Meland Holdings Pty Ltd v Saunders & Anor

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MELAND HOLDINGS PTY LTD v SAUNDERS & ANOR
[2024] SASC 27
Reasons for Decision of Judge Dart a Master of the Supreme Court
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - WHO MAY LODGE AND WHAT INTEREST SUFFICIENT - GENERALLY
Applicant and respondents entered into letters of offer - subject matter of those documents is the sale and purchase of land - further documents anticipated - applicant lodged caveats - respondents warn the caveats - application for an extension - respondents say no binding agreement - applicant makes out serious question to be tried - caveats extended.
Held:
1. Time for removal of the caveats is extended.
2. Applicant to file a statement of claim.
Real Property Act 1886 (SA) s 191, referred to.
Adderley v Dixon (1824) 1 Sim & St 607; Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458; Masters v Cameron (1954) 91 CLR 353; Nexus Mortgage Securities v Mawson KLM Holdings & Starmaker (No 51) Pty Ltd SCGRG-97-364, Judgment No S6347; Pua Hor Ong & Ors v Wu You Yang Pty Ltd & Ors [2008] SASC 365; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, considered.

MELAND HOLDINGS PTY LTD v SAUNDERS & ANOR
[2024] SASC 27

This is an application to extend the time for the removal of two caveats. I made an order extending time for removal and directed the applicant to file a statement of claim so the matter can be progressed on an expedited basis. These are my brief reasons for doing so.
Background
The applicant, by its sole director, signed two documents headed “Letter of Offer” on or about 15 December 2022. One of the documents related to land owned by the first respondent and the other relates to land owned by the second respondent. The two documents have the same structure but do have some different terms.
In relation to the first respondent, it was proposed that he would sell the identified land to the applicant for the sum of $10,400,000 (GST exclusive). A draft contract of sale was attached to the Letter of Offer. It was anticipated that the applicant would have a 60 day due diligence period from execution of the contract of sale and that, at the end of that period, the applicant could either terminate the contract or pay the deposit. The deposit was fixed in the amount of $2,320,000 (GST exclusive). The agreement provided that the deposit was non-refundable and upon payment could be used by the first respondent for his own purposes. A settlement period of 72 months from the date of execution of the contract of sale was provided for.
The second respondent agreed to sell the identified land to the applicant for the sum of $12,800,000 (GST exclusive). In relation to this contract, it was intended that a put and call option agreement would be signed. A draft of that document was attached to the Letter of Offer. The put option provided that it was to be exercised within three years. The agreement also provided that settlement would be three years from the exercise of the option. Each of the Letters of Offer referred to the other and each contains a term that both contracts must settle at the same time. Again, a deposit of $2,320,000 (GST exclusive) was provided for and again upon payment the money was able to be utilised by the second respondent.
The first sentence of each Letter of Offer is as follows:
The parties agree that the Vendor shall sell to the Purchaser who shall purchase from the Vendor the Property on the terms below: (description of land and price)
Each of the Letters of Offer contains clause 7 which is in the following terms:
This offer is executed as a deed and legally binding for both parties. The vendor may withdraw this offer any time before the vendor signs.
Each of the vendors signed their respective Letter of Offer on or about 21 December 2022. Since the Letters of Offer were executed by the parties, there have been discussions about amending the contract of sale of land in relation to the first matter and the terms of the put and call option agreement in relation to the second. The applicant says that the respondents stopped communicating, after the applicant understood that all terms of the additional documents had been agreed. It says the respondents have refused to provide execution copies for the applicant to sign. The respondents dispute the applicant’s version of events.
The material before the Court discloses that the respondents have other offers for the properties at a higher price.
As a result of the solicitors for the respondents not providing execution copies of the documents referred to in the Letter of Offer, the applicant lodged a caveat in relation to each parcel of land. Each caveat is in the following terms:
An estate or interest in fee simple as purchaser in the land described pursuant to a contract/agreement/deed made between the caveator and caveatee dated 21 December 2022.
Each of the respondents warned the caveat in relation to their land which led to this application being commenced.
Extending time for the removal of a caveat
This is a statutory application. The relevant provision of the Real Property Act 1886 is as follows:
191—Caveats
(1) Any settlor of land or beneficiary claiming under a will or settlement, or any person claiming to be interested at law or in equity, whether under an agreement, or under an unregistered instrument, or otherwise howsoever in any land, may lodge a caveat in the Lands Titles Registration Office:
…
(fa) Action to establish validity of claim a caveator may bring an action in the Court to establish the validity of the claim on which the caveat is based;
(g) Caveator may apply to Court for order to extend time the Court may, on the caveator's application, extend the period of 21 days until an action under paragraph (fa) is determined or for any other period;
…
(j) Caveator, except Registrar-General, liable to make compensation any caveator other than the Registrar-General who shall have lodged or refused or neglected to withdraw any caveat wrongfully and without reasonable cause, shall be liable to make compensation to any person who may have sustained damage thereby, and such compensation may be recovered by action: Provided that, if proceedings shall have been taken in the Court by the caveatee or other person interested, the amount of such compensation may be assessed by the Court acting in the same proceedings; or the Court may direct an action to be brought to ascertain and recover such amount;
The decision by the Court to extend or remove a caveat is an exercise of the statutory power given by the Real Property Act in s 191(1)(g). Generally speaking, the case law approaches the question by applying the test applicable to determining whether or not to grant an interlocutory injunction. That, of course, is an exercise of the Court’s equitable jurisdiction rather than a statutory jurisdiction.
The leading authority in this state remains Nexus Mortgage Securities v Mawson KLM Holdings & Starmaker (No 51) Pty Ltd.[1] It is a decision of the Full Court. There are three judgments but the principal judgment is delivered by Doyle CJ. Relevantly his Honour said:
The outcome of the appeal turns on three issues.
First, is Nexus able to show that there is a serious question to be tried as to the existence of the interest in the land that Nexus relies upon to support its caveat?
Secondly, on an application such as that made by Nexus, is it appropriate to consider whether the balance of convenience favours the extension of the time for removal of the caveat, once a serious question in the above sense has been demonstrated?
…
As is well-known, it is usually neither convenient nor appropriate on an application, such as that made to the court, to determine finally the entitlement of the caveator to the interest in the subject land upon the basis of which it lodged its caveat: see Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176 and Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198. The reasons for this are obvious. An application under subparaVII has been treated as, in substance, an application to preserve the status quo, and thus the caveat, while the rights of the parties are finally determined. Applications under subparaVII are usually dealt with relatively expeditiously. As a matter of practice in this court, and I believe other courts, they are dealt with in a manner which is not appropriate for the resolution of disputed facts or difficult questions of law. Such applications are usually dealt with expeditiously, and upon the basis that there will follow later a full trial of the issues upon which the claim to a caveat depends.
[1] SCGRG-97-364, Judgment No S6347.
If an applicant who seeks to extend the time for removal of a caveat fails to establish a serious question, that will be the end of the matter. If a serious question is established, then it becomes a question of how the balance of convenience plays out.
In Nexus it was put to the Court that the balance of convenience rarely has any role to play. That is, if an arguable claim for an interest in land is made out, then it would be extremely rare to remove the caveat on a balance of convenience basis. Doyle CJ said as follows:[2]
That was the approach taken by Cox J, after a careful review of decisions in this State, in Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198. It may be that the particular submission now made was not made to Cox J, but the basis upon which an order extending the time for the removal of a caveat should be made was certainly a matter considered by him with some care. Moreover, decisions in New South Wales, Victoria and Queensland have proceeded upon a similar basis. A number of relevant decisions are reviewed by Owen J in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42. It may be that the approach taken to the relevance of the balance of convenience is different in Western Australia. In the case just referred to the other members of the court concurred in the judgment of Owen J. On the point at issue, having reviewed authorities in other States, he concluded as follows (at 50):
“... the review does demonstrate that although considerations relevant to an interim injunction are applicable, they may not necessarily be used in the same way. In relation to a caveat the question has to be decided bearing in mind the peculiar statutory context.
In my opinion, the balance of convenience is a factor to be considered in an application under s138. 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.”
He went on to say that the purpose of a caveat is to restrain dealings with land that would defeat or derogate from the proprietary interest the subject of the caveat, that removal of the caveat would in many cases destroy the benefit of the relevant proprietary interest for all practical purposes, and that for that reason a court would ordinarily extend the time for removal of a caveat once an arguable case as to the existence of the interest had been demonstrated.
In my respectful opinion there is some force in what Owen J says, and in the analysis which he makes of the cases to which he refers. However, to my mind the points that he makes are capable of being subsumed as aspects of the consideration of the balance of convenience.
[2] Nexus Mortgage Securities v Mawson KLM Holdings & Starmaker No 51 Pty Ltd, SCGRG-97-364, Judgment No S6347.
The approach of Doyle CJ suggests that the test for the balance of convenience is similar, but not identical in all respects, to that applied for an interlocutory injunction. The reason for the difference is because of the subject matter of a caveat. A caveat is dealing with an alleged interest in land.
In this matter, the interest arises from what is said to be a contract for the sale and purchase of land. Exactly 200 years ago the Courts of Chancery in Adderley v Dixon[3] held that in relation to a contract for the sale and purchase of land, damages are not to be regarded as an adequate remedy. That remains the law. It is for that reason that a purchaser is entitled to specific performance of such a contract.
[3] (1824) 1 Sim & St 607.
In equity, on an application for an interlocutory injunction, the question of whether damages would be an adequate remedy is a relevant consideration on the balance of convenience issue. It is not a relevant consideration on the question of extending time to remove a caveat.
I note the comments of the Chief Justice in Pua Hor Ong & Ors v Wu You Yang Pty Ltd & Ors:[4]
The purpose of a caveat is to protect the interest the caveators claim to have in land. It is in the very nature of an interest in land in that it prevails over other 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. For those reasons, where a caveator establishes a prima facie case, the balance of convenience is likely to favour retention of the caveat.
(footnote omitted)
[4] [2008] SASC 365 at [66].
Logically it would be extremely rare, where if a person succeeds at trial, he or she would be entitled to an order for specific performance of the contract for the purchase of land, to take that opportunity away, on an interlocutory basis.
How are the Letters of Offer to be construed?
It is necessary to consider the terms of the Letters of Offer to determine if the applicant has made out the serious question to be tried. The law of contract in Australia is objective. The subjective beliefs of the parties as to what they have done is irrelevant and, for that reason, inadmissible. As the High Court noted in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:[5]
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
(footnotes omitted)
[5] (2004) 219 CLR 165 at [40].
The Letters of Offer anticipated that further documents would be executed. That raises the question of whether there was a binding agreement at the time the Letters of Offer were executed. The well-known High Court decision of Masters v Cameron[6] has application. In the joint judgment it was said:[7]
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
[6] (1954) 91 CLR 353.
[7] (1954) 91 CLR 353 at [9].
The dispute at trial will be in relation to which category of agreement do the Letters of Offer fall into.
The respondents’ submissions
The submissions of the respondents raised a number of issues. They were that:
1.There is no binding agreement.
2.The applicant is not the correct party.
3.The caveats claim an incorrect interest and are bad for that reason.
4.The applicant has no assets and the undertaking as to damages should not be accepted.
The first issue is whether there is a binding agreement. At an interlocutory stage the Court is not making a final determination on that question. The applicant must establish that there is a serious question to be tried as to whether or not there was a binding agreement. Looked at objectively, the words indicate that the parties intended to enter into some form of binding agreement. The words of clause 7 indicate that. All of the other subject matter necessary for a contract for the sale and purchase of land are contained in the Letters of Offer. The parties are identified, the land is identified and the price is identified. The Letters of Offer also provide a method as to how the date of settlement is to be fixed. That is enough to establish a serious question to be tried.
The second issue relates to whether the applicant is the correct party. The respondents raised the issue of a company called Concordia Views Pty Ltd. The Letters of Offer define the purchaser as the applicant and/or nominee. At some stage in the process it appears that the applicant was suggesting that Concordia Views Pty Ltd would be its nominee for the purpose of settling on the contracts.
The addition of the words “and/or nominee” to the name of a purchaser in a contract for the sale and purchase of land has a limited effect. It does not change the contracting parties. In the Letters of Offer the applicant is the purchaser and the respondents are the vendors.
In Harry v Fidelity Nominees Pty Ltd[8] the Full Court was asked to consider the legal effect of the addition of the words “and or nominee” in similar circumstances to this matter. King CJ noted as follows:[9]
I think that adequate effect is given to the expression “and or nominee” if it is construed simply as expressing the ordinary right to require that the property be transferred to a nominee.
[8] (1985) 41 SASR 458.
[9] (1985) 41 SASR 458 at 460.
The applicant is the correct party to these proceedings. It remains the contractual party, even if it nominates another party to take the land at settlement.
The third issue is that, at least in relation to the second respondent’s caveat, the incorrect interest has been claimed. The interest claimed is that of a purchaser of land. The second respondent submits that the agreement is really a put option and for that reason the wrong interest is claimed in the caveat. It is necessary to claim the correct interest.
When the whole of the Letter of Offer is considered, I am satisfied that, in substance, it is a contract for the sale and purchase of land. The put option is intended to permit the purchaser time to consider whether or not to proceed with the contract and, if so, it fixes a date for settlement. It does not change the nature of the agreement which is a contract for the sale and purchase of land. The caveat is expressed in appropriate terms.

The respondents raised a further issue. They assert that the applicant is an empty vessel and that the undertaking as to damages proffered by it may be worthless. In response, and to alleviate any concerns of the respondents, the applicant offered to pay the sum of $500,000 into the Suitors Fund as security for the undertaking as to damages. That money has been received by the Court.
As an aside, it is curious that an undertaking as to damages is required. It arises because of the treating of this type of application as equivalent to an interlocutory injunction. The practice is well-established and it is not for a single judge to depart from the practice. I note that s 191(1)(j) provides a statutory power to award compensation for a caveat lodged wrongfully and without reasonable cause. It is not clear that an undertaking as to damages adds to the right to compensation.
Conclusion
I am satisfied that the applicant has established a serious question in relation to whether or not the Letters of Offer are binding contracts for the sale and purchase of the land. On their face, they appear to be. The wording of clause 7 of each Letter of Offer indicates that the parties intended the document to be legally binding. That is sufficient, at an interlocutory stage, to establish that there is a serious question to be tried. No issues of sufficient weight arise in relation to the balance of convenience.
It is appropriate to extend the time for the removal of the caveats. The progress of the matter to trial should be expedited.

[2024] SASC 27

5 March 2024