the event I have not had to refer to any of the paragraphs to which objection is taken in determining the outcome of this application.
3 The first and second defendants are the registered proprietors of a property known as Lot 59, St John Road, Wattle Grove ("Lot 59"). On 12 November 2003 the first plaintiff made an offer that it, or its elected nominee, would purchase Lot 59 from the first and second defendants for the sum of $830,000 (see affidavit of Mark Abbott, sworn 13 January 2005, annexure "MA4"). The offer was made on a standard Offer and Acceptance form, which incorporated the Joint Form of General Conditions for the Sale of Land (2002 Revision). Annexed to the offer and acceptance was a form titled Annexure "A". Clause 7 of the annexure allowed the purchaser to use a nominee company to effect the purchase in due course. The second plaintiff was not incorporated as at the date the offer to purchase was made. The first plaintiff has subsequently put forward the second plaintiff as its nominee. This arrangement has no effect on the outcome of this application and I mention it only to explain the fact that there are two plaintiffs in this action.
4 Clause 4 of annexure A dealt with the deposit. It is of some importance and I will quote the clause in full (see annexure "MA5"):
"4.Deposit & Settlement. (Variation to General Conditions for the sale of land). The deposit will be paid as described in conditions 5(a)(b) below:
a) 30 days after signing the Purchaser will pay direct to the Vendor the sum of $10,000.00 being the deposit money this deposit money is not refundable but will be part of the Purchase Price at settlement.
(Page 6)
- b) On the 30th April 2004 this deposit money will be increased by $40,000.00 to bring the total deposit paid to $50,000.00. This money is not refundable but will be part of the purchase price at settlement.
c) All parties agree that the Vendor is free to spend the Deposit money in any way that they may wish to do so and that upon that payment of this money that the Purchaser will have no further claim on this money, all parties agree, that this Deposit money forms part of the purchase price if the contract proceeds to settlement and that the balance of the purchase price is to be paid at settlement."
5 The settlement date specified in the contract was 30 June 2004. The plaintiffs paid the deposit in full on or before the due date. On 20 May 2004 the first plaintiff and the first and second defendants entered into a variation to the contract of sale, which extended the date of settlement from 30 June 2004 to 30 July 2004 (annexure "MA6"). On 17 August 2004 the first plaintiff and the first and second defendants entered into a further variation of the contract of sale. The second variation extended the date for settlement to 30 September 2004 and increased the deposit payable by $100,000 to $150,000. This deposit was to be paid by 26 August 2004 (annexure "MA7"). It is at this point that the transaction ran into difficulties.
6 On 27 August 2004 the first plaintiff prepared a proposed third variation to the contract of sale which varied the terms as to when and how the deposit was to be paid and the date for settlement to 30 September 2004 (annexure "MA8"). By this stage the plaintiffs had not paid the $100,000 anticipated by the second variation. The first plaintiff presented to the first and second defendants the proposed third variation and a cheque for $30,000. The first and second defendants accepted the $30,000 but did not sign the third variation. On or about 3 September 2004 Mark Abbott ("Abbott"), a director of the first and second plaintiffs, met with one Carlo Pimerano ("Pimerano"), a representative of the first and second defendants' solicitor, to hand over the balance of the deposit anticipated by the third extension. Pimerano advised Abbott that he was not sure the first and second defendants would agree to a further extension. Pending finalisation of that question, the sum tendered would be retained in the first and second defendants' solicitors'
(Page 7)
- trust account until settlement. Some further discussion took place but it is clear that there was no agreement in terms of the third variation.
7 On 1 October 2004 the first and second defendants' solicitor prepared and served a default notice (annexure "MA10".) The notice itself refers to the contract and the fact that the original date for settlement had been extended from 30 June 2004 to 30 July 2004 and then to 30 September 2004. The notice advises that the first and second defendants were ready, willing and able to settle as at 30 September 2004 and that they remained ready, willing and able to proceed to settlement. The notice called upon the plaintiffs to rectify their default within 10 business days of the service of the notice and advised that if the default was not rectified, the first and second defendants might exercise their rights under the contract, including the right to terminate the contract.
8 It is worth pausing at this point to say that there can be no doubt that this default notice was validly issued. Settlement was due on 30 September 2004 and the plaintiffs were not in a position to pay the balance of the purchase price. It was not argued by counsel for the plaintiffs that the default notice was in any way defective.
9 This default notice was the basis of a notice of termination dated 21 October 2004. It is the first and second defendants' position that the contract has been validly terminated. Events then took a slightly unusual turn. Some time just prior to 30 September, Abbott inspected Lot 59. He found that the house on Lot 59 was no longer in the condition it had been in when the purchase took place. He says the hot water system, the carpets, the oven and cooking equipment, the light fittings and window treatments had been removed from the house. Some brick paving and a post and rail fence had been disturbed and a number of sheds had been removed from the back yard. On Abbott's evidence, at no stage did the first and second defendants advise him or anyone else connected with the plaintiffs that any items had been removed from Lot 59. On 14 October 2004 the plaintiffs forwarded to the first and second defendants' solicitors a letter advising that in their view, the first and second defendants were not ready, willing and able to settle because of the removal of items from and damage to Lot 59. The first and second defendants' solicitors responded on the same day. They advised their clients were ready, willing and able to settle and that the matters raised by the plaintiffs were "incorrect". By way of response, and again on the same day, the second plaintiff advised it intended lodging a caveat over Lot 59. This was done and it is that caveat which is the subject of these proceedings (annexure "MA11-13").
(Page 8)
10 There was much correspondence between the parties as to the nature of the damage to Lot 59 and what chattels had been removed. For present purposes it is not necessary for me to detail that correspondence or make any findings of fact on these issues. Counsel for the first and second defendants was prepared to concede that for the purposes of this application, it was to be assumed that the chattels had been removed and that the items allegedly damaged were so damaged. That was an entirely proper concession. Resolution of the question of the precise condition of Lot 59 in early October 2004 is a matter to be determined at a later date. At the very least, had the concession not been made, I would have had to conclude that there was a serious question to be tried as to the condition of Lot 59 at the relevant date. It was the first and second defendants' position that even assuming the damage, there was still no basis upon which the caveat could be extended.
11 It is appropriate at this point to look at the terms of the contract - that is, to consider the relevant provisions of the Joint Form of General Conditions for the Sale of Land (2002 Revision) included in the contract between the parties. Clause 5 of the conditions is headed "Inspection". It allows a purchaser to inspect the subject property within five days before settlement date. The clause is, by its terms, mechanical. That is, it sets up the right to inspect and then sets out how arrangements are to be made for the inspection. For present purposes it is important to note that clause 5 anticipates but does not compel an inspection and does not, by its terms, say anything about what is to happen if the inspection reveals that the property is not in the same condition as it was in when it was purchased. It is also worthy of note that whatever the circumstances of the inspection by Abbott of Lot 59, it was not made pursuant to cl 5.
12 Clause 8 is headed "Risk". It is central to resolution of this dispute and I will quote it in full:
"8 Risk
8.1 Passing of risk
Despite any rule of law or equity to the contrary, risk relating to the Property passes from the Seller to the Buyer when the:
(a) Purchase Price is paid in full; or
(b) Buyer becomes entitled to possession of the Property; or
(Page 9)
- (c) Buyer is given possession of the Property;
whichever first occurs.
- 8.2 Damage or destruction
(a) If the Property includes a building or other improvement which is:
(1) destroyed; or
(2) partially damaged,
- before Settlement, subclause (b) will apply.
(b) If:
(1) the building is a residence and is made substantially uninhabitable; or
(2) in any other case, a building or other improvement is made substantially unusable for the current use as at the Contract Date;
clauses 8.3 to 8.7 will apply.
8.3 Notice of damage or destruction
The Seller must immediately following the damage or destruction referred to in clause 8.2, give Notice to the Buyer specifying the following.
(a) Full particulars of the damage or destruction.
(b) That the Buyer may, within 10 Business Days of service of the Notice terminate the Contract.
(c) That it is desirable for the Buyer to obtain legal advice following service of the Notice.
8.4 Right of Buyer to terminate
(Page 10)
- (a) The Buyer may, within 10 Business Days of the service of Notice under clause 8.3, give Notice to the Seller that the Buyer has elected to terminate the Contract.
(b) If the Buyer gives a Notice in accordance with subclause (a), the following will apply.
(1) Subject to this subclause the Contract is terminated as from service of that Notice.
(2) The Deposit and any other money paid by the Buyer under the Contract, must be promptly repaid to the Buyer.
(3) If the Deposit has been invested by the Deposit Holder in accordance with clause 1.9, the Buyer will be entitled to the interest on the Deposit.
(4) If any other money has been paid to the Deposit Holder by the Buyer, and invested by the Deposit Holder with a Deposit Financial Institution, the Buyer will be entitled to the interest on that other money.
(5) Subject to subclause (2) to (4), no Party will have any claim or right of action against the other arising from the termination, except in respect to any matter which arose before the termination.
- 8.5 Right of Buyer to proceed
If the Buyer, within 10 Business Days of the service of Notice under clause 8.3:
(Page 11)
- (a) gives Notice to the Seller that the Buyer intends to proceed with the Contract; or
(b) does not give a Notice under subclause (a) or clause 8.4,
- the Contract will remain valid and enforceable, but clauses 8.6 and 8.7 will apply.
8.6 Reduction of Purchase Price
If clause 8.5 applies, the following will apply.
(a) The Purchase Price will be reduced by the amount of the reduction in value of the Property following the damage or destruction.
(b) The amount of the reduction of the Purchase Price will, subject to this clause, be the amount which is agreed in writing between the Seller and the Buyer within 20 Business Days of the date of service of the Notice under clause 8.3.
(c) If the reduction of the Purchase Price is not agreed in writing between the Seller and the Buyer, the amount of the reduction of the Purchase Price must, subject to subclause (d), be determined by arbitration in accordance with clause 25.1.
(d) Even if:
(1) the period specified in subclause (b) has expired; and
(2) arbitration proceedings have commenced under subclause (c),
the Buyer and the Seller may at any time agree in writing the amount of the reduction of the Purchase Price.
8.7 Variation of Settlement Date
(Page 12)
- If the Contract proceeds in accordance with clause 8.5 the Settlement Date is the date which is 10 Business Days after the amount of the reduction of the Purchase Price has been:
(a) agreed between the Buyer and the Seller; or
(b) determined by arbitration."
14 The first and second defendants say that the nature of the damage is such that it has not made Lot 59 substantially uninhabitable. They say that the building retains its structural integrity and any person or persons wishing to move into the house could do so and live quite adequately.
15 This is an issue which is not capable of resolution on the affidavit material. It is a serious question to be tried. For the purposes of this application I am prepared to assume that it is arguable that the premises are substantially uninhabitable. The question then is what consequences flow, given that the terms of cl 8.2 are satisfied.
16 Clause 8.3 anticipates that as soon as the seller - in this case the first and second defendants - become aware of the damage they are required to give a notice to the buyer - in this case the plaintiffs, specifying certain matters set out in cl 8.3(a) to (c). It is common ground between the parties that no such notice has been given. It is the plaintiffs' position that unless and until such a notice is given and the plaintiffs decide whether to terminate or proceed under cl 8.4 and 8.5, then settlement is not to take place. That, they say, is confirmed by the terms of cl 8.7. In my view, the plaintiffs are correct when they assert that after the first plaintiff notified the first and second defendants of the damage to the property, the first and second defendants were obliged to give a notice under cl 8.3 The fact that they have not done so means that they are in default under the terms of the contract. That then leads to a rather remarkable position. The plaintiffs are in default because they did not settle on 30 September 2004. That default was subject to a notice issued under cl 23 and on the first and second defendants' case, has led to termination of the contract. On the
(Page 13)
- other hand, the first and second defendants are in default because they have not complied with cl 8.3. That default has not been the subject of any notice under cl 23. The plaintiffs say the failure to issue a default notice is of no consequence. A default notice is only required where a party wishes to terminate the contract. The plaintiffs want the contract to remain on foot, so they have not issued a default notice. What they say is that the default notice issued by the first and second defendants is ineffective and cannot ground any purported termination.
17 On balance, I am satisfied that the plaintiffs' position on this question is arguable. That is to say, there is a serious question to be tried. It is inappropriate, given that this is in the nature of an interlocutory application that I say too much about my views as to the operation of cl 8 and its interaction with the rights of the first and second defendant consequent upon the failure of the plaintiffs to settle. Both parties accepted that once I concluded there was a serious question to be tried, there are grounds for extending the caveat: see Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.
18 Having reached that conclusion, it is not necessary for me to deal with other matters raised by the plaintiffs. However, given it was fully argued, I should at least refer in passing to the argument that this was a "terms contract" within s 5 of the Sale of Land Act 1970 and as a consequence, the default notice was not in a proper form and was not effective. It is sufficient if I say that were this the only argument advanced by the plaintiffs, I would not have been minded to extend the operation of the caveat. The plaintiffs' argument depends upon the variations of the contract which extended out the payment of the deposit being categorised as instalments of the purchase price, a feature of terms contracts. While I accept it is a question of fact whether or not particular instalments are properly considered part of a deposit paid over time, or instalments of the purchase price, I am not satisfied in this case there is a serious question to be tried on that issue.
19 There was one further matter raised by the first and second defendants. This has to do with the failure of the plaintiffs to make payment of the full amount of the deposit as anticipated by the second variation. It is common ground that the plaintiffs have not paid the full $150,000 anticipated by the second variation. What they have paid to the first and second defendants is the original $50,000 plus an amount of $30,000 being the first instalment proposed in the third variation, which is at present being held by the first and second defendants' solicitors in their trust account. This $30,000 was, in fact, never tendered as part payment
(Page 14)
- of the $150,000 due and owing. It was tendered in relation to the third variation. In dealing with this aspect of the application, I will assume that the $30,000 has been received by the first and second defendants in part payment of the additional deposit, leaving a balance of $70,000 still outstanding.
20 By letter dated 26 August 2004 the first and second defendants' solicitors wrote to the first plaintiff requiring payment of the $70,000 "by no later than 12 noon Friday 3 September 2004" (see first defendant's affdiavit, sworn 8 february 2005, annexure "VC14"). They went on to say that if payment was not made, this would be regarded as a breach of the contract and they referred the first plaintiff to the terms and conditions. On 3 September 2004 they wrote again requiring payment of the $70,000 by 4 pm that same day (annexure "VC16"). This letter did not make any threat to terminate the contract. As I have noted above, on 21 October 2004 the first and second defendants' solicitors purported to terminate the contract on behalf of their clients. They did so by specific reference to the default notice of 1 October 2004 (annexure "VC26"). On 16 December 2004 the first and second defendants solicitors wrote to the plaintiffs in the following terms:
"In addition to and without prejudice to our clients' notice of termination to you dated 21 October 2004, our clients hereby serve you notice that they terminate the contract for the sale of land in accordance with condition 1.5 of the Joint Form of General Conditions For the Sale of Land (2002 Revision) for your failure to pay the balance of the deposit of $70,000.00 as agreed in the variation to contract signed by the parties dated 17 August 2004." (annexure "VC30")
21 Clause 1 of the joint conditions deals with Deposit. Clause 1.4 is titled "Notice of non-payment". If a buyer does not pay the deposit in full as required by the contract, then the seller may give the buyer a notice requiring payment "within 48 hours of the service of the notice". If the buyer does not make payment as required by the notice, then the seller may terminate the contract by giving notice of termination to the buyer. It is the first and second defendants' position that the plaintiffs have not made payment of the deposit, that a notice has been served on them under cl 1.4 of the joint conditions and that as the plaintiffs have failed to comply with that notice, the contract has now been terminated under cl 1.5.
(Page 15)
22 In response to that argument, the plaintiffs say two things. First, they say that there has been no proper notice served on them under cl 1.4. They say that the letter of 26 August 2004 cannot properly be regarded as a default notice because it was superseded by the notice of 3 September 2004. As to that purported notice, they say that it did not offer the plaintiffs 48 hours to rectify their default and therefore it was not a notice which complied with cl 1.4.
23 Second, it is said that by issuing the default notice on 1 October 2004, the first and second defendants elected to regard the contract as still on foot, with the effect that they cannot now rely on any purported notice to terminate the contract pursuant to cl 1.5.
24 Once again, it is inappropriate for me to analyse in depth either of these two arguments. It is sufficient if I say that I am satisfied that both give rise to a serious question to be tried. I acknowledge that in relation to both matters raised by the plaintiffs, all necessary documents appear to be in evidence and it is hard to imagine that there are any other issues which would need to be canvassed before a final decision. However, the status of the default notice issued by the first and second defendants pursuant to cl 23 of the joint conditions may well need to be determined before the dispute over whether or not termination for failure to pay the deposit was available to the first and second defendants.
25 It follows then that I am prepared to extend the operation of the caveat. During the course of the hearing, both counsel referred to the wording of the caveat and there was a dispute as to whether or not it was in the proper form. There was also a dispute about whether or not an undertaking as to damages was required. Sensibly, both counsel agreed that both of these matters should be held over until I determined whether or not the caveat would be extended. Having concluded that the caveat should be extended, I will afford counsel the opportunity to address both these issues.
0
15
0