Mayfair Build Pty Ltd v Sanoubane

[2023] ACTSC 148

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Mayfair Build Pty Ltd v Sanoubane

Citation:

[2023] ACTSC 148

Hearing Date:

26 May 2023

DecisionDate:

14 June 2023

Before:

McCallum CJ

Decision:

Proceedings relisted on 12 July for further submissions as to the orders to be made.

Catchwords:

CAVEATS – Application to restrain removal of caveat – where building contract created a charge on the land to secure moneys owing under building contract – dispute between builder and owners as to whether any amount owing – whether there is a serious issue to be tried as to the amount owed – whether the balance of convenience favours restraining the removal of the caveat – where no proceedings for the debt have been brought – where parties did not address the issue of payment into court as security for the amount claimed  

Legislation Cited:

Land Titles Act 1925 (ACT) s 107

Cases Cited:

Adrija Pty Limited v Mohamed and Ors [2013] ACTSC 120

Danthanarayana v GR8 Constructions Pty Ltd [2012] FCA 231
GR8 Constructions Pty Limited v O’Donnell [2011] ACTSC 92
Kingstone Constructions v Crispel (Supreme Court of New South Wales, Young J, 12 March 1991)
Matken Constructions Pty Ltd v James [2009] ACTSC 100

Porter v McDonald [1984] WAR 271

Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd [2020] ACTSC 149

Parties:

Mayfair Build Pty Ltd (ABN 65 640 189 233) ( Plaintiff)

Sengaroun Sanoubane ( First Defendant)

Awatta Supphasri ( Second Defendant)

Registrar-General of Land Titles for the Australian Capital Territory ( Third Defendant)

Representation:

Counsel

G Blanke ( Plaintiff)

R Arthur ( First and Second Defendants)

Solicitors

Sparke Helmore Lawyers ( Plaintiff)

BAL Lawyers ( First and Second Defendants)

File Number:

SC 164 of 2023

McCALLUM CJ:

1. By amended originating application dated 5 May 2023, Mayfair Build Pty Ltd seeks an order preventing the removal of a caveat lodged by it over land owned by the first and second defendants, to whom I will refer as the owners.  The circumstances in which the application is brought may be summarised as follows.

1. On 11 June 2021, Mayfair Build and the owners entered into a home building contract for the construction of a two-storey house on land that had been purchased from Mayfair Build by the owners.  The building contract price was $577,750.  That was in fact the second contract the owners had entered into with Mayfair Build, the first having contemplated the construction of only a single-storey house.  However, for today’s purposes, it is the second contract dated 11 June 2021 that is the relevant contract. 

1. The contract included clause 30 as follows:

30. CHARGE ON LAND

The Owner charges the Site and Works with the payment to the Builder of all money payable to the Builder under this Contract or otherwise from the carrying out of the Works. 

The words in bold are each defined elsewhere in the contract.  The word “Site” is defined to mean land. 

1. On 21 June 2021, an engineer advised that a waffle slab would be required to support the proposed two-storey construction.  The laying of a waffle slab had not been provided for in the contract.  On 15 July 2021, the builder issued an invoice for a variation under the contract for additional cutting of the site said to be required to enable the waffle slab to be laid.  The owners disputed the builder’s entitlement to claim that amount as a variation.  The amounts relating to the additional preparation for the site, including the site cut, totalled some $22,549.60.  That amount was not immediately paid by the owners. 

1. The builder concluded the laying of the waffle slab on 9 November 2021.  That day, the owners were invoiced by the builder for the sum of $57,775.  That amount was not paid.  The parties have since remained in dispute and no further works have been undertaken at the site. 

1. The owners contend that the contract has been lawfully terminated by them.  The builder disputes that contention and claims amounts owing for the works completed to date.  The sum of $22,549.60 relating to the additional preparation of the site was paid by the owners almost a year later, in October 2022.  However, the builder claims further amounts adding up to some $138,000, principally made up of the $57,775 for the laying of the waffle slab together with an amount of $1,000 claimed every week since a letter was sent to the owners requesting them to make selections in relation to internal fittings for the proposed construction.  The contract makes provision for that amount to be claimed in effect by way of liquidated damages. 

1. On 5 April 2022, the builder lodged the caveat that is the subject of these proceedings.  On 21 April 2023, the owners lodged a lapsing notice resulting in the commencement of the present application by the builder. 

1. The principles to be applied in determining such an application were largely not in dispute. The builder’s claim invokes the application of s 107 of the Land Titles Act 1925 (ACT) which provides:

107  Removal of caveat

(1)    A registered proprietor to whose interest in land a caveat relates may apply to the          registrar-general to have the caveat removed.

Note 1    A fee may be determined under s 139 (Determination of fees, charges and   other amounts) for lodgment of an application to remove a caveat.

Note 2    If a form is approved under s 140 (Approved forms) for an application, the form                 must be used.

(2)    On receipt of an application under subsection (1), the registrar-general shall—

(a)      give notice of the application to the caveator; and

(b)      not less than 14 days from the date of service of the notice, remove the caveat             from the register, unless the court otherwise orders.

(3)    If the registrar-general believes on reasonable grounds that the caveator’s interest has     been extinguished by the transfer of the whole of the registered proprietor’s interest to        another person, the registrar-general may—

(a)      give notice to the caveator that he or she believes that the caveator’s interest                has been extinguished and that he or she intends to remove the caveat from                 the register; and

(b)      not less than 14 days from the date of service of the notice, remove the caveat    from the register, unless within that time—

(i)       the caveator shows to the satisfaction of the registrar-general that his   or her interest has not been extinguished; or

(ii)       the court otherwise orders.

1. An application to restrain the registrar-general from removing a caveat falls within the inherent jurisdiction of the Court.  The relevant principles were discussed in detail by McWilliam AJ, as her Honour then was, in Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd [2020] ACTSC 149 at [11]-[12]. In particular, as her Honour noted, the application requires the builder to demonstrate a serious question to be tried and the balance of convenience must favour the extension of the caveat. The onus of establishing that there is a serious question rests with the caveator.

1. As her Honour noted at [13] of the judgment, it is necessary in making those determinations:

[T]hat the Court must pay close attention to matters such as the nature of the interest claimed by the caveator, whether there is any dispute as to the existence or extent of the interest, and the likely consequences of ordering the caveat to be withdrawn: Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240; 93 NSWLR 1, per Sackville AJA (with whom Beazley P and Payne JA agreed) at [62].

1. In the present case, two central issues arise: first, whether the builder had a caveatable interest; and secondly the extent of that interest.

1. The first is straightforward.  The builder relied on the decision of Master Mossop, as his Honour then was, in Adrija Pty Limited v Mohamed and Ors [2013] ACTSC 120 where he discussed the kinds of clauses which have been held to create a charge in building contracts. His Honour observed at [25] of the judgment that, in the Australian Capital Territory, a straightforward charging clause has been considered in the decisions of Matken Constructions Pty Ltd v James [2009] ACTSC 100, GR8 Constructions Pty Limited v O’Donnell [2011] ACTSC 92 and Danthanarayana v GR8 Constructions Pty Ltd [2012] FCA 231. The clause considered in those decisions was identical to the clause here, save for the fact that the clause here includes the additional words “and Works”.

1. In each of those decisions, the clause was found to be sufficient to create a charge securing payment of unpaid moneys in the circumstances of those cases.  In Danthanarayana, Foster J discussed that issue at [45]-[52]. His Honour held that “[t]he fact that the building contract has been terminated does not cause the builder’s equitable charge to cease to have effect”: at [52]. It was an equitable interest which his Honour held arose immediately upon the entry into the contract: at [45]. It is appropriate to apply those principles in the present case, and the solicitor for the defendants did not contend otherwise.

1. In Adrija, Mossop M expressed the view at [28] that, where the Court can determine the proper construction of such a clause, it can be determined on a final basis rather than applying the “serious question” test.

1. I am satisfied that in the present case, when the contract was entered into, cl 30 created an immediate charge on the land for any amount payable to the builder under the contract, or otherwise, from the carrying out of the works.

1. The more difficult question is the extent of that interest.  As already noted, the builder claims $138,000 odd, largely comprising amounts the amounts of $1000 claimed by the builder as a result of the owners’ failure to select fittings.  The owners claim those amounts are liable to be set aside as a penalty.  However, the amount claimed by the builder also includes what appears to be an undisputed amount relating to the construction of the slab.  The builder has also indicated that, the contract having been repudiated (on his contention), he is entitled to loss of profit.  I was told from the Bar table that that would amount to something in the order of $150,000, the total claim therefore being likely to be in the order of $300,000, perhaps more when interest and costs are added.

1. The owners do not dispute that the waffle slab was laid and they did not purport to terminate the contract until well after that date.  There is a dispute between the parties as to whether and when the contract has been terminated by the owners, but at the very least it appears that an amount of about $57,000 is undisputed. 

1. The owners claim, however, that no amount would be owed by them because the $1,000 weekly payments would be set aside as a penalty and further because the contract was entered into on the basis of a misrepresentation.  That claim will be supported by a contention that, at the time the builder entered into the second contract, he was already in possession of a report from the engineer and already knew that the waffle slab would be needed but that he did not inform the owners of that fact, instead pretending he became aware of the need for a waffle slab only after the contract had been entered into.

1. In order to establish that the contract was able to be terminated on that basis, the owners will need to go further than they did in the evidence before me, which was nothing more than an apparent copy of the engineer’s report dated earlier than the date the second contract was entered into.  There would need to be significantly more investigation of those facts before this Court could make a finding of the level of seriousness contended for by the owners. 

1. In any event, as I have explained, it is clear that there is a serious question to be tried as to the builder being owed at least $57,000. 

1. Turning to the balance of convenience, difficult questions arise.  On the one hand, the owners contend they are being prevented from refinancing so as to complete the build and that in turn is having a knock-on effect for them because they are presently servicing two mortgages.  They also point to other lifestyle considerations such as the fact that the second defendant’s mother has been prevented from moving into the premises which was their original plan.

1. The evidence in relation to those matters was such as to cause concern but was unfortunately vague.  It did not go so far as to establish that, but for the existence of the caveat, the defendants would have been able to refinance and press on with the build at this stage.  The other disadvantages claimed (to which I have referred) are not of the kind that should weigh into the balance of convenience here, because they would not be amounts that would sound in damages in any cross claim to the builder’s claim for unpaid amounts under the contract. 

1. On the other hand, while the builder claims upwards of $138,000 under the contract, he has taken no steps to enforce it.  No proceedings have been commenced in the lengthy period of the dispute.  As observed by McWilliam AJ in Stone Living at [46], referring to a decision of Young J in Kingstone Constructions v Crispel (Supreme Court of New South Wales, Young J, 12 March 1991):

[T]his court has ensured that caveats are not used as a blackmailing device so that a caveat can legitimately be lodged in respect of a relatively small claim and force the registered proprietor to pay out such a claim even though it is bitterly contested. 

1. There are financial considerations too.  The builder offers an undertaking as the price of the order sought in these proceedings, but the owners contend that his undertaking may be worthless.  There is some evidence in the form of corporate records to suggest that the sole director of Mayfair Build previously traded under a different name in a company that was ultimately placed into external administration.

1. Conversely, the possible damage that might be suffered by the owners has not been quantified and would certainly not extend to all of the categories identified or apparently sought to be claimed in the affidavits. 

1. It is clear that there is at least some amount arguably owed on the serious question to be tried test.  It is not appropriate to resolve factual disputes of the kind raised in the affidavit in a proceeding of this kind: see the decision of the Full Court of the Supreme Court of Western Australia in Porter v McDonald [1984] WAR 271.

1. Finally, I note that the owners offer no substitute security for what appears to be an undisputed amount owed under the contract: cf Matken Constructions. 

1. In the result, if the caveat were removed now, the builder would lose the security that he rightfully has under the contract which, so far as the Court knows at this stage, was freely entered into by all of the parties, leaving him with a potentially hollow claim for amounts for works which it is not disputed were in fact undertaken. 

1. In the present circumstances, for those reasons, I am persuaded that the caveat should not be removed at this stage.  I will however hear the parties as to the conditions which might apply to its continuation. 

1. Proceedings are relisted on 12 July for further submissions as to the orders to be made. 

I certify that the preceding thirty [30] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum

Associate:

Date: 5 July 2023