McInnes v Davies

Case [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…

Continue reading McInnes v Davies

Sign in free to access the full text

Details
AGLC
McInnes v Davies [2014] SASC 184
Case
[2014] SASC 184
Decision Date

CaseChat Overview and Summary

The appeal in the matter of McInnes v Davies was brought before the Court to challenge a decision of the District Court concerning the extension of a caveat over property. The primary issue was whether the caveat, which the appellant had lodged to preserve his interest in the property, should be extended until the trial of his claim for specific performance of a contract for the sale of the property. The District Court had rejected the appellant’s application for an extension of the caveat, leading to this appeal.

The legal issues central to the appeal involved the principles guiding the extension of caveats under the Real Property Act 1886 (SA) and the factors that determine the balance of convenience in such matters. Specifically, the Court needed to consider whether the appellant had established a serious question to be tried regarding his equitable interest in the property and whether the balance of convenience favoured the extension of the caveat. The appellant argued that the refusal to extend the caveat would effectively destroy his claim for specific performance, as it would prevent him from obtaining an order for specific performance of the contract.

The Court's reasoning highlighted the purpose of a caveat, which is to protect the caveator's interest in the property until the determination of their respective rights. The Court noted that the extension of a caveat should be granted if it is necessary to prevent the destruction of the caveator’s claimed equity in the property. The Court found that the appellant had established a prima facie case for a serious question to be tried, as there was some evidence indicating his readiness and ability to settle on the property. The Court also concluded that the balance of convenience favoured the extension of the caveat, as the refusal to extend it would effectively deny the appellant an effective right to a trial on the merits of his claim.

The Court allowed the appeal and directed the parties to discuss the terms of the orders to be made. The appeal was successful in establishing that the District Court had erred in not extending the caveat, and the Court emphasized the importance of protecting the appellant's equitable interest in the property until the substantive claim was determined.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.