Rands Developments Pty Ltd v Davis

[1975] HCA 36

HIGH COURT OF AUSTRALIA

Gibbs, Stephen and Jacobs JJ.

RANDS DEVELOPMENTS PTY. LTD. v. DAVIS

(1975) 133 CLR 26

12 September 1975

Vendor and Purchaser

Vendor and Purchaser—Sale of land—Completion of transaction—Transfer—Title—Vendor required to tender registrable transfer and other documents including relevant certificate of title appropriate to lead to registration of the purchaser—Tender of certificate of title in name of third person, transfer from third person to vendor, and transfer from vendor to purchaser—Whether purchaser obliged to accept.

Decisions

September 12.
The following written judgments were delivered:-
GIBBS J. The facts of this case are set out in the judgment of my brother Jacobs and I have no need to repeat them. The question for decision is whether the appellant company, the vendor, complied with its obligations under its contract with the respondent purchaser by tendering to the respondent, on the day fixed by the contract for completion, a certificate of title in the name of a third person, a memorandum of transfer from that third person to the vendor and a memorandum of transfer from the vendor to the purchaser. (It is not irrelevant to notice that the certificate of title referred to other land as well as that the subject of the sale, and would therefore in fact probably have been produced rather than tendered to the purchaser, but I do not need to base my judgment on this circumstance.) It was submitted on behalf of the appellant that the obligation of a vendor of land under the Real Property Acts is to place the purchaser in a position to obtain registration in his own name of the title to the land sold, that is, to make available to him documents which would secure his registration as the proprietor of the land. Reliance for this submission was placed on some observations made by the Chief Justice in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529, at p 536 , and Travinto Nominees Pty. Ltd. v. Vlattas (1973) 129 CLR 1, at p 12 . I do not question the correctness of those observations but in neither of those cases was it necessary to consider the question whether the obligation of the vendor is to have himself registered as proprietor on or before the date of completion. This question must depend primarily upon the terms of the particular contract, for if the parties have agreed that the vendor will at the date of completion be the registered proprietor of the land sold and will tender a transfer from himself to the purchaser, that will be decisive. Equally, the contract may contain an effective provision negativing an obligation to produce the title in the vendor's own name - cf. Vickery v. Woods (1952) 85 CLR 336, at p 342 . If the contract is silent on the point, or ambiguous, it may be necessary to have regard to more general considerations such as the practice of conveyancers (of which there was no evidence in the present case) and the effect of the Real Property Acts. (at p29)

2. The obligation of the vendor under cl. 1 (a) of the contract now under consideration is to give the purchaser in exchange for the balance of the purchase price "a registrable transfer and such other documents (including the relevant certificate of title) as may be appropriate to lead to registration of the purchaser as proprietor of an estate in fee simple, free from encumbrances". The expression "registrable transfer" means of course a transfer capable of registration, and although in some contexts it could refer to a transfer that would become capable of registration if certain conditions were first fulfilled - e.g. if prior dealings were registered - it more naturally appears to refer to a transfer which can, without more, be registered, that is, to a transfer in proper form executed by the registered proprietor. This is the meaning which the phrase was given, in a different context, by Taylor J. in I.A.C. (Finance) Pty. Ltd. v. Courtenay (1963) 110 CLR 550, at p 591 , and, in a context similar to that of the present, by Matthews J. in Daamen v. W. &T. Investments Pty. Ltd. (1974) Qd R 98, at p 101 . (The judgment of Matthews J. in that case was affirmed by the Full Court of the Supreme Court (1974) Qd R 400 whose decision was followed by the learned primary judge in the present case.) On behalf of the appellant it was submitted that the words in cl. 1 (a) refer only to the sufficiency of the transfer as a conveyancing form. In my opinion the words should not be given so narrow a meaning; the parties to the contract obviously intended that the transfer should be executed by the proper transferor, and were not concerned only with the form of the document. Further, the words "a registrable transfer and such other documents . . . as may be appropriate to lead to registration . . . " suggest that it is contemplated that only one memorandum of transfer will be used to complete the transaction; in the context, "such other documents" naturally mean documents other than a transfer. If the contract requires that only one transfer will be used to complete the transaction, that transfer, to be effective, must be executed by the registered proprietor. Clause 20, which gives the vendor a right to rescind if any predecessor in title fails to make title to the vendor on or before the date of settlement, supports the conclusion that the vendor was intended to have title to the land at the date of settlement and to be the person by whom the transfer is executed. (at p30)

3. No other provision of the contract appears to require a different conclusion. The appellant particularly relied on cl. 14 which provides that, "If on or before the date of settlement is due hereunder, any financing institution for the purchaser declines to accept any unregistered dealing relating to the title of the vendor, the vendor may at its option elect to rescind this contract". It was submitted that this clause impliedly excludes any right of rescission by the purchaser on the ground that any dealing necessary to make title is unregistered at or before the date of settlement and contemplates the possibility that the vendor's title may depend on an unregistered instrument. However, cl. 14 does not purport to affect in any way the rights of the purchaser if the contract is not in fact rescinded by the vendor. The clause is intended only to confer a special right of rescission on the vendor. In the absence of a provision such as cl. 14, neither party could, before the date of completion, rescind on the ground that a dealing, whose registration was necessary to give title to the vendor, remained unregistered. Before the date of completion arrived the purchaser would have no right to rescind the contract on the ground that the vendor was not registered as proprietor (Forbes v. Butler (1903) 29 VLR 374 ) unless it was quite clear that he would not be able to perform his obligation to make title when the time for performance arrived (cf. Bell v. Scott (1922) 30 CLR 387, at pp 392, 399 ; and Rawson v. Hobbs (1961) 107 CLR 466, at pp 481-482 ). Clause 14 does not affect that situation. In the absence of a provision such as cl. 14 the vendor could not rescind the contract on the ground of his own difficulty in making title. However, if an institution from which the purchaser was seeking finance objected to the vendor's title, on the ground that a relevant dealing was unregistered, the vendor might wish to rescind, simply because for practical reasons it might be thought more profitable to get rid of a contract which the purchaser for lack of finance might be unable to complete, even though he might still wish to complete it. Clause 14 enables the vendor to rescind in such a case. This may explain the purpose of cl. 14, but whatever its purpose that clause does not enable the vendor to force the purchaser on completion to accept a transfer which is not "registrable" within cl. 1 (a). (at p30)

4. There are sound reasons why a purchaser of land under the Real Property Acts may wish to require that the vendor should be obliged to tender to him, on completion, a transfer from the registered proprietor. It is fundamental that it is registration that vests title (Frazer v. Walker (1967) 1 AC 569, at pp 580, 584 , and it is only when the purchaser becomes registered as proprietor that his title will have the indefeasibility that the Acts confer. The risk that the purchaser's title may be defeated by someone claiming a prior interest in the land will be reduced to a minimum if the purchaser takes a transfer from the registered proprietor. If he takes a transfer from a person apparently entitled to registration, but not registered, the possibility exists that by reason of circumstances unknown to the purchaser that apparent entitlement will be defeated or denied and that registration will not be effected. It would be reasonable for a purchaser to avoid any possible risk of this kind by including in his contract a provision that on completion he should be tendered a transfer from the registered proprietor, which would be immediately registrable. The construction which I have concluded should be given to cl. 1 (a) therefore gives that clause the effect which a prudent purchaser of land under the Real Property Acts might have been expected to require. Perhaps I should add, to obviate any possible misunderstanding, that it does not follow that if the land sold is subject to a mortgage it will be reasonable to require the vendor who has agreed to sell it free of encumbrances to discharge the mortgage before the date of completion; it will be sufficient if the mortgagee is represented on settlement and the discharge of mortgage is handed over in present payment of the mortgage debt - see Neeta (Epping) Pty. Ltd. v. Phillips (1974) 131 CLR 286, at p 304 . (at p31)

5. In the present case it is not necessary to decide whether as a general rule a purchaser can insist that the vendor himself should transfer the land or whether it is sufficient for the vendor to procure a transfer to the purchaser from a third person. Speaking generally, a vendor is obliged to execute a conveyance of the land sold to the purchaser or as he shall direct (see Vickery v. Woods (1952) 85 CLR, at p 343 , and Curtis Moffat Ltd. v. Wheeler (1929) 2 Ch 224 ), but in my opinion it does not necessarily follow that a purchaser is obliged to accept a conveyance from anyone other than the vendor. The learned authors of Stonham, Vendor and Purchaser (p. 655, par. 1304) and Voumard, Sale of Land (2nd ed. (1965), p. 302) appear to think that a purchaser cannot insist that the land be conveyed to him by the vendor and that the vendor will discharge his obligations by procuring a transfer from the registered proprietor at his direction. On the other hand, it has been held in Canada that under a contract by which a vendor agrees to convey lands to the purchaser the latter has the right to refuse conveyance from a third person: Stewart v. Friedrichsen (1960) 24 DLR (2d) 477, at p 479 . Whatever may be the position if the contract is silent, the provisions of cl. 6 as well as those of cl. 20 of the present contract indicate that the vendor himself was intended to execute the transfer. (at p31)

6. Time was of the essence of the contract, and the documents specified in cl. 1 (a) were required to be tendered on or before 25th July 1974. For the reasons given I am of opinion that the vendor was obliged to tender a memorandum of transfer executed by himself as registered proprietor, and that the documents tendered did not satisfy his contractual obligation. It is not necessary in the present appeal - which arose out of an application for the determination of particular questions - to consider the consequences of the failure to make a proper tender. Nor is it necessary to consider the effect (if any) of cl. 1 (b) of the contract. (at p32)

7. The questions were correctly answered by the learned primary judge and the appeal should be dismissed. (at p32)

STEPHEN J. I would dismiss this appeal for the reasons stated by Gibbs J. in his judgment, with which I am in agreement. (at p32)

JACOBS J. The appellant by an agreement in writing dated 26th April 1974 agreed to sell to the respondent and the respondent agreed to purchase from the appellant certain land of an area of 62 acres 2 roods described as Portion 93 County of Churchill Parish of Mutdapilly for the sum of $18,950. Condition 1 of the Conditions of Sale was as follows:

"1. (a) The Purchaser(s) shall pay a deposit of $4000 (Four thousand dollars) on the signing hereof which is hereby acknowledged and shall make a further payment of $4000 (four thousand dollars) to the vendor within 90 (ninety) days from the date hereof and shall pay the balance purchase monies namely $10,950 (Ten thousand nine hundred and fifty dollars) within (90) ninety days from the date hereof in exchange for a registrable transfer and such other documents (including the relevant Certificate of Title) as may be appropriate to lead to registration of the purchaser as proprietor of an estate in fee simple, free from encumbrances. Unless the Vendor nominates otherwise, such registrable transfer shall be prepared by and at the expense of the Purchaser(s). All right title and interest to the land hereby sold to be acquired by the Purchaser(s) shall be in terms of this Contract of Sale to the exclusion of any other. 1. (b) The Purchaser(s) shall forthwith make application for finance to some established Finance Company, Bank or Institution to the extent of $10,950 (Ten thousand nine hundred and fifty dollars) AND on the making of such application the within contract shall be conditional on such finance being available to the Purchaser(s) within the time stipulated for settlement as per Clause 1 (a) hereof. Should such finance not be approved within (14) fourteen days from the date hereof then the within contract may at the option of the Vendor be cancelled and all monies paid by the Purchaser(s) shall be refunded PROVIDED THAT the Vendor may extend the said period of (14) fourteen days or the date of settlement as herein provided for a further period not exceeding 28 (twenty-eight) days."

The remaining conditions were in printed form except for certain words filled in in ink which are not presently relevant. Certain of these conditions have been relied on and I set them out.

"5. THE Vendor shall do all acts and execute all necessary documents and paper writings for the purpose of completing the sale and ensuring that the Purchaser obtains a proper and valid title to the property hereby sold. Should the original title deeds relating to this property relate to other properties also the Vendor will not part with the possession thereof but will enter into the usual covenants with the Purchaser for production of such deeds as are in his possession and for furnishing copies thereof. 6. WITHOUT prejudice to the provisions of Section 9 of 'The Contracts of Sale of Land Act of 1933' or any amendment thereof, the Vendor will upon payment of the full amount of the purchase money and interest and other moneys payable under this Contract execute in favour of the Purchaser a transfer or conveyance capable of registration to be prepared by and at the expense of Purchaser. 14. IF on or before the date of settlement is due hereunder any financing institution for the Purchaser declines to accept any unregistered dealing relating to the title of the Vendor, the Vendor may at its option elect to rescind this Contract. 20. SHOULD any predecessor in title of the Vendor fail to make title to the Vendor on or before the date of settlement of this contract is due, then the Vendor may, at its option, rescind this contract, and all monies payable hereunder shall be refunded. 21. TIME shall in all cases and in every respect be the essence of the Contract." (at p33)

2. Settlement was arranged for 25th July 1974. On settlement the vendor's solicitors tendered a memorandum of transfer dated 25th July 1974 from the vendor by its attorney to the purchaser. It also tendered a memorandum of transfer from one Lenard William Drager to the vendor dated 23rd July 1974. In this document the transfer was stated to be "In consideration of the provisions of a Contract of Sale dated the Ninteenth day of March 1974 entered between Lenard William Drager as Vendor and Rands Developments Pty. Limited as Purchaser". (at p33)

3. On settlement the vendor's solicitors also tendered certain supporting documents including an undertaking by the vendor to attend at the office of the Registrar of Titles with the relevant certificate of title and to lodge the same in conjunction with the dealings to be lodged by the purchaser in pursuance of the contract. The certificate of title was produced on settlement. It included portion 92 as well as portion 93, the land agreed to be sold. It was in the name of Lenard William Drager. The purchaser's solicitors refused to complete the transaction by taking in return for the balance of purchase price the two memoranda of transfer and claimed that the title to the land should be in the name of the vendor. (at p34)

4. Thereupon the vendor instituted proceedings by way of originating summons for determination of the following questions:

"(a) whether, within the meaning of the contract of sale, and in particular clause 1 (a) thereof, dated 26th April 1974, made between the applicant and the respondent John Brian Davis, the documents tendered by the applicant on 25th July 1974 were a registrable transfer and such other documents (including the relevant Certificate of Title) as may be appropriate to lead to registration of the purchaser as proprietor of an estate in fee simple, free from encumbrances . . . ; (b) whether the tender made by the applicant on the said date was a good and valid tender of performance within the meaning of the said contract." (at p34)

5. W.B. Campbell J. answered both these questions in the negative. From that decision the vendor now appeals. I should say at the outset that I am not satisfied that the appellant has any appeal as of right. The originating summons was only for construction of the contract. The consequences of one or another construction are not necessarily or at all an action for damages for breach of contract and on an action for specific performance of the contract an opportunity could be given to cure the objection to conveyance which was raised. That time was of the essence of the contract might or might not affect the rights of the parties depending on circumstances which were not disclosed in the evidence. (at p34)

6. But in any event the appeal even if it be properly brought must in my opinion fail. Clause 1 (a) of the contract must be read in the light of the proper conveyancing procedure on a settlement of a transfer of land under registered title. That procedure must be determined and then it must be ascertained whether the clause on its true construction shows that the parties intended that a different procedure be followed. The procedure to be adopted on settlement must be such that it gives to the purchaser the fullest protection which is consonant with a settlement of transactions without undue delay or expense. The purchaser is entitled to all reasonable protection. Once a purchaser or transferee is registered as proprietor no substantial problems can arise, particularly when the proprietor obtains the wide protection enunciated in Frazer v. Walker (1967) 1 AC 569 and Breskvar v. Wall (1971) 126 CLR 376 . The protection which a purchaser or transferee requires is protection between the date of settlement and the date of registration, particularly if he has notice of any outstanding interests to which on registration his title would be paramount. Until registration the transferee has no statutory protection. His interest in the land is equitable only and he runs the risk of being postponed to a prior equity. There is no provision in Queensland legislation which is similar to s. 43 A of the Real Property Act, 1900 (N.S.W.) which gives some further protection against notice of prior interests to transferees between settlement and registration. If a transferee does not deal with the registered proprietor of the land he runs the particular risk that there may be outstanding some equitable right or interest in that proprietor which is enforceable against the transferor from whom the transferee is asked to take a transfer but who is not registered as proprietor. That is a risk which ordinarily a transferee is not required to take. It is true that an equity of a registered proprietor who has given a transfer, for example an equity to set the transfer aside, may be postponed to the later equity of the ultimate transferee but not if the latter has notice of the earlier equity. (at p35)

7. The position is different where the registered proprietor or the holder of the earlier interest is represented on settlement and participates in that settlement by the contemporaneous settlement of his dealing with his interest. In the common transaction where a mortgagee hands over a registrable discharge of mortgage in return for payment of the outstanding mortgage debt out of the purchase price being paid by the purchaser there is no recognizable risk of any outstanding interest in that mortgagee. On a transfer by direction where the ultimate purchaser receives a transfer from the registered proprietor and on settlement ensures that the registered proprietor is paid out of the purchase price which he as the ultimate transferee is paying, there is again no recognizable risk to the latter. But there is no protection to a transferee who takes a transfer not from a registered proprietor but from an intermediate transferee even though he receives a memorandum of transfer in respect of the intermediate transfer which has the appearance of regularity. Particularly is this so when the duplicate certificate of title is not unconditionally handed over on settlement because, for instance, the whole of the land is not the subject of the transfer to the ultimate transferee. (at p35)

8. The question then is whether by their contract in this case the parties thereto intended to provide for a procedure on settlement which departed from the procedure which a purchaser was entitled to have followed in order to minimize as far as was reasonably possible the risk to him of failing to obtain registration. I can see no such indication. The clause provided for a registrable transfer, not a succession of memoranda of transfer. In this context an earlier memorandum of transfer hardly falls within the words "such other documents . . . as may be appropriate to lead to registration . . . ". Nor do any of the clauses in the printed conditions disclose a contrary intention. Clause 5 is against such an intention. By it the vendor promises to do all acts necessary for the purpose of ensuring that the purchaser obtains a proper and valid title to the property sold. Clause 6 adds nothing on the point. Clause 14 is difficult to understand or to apply but I do not think that it can be read as stating the only circumstance where there may be an objection to an unregistered dealing being tendered on settlement as part of the title of the vendor. Clause 20 envisages that the vendor will make title to the land before settlement. Legal title is clearly referred to and the only legal title is registered title and therefore the clause is against the appellant's contention. (at p36)

9. Therefore, in my opinion, the questions were correctly answered in the negative and the appeal should be dismissed. (at p36)

Orders

Appeal dismissed with costs.