McInnes v Davies - [2014] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Appeals to a Single Judge: Civil)
MCINNES v DAVIES
[2014] SASC 184
Judgment of The Honourable Justice Stanley
5 December 2014
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - IN GENERAL
CONVEYANCING - LAND TITLES UNDER THE TORRENS SYSTEM - CAVEATS AGAINST DEALINGS - LAPSE, REMOVAL AND WITHDRAWAL
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - SERIOUS QUESTION TO BE TRIED
Appeal to a single judge.
This is an appeal from a decision of a judge of the District Court rejecting an application pursuant to s 191G and/or s 191K of the Real Property Act 1886 (SA) to extend a caveat over land until the appellant’s claim for specific performance of a contract for the sale of the property is determined at trial.
On 3 April 2014 the parties executed a contract for the sale of residential property by the respondents to the appellant. The contract was subject to a condition that the appellant obtain finance by 24 April 2014. That did not occur. The appellant then failed to obtain finance by the extended date of 16 May 2014. On 26 May 2014 the respondents sent an email to their agent stating that they wished to ensure that “all dealings of this sale are and have been cancelled”. The following day the respondents sent a further email to their agent enclosing a signed termination notice addressed to the appellant with an instruction to return the appellant’s deposit. For reasons that are not clear, the notice was not given at that time nor was the deposit returned. Later that day the NAB emailed to the respondents’ agent a copy of a letter of 27 May 2014 to the appellant advising him that finance had been approved to assist with the purchase of the subject property. On that same day the respondents executed a contract with a third party to purchase the property at a slightly lower price. Subsequently, the appellant’s solicitors wrote to the respondents’ solicitors asserting that their client had not received the notice of termination until 6 June 2014, and that as at 27 May 2014 the contract was still on foot and upon that day, the finance condition having been satisfied, the contract had become unconditional.
On 6 June 2014 the appellant lodged a caveat over the subject property. He issued proceedings seeking specific performance of the contract and the extension of the caveat. The issue before the court was whether the caveat should be extended. That, in turn, required consideration of whether there was a serious question to be tried and where the balance of convenience lay.
There was no dispute that the appellant has a caveatable interest in the land. The judge found there was a serious issue to be tried. There is no challenge to this conclusion on appeal. However, the judge found that the balance of convenience did not favour an extension of the caveat. The appellant contends that the judge erred in doing so.
Whether the judge considered irrelevant matters. Whether the judge acted on an erroneous principle. Whether the judge reached a decision that is so extreme it must have been the result of error.
Held (allowing the appeal):
1. The purpose of the caveat is to restrain the registered proprietor from dealing with land in a way which will defeat or derogate from the caveator’s interest until the respective rights of the parties have been determined. It mitigates the risk of injustice to a caveator until his or her rights can be finally determined (at [20]).
2. In this matter, there being no dispute that the appellant has a caveatable interest in the property and the judge having found there is a prima facie case, the appellant was entitled to an order extending the caveat unless there was some act or omission on his part which would persuade the court that the balance of convenience does not favour the protection of his claimed equity in the property (at [21]).
3. There is nothing in the conduct of the appellant which justified the judge in depriving him of the protection of the caveat pending the trial of his action, given that the exercise of the judge’s discretion results in the defeat of the appellant’s claim without a trial on the merits (at [23]).
4. The judge’s conclusion that the balance of convenience did not favour extending the caveat discloses a failure properly to exercise his discretion. The incompatibility of the finding that a prima facie case existed with the refusal to extend the caveat, resulting in the final disposition of the appellant’s claim, discloses a difficulty of coherence of the law (at [23]).
5. The judge fell into error in weighing the costs to be incurred in a trial of the action in considering the balance of convenience. The costs of any trial, pending which an interlocutory injunction has been sought to preserve the status quo, is not a factor relevant to the balance of convenience (at [24]).
Real Property Act 1886 (SA) s 191, referred to.
McInnes v Davies [2014] SADC 136; Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621; Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors (2008) 102 SASR 177 ; Palm Gardens Consolidated Pty Ltd v P G Properties Pty Ltd [2009] SASC 311; Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; Pua Hor Ong v Wu You Yang Pty Ltd (2008) 103 SASR 9; Adelaide Bank Ltd v Lucke [2010] SASC 59; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Spencer v The Commonwealth (2010) 241 CLR 118; Sullivan v Moody (2001) 207 CLR 562; Agricultural and Rural Finance v Gardiner (2008) 238 CLR 570; Miller v Miller [2011] HCA 9; Equuscorp v Haxton [2012] HCA 7; Patrick Stevedores v Maritime Union of Australia (1998) 195 CLR 1; Kennaway v Thompson [1981] QB 88, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"serious question to be tried’ and ‘balance of convenience"

MCINNES v DAVIES
[2014] SASC 184
Appeal to a Single Judge
STANLEY J:
Introduction

This is an appeal from a decision of a judge of the District Court rejecting an application pursuant to s 191G and/or s 191K of the Real Property Act 1886 (SA) (the Act) to extend a caveat over land until the appellant’s claim for specific performance of a contract for the sale of the property is determined at trial.
Background
On 3 April 2014 the parties executed a contract for the sale of residential property by the respondents to the appellant. The contract was subject to a condition that the appellant obtain finance by 24 April 2014. That did not occur. Subsequently the parties executed a written agreement to extend the date for finance to be obtained to 16 May 2014. That did not occur, on the contrary, on that date finance for the purchase was declined by the lender specified in the contract and that advice was conveyed to the parties. On 26 May 2014 the respondents sent an email to their agent stating that they wished to ensure that “all dealings of this sale are and have been cancelled”. The following day the respondents sent a further email to their agent enclosing a signed termination notice addressed to the appellant with an instruction to return the appellant’s deposit. For reasons that are not clear, the notice was not given at that time nor was the deposit returned. Later that day the NAB, which is not the nominated lender in the finance condition, emailed to the respondents’ agent a copy of a letter of 27 May 2014 to the appellant advising him that finance had been approved to assist with the purchase of the subject property. In fact, on that same day the respondents executed a contract with a third party to purchase the property at a slightly lower price. On 5 June 2014 the appellant’s solicitors wrote to the respondents asserting, contrary to the respondents’ claim that the contract had been terminated, that it remained on foot, that their client’s default had been remedied and that he intended to settle on the contract. Subsequently, the appellant’s solicitors wrote to the respondents’ solicitors asserting that their client had not received the notice of termination until 6 June 2014, and that as at 27 May 2014 the contract was still on foot and upon that day, the finance condition having been satisfied, the contract had become unconditional.
On 6 June 2014 the appellant lodged a caveat over the subject property. He issued proceedings seeking specific performance of the contract and the extension of the caveat. By oversight, the caveat lapsed on the day before the first return of the application to extend the caveat. The appellant applied for permission to lodge a fresh caveat. At the hearing below, the judge correctly proceeded upon the basis that the substantive issue on the application was the same as would arise upon an application to extend a caveat where the caveat has not yet lapsed. Accordingly, the issue before the Court was whether the caveat should be extended. That, in turn, required consideration of whether there was a serious question to be tried and where the balance of convenience lay.
The judge’s reasons
The appellant’s case was that prior to the purported termination of the contract, he obtained finance and communicated that fact to the respondents. He submitted that the finance condition was entirely or primarily for his benefit. Accordingly, he could unilaterally waive that condition so that when he advised that he had obtained finance and wished to proceed with settlement, by implication, he waived his right to terminate the contract for want of finance. At this time, he contended, the contract became unconditional and binding on the parties. The respondents’ position was that the contract for sale had been validly terminated and there was no right to specific performance.
To obtain an extension of the caveat, the appellant had to establish that he had a caveatable interest over the land, that there was a serious issue to be tried and that the balance of convenience favoured extending the caveat pending the trial of the action.
There was no dispute that the appellant has a caveatable interest in the land. The judge found there was a serious issue to be tried, albeit he was only just persuaded of this matter. There is no challenge to this conclusion on appeal. However, the judge found that the balance of convenience did not favour an extension of the caveat. The judge said:[1]
I have regard to all counsel’s submissions and the cited authorities concerning where, in these circumstances, the balance of convenience may lie. In particular, I am aware that if the caveat is not extended, then the defendants may sell to a third party. They have indeed signed a ‘cash unconditional’ contract to do so, albeit for slightly less than the value of their contract with the plaintiff.
The inference on the material before me is that the defendants became frustrated with the repeated failure of the plaintiff to obtain finance by the due dates, and wished to terminate and achieve the certainty of a cash unconditional contract with a new purchaser. There is no evidence that the defendants are seeking to evade the contract with the plaintiff to get a better price or for any inappropriate motive. Indeed they are selling for a slightly lower price.
I have regard to the fact that on the material before me, the default to date has been primarily by the plaintiff. On two separate occasions the plaintiff failed to secure finance by the due date, then did not seek to further negotiate an extension of the date, and indeed communicated that finance had been refused.
The defendants immediately took the position with their agents they wished to terminate, and also sent a formal notice of termination. Only after that did the plaintiff send a bare finance approval letter, which I note contained no particulars enabling the defendants to be satisfied that the approved finance satisfied the required particulars in the contract such that it would in fact enable the plaintiff to settle.
The property is a single modestly priced, standard residential home. If the caveat is not extended, the plaintiff will not get the property. The plaintiff will suffer no financial loss. If the caveat is extended, there will need to be a full trial, and based on the submissions of counsel other parties may well need to be joined, for example the respective parties’ agents who variously failed to clearly convey or give effect to their respective clients’ aims. In all, no trial will occur either quickly or economically. There will be considerable time and substantial cost to all.
I add to that that in my view, the defendants have a very strong case, based on a black and white contractual right to terminate. They did nothing which might equate to a waiver on their own part, and they gave the plaintiff two opportunities to satisfy the finance condition, and they then attempted to terminate the contract, and in my view those actions likely did terminate the contract. Whilst there is an argument to the contrary, in the circumstances of this case the equity of the circumstances is so overwhelmingly in favour of the defendants, that I conclude that the balance of convenience does not favour extending the caveat.
[1] McInnes v Davies [2014] SADC 136 at [52] – [57].
Principles on appeal
This is an appeal from a discretionary order made at an interlocutory stage of proceedings. The principles applicable to the exercise of appellate review do not permit an appeal court to substitute its opinion for a discretionary order of a judge possessed of the requisite jurisdiction and powers in the absence of relevant error. Those principles were explained in Australian Coal and Shale Employees’ Federation v The Commonwealth[2] by Kitto J in the following terms:
…[T]he true principle limiting the manner in which appellate jurisdiction is exercised in respect of decisions involving discretionary judgment is that there is a strong presumption in favour of the correctness of the decision appealed from, and that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong. A degree of satisfaction sufficient to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. Again, the nature of the error may not be discoverable, but even so it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
[2] [1953] HCA 25, (1953) 94 CLR 621 at 627.
Submissions of the appellant
The appellant submits that the judge fell into error by concluding that the balance of convenience did not favour extending the caveat. He submits the judge erred in three ways. First, by considering irrelevant matters, namely, the blameworthiness of the appellant’s conduct. Secondly, because he acted on an erroneous principle, namely, his failure to balance the injury to the appellant in failing to extend the caveat against the injury to the respondents if it was extended. Thirdly, by reaching a decision that is so extreme it must have been the result of error, namely, by depriving the appellant of the remedy he sought on an interlocutory basis where the Court had found a serious question to be tried.
Submissions of the respondent
The respondents submit there is a heavy onus on an appellant to persuade an appellate court to interfere with a discretionary judgment such as is involved in the grant or refusal of an interlocutory injunction and, by parity of reasoning, the grant or refusal of an extension of a caveat. The respondents submit that the judge’s refusal to extend the caveat was correctly decided for the reasons he gave. The balance of convenience did not favour extending the caveat. The appellant’s case was weak. There was nothing special about the property. It was a standard residential house. The appellant could easily have purchased another. On the other hand, the extension of the caveat would have injured the respondents and adversely affected the interests of the subsequent purchaser. The respondents would have been exposed to the risk of a claim by the subsequent purchaser if the caveat was extended. The conduct of the respondents is relevant to a consideration of the rights of the subsequent purchaser and the competing interests of the appellant and the subsequent purchaser in the land. Equity will not ordinarily and without special necessity grant an injunction where the injunction will materially injure the rights of third parties not before the court. Finally, it was not clear that the appellant in fact had the capacity to settle on the property.
Relevant legal principles
This Court has previously held that the principles governing the exercise of the discretion to grant an interlocutory injunction apply to applications made pursuant to s 191 of the Act with respect to caveats.[3]
[3] Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors [2008] SASC 287 at [48], (2008) 102 SASR 177 at 192; Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311 at [113] – [116].
In Australian Broadcasting Corporation v O’Neill[4] Gummow and Hayne JJ explained those principles in the following way:[5]
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
“The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.”
By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
“How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.”
[Footnotes omitted].
[4] [2006] HCA 46, (2006) 227 CLR 57.
[5] [2006] HCA 46 at [65], (2006) 227 CLR 57 at 81 – 82.
Gleeson CJ and Crennan J agreed with this exposition of the organising principles applicable to the grant or refusal of an application for an interlocutory injunction.[6] They said a court will ask whether the applicant has shown that there is a serious question to be tried as to the applicant’s entitlement to relief, has shown that the applicant is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These factors are to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed.
[6] [2006] HCA 46 at [19], (2006) 227 CLR 57 at 68.

Importantly, for the purposes of the determination of this appeal, Gummow and Hayne JJ identified the governing consideration in determining the application for an interlocutory injunction is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.[7] They said that the reference to practical consequences is illustrated by the particular considerations which arise where the grant or refusal of an interlocutory injunction in effect would dispose of the action finally in favour of whichever party succeeded on the application.
[7] [2006] HCA 46 at [71], (2006) 227 CLR 57 at 84.
In my view, that principle is particularly relevant to the approach the authorities take to the application of s 191 of the Act with respect to caveats.
In Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors Bleby J said:[8]
Given the statutory effect of a caveat, it may be that in many cases, if there is a serious question to be tried as to its validity, the balance of convenience will inevitably favour the caveator. The following observations of Owen J in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd are relevant:
In my opinion, the balance of convenience is a factor to be considered in an application under s 138. However, it seems to me that interlocutory removal of a caveat where an arguable case as to the existence of the caveatable interest has been demonstrated, will be unusual. It is important to bear in mind the nature and purpose of a caveat under the Torrens System. By its very nature, a caveatable interest must be a proprietary interest in land. The purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidents attaching to that proprietary interest until the respective rights of the parties have been honoured (if there is agreement) or determined (if there is disagreement). In many cases, removal of the caveat will have the effect of destroying for all practical purposes, the benefit of the proprietary interest. For example, a creditor, having a specific security interest in land, will rank as an unsecured creditor once the property, the subject of the specific security, no longer exists. This will often be the result of removal of a caveat which permits the registered proprietor to sell the property free from any practical obligation to account to the secured creditor for the proceeds of sale.
[Footnote omitted].
[8] Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors [2008] SASC 287 at [51], (2008) 102 SASR 177 at 192 – 193.
The purpose of a caveat is to protect the interests the caveator claims to have in land. It is designed to ensure that interests in land are not defeated by the registration of inconsistent dealings with the land. It is in the very nature of an interest in land that it prevails over any lesser or later interests. However, the rights enjoyed by a person who holds an interest in land can be defeated if the statutory protection afforded by notification on the title is denied the caveator. Accordingly, where a caveator establishes a prima facie case, in the sense explained in ABC v O’Neill, the balance of convenience is likely to favour extension of the caveat.[9]
[9] Pua Hor Ong v Wu You Yang Pty Ltd [2008] SASC 365 at [66], (2008) 103 SASR 9 at 27 – 28.
These principles are illustrated by the case of Adelaide Bank Ltd v Lucke.[10]In that case Mr Lucke and Ms Cleary were in a de facto relationship when they entered into a joint venture to purchase and develop two adjoining residential properties. The properties were purchased in the name of Ms Cleary. Later, the relationship broke down and Mr Lucke lodged a caveat over the properties claiming to be beneficially entitled to an estate and interest in both properties, having contributed to the acquisition, maintenance and improvement of the land. Subsequently, without knowledge of Mr Lucke, Ms Cleary entered into a contract for the sale and purchase of a one-half interest in one of the properties. That arrangement involved a joint venture agreement for the development of that property which was to be financed by the Adelaide Bank. The bank advanced monies for this purpose. The transfer of the half interest in the property was executed and a mortgage entered into to secure the bank’s lending. Partial settlement was effected, however, Mr Lucke’s caveat precluded the registration of the mortgage to the bank as a first mortgage, and the transfer to the third party purchasers of the half interest.
[10] [2010] SASC 59.
The matter came before a master of the District Court on an application for an order removing the caveat. The master made a removal order. A challenge to that order ultimately was not pursued. Mr Lucke, however, sought an injunction directed to the Registrar-General to restrain the transfer of the half interest in the property and the registration of the bank’s mortgage. The master granted an interlocutory injunction on the basis that Mr Lucke had established a prima facie case of an equitable interest in the property and that his equity had priority over the position of the bank. The master considered the balance of convenience favoured the granting of the injunction. An appeal to the District Court was dismissed by a judge. The matter came before Gray J on an application for permission to appeal from the decision of the District Court judge. In granting permission to appeal but dismissing the appeal, Gray J concluded that Mr Lucke had established a prima facie case for interlocutory injunctive relief against Ms Cleary, the third party purchasers and the bank. He then turned to address the balance of convenience in the following terms:[11]
Ordinarily in a case such as the present the balance of convenience will favour the party in the position of Mr Lucke. Assuming the establishment of a serious question to be tried as to the existence of a continuing equitable interest, refusal of an injunction would have the effect of destroying for all practical purposes the benefit of that interest. It would prevent Mr Lucke from being able to obtain an order for specific performance of the Deed, and in particular clause 10, so as to give effect to, or vindicate, his equitable interest. This is so whether Mr Lucke’s equitable interest arises under a resulting or constructive trust, or a new or altered interest under the Deed; Ms Cleary’s sale to Mr Doble and Ms Kaminszky, and the creation of the Bank’s mortgage, was inconsistent with either. To refuse an injunction would determine the priority dispute the subject of these proceedings in favour of Mr Doble, Ms Kaminszky and the Bank. It would place those defendants in a better position than they were at settlement, as they would gain registered legal interests as opposed to the merely equitable interests that they had at settlement.
This is a case where the balance of convenience strongly favours injunctive relief. If relief against the Bank were to be refused, Mr Lucke’s claim for priority would be permanently foreclosed. The Bank is able to protect itself against any subsequent dealing in the land by a caveat. So too can the other defendants.
[Footnote omitted].
[11] [2010] SASC 59 at [34] – [35].
Consideration
In my view the appeal must be allowed.
The purpose of the caveat, as Owen J said in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd,[12] cited with approval by Bleby J in Cini,[13] is to restrain the registered proprietor from dealing with land in a way which will defeat or derogate from the caveator’s interest until the respective rights of the parties have been determined. It mitigates the risk of injustice to a caveator until his or her rights can be finally determined. The protection afforded by the caveat is intended to be temporary. In the usual case, the caveatee is faced with a mere postponement of the exercise of his or her rights by the preservation of the status quo, not their eradication. When the court comes to consider whether to extend the caveat it must decide whether the caveator has shown a serious question to be tried and consider the balance of convenience. If the factors relevant to the balance of convenience are evenly balanced, then the respective strengths of the parties’ cases can be taken into account, but only if there is no credible dispute that one party’s case is disproportionately stronger than the other party’s case. Where, however, the reality of the matter is such that the refusal to extend the caveat will have the practical effect of destroying the caveator’s claimed equity in the land, the caveat ought to be extended if the consequence of failing to do so is to deny the caveator an effective right to a trial on the merits of his or her claim, unless it can be demonstrated that the caveator has so conducted himself or herself, in acting to protect the claimed equity in the land, that a court can conclude that the balance of convenience does not favour the extension of the caveat. Such circumstances might include where there has been considerable delay on the part of the caveator to act to protect the caveator’s claimed equity in the property, or other acts or omissions which might in equity constitute laches or acquiescence. That is not to suggest they are the only circumstances in which, a serious question to be tried having been made out, the balance of convenience would not favour the extension of the caveat. The circumstances which would decide the balance of convenience against the extension of the caveat where the consequence of failing to do so is effectively to defeat the caveator’s claim are not closed.
[12] (1992) 8 WAR 42.
[13] [2008] SASC 287, (2008) 102 SASR 177.
It follows that in this matter, there being no dispute that the appellant has a caveatable interest in the property and the judge having found there is a prima facie case, which finding is not challenged, the appellant was entitled to an order extending the caveat unless there was some act or omission on his part which would persuade the court that the balance of convenience does not favour the protection of his claimed equity in the property.
The task the judge was required to undertake in considering the balance of convenience was to weigh the injury the appellant would suffer if the caveat was not extended against the injury the respondents would suffer if the caveat was extended pending the hearing and determination of the appellant’s claim. If the caveat was not extended the injury to the appellant would be fatal. The appellant’s claimed equity in the property would be permanently defeated. On the other hand, if the caveat was extended, the injury to the respondents would not be fatal. While they have entered into a subsequent contract for the sale of the property, there is no evidence the purchaser is pressing to settle. Even if the respondents are exposed to the risk of a claim for specific performance or damages by the subsequent purchaser, arguably the subsequent purchaser’s interest is subject to the appellant’s interest. In a contest of priorities, the earlier purchaser prima facie takes priority over the subsequent purchaser. As a consequence, if the appellant’s claim at trial succeeds, the respondents will not be liable to settle with the subsequent purchaser. Any claim for damages is moot and the amount of any possible award unclear.
In my view, there is nothing in the conduct of the appellant which justified the judge in depriving him of the protection of the caveat pending the trial of his action, given that the exercise of the judge’s discretion results in the defeat of the appellant’s claim without a trial on the merits. There is no suggestion of inordinate delay on the part of the appellant in seeking to protect his claimed equity by the lodging of the caveat. The only factors identified by the judge which persuaded him the balance of convenience did not favour extending the caveat, was the fact that the respondents had a strong case on the merits and they had afforded the appellant two opportunities to satisfy the finance condition. These are considerations that are relevant to consideration of whether a prima facie case has been established. While in some circumstances there is room, as I have said, to take into account the respective strengths of the parties’ cases, in determining whether to extend a caveat, that is only in circumstances where the factors relevant to the balance of convenience are evenly balanced and there is no credible dispute that one party’s case is disproportionately stronger than the other party’s case. That is not the case here. On the contrary, the balance of convenience overwhelmingly favoured the extension of the caveat to protect the appellant’s claimed equity once the judge had found a prima facie case existed, which finding is unchallenged on appeal. Further, while the judge found the appellant’s case is weak, that characterisation of his case is not conceded by the appellant. In any event, assuming the judge’s characterisation of the strength of the appellant’s case to be correct, the fact that the refusal to extend the caveat would effectively put an end to the appellant’s action is a factor overwhelmingly in favour of extending the caveat. The judge’s exercise of his discretion amounted to a summary disposal of the appellant’s action without reference to the principles applicable to summary judgment. At common law, that requires formation of a certain concluded determination that a proceeding would necessarily fail.[14] But in this matter, far from the judge reaching such a concluded determination, he found the existence of a prima facie case. In these circumstances the judge’s conclusion that the balance of convenience did not favour extending the caveat discloses a failure properly to exercise his discretion. The incompatibility of the finding that a prima facie case existed with the refusal to extend the caveat, resulting in the final disposition of the appellant’s claim, offends the principle of coherence of the law.[15]
[14] Dey v Victorian Railways Commissioners [1949] HCA 1, (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69, (1964) 112 CLR 125; Spencer v The Commonwealth [2010] HCA 28 at [53], (2010) 241 CLR 118 at 139.
[15] Sullivan v Moody [2001] HCA 59 at [41], [54] – [55], (2001) 207 CLR 562 at 576, 580 – 581; Agricultural and Rural Finance v Gardiner [2008] HCA 57 at [100], (2008) 238 CLR 570 at 602; Miller v Miller [2011] HCA 9 at [15], [56], [74] and [102], (2011) 242 CLR 446 at 454, 467, 473 and 482; Equuscorp v Haxton [2012] HCA 7 at [23], [25], [34], [38], [43] and [45], (2012) 246 CLR 498 at 513, 514, 518, 520 and 521 – 523.
In addition, the judge fell into error in weighing the costs to be incurred in a trial of the action in considering the balance of convenience. The costs of any trial, pending which an interlocutory injunction has been sought to preserve the status quo, is not a factor relevant to the balance of convenience.
Finally, I should address two submissions put by the respondents. First, that the rights of the subsequent purchaser was a factor to be weighed by the judge in deciding whether to extend the caveat. Secondly, that there was insufficient evidence before the judge of the appellant’s capacity to settle.
In relation to the first point, I accept that as a matter of general principle, equity permits consideration of hardship either to third persons or the general public in determining where the balance of convenience lies.[16] However, as the High Court recognised, hardship to third parties or the general public are only rarely found to be decisive. A plaintiff is not ordinarily denied relief merely because of prejudice or hardship to third parties or the public.[17] It is only in exceptional circumstances where relief would be refused by the court because of hardship to the public or a third party. That will occur only where the hardship is so disproportionately great relative to the prospective prejudice or hardship to the plaintiff.[18] For the reasons I have explained earlier, that is not the case here. In any event, if the caveat is extended and the action proceeds to trial, the subsequent purchaser will have the opportunity to join the action and press her claim for specific performance. In these circumstances the court would be able to determine the question of priority. Apart from the question of costs, that will occasion no real hardship to the subsequent purchaser. On the other hand, if the caveat is not extended, as I have explained, the appellant will be deprived of his claimed equity in the property.
[16] Patrick Stevedores v Maritime Union of Australia [1998] HCA 30 at [65], (1998) 195 CLR 1 at 41 – 42.
[17] Kennaway v Thompson [1981] QB 88.
[18] Spry, Equitable Remedies, 9^th Ed, page 209.
As to the second matter, this was not a factor considered by the judge in determining the balance of convenience. In any event, I am satisfied that there was some, albeit not convincing, evidence of the appellant’s capacity to settle. That evidence is found in correspondence from the appellant’s solicitors of 5 June 2014 asserting that the appellant had obtained finance to enable him to settle on the property and the affidavit of Mark Hamilton of 24 July 2014 which asserted that the appellant was ready, willing and able to settle on the property. In any event, it defies logic that the appellant would be pursuing these proceedings now if he lacked the financial capacity to settle on the property.
Conclusion
I would allow the appeal. I would hear the parties as to the terms of the orders to be made in light of these reasons.