Pj Balnaves Nominees Pty Ltd v Third Szable Holdings Pty Ltd and Anor No. Scciv-02-165

PJ BALNAVES NOMINEES PTY LTD V THIRD SZABLE HOLDINGS PTY LTD AND ANOR
[2002] SASC 180

JUDGE BURLEY. By application dated 10 May 2002, the second defendant seeks the following orders:
“1.That the first defendant be restrained until further order from determining the agreement dated 21 December 2001 wherein the first defendant agreed to sell to the second defendant the property known as Campbell Park.
2.That the first defendant on or before 5.00pm on Tuesday, 14 May 2002 do withdraw the notices to complete dated 29 April 2002 given by it.”
These proceedings consist of a claim by the plaintiff against the defendants and a counterclaim by the second defendant against the first defendant and the plaintiff. This application relates to the counterclaim. The plaintiff is the registered proprietor of the land contained in Certificate of Title Register Book Volume 5063 Folio 917 and Folio 918. The second defendant holds a mortgage in respect of that property. The first defendant has exercised its power of sale under the mortgage and has sold the property to the second defendant by contract dated 21 December 2001, a copy of which has been admitted on this application as Exhibit 1D1 (the contract).
The counterclaim recites that the contract between the mortgagee and the first defendant provided for a purchase price of $426,525.00 and that the deposit payable was $42,652.50. Settlement was to take place on 25 January 2002. It is common ground that settlement has not taken place.
The contract provides that the mortgagee, the first defendant, would give vacant possession to the purchaser at settlement.
On 24 December 2001, the plaintiff lodged a caveat over the land claiming an interest in the land as lessee. That aspect of the plaintiff’s claim in these proceedings was dealt with by way of summary application. On 13 March 2002 I dismissed the plaintiff’s claim to a leasehold interest and published reasons for that decision. The plaintiff has lodged an appeal in respect of that decision but, as far as I can see, has done nothing as yet to prosecute the appeal.
Various affidavits were relied upon by the parties at the hearing on the application for injunctive relief on 24 May 2002. Those affidavits are as follows:
·Affidavit of the second defendant dated 28 March 2002 (Document 26).
·Affidavit of the second defendant dated 9 May 2002 (Document 32).
·Affidavit of Mr A D O’Halloran dated 17 May 2002 (Document 37).
·Affidavit of Peter Szanto dated 17 May 2002 (Document 36).
The affidavits disclose that the subject property is some 75 acres in area, having as improvements a large house of some 90 squares and a collection of outbuildings. The plaintiff, in the balance of the action not the subject of an order for dismissal, claims to be entitled to certain chattels on the land, including chattels in respect of which there is a dispute as to whether the same are fixtures. If they are fixtures, the chattels pass with the land but if they are not, they belong to the plaintiff.
The second defendant, as purchaser, has been called upon to settle by the first defendant who asserts that if the second defendant fails to settle, the first defendant will terminate the contract. The second defendant asserts that the first defendant is not entitled to terminate the contract because it cannot give vacant possession if settlement were to take place.
There are two bases upon which the second defendant asserts that the plaintiff is unable to give vacant possession: first, if the plaintiff successfully appeals from my decision dismissing its claim to an entitlement to a lease, the plaintiff may potentially become entitled to possession if it subsequently establishes at trial that it is entitled to a lease on the property which prevails over the interest of the mortgagee and of the second defendant as purchaser; and, second, it is common ground that there are present on the property various chattels, the presence of which, the second defendant asserts, precludes the first defendant from giving vacant possession.
It was accepted by both parties that the principles applicable to an application for an interlocutory injunction are set out in a number of High Court decisions, the most frequently referred to of which is Castlemaine Tooheys Limited and Ors v The State of South Australia (1986) 161 CLR 148. The applicant must establish that there is a serious question to be tried, that if the respondent’s conduct is unrestrained, irreparable harm will be caused to the applicant in respect of which an award of damages is not an adequate remedy and that the balance of convenience requires the granting of an injunction.
I shall refer to the parties respectively as the applicant and the respondent. I will refer to the respondent in the singular because, although the plaintiff was served with the application in addition to the first defendant, only the first defendant sought to be heard on the application.
The applicant submitted that the serious question to be tried was whether or not the respondent was entitled to terminate the contract. The respondent argued that it was so entitled because it had called upon the applicant to settle in circumstances where there had been a failure on the part of the applicant to settle within the time stipulated in the contract. The applicant argued that the respondent was not entitled to call upon her to settle because the respondent has never been at any time in a position to give vacant possession at settlement in accordance with the terms of the contract.
The first matter to be determined on this application is whether or not, by virtue of the plaintiff’s claim to leasehold interest in respect of the property, the proceedings to enforce which have previously been dismissed by me, preclude the defendant from giving vacant possession at settlement. It seems to me that there is a simple answer to this question. The plaintiff’s claim that it has such a leasehold interest has been dismissed by a final judgment of the Court. There has thus been a curial determination by the plaintiff that the plaintiff does not have the alleged leasehold interest. Consequently, it cannot be said that the respondent is precluded from giving vacant possession merely because there has been, in the past, a claim by the plaintiff to leasehold interest, which if it exists, would clearly prevent the respondent from giving vacant possession on settlement. However, the applicant is concerned about the appeal which the plaintiff has lodged in respect of my decision to dismiss the plaintiff’s claim to an entitlement to a lease. It is understandable that the respondent may be concerned because she would not wish to be faced with the position of settling in respect of the contract only to find at a later stage that an appellate court has set aside the earlier judgment dismissing the plaintiff’s claim.
In my view, I think that the applicant’s concern in this regard is not justified. If the applicant and the respondent were to settle in respect of the contract, the applicant would receive an indefeasible title in fee simple in respect of the land. It is true that both the applicant and the respondent have had notice of the plaintiff’s claim to an entitlement to a lease, but notice itself does not preclude the indefeasibility provisions in the Real Property Act from taking effect. The applicant is not a volunteer having agreed to pay full value for the property. There is no question of fraud or forgery on the part of either the applicant or the respondent. Nor is there any question that there has arisen between any of the parties rights in personam which would enable the plaintiff, who has not sought to be heard on this application, to set aside the transfer of the fee simple interest from the respondent as mortgagee in possession to the applicant as purchaser.
In my view, I must approach this application on the basis that if the applicant and respondent were to settle, any chance that the plaintiff might have of succeeding on appeal would be removed because of the indefeasibility provisions of the Real Property Act. If such a result were to be avoided, it would be necessary for the plaintiff to seek injunctive relief pending appeal to prevent the parties, the applicant and the respondent, from settling. This the plaintiff has not done.
For the above reasons, I do not consider that the applicant has established that there is a serious question to be tried in relation to whether or not the respondent is able to give vacant possession on settlement on the grounds of the existence of a claim by the plaintiff to a leasehold interest in respect of the subject property.
I should also mention that during the course of the argument I asked whether any caveat existed on the title lodged by the plaintiff or otherwise which would preclude settlement. Both parties agreed that the respondent would not be precluded from settling by the existence of any such caveat.
In arriving at the above conclusions, I have borne in mind that it is not my function on an application such as this to attempt to determine the issues in dispute between the parties. However, where the applicant must demonstrate that there is a serious question to be tried, the factual and legal substratum of that submission must give rise to the existence of a serious question to be tried. I have concluded, on the facts before me, that, as a matter of law, it cannot be argued that the existence of an appeal from the dismissal of the plaintiff’s claim to an entitlement to a lease interferes in any way with the respondent’s ability to give vacant possession at settlement.
The second basis on which the applicant contends that the respondent is unable to give vacant possession on settlement is based on the evidence, which is undisputed, that within the main dwelling and the outbuildings there are various goods and chattels. The applicant has argued that they should be removed by the respondent and unless and until they are removed, vacant possession cannot be given. I was referred to the decision of Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd, an unreported decision of Waddell CJ in Equity delivered on 8 January 1992, BC9202107. In that case there were several disputes between vendor and purchaser of real property, one of which involved the contention by the purchaser that because of the existence of a great deal of plant and equipment on the property, the vendor was unable to give vacant possession. His Honour referred to the decision of the Court of Appeal in Cumberland Consolidated Holdings Ltd v Ireland (1946) 1 KB 264. In relation to vacant possession, his Honour cited the judgment of Lord Greene in the Cumberland Consolidated Holdings case:
“The phrase ‘vacant possession’ is no doubt generally used in order to make it clear that what is being sold is not an interest in a reversion. But it is not confined to this. Occupation by a person having no claim of right prevents the giving of ‘vacant possession’, and it is the duty of the vendor to eject such a person before completion. See Royal Bristol Permanent Society v Bomash (1887) 35 Ch D 390, 395 and Engell v Fitch (1869) LR 4 QB 659. The reason for this, it appears to us, is that the right to actual unimpeded physical enjoyment is comprised in the right to vacant possession. We cannot see why the existence of a physical impediment to such enjoyment to which a purchaser does not expressly or impliedly consent to submit should stand in a different position to an impediment caused by the presence of a trespasser. It is true that in each case the purchaser obtains the right to possession in law, notwithstanding the presence of the impediment. But it appears to us that what he bargains for is not merely the right in law, but the power in fact to exercise the right. When we speak of a physical impediment we do not mean that any physical impediment will do. It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property. Such cases will be rare, and can only arise in exceptional circumstances, and there would normally be (what there is not here) waiver or acceptance of the position by the purchaser. The facts as found by the county court judge are of a very exceptional nature, since the presence of the rubbish which the purchaser never bought and to whose presence he never submitted did in fact make it impossible for him to use a substantial part of the property which he had bought.”
The Court of Appeal accepted that the presence of plant and equipment on the property the subject of the contract could preclude the giving of vacant possession by the vendor to the purchaser. It was argued by Mr Morecombe QC, counsel for the applicant, that the presence of a large sideboard in one of the rooms of the main dwelling and the presence of, in particular, boxes of files and a collection of rubbish as depicted in the photographs (which are Exhibit RAD6 to the affidavit of the applicant sworn on 28 March 2002) would materially interfere with the applicant’s enjoyment of the property and, as such, the required vacant possession could not be given unless and until those items were removed.
The subject property is approximately 75 acres in area and is located near Lake Albert at Meningie, South Australia. The main house consists of twelve main rooms and is approximately 910 square metres in area. There is a cottage on the property comprising seven main rooms. There is also a five bay carport together with stables and some old stone toilets and stone buildings.
With regard to the large sideboard located in one of the rooms of the main building, it is apparent that that item belongs to neither the applicant nor the respondent. It is also apparent that it is of such a size that it cannot be removed other than through a window which needs to be dismantled.
It is apparent from the photographic evidence that there is a good deal of material occupying considerable areas of the outbuildings.
The respondent argued that the inability to give vacant possession must arise from “an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property”. It was argued, on the evidence adduced by the applicant on this application, that that requirement has clearly not been made out and as such, the applicant has failed to make out that aspect of the serious question to be tried.
I do not accept this submission. It seems to me that it is at least arguable by the respondent that the presence of the items on the property, distributed as they are amongst several of the buildings on site, would interfere with enjoyment by the applicant of the right of possession to the property. Whether that interference was of a sufficient degree to preclude the provision of vacant possession is a matter for the trial judge.
The question must next be asked: if the respondent was, at the time that it called upon the applicant to settle and at the time proposed for settlement, unable to give vacant possession, is it entitled to rescind the contract for the failure on the part of the applicant to settle? It was argued by Mr O’Halloran, counsel for the respondent, that the provision of vacant possession was not a requirement of settlement because paragraph 8 of the contract, dealing with settlement, did not include that requirement. However, paragraph 9 of the contract, which dealt with possession, required possession to be given and taken on settlement. It is, therefore, at least arguable that the respondent could not legally call upon the applicant to settle whilst the respondent was unable to give vacant possession.
I must next consider whether or not irreparable harm would be caused to the applicant should the injunctive relief sought by the applicant be refused. I do not think there is any doubt that irreparable harm would be caused to the applicant because the contract would be determined and she would lose her rights under it. Being a contract for the sale and purchase of real estate, damages would not be an adequate remedy.
It is necessary for me to consider the balance of convenience. It is not disputed that the respondent has entered into a further contract for the sale of the property subject to determination of the contract between the applicant and the respondent. So long as the respondent is precluded from terminating the contract between the applicant and the respondent, the respondent is precluded from effecting a sale of the property and thereby recovering the amount due to it under the mortgage given by the registered proprietor. It is common ground that the sale price stipulated in the contract between the applicant and the respondent is not sufficient to discharge the full indebtedness alleged to be owing under the mortgage. The subsequent contract is for a higher price but I am unaware whether that price will account for the whole of the mortgage debt. Interest is continuing to accrue under the mortgage and, thus, the mortgage debt is increasing with the passage of time.
As against this detriment to the plaintiff, Mr Morecombe has pointed out that the applicant has given an undertaking as to damages. In addition, during the course of argument, the applicant, through Mr Morecombe, gave an undertaking to pay into Court an amount equivalent to the interest on the purchase price recoverable by the respondent should it be found that the applicant has at all material times been in breach of the contract. The original settlement date was 25 January 2002. The undertaking includes payment of interest at the rate of 8 per cent on the purchase price until there is either a determination by the Court of the matters in dispute between the applicant and the respondent or until they otherwise compromise the matter. Such an undertaking needs to be better particularised and would need to cover the payment of a sum to cover interest which has accrued from 25 January this year and for further periodical payments for interest as it accrues whilst the dispute between the applicant and respondent remains unresolved. The undertaking, as I understand it, is to include a promise that if the applicant is found to be in breach of the contract such that the respondent is entitled to interest on the purchase price under the provisions of the contract, the monies paid into Court will be applied in payment of that award.
In dealing with the balance of convenience I must also take into account that the respondent, by its solicitor, has undertaken to refund the deposit paid by the applicant if the injunction is not granted and it terminates the contract. This undertaking applies irrespective of whether or not the applicant has a contractual right to a refund.
I mention also that Mr Morecombe has filed an affidavit sworn on 17 May 2002 in which he has deposed to the fact that he is the husband of the applicant and that on 15 March 2002 the applicant assigned to him one-half of her interest in the subject property. He seeks to be joined as a defendant in these proceedings and that application is to be dealt with at a later date. He records in paragraph 5 of his affidavit that he gives the usual undertaking as to damages in respect of the injunctive relief presently sought by the applicant.
Mr O’Halloran submitted, in the alternative, that if I accepted that there was a serious question to be tried, the case for the applicant was not very strong and that I should take that into account on the balance of convenience. I agree with both aspects of that submission.
Had the respondent not given an undertaking to refund the deposit, I think the balance of convenience would require the injunction to be granted even though the applicant’s case that the respondent was not at the material times able to give vacant possession was weak. However, the undertaking to refund the deposit tips the balance in favour of the respondent.

For the above reasons, the application by the second defendant for injunctive relief is refused.

[2002] SASC 180

3 June 2002