Hydrox Nominees Pty Ltd v Property Development (WA) Pty Ltd - [2018] WASC 367

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   HYDROX NOMINEES PTY LTD -v- PROPERTY DEVELOPMENT (WA) PTY LTD [2018] WASC 367
CORAM:   VAUGHAN J
HEARD:   22 NOVEMBER 2018
DELIVERED          :   22 NOVEMBER 2018
PUBLISHED           :   28 NOVEMBER 2018
FILE NO/S:   CIV 2979 of 2018
BETWEEN:   HYDROX NOMINEES PTY LTD
Plaintiff
AND
PROPERTY DEVELOPMENT (WA) PTY LTD
First Defendant
YORK HOLDINGS LAND (WA) PTY LTD
Second Defendant
REGISTRAR OF TITLES
Third Defendant

Catchwords:

Practice and procedure - Trial of preliminary issue - Whether contract for sale of land lawfully terminated - Turns on own facts

Legislation:

Nil

Result:

Agreement lawfully terminated

Category: B

Representation:

Counsel:

Plaintiff	:	Mr C M Slater
First Defendant	:	Mr N van Hattem
Second Defendant	:	Mr N van Hattem
Third Defendant	:	No appearance

Solicitors:

Plaintiff	:	Jackson McDonald
First Defendant	:	Lawley Legal
Second Defendant	:	Lawley Legal
Third Defendant	:	No appearance

Case(s) referred to in decision(s):

Nil

VAUGHAN J:

(This judgment was delivered extemporaneously on 22 November 2018 and has been edited from the transcript.)

Introduction

The matter before me concerns the trial of a preliminary issue as to the question raised by par 1 of the writ of summons, namely, whether a contract for the sale of land dated 26 July 2018 between the plaintiff and the first defendant has been lawfully terminated.
For reasons I will come to the trial of preliminary issue has been expedited. The writ in this action was issued on 14 November 2018. The trial of preliminary issue was set down for hearing following a directions hearing before me on 15 November 2018. Pleadings have been dispensed with. Evidence has been adduced by affidavit. No party sought to cross‑examine.
Programming orders were, however, made for the first and second defendants to indicate the basis of their opposition to the declaration as sought in par 1 of the writ of summons.
In particular, on 15 November 2018 I made orders that:
(1)By 4.00 pm on Monday, 19 November 2018 the first and second defendants file and serve a concise statement, no more than two pages, setting out the factual and legal contentions relied on in support of the proposition that the 'Agreement' as referred to in par 1 of the writ of summons has not been lawfully terminated by the plaintiff and is specifically enforceable at the suit of the second defendant (order 5(b)(i)).
(2)By 10.00 am on Wednesday, 21 November 2018 the parties file and serve an outline of submissions on the trial of the preliminary issue, such submissions to be limited to five pages (order 5(c)).
I also made orders for affidavit evidence.
In due course the first and second defendants filed an affidavit of Joseph Tilli sworn 20 November 2018. The first and second defendants sought to have that affidavit read at the trial. It was objected to by counsel for the plaintiff. In light of the objection, counsel for the first and second defendants withdrew the affidavit of Mr Tilli from evidence. Accordingly, it is not before me on the trial of preliminary issue.
Otherwise, the first and second defendants never filed the concise statement or submissions as contemplated by the programming orders.
That failure was explained by counsel for the first and second defendants this morning. The court was informed that after provision of legal advice the first and second defendants accepted that there was no legal basis to resist the orders sought by way of declaration that the contract for sale had been lawfully terminated. It was said on behalf of the first and second defendants that there was no legal contention advanced in opposition to the substantive orders sought by the plaintiff in its minute of proposed orders dated 21 November 2018.
Nevertheless, the first and second defendants would not consent to the orders as sought. Accordingly, it is necessary to proceed to determine the matter.
In substance, however, the trial of preliminary issue has proceeded on an undefended basis.

Factual background

The plaintiff relied on a series of affidavits without objection. These comprised:
(1)the affidavits of Andrew Selim sworn 14 and 16 November 2018;
(2)the affidavits of Belinda Giles affirmed 14, 15, 15 and 16 November 2018;
(3)the affidavit of Sara Tusa sworn 16 November 2018;
(4)the affidavit of Devaki Krishnan sworn 16 November 2018;
(5)the affidavit of James Condon sworn 16 November 2018; and
(6)the affidavit of Majella Dowden sworn 16 November 2018.
Based on these affidavits, the material evidence is as follows.
The plaintiff is the owner of land at 600 Ranford Road, Forrestdale, Western Australia (being legally described as Lot 801 on Deposited Plan 66167, the whole of the land comprised in Certificate of Title Volume 2747 Folio 797) (Land).
On 26 July 2018 the plaintiff and the first defendant entered into an agreement for the sale of the Land (Agreement). The first defendant did so as trustee of the Forrestdale Unit Trust (FUT). The Agreement for the sale of the Land provided for a purchase price of $8.1 million (item 3) and a deposit of $300,000 to be paid within seven days of execution (item 4).
As to the deposit, cl 3 of the Agreement provided:
3.1 On execution of this Agreement, the Purchaser must pay the Deposit to the Deposit Holder in Immediately Available Funds.
…
3.8 If the Deposit is not paid as required by clause 3.1, the Purchaser is in breach of the Purchaser's obligations under this Agreement and the Vendor may terminate this Agreement by notice to the Purchaser (without prejudice to any other right or remedy available to the Vendor) and clause 26 [sic] does not apply.
Item 4 of the Agreement, providing for the deposit to be paid within seven days of execution, is a more specific provision than cl 3.1. Accordingly, the relevant term of the Agreement is that the deposit was to be paid within seven days of execution.
There are other relevant clauses within the Agreement. I do not intend to recite them. I note, however, that termination of the Agreement is provided for within cl 20. Also, as to notices, see cl 30.
On 26 July 2018, presumably after execution of the Agreement, the plaintiff sent an email to the first defendant's former solicitor, Denis O'Haire of Forbes Kirby, requesting payment of the deposit by 2 August 2018. On the same day, Savills WA Pty Ltd (Savills), who was nominated as the Deposit Holder under the Agreement, provided the first defendant with trust account details for payment in of the deposit.
There was a further email from Savills on 27 July 2018. This was an email to Mr Tilli, who was and is a director of the first and second defendants. The email of 27 July 2018 mentioned that the deposit was due on 2 August 2018. On 1 August 2018 Mr O'Haire sent an email to Mr Tilli. That email was copied to Savills. The email was eventually forwarded to Mr Selim, who is an officer of the plaintiff. There was reference to something called the 'crossover issue'. Mr O'Haire said that he did not understand that issue. Mr O'Haire then went on to state to Mr Tilli:
I don't see any need to pay a non-refundable deposit until this [among other things, the crossover issue] is all clarified.
I'm sure the seller will agree.
That should happen soon enough.
Notwithstanding Mr O'Haire's email of 1 August 2018, on the same day, Mr Selim, for the plaintiff, sent an email to Mr O'Haire. That email clarified that the deposit of $300,000 was due to be paid the next day. Mr Selim's second affidavit then deposes to a conversation that occurred between him and Mr O'Haire on 1 August 2018. Mr Selim deposes that:
Mr O'Haire said to me words to the effect that 'my client requires an explanation about a crossover issue before it will pay the deposit under the contract'.
On 2 August 2018 Mr O'Haire sent an email to Mr Selim. That email referred to the crossover issue, required an explanation as to it, and said that only then would the first defendant be in a position to pay the deposit. That email excited a further conversation between Mr Selim and Mr O'Haire about the payment of the deposit. That too is deposed to by Mr Selim in his second affidavit. Mr Selim deposes as follows:
On 2 August 2018 I spoke on the telephone with Mr O'Haire. During that conversation, I said to Mr O'Haire words to the effect that 'Hydrox Nominees Pty Limited requires payment of the deposit today and reserves its rights if the deposit is not paid'.
The time for payment of the deposit expired on 2 August 2018. The deposit was not paid.
On 3 August 2018 the first defendant lodged Caveat N957094 in relation to the Land. That caveat is attachment 'AS‑8' to Mr Selim's first affidavit. The first defendant claimed an equitable estate or interest in the Land as the purchaser of an estate in fee simple. The caveat was supported by a statutory declaration of Mr Tilli made 2 August 2018. The statutory declaration provided that the first defendant and the plaintiff had executed a contract for the first defendant to purchase the Land from the plaintiff on 26 July 2018. A copy of the contract for sale was attached to the statutory declaration. The statutory declaration went on to explain that the caveat was lodged on the basis that the first defendant claimed an equitable estate or interest in the Land as purchaser under the contract.
Non‑payment of the deposit continued.
On 8 August 2018 the plaintiff issued a default notice to the first defendant following the non-payment of the deposit. The default notice was served on the first defendant in various ways on that day. There is no suggestion that service was not effected in accordance with the Agreement.
On 13 August 2018 Mr Tilli sent an email to Savills. This forwarded an email sent by Mr O'Haire on 2 August 2018. Mr Tilli's email noted that there had been no reply to Mr O'Haire's email of 2 August 2018. Mr Tilli said, however, that there had been the issue of a default notice. Mr Tilli's email concluded by saying that once there was an appropriate reply, and his lawyer authorised the payment of the deposit, he would do so.
On 15 August 2018 the time for compliance with the default notice expired without payment of the deposit.
On 21 August 2018 the plaintiff issued a termination notice to the first defendant terminating the Agreement based on non‑payment of the deposit. That termination notice was served on the first defendant on the same day. Once again, it was served on the first defendant by various means.
On 27 August 2018 the plaintiff entered into a new contract for sale of the Land to a third party.
In order to bring about settlement of the sale of the Land under that new contract the plaintiff caused Landgate to issue a s 138B notice in relation to the first defendant's caveat, Caveat N957094, as lodged in relation to the Land. The lapse notice was issued by Landgate on 12 October 2018.
In the ordinary course the caveat would lapse at midnight on 6 November 2018.
On 6 November 2018, immediately before the coming into operation of the lapse notice, the second defendant became the trustee of the FUT. After the second defendant became the trustee of the FUT it lodged a new caveat - Caveat O028173 - in relation to the land. That caveat also claims an equitable estate or interest in the Land as the purchaser of the land. It too is supported by a statutory declaration made by Mr Tilli. That statutory declaration provides as follows:
(1)I am one of the directors of York Holdings Land (WA) Pty Ltd ACN 614 172 502 [the second defendant] as new Trustee for the Forrestdale unit trust as caveator…
(4)I have knowledge of the dealings with the Proprietor of the Property.
(5)On 26 July 2018 the previous trustee of the Forrestdale trust being Property Development WA Pty Ltd [the first defendant] executed a contract for the caveator to purchase the Property. Peter Tilli and I being the directors of the previous trustee company signed the sale contract Annexure A.
(6)The Caveator therefore claims an equitable estate or interest in the Property as purchaser under the Sale Contract.
(7)Annexed herein and marked B is the deed of retirement and appointment of new trustee for the Forrestdale Trust.
In the meantime, the plaintiff had booked a time for settlement of the sale of the Land under the new contract with the third party. Settlement had been booked for 14 November 2018. Because the second defendant had lodged Caveat O028173, the certificate of title to the Land became subject to dealing. That had consequences for the proposed settlement of the sale of the Land under the new contract. In short, the purchaser was unwilling to complete settlement given the Land being shown as subject to dealing and affected by the presence of Caveat O028173 on the part of the second defendant. The settlement did not proceed.
Thereafter, after demands to remove the caveat were unsuccessful, the plaintiff commenced these proceedings against the first and second defendants.

Disposition

Based on that recitation of the facts, arising from the uncontradicted affidavit evidence of the plaintiff, I find as follows.
First, the plaintiff and the first defendant, the first defendant acting as trustee for the FUT, entered into a contract on 26 July 2018 for the sale of the land (ie the Agreement).
Second, the Agreement provided for the first defendant to pay a deposit of $300,000 by 2 August 2018.
Third, the deposit was not paid by 2 August 2018 or at all.
Fourth, cl 3.8 of the Agreement permitted the plaintiff to terminate the Agreement following non-payment of the deposit on 2 August 2018. Rather than doing so forthwith, the plaintiff elected to issue a default notice. The default notice was served on the first defendant on 8 August 2018. In terms of the relevant default clause provision (cl 20), the default notice required compliance within five business days, that is, by 15 August 2018. In terms of compliance, the default notice required payment of the $300,000 deposit as was provided for under item 4 of the Agreement.
Fifth, the default in payment of the $300,000 deposit continued as at 15 August 2018 and has continued thereafter.
Sixth, on 21 August 2018, the plaintiff, as it was lawfully entitled to do, terminated the Agreement.
Accordingly, the question raised by par 1 of the writ of summons in this trial of preliminary issue, namely whether the Agreement has been lawfully terminated by the plaintiff, is resolved in favour of the plaintiff. I find, as to the question reserved for the trial of preliminary issue, that the Agreement has been lawfully terminated.

Orders

The next issue is what relief ought to be awarded to the plaintiff.
I am broadly content with a declaration in terms of par 1 of the minute of proposed orders dated 21 November 2018. I also accept that there should be restraints in terms of pars 3 and 4 of the minute. There should be no repetition of action by way of self‑help on the part of the first or second defendants to stymie the plaintiff in completing a sale of the Land under the new contract.
However, I do have concerns as to par 2 of the minute. Paragraph 2 reads as follows:
Following the declaration made in order 1 above:
(a)[the] third defendant forthwith reject the registration of dealing O028173, which was lodged by the second defendant on 13 November 2018; or
(b)alternatively, the second defendant forthwith issue a written request to the third defendant for dealing O028173, which was lodged on 13 November 2018, to be withdrawn from registration.
I am not satisfied that the plaintiff needs an order in terms of par 2(a) if there is an order in terms of par 2(b). The third defendant, the Registrar of Titles, has not entered an appearance and has taken no part in the proceedings. I am reluctant to make a coercive order against the third defendant in those circumstances - all the more so when it is not required having regard to par 2(b) of the plaintiff's minute.
I will, however, place a strict time limit on compliance with proposed order 2(b) and I will also give the plaintiff liberty to apply in the event of non‑compliance on the part of the second defendant.

Costs

As to costs, I note the following two matters. First, in my opinion no litigant, properly advised, would have resisted the application made by the plaintiff. That conclusion, summary though it is, is supported by the careful approach that counsel for the first and second defendants has correctly taken in respect of today's proceedings. Second, it is apparent that the second defendant in lodging the caveat on 13 November 2018 has taken self‑help action to circumvent the operation of s 138D of the Transfer of Land Act 1893 (WA).
Those two matters, individually and collectively, constitute misconduct sufficient to justify an indemnity costs order.
In my view, it is appropriate that the order be by way of indemnity costs rather than solicitor and client costs as suggested by counsel for the first and second defendants. The plaintiff ought to have the benefit of the onus that arises under an indemnity costs order. Accordingly I will make an order for indemnity costs.
The indemnity costs order will be made as to the first and second defendants only at this stage of the proceedings. In my view, it is premature to consider a third party costs order against Mr Tilli as a director of the first and second defendants. Such an order may be appropriate. I say nothing on that as it may need to be determined later. But if there was to be recovery against the first and second defendants there would be no need to pursue recovery against Mr Tilli.
I also consider that, at least from a procedural perspective, more needs to be done by way of making a formal application for a third party costs order against Mr Tilli as a non‑party. I appreciate that the order has been foreshadowed, both in correspondence and in the minute of proposed consent orders. However, as it stands no process has been issued in respect of Mr Tilli.
Accordingly, I will make an order that grants liberty to apply for a non‑party costs order against Mr Tilli.
My expectation is, however, that the plaintiff will first seek to enforce and recover as against the first and second defendants. If that occurs, it will obviate any necessity for further proceedings to agitate a non‑party costs order.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AD
ASSOCIATE TO THE HONOURABLE JUSTICE VAUGHAN
28 NOVEMBER 2018