Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd
[2009] WASCA 171
•7 OCTOBER 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: PERRON INVESTMENTS PTY LTD -v- TIM DAVIES LANDSCAPING PTY LTD [2009] WASCA 171
CORAM: McLURE JA
PULLIN JA
NEWNES JA
HEARD: 4 JUNE 2009
DELIVERED : 7 OCTOBER 2009
FILE NO/S: CACV 94 of 2008
BETWEEN: PERRON INVESTMENTS PTY LTD
Appellant
AND
TIM DAVIES LANDSCAPING PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :TIM DAVIES LANDSCAPING PTY LTD -v- PERRON INVESTMENTS PTY LTD [2008] WASC 178
File No :CIV 2349 of 2007
Catchwords:
Caveat - Building contract - Claim by landscaping subcontractor of equitable interest in land of principal - Romalpa clause in contract between contractor and subcontractor - Whether principal had knowledge of Romalpa clause - Whether Romalpa clause capable of giving rise to caveatable interest in land of principal - Whether landscaping work and materials gave rise to equitable lien - Onus on caveator on application to extend operation of caveat - Turns on own facts
Legislation:
Nil
Result:
Appeal allowed
Category: B
Representation:
Counsel:
Appellant: Mr M N Solomon & Mr P Van Der Zanden
Respondent: Mr D H Solomon
Solicitors:
Appellant: Hotchkin Hanly
Respondent: Solomon Brothers
Case(s) referred to in judgment(s):
Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Borden (UK) Ltd v Scottish Timber Products Ltd [1979] 3 WLR 672
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
First Trade Consulting Pty Ltd v Kirfield Limited [2006] WASCA 174
Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93
Hampton v Glamorgan County Council [1917] AC 13
Hewett v Court (1983) 149 CLR 639
HG & R Nominees Pty Ltd v Caulson Pty Ltd (2000) V ConvR 54‑630
Kang v Kwan [2002] NSWSC 1187
Kay's Leasing Corporation v CSR Provident Fund Nominees Ltd [1962] VR 429
Kirfield Limited v First Trade Consulting Pty Ltd [2005] WASC 277
North West Metropolitan Regional Hospital Board v TA Bickerton & Son [1970] 1 WLR 607
Re Bond Worth Ltd [1980] Ch 228
Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50
Re Samuel Allen & Sons Ltd [1907] 1 Ch 575
Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1989) NSW ConvR 55-437
Tim Davies Landscaping Pty Ltd v Perron Investments Pty Ltd [2008] WASC 178
Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406
McLURE JA: I would dismiss the application for leave to appeal and the appeal. The background and grounds of appeal are detailed in the reasons of Newnes JA and not repeated here unless necessary for an understanding of these reasons.
The evidence establishes that there was a conventional construction arrangement whereby the contractor (Link Projects Australasia Pty Ltd (in liq) (Link Projects)) entered into a head contract with the owner of the land (the appellant) to perform the entirety of the building works (the head contract). Link Projects entered into a subcontract with the respondent under which the respondent was to perform part of the building works (the subcontract). The subcontract related to the provision of landscaping services and materials. The materials included soil, mulch, turf, trees and plants, irrigation plant and equipment, paving and masonry.
The head contract is a standard form ABIC SW-1 2002 simple works contract. The architect, Oldfield Knott Architects Pty Ltd (Oldfield Knott), had a conventional role to play under the head contract. Oldfield Knott was the agent of the appellant for the purpose of administering the head contract (cl A6.2) and instructing the contractor in relation to variations (cl J1.1). Oldfield Knott also acted under the head contract as assessor, valuer and certifier in which capacities the architect was not acting as agent of the proprietor (cl A6.2).
The head contract also made provision for the architect to give an instruction to the contractor for a person other than the contractor to perform work or supply and install an item for which a provisional sum or prime cost sum had been allowed, with the nominated person becoming a subcontractor (cl K3.1). The provisional and prime cost sums are set out in sch 6 and sch 7 respectively. It is apparent that at least part of the landscaping works the subject of the subcontract are included in sch 6 and sch 7 from which it can be inferred that the respondent was nominated by Oldfield Knott under cl K3. That inference is supported by a document attached to a progress claim (GAB 134).
As noted in Dorter JB and Sharkey JJA, Building and Construction Contracts in Australia (2nd ed) [5.220], the benefit to the owner in the system of nomination is that the owner can generally avoid both responsibility to the nominated subcontractor and the difficulties created by multiple contracts while exercising a degree of control over the price and the substance of the work by negotiating directly with the subcontractor, often through his agent the architect or engineer (relying on Lord Reid's explanation of the nomination system in North West Metropolitan Regional Hospital Board v TA Bickerton & Son [1970] 1 WLR 607, 611). Bickerton decided that in the event a subcontract with a nominated subcontractor was terminated before completion of the subcontract works, the owner was under a duty to nominate a replacement contractor. That aspect of Bickerton was distinguished in Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274. However, that may not affect the correctness of the discussion of the nomination system generally.
In a conventional construction arrangement, the circumstances in which a direct contract can be established between the owner and the subcontractor, including a nominated subcontractor, will be rare: Hampton v Glamorgan County Council [1917] AC 13; Dorter and Sharkey [5.220], [5.630].
There is evidence in this case that Oldfield Knott communicated directly with the respondent concerning the terms and conditions of the proposed subcontract. This is evident from a letter dated 8 June 2007 from the respondent to Oldfield Knott referring to previous discussions and enclosing a landscape works quotation. That quotation was the subject of a purchase order to the respondent from Link Projects. On the limited evidence before the court against the background of generally accepted construction practice, there is evidence from which it may (not must) be inferred that (1) the negotiations for the subcontract were conducted by Oldfield Knott (with either actual or ostensible authority) on behalf of the appellant; (2) Oldfield Knott's knowledge is attributable the appellant; (3) Oldfield Knott instructed Link Projects under cl K3 of the head contract to enter into the subcontract on the terms and conditions the subject of the landscape works quotation; (4) therefore Oldfield Knott had read the landscape works quotation.
The landscape works quotation contained a romalpa clause in the following terms:
The ownership of the goods supplied by the contractor to the customer shall remain with the contractors until payment in full has been received by the contractor. If such payment is overdue in whole or in part the contractor shall have every right (without prejudice to any other rights) and is hereby authorised by the client to enter into and upon the premises (between 8am and 5pm) where the goods may be stored or in use (with or without others) to retake possession and remove the same. The customer hereby indemnifies the contractor against any claim, action or damages arising out of any such action against the cost of the same.
It was accepted by the appellant for the purpose of the proceedings that the reference in the romalpa clause to 'the client' is a reference to the appellant and thus the clause purported to bind the appellant. It is this fact which arguably puts this case into the rare category. In these circumstances, I am satisfied that there is sufficient evidence to support an arguable claim that in consideration of the respondent entering into the subcontract with Link Projects, the appellant, by its agent Oldfield Knott, agreed to permit the respondent to enter upon the building premises to retake possession and remove goods supplied under the subcontract for which payment had not been received in full.
Thus it is necessary to address the appellant's contention that there is no arguable basis for the respondent's claim that it has an equitable interest in the appellant's land by virtue of the romalpa clause in the subcontract.
It is arguable that a retention of title or romalpa clause is capable of applying in the context of a contract for work and materials such as a building contract: Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406.
Goods that become affixed to land become part of the land. That is, the status of the property changes from personal to real property. A fixture that is severed from the land resumes its status as personal property. There is the possibility in this case that the goods supplied under the subcontract have either (i) retained their status as chattels; (ii) lost their original identity by, for example, being mixed with goods belonging to another; or (iii) become fixtures without having lost their original identity. Where the goods have retained their character as chattels, the respondent has no arguable interest in the land on which they are situated. Where the goods have lost their original identity, the balance of authority is that the retention of title clause will not be effective: Borden (UK) Ltd v Scottish Timber Products Ltd [1979] 3 WLR 672; Re Bond Worth Ltd [1980] Ch 228; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588.
For the purposes of these proceedings it can be assumed that at least some of the goods supplied by the respondent under the subcontract have become fixtures and have not lost their identity. There is authority to the effect that a contractual right to own and take possession of fixtures under a romalpa clause confers on the holder of that right an equitable interest in the land which entitles the holder to enter upon the land to sever and remove the fixtures: Kay's Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429; Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1989) NSW ConvR 55-437; Re Samuel Allen & Sons Ltd [1907] 1 Ch 575; Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50.
The appellant challenges the correctness of the orthodoxy that a romalpa clause can give rise to an equitable interest in the land to which goods are affixed. However, it accepts that this claim cannot be resolved in its favour in interlocutory proceedings for the extension of a caveat. The elements of the test for extension of a caveat are the same as that for an interlocutory injunction. The applicant must demonstrate that there is a serious question to be tried as to whether a caveatable interest exists and that the balance of convenience favours the extension.
The appellant's position in these proceedings was that 'the dubious principle' in Kay's Leasing should not be extended to cover the facts in this case. The starting assumption for the assessment of that proposition is that on its proper construction, the romalpa clause in the subcontract gives the respondent a right of access to the appellant's land to remove its goods that had become fixtures.
The appellant's first contention is that a romalpa clause can only give rise to an equitable interest in land in circumstances where the person who is capable of creating or transferring the interest in land is the person liable to pay for the goods. It can be accepted for present purposes that in all cases in which a supplier's equitable interest in land has been recognised, the romalpa clause related to a debt owed by the owner of the land in question. However, it is arguable that the principle in Kay's Leasing extends to circumstances where the owner of the land is in effect a third party security provider, not for the debt but for the right to sever and remove the fixtures.
The appellant's second contention is that where there is a claim by the supplier of the goods against a party to the romalpa clause, the supplier's sole remedy is contractual. The co‑existence of contractual and proprietary remedies is well known to the law. The appellant's proposition may be arguable but is not unarguably correct.
Finally, the appellant contends that the appellant's grant of access to its land does not survive the termination of the head contract. That contention is based on the premise that the subcontract has to be consistent with the head contract. The submission is as follows. The purchase order is expressly stated to be issued 'as per terms of main
contract for this order'. The 'main contract' means the head contract. That is consistent with cl G4.3 of the head contract which provides that the relevant provisions of the head contract must be included in contracts that the contractor makes with its subcontractors. The owner can terminate the head contract if an insolvency event occurs by giving a written notice of termination (cl Q2). Where the engagement of a contractor has been terminated because an insolvency event has occurred, the owner is not bound to make any further payment to the contractor (cl Q6.1). If the owner terminates the engagement because of an insolvency event, the owner has the power at its sole discretion to directly pay any subcontractor or supplier for any work, materials or equipment necessary to complete the works (cl Q7.1).
The appellant contends that cl Q6 and cl Q7 are inconsistent with a direct security relationship between the owner and the subcontractor from which it follows that the contractual right of access under the romalpa clause is dependent on the head contract remaining extant (ts 45). Whether and if so to what extent the romalpa clause is inconsistent with the head contract and the effect of any inconsistency are arguable matters that should be determined at trial.
The appellant has failed to demonstrate that the Master erred in extending the caveat based on the romalpa clause. As that caveat will remain, there is no necessity to determine whether the respondent also has an arguable claim for an equitable lien. I would refuse leave to appeal and dismiss the appeal.
PULLIN JA: I agree with Newnes JA.
NEWNES JA: This is an application for leave to appeal and an appeal against a decision of Master Sanderson extending the operation of two caveats lodged by the respondent against the title to the appellant's land: Tim Davies Landscaping Pty Ltd v Perron Investments Pty Ltd [2008] WASC 178. On 23 October 2008, Pullin JA ordered that the application for leave to appeal be heard together with the appeal.
Background
The appellant is the owner of land at Lot 203 Wentworth Parade, Success, south of Perth (the land). On 5 October 2006, the appellant entered into a contract with Link Projects Australasia Pty Ltd (Link Projects) for the construction work in connection with the Gateways
Tavern on the land. The contract provided that it was to be administered on behalf of the appellant by Oldfield Knott Architects Pty Ltd (Oldfield Knott).
In the course of the work, Link Projects entered into a contract with the respondent for landscaping work to be carried out on the land. How that came about does not emerge with any clarity from the evidence.
An affidavit in support of the application was sworn by Mr Timothy Davies, a director of the respondent. Mr Davies attached to that affidavit a statutory declaration he made on 12 October 2007, in which he says (relevantly):
Link Projects, through Oldfield Knott Architects, requested that [the respondent] quote on performing various landscaping works at the Gateways Tavern of Lot 203 Wentworth Parade, Success.
It is not apparent whether the respondent was the only entity asked to quote on the work, or whether it was one of several or many. Nor is it apparent how it came about that Link Projects requested the quote through Oldfield Knott. It was not contended on behalf of the respondent that the respondent was a nominated sub‑contractor, although certain landscaping described in sch 6 and 7 of the contract was work in respect of which the appellant reserved the right to nominate a sub‑contractor.
There is in evidence a document from the respondent, entitled 'Landscape Works Quotation Q2402‑BEE‑A', addressed to Oldfield Knott and dated 8 June 2007. The document (the quotation) refers to 'recent discussions' with regard to the Gateways Tavern and attaches a detailed breakdown of a quoted price of $219,563.58 for landscaping work, and the respondent's terms of contract. Relevantly, one of those conditions (the Romalpa clause) is in the following terms:
The ownership of the goods supplied by the contractor to the customer shall remain with the contractors until payment in full has been received by the contractor. If such payment is overdue in whole or in part the contractor shall have every right (without prejudice to any other rights) and is hereby authorised by the client to enter into and upon the premises (between 8 am and 5 pm) where the goods may be stored or in use (with or without others) to retake possession and remove the same. The customer hereby indemnifies the contractor against any claim, action or damages arising out of any such action against the cost of the same.
There is also attached to Mr Davies' affidavit a purchase order dated 13 June 2007 which Link Projects sent to the respondent. It is in (relevantly) the following terms:
Supply & install the landscaping & reticulation as per your quotation Q2402‑BEE‑A dated 8 June, 2007.
The respondent says that it subsequently issued to Link Projects invoices totalling $165,679.94 which remain unpaid. Link Projects is in liquidation.
On 12 October 2007, the respondent lodged a caveat claiming an interest in the land as equitable chargee. The caveat was supported by the statutory declaration of Mr Davies to which I have referred. In that statutory declaration Mr Davies says that by virtue of the Romalpa clause the respondent claims an equitable estate or interest in the land for the amount of the unpaid invoices. A second caveat was lodged on the same day by the respondent claiming an interest in the land as the holder of an equitable lien as unpaid vendor, in the event that title to the goods affixed to the land under the landscaping contract had been transferred to the appellant. The supporting statutory declaration of Mr Davies was to the same effect as the statutory declaration for the first caveat, save for the assertion of the equitable lien and the omission of reference to the Romalpa clause.
The appellant subsequently caused the Registrar of Titles to send to the respondent a notice, dated 19 December 2007, under s 138B of the Transfer of Land Act 1893 (WA) (the Act) in respect of each caveat. Under s 138B, the effect of each of the notices was that the caveat to which it related would lapse unless, within 21 days of service of the notice, the respondent obtained from the Supreme Court an order extending the operation of the caveat and lodged a copy of the order with the Registrar of Titles. Section 138C(2) of the Act provides, in effect, that upon an application for such an order the court may extend the operation of the caveat 'if satisfied that the caveator's claim has or may have substance', but otherwise shall dismiss the application.
On 20 December 2007, the respondent applied by originating summons under s 138C for orders extending the operation of each of the caveats until further order of the court. The application came before Hasluck J on 3 January 2008 and orders to that effect were made in respect of each caveat. His Honour also made programming orders directed to a substantive hearing of the application.
That hearing occurred on 11 August 2008 before Master Sanderson. At the hearing, the appellant's counsel conceded for the purposes of the application that in the Romalpa clause 'the customer' was a reference to Link Projects and 'the client' was a reference to the appellant. The Master also noted that, for the purposes of the application, counsel for the appellant 'was prepared to accept that [Oldfield Knott] were the agents of the [appellant]' [10]. The nature or scope of the agency was not identified.
Having referred to the submissions of the parties and the relevant documents, the Master said:
I am satisfied it is arguable that [Oldfield Knott] on behalf of their principal, the [appellant], agreed to a Romalpa clause in the contract between the [respondent] and Link Projects which they knew or ought to have known would create an equitable interest in the land. Once that point is reached, the necessary conclusion is that there is a serious question to be tried. It is not a matter that I should attempt to resolve on the evidence as it stands [17].
The Master concluded that as there was a serious question to be tried with respect to the first caveat, nothing was to be gained by considering the merits of the second caveat.
The Master ordered that the operation of each of the caveats be extended until final judgment in the proceedings or further order of the court. He ordered that the substantive issues between the parties underlying the claims in the caveats be determined as if the proceedings had been commenced by writ and ordered the respondent to make an application for admission of the matter to the CMC List within seven days of serving a statement of claim.
The appellant commenced this appeal on 26 September 2008. A notice of respondent's intention was filed on 3 October 2008 and, as I have mentioned, on 23 October 2008 Pullin JA ordered that the application for leave be heard together with the appeal. Thereafter the parties appear to have pursued the appeal at a very leisurely pace and nothing has been done to advance the proceedings in accordance with the orders of Master Sanderson.
The grounds of appeal
The grounds of appeal are as follows:
1.The learned Master erred in law in finding that there is an arguable case that the Romalpa clause in the contract between the respondent (plaintiff) and Link Projects Australasia Pty Ltd (Link Projects) conferred upon the respondent an equitable interest in the subject land owned by the appellant (first defendant).
2.The learned Master erred in fact and law in finding that because the appellant arguably had notice that a quotation issued by the respondent to Link Projects had a Romalpa clause, it arguably agreed to the Romalpa clause, and by reason of those matters the respondent arguably obtained an equitable interest in the subject land.
3.The learned Master erred in fact and law in finding that it is arguable that if, which is denied, the appellant arguably agreed to a Romalpa clause in the contract between the respondent and Link Projects, that created an equitable interest in the appellant's land.
4.The learned Master erred in fact and law in not finding that even if, which is denied, the respondent obtained an equitable interest in the subject land on annexation of the goods, it is not arguable that the (arguable) interest survived termination of the building contract.
5.The learned Master erred in ordering that the operation of [the second caveat] be extended in circumstances where:
(a)he failed to consider whether there was a serious question to be tried as to whether a caveatable interest existed;
(b)he should have found that there was not a serious question to be tried as to whether the respondent had an interest in the appellant's land as an equitable lien holder as, in the circumstances, no equitable lien could arguably arise.
Disposition of the appeal
The first caveat
It was the respondent's case, in substance, that the equitable interest claimed in the caveat arose because the appellant, by its agent Oldfield Knott, was a party to the landscaping contract which included the Romalpa clause or, at the least, was bound by it because (by Oldfield Knott) it was aware that the terms upon which Link Projects was contracting with the respondent for the landscaping work included the Romalpa clause and consented to the respondent contracting on such terms. It was not suggested that the appellant was a party to, or aware of, the landscaping contract otherwise than by Oldfield Knott as its agent.
In their submissions, the parties devoted a good deal of attention to whether the contract between the respondent and Link Projects was capable of giving rise to an equitable interest of the respondent in the land. Neither party was able to refer to any case on point. I do not, however, think it is necessary to consider the issue. That is because, as the appellant contended, there is no evidence that the appellant ever agreed to or was aware of the contract.
It was common ground (and in my view it is the case) that on the hearing of an application under s 138C of the Act the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists and that the balance of convenience favours the retention of the caveat on the title; that is, that the principles applicable to an application under s 138 of the Act apply to an application under s 138C of the Act: as to which, see Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 48 ‑ 50.
Those principles, however, must now be understood in light of the decision of the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82 so that the existence of a serious question to be tried involves showing 'a sufficient likelihood of success to justify in the circumstances the preservation of the status quo' pending trial. How strong the likelihood of success needs to be depends upon the nature of the rights asserted and the practical consequences likely to flow from the order sought.
In that context, it is important to bear in mind, as Owen J (as his Honour then was) pointed out in Custom Credit (50) that the purpose of a caveat is to prevent the registered proprietor from dealing with the land in a way which will defeat or derogate from some other proprietary interest in the land, and that in many cases removal of a caveat will have the effect of destroying for all practical purposes the benefit of that proprietary interest.
The potential seriousness of the consequences of refusing relief must not, however, distract attention from the obligation that lies on a party seeking to maintain a caveat to show a sufficient likelihood of success to justify in the circumstances the maintenance of the caveat. A party who fails to show any likelihood of success does not overcome that by showing that they would suffer very severe consequences if relief were refused.
It is in showing that there is a serious question to be tried that, in my view, the respondent falls short.
The evidence in support of the respondent's case was simply that there were discussions (the content of which is not described) between the appellant's architect, Oldfield Knott, and the respondent concerning landscaping works to be carried out on the appellant's land. Following those discussions, the respondent sent the quotation to Oldfield Knott. Some five days later, Link Projects wrote to the respondent accepting the quotation.
The circumstances in which Link Projects came to accept the quotation are simply not dealt with at all in the evidence. Thus there is no evidence as to how Link Projects came into possession of a copy of the quotation, whether from Oldfield Knott (and if so, in what circumstances) or by some other means. The evidence is completely silent on what (if any) communications passed between Oldfield Knott and the respondent in relation to the quotation. And as I have said, it is also not apparent whether the quotation was the only one received by Oldfield Knott for the work or whether it was one of several or many. It was not alleged that the respondent was a nominated sub‑contractor.
The difficulty for the respondent is that there is no evidence that Oldfield Knott (and thereby the appellant) was aware that Link Projects would, or was likely to, enter into a contract with the respondent on the terms of the quotation, or from which that could reasonably be inferred. Indeed, there is no evidence that prior to the present dispute over the caveats, Oldfield Knott was aware that Link Projects had accepted the quotation or that a contract had been made between Link Projects and the respondent.
This is not a case where the respondent contends that the relevant evidence is wholly within the possession of the appellant or Oldfield Knott (or is otherwise not currently available to the respondent), but that there are reasonable grounds to suppose that such evidence exists and for that reason the caveats should be maintained until trial. In the course of argument, counsel for the respondent disavowed such a case (ts 56). Counsel said that the respondent was in a position to advance substantial evidence about Oldfield Knott's involvement in connection with the quotation.
However, no such evidence was adduced, although the onus lay on the respondent to establish before the Master that there was a sufficient likelihood of success to justify the preservation of the caveats, or one or other of them. It was not open to the court to infer that such evidence existed and what it might be.
It is the case, as counsel for the respondent stressed, that a caveator served with a notice under s 138B of the Act has very limited time within which to marshal its evidence and to obtain the necessary order, and the extent of the evidence an applicant is able to adduce on an application under that provision has to be considered in that light. Those circumstances do not, however, do away with the obligation of an applicant to adduce sufficient evidence to establish that there is a serious question to be tried.
In the present case, where there is simply no evidence that Oldfield Knott knew that the respondent and Link Projects would, or were likely to, enter into, or had entered into, a contract on the terms of the quotation, no question could arise as to whether, through Oldfield Knott as its agent, the appellant had agreed to the terms of the contract or had consented to the inclusion of the Romalpa clause in the contract between Link Projects and the respondent. In the absence of any such evidence, the respondent's case must necessarily fail. The evidentiary basis for it is simply absent. It is unnecessary to consider whether such agreement or consent on the part of the appellant is capable of giving rise to the interest in the land claimed by the respondent.
The second caveat
As I have mentioned, the second caveat is based upon the assertion of an equitable lien. The respondent says that it has supplied goods and services under its agreement with Link Projects for which it has not been paid and that the goods are affixed and in use on the appellant's property. If (which the respondent does not admit) title in the goods has been transferred to the appellant, the respondent claims an equitable lien in the land as unpaid vendor.
In Hewett v Court (1983) 149 CLR 639, Deane J described an equitable lien as 'a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness' (663). His Honour set out the circumstances which are sufficient (albeit, not necessarily essential) for the implication, independently of agreement, of an equitable lien between the parties in a contractual relationship. Those circumstances are (668):
(a)there be a potential or actual indebtedness on the part of the party who is the owner of the property to the other party arising from the payment or promise of payment either of consideration in relation to the acquisition of the property or an expense incurred in relation to it;
(b)that property (or arguably property including that property) be specifically identified and appropriated to the performance of the contract; and
(c)that the relationship between the actual or potential indebtedness and the identified or appropriate property be such that the owner would be acting unconscientiously or unfairly if it were to dispose of the property to a stranger without the consent of the other party or without the actual or potential liability having been discharged.
An obvious, and in my view insuperable, difficulty confronts the respondent in respect of its claim in respect of this caveat; namely, that there is no evidence of any actual or potential indebtedness of the appellant to the respondent in respect of the landscaping work. Ordinarily a sub‑contractor will have no contractual relationship with the owner, even where the sub‑contractor is a nominated sub‑contractor: Hampton v Glamorgan County Council [1917] AC 13. The respondent acknowledges that its contract was a sub‑contract with Link Projects. Link Projects entered into that sub‑contract in its own right as a principal, not on behalf of the appellant. There was no contract between the respondent and the appellant in respect of the landscaping work, and the respondent has no claim against the appellant for the payment of any amount owing to it under the sub‑contract.
There is a further difficulty in that there is a substantial body of authority that the expenditure of work and materials under a construction contract does not of itself confer on an unpaid contractor any interest in the land on which the work is done: Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93, 104 ‑ 105; HG & R Nominees Pty Ltd v Caulson Pty Ltd (2000) V ConvR 54‑630 [64,519]; Kang v Kwan [2002] NSWSC 1187 [202]; Kirfield Limited v First Trade Consulting Pty Ltd [2005] WASC 277 [50] ‑ [55]; and on appeal First Trade Consulting Pty Ltd v Kirfield Limited [2006] WASCA 174 [14]. In this case, that principle seems to me to be applicable to the respondent's landscaping sub‑contract.
In my view, there is no arguable basis for this caveat.
The question of substantial injustice
It was also submitted on behalf of the respondent that, regardless of the strength of the respondent's case before the Master, there would be no substantial injustice if the caveats were maintained until trial. It had not been suggested that the existence of the caveats was causing any inconvenience to the appellant or that the appellant would suffer any inconvenience if the operation of the caveats was extended to trial. Accordingly, leave to appeal should be refused.
I do not accept that submission. The respondent's argument would have had greater force had the respondent taken the steps envisaged by the programming orders made by the Master to bring the proceedings to trial. If that had been done it is very likely that, if the trial had not already taken place, it would be imminent. Instead, nothing has been done in that respect, with the result that none of the interlocutory steps necessary to make the matter ready for trial have been taken. In circumstances where the respondent has failed to show that there is a serious question to be tried, there is no reason that the appellant's land should continue to be encumbered by the respondent's caveats.
Conclusion
In my respectful opinion, the respondent failed to establish that there was a serious question to be tried in respect of either caveat and, accordingly, the Master erred in the exercise of his discretion in extending the operation of the caveats.
I would therefore:
1.grant leave to appeal;
2.allow the appeal;
3.set aside the orders of the Master; and
4.dismiss the respondent's application to extend the operation of the caveats.
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