Sanctuary Park Estate Toodyay Pty Ltd v Griffin Plant Hire Pty Ltd

[2003] WASC 174

SANCTUARY PARK ESTATE TOODYAY PTY LTD -v- GRIFFIN PLANT HIRE PTY LTD [2003] WASC 174

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2003] WASC 174
Case No:	CIV:2065/2003	Heard:	2 & 4 SEPTEMBER 2003
Coram:	BARKER J	Delivered:	5/09/03
No of pages:	22	Judgment Part:	1 of 1
Result:	Interlocutory injunction granted
Category:	A
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Parties:	SANCTUARY PARK ESTATE TOODYAY PTY LTD GRIFFIN PLANT HIRE PTY LTD
Catchwords:	Interlocutory injunction Whether mandatory interlocutory injunction requiring defendant to execute withdrawal of caveat should go Whether serious issue to be tried in respect of equitable lien claimed by defendant in support of caveat Whether serious issue to be tried in respect of plaintiff's claim to rectification of deed of settlement Whether balance of convenience justified grant of relief
Legislation:	Transfer of Land Act 1893 (WA), s 138, s 138C, s 140
Case References:	Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 Eades v Reilly, unreported; SCt of WA; Library No 980675; 20 November 1998 Hewett v Court (1983) 149 CLR 639 His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 Lydon v Ryding [2002] WASC 308 Pindan Pty Ltd v Sunny's Redevelopment Pty Ltd [2001] WASC 104; [2002] ANZ Conv R 51 Re T P Stevens Earthmoving Pty Ltd [1975] Qd R 69 SDS Corporation Ltd v Pasdonnay Pty Ltd [2002] WASC 276 Bank of Western Australia v Connell (1996) 16 WAR 483

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : SANCTUARY PARK ESTATE TOODYAY PTY LTD -v- GRIFFIN PLANT HIRE PTY LTD [2003] WASC 174 CORAM : BARKER J HEARD : 2 & 4 SEPTEMBER 2003 DELIVERED : 5 SEPTEMBER 2003 FILE NO/S : CIV 2065 of 2003 BETWEEN : SANCTUARY PARK ESTATE TOODYAY PTY LTD

Plaintiff

AND

GRIFFIN PLANT HIRE PTY LTD
Defendant

Catchwords:

Interlocutory injunction - Whether mandatory interlocutory injunction requiring defendant to execute withdrawal of caveat should go - Whether serious issue to be tried in respect of equitable lien claimed by defendant in support of caveat - Whether serious issue to be tried in respect of plaintiff's claim to rectification of deed of settlement - Whether balance of convenience justified grant of relief

Legislation:

Transfer of Land Act1893 (WA), s 138, s 138C, s 140

(Page 2)

Result:

Interlocutory injunction granted

Category: A

Representation:

Counsel:

Plaintiff : Mr M H Zilko SC
Defendant : Mr A Metaxas

Solicitors:

Plaintiff : Eley Palmer
Defendant : Metaxas & Vernon

Case(s) referred to in judgment(s):

Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Eades v Reilly, unreported; SCt of WA; Library No 980675; 20 November 1998
Hewett v Court (1983) 149 CLR 639
His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lydon v Ryding [2002] WASC 308
Pindan Pty Ltd v Sunny's Redevelopment Pty Ltd [2001] WASC 104; [2002] ANZ Conv R 51
Re T P Stevens Earthmoving Pty Ltd [1975] Qd R 69
SDS Corporation Ltd v Pasdonnay Pty Ltd [2002] WASC 276

Case(s) also cited:

Bank of Western Australia v Connell (1996) 16 WAR 483

(Page 3)

BARKER J:

Introduction

1 Before me is an urgent application by the plaintiff for an interlocutory injunction requiring the defendant forthwith to execute and deliver to the plaintiff's solicitors forms of withdrawal of caveat in respect of lots 26-32 and lots 39-42 on deposited plan 33566, each respectively being the subject of certificates of title volume 2542 folios 381-391.

2 The plaintiff commenced this action by writ of summons filed on 2 September 2003. The application for interlocutory injunction came before me for hearing on 2 September 2003. Following initial argument, I made directions concerning the filing of further affidavit evidence and submissions by the parties and adjourned the hearing of the application to 4 September 2003. At the hearing of the adjourned application on 4 September 2003, I granted leave to the plaintiff to file a further amended writ of summons dated 4 September 2003.

3 In the plaintiff's further amended writ of summons, the plaintiff claims as against the defendant the following primary relief:

(1) A declaration that caveat I 469306 was registered by the defendant without reasonable cause;

(2) an order that the defendant forthwith execute and deliver to the solicitors for the plaintiff forms of withdrawal of caveat in respect of lots 26-32 and 39-42;

(3) an order that a deed of agreement dated 26 August 2003 and entered into between the plaintiff and the defendant be rectified so as to embody the agreement actually made between them by including in the definition of Sanctuary Park Estate Stage 1 - lots 26, 27, 28, 29, 30, 31, 32, 39, 40, 41 and 42 on deposited plan 33566 being the land in the certificates of title I have already identified.

Background

4 The application for interlocutory injunction of the plaintiff arises in the following circumstances. The plaintiff is engaged in the business of land development. In October 2002, the plaintiff became the registered proprietor of land near Toodyay, being lot 22048 on deposited plan 201942 and being the whole of the land in certificate of title volume 1746 folio 625, and lot 405 on deposited plan 103195 and being the whole of

(Page 4)

the land in certificate of title volume 2056 folio 76. The plaintiff proposed the subdivision of this land, which it styled "Sanctuary Park Estate", in two stages, the first to involve the subdivision of most of lot 22048 into 42 lots each of about five acres in area (Stage 1), and the second to involve the balance of lot 22048 (which later became lot 9002) and lot 405 into about 12 lots each of approximately 10 acres in area.

5 In order to finance the proposed land development, the plaintiff borrowed the purchase price through private lenders and also arranged with those private lenders a facility for the additional funds necessary to meet the costs of development. The total facility was for a sum of $1.5 million and a mortgage stamped for that sum was registered against lot 22048 and lot 405. The interest rate is 25 per cent per annum, with a higher rate of 36 per cent per annum if the mortgage sum is not paid within the required time. The mortgage was due to be repaid nine months after the initial advance, which was 31 July 2003. This was intended to provide sufficient time for Stage 1 of the subdivision to be completed.

6 It appears that either the plaintiff or its sole director, John Garry Hay, is also involved in other land developments which relate to the Sanctuary Park Estate development, in that the loan funds that are to be repaid under the mortgage over the Sanctuary Park Estate land will be advanced again under different security to facilitate a land development near Geraldton. Mr Hay says that if the plaintiff does not repay the mortgage on the Sanctuary Park Estate, the mortgagees will not advance the funds for the purchase of the Geraldton land. Mr Hay says that, if Stage 1 of the Sanctuary Park Estate cannot be sold and settled, there will be a domino effect that will cause him to default in the contracts that are subsequent to the sale and the settlement of the lots in Stage 1 of Sanctuary Park Estate.

7 The plaintiff has "pre-sold" 40 of the 42 lots the subject of the Stage 1 development, including the 11 lots the subject of this application.

8 In order to carry out the Stage 1 development and to obtain certificates of title to the newly-created lots for the purpose of sale to the prospective purchasers, it was necessary for the plaintiff to carry out subdivisional works by way of earthmoving and road-making on the land. To that end, Mr Hay, on behalf of the plaintiff, engaged a Mr Costantino to act as a consultant to the plaintiff. On Mr Costantino's advice, the plaintiff engaged the defendant as its contractor to carry out the necessary subdivisional works.

(Page 5)

9 Contractual dealings between the plaintiff and the defendant were, at material times, concluded between Mr Hay, on behalf of the plaintiff, and Nicholas Rumenos, on behalf of the defendant. Engineering drawings for Stage 1 and Stage 2 of the land development were prepared for the plaintiff by McDowall Affleck Pty Ltd consulting engineers. On or about 29 October 2002, the plaintiff and the defendant executed a contract in respect of the subdivisional works to be carried out by the defendant. The performance of that contract is now the subject of dispute between the parties and has been referred to arbitration pursuant to the contract. The arbitration is pending. In short, the plaintiff says the subdivision works were to be carried out by the defendant for an agreed price of $363,381. The defendant says that it is entitled to claim for work done by way of variations to the contract drawings upon which the contract was based. The defendant claims an amount of $345,161.42 is now due and owing. The plaintiff denies that. Much of the dispute appears to relate to the question whether the contract was based upon a set of contract drawings provided at or soon after the contract was signed (the plaintiff's contention) or on an earlier set of drawings which were amended after the contract was signed (the defendant's contention). That and other matters in dispute in the arbitration proceedings do not fall for determination on the hearing of this application.

10 Suffice it to say that, from the plaintiff's perspective, the subdivisional works to be carried out by the defendant were never completed by the defendant and the defendant is in breach of the contract. As a result, the plaintiff engaged other contractors to complete the works in order to clear the conditions of subdivision approval and obtain certificates of title in respect of the new lots within Stage 1 of the development.

11 From the defendant's perspective, the plaintiff failed to make the proper payments due under the contract for the work done, including with respect to variations, and repudiated the contract.

12 On or about 5 May 2003, the defendant registered caveat I 469 306 C in respect of lot 22048. The defendant claims an estate or interest in that land as an "equitable chargee". The caveat forbids the registration of any instrument affecting the estate or interest unless expressed to be subject to the caveator's claim. The caveat is supported by a statutory declaration made by Mr Rumenos on behalf of the defendant. Having referred to the contract for the carrying out of earthworks, road works and drainage on the land to the value of $363,380.79, Mr Rumenos states in his statutory declaration that:

(Page 6)

"The Caveator has carried out variations at the request of the Registered Proprietor. The Registered Proprietor acknowledges that additional work has been performed which are variations under the contract. There is dispute as to the payment to which the caveator is entitled in respect of those variations. The Registered Proprietor's value for the variations is $97,339.55 (of which not all has been paid). The Caveator's value for the variation is $186,741.08 with further variations to be billed."

13 Following the registration of the caveat, the solicitors for the parties exchanged correspondence concerning the removal of the caveat. The solicitors for the defendant, by letter dated 18 July 2003, advised that the defendant would remove its caveat "provided it receives, in effect, sufficient security for its claim on other land."

14 These negotiations continued in the context of the arbitration proceedings. Further correspondence between the solicitors resulted in the defendant's solicitors requesting further information or documentation to verify the indebtedness of the plaintiff under the mortgage over lot 22048 and lot 405 and the value of "pre-sales" of the proposed subdivisional lots.

15 A question arose in correspondence from the plaintiff's solicitors concerning the good faith of the defendant in suggesting that it would be prepared to remove the caveat if proper security were made available to it. By letter dated 7 August 2003, the solicitors for the defendant advised the plaintiff's solicitors as follows:

"I confirm my client's bone fides in relation to his preparedness to uplift its caveat upon being satisfied that alternate security of sufficient value is available against other land. A deed will need to be prepared and executed by the parties to provide a basis for the registration of my client's caveat upon other land. I will proceed on the basis that you will prepare that deed unless you inform me otherwise."

16 The plaintiff's solicitors then prepared a draft deed and forwarded it under cover of or following a letter dated 13 August 2003 sent by facsimile to the defendant's solicitors. Paragraph 1 of that letter states:

"A fairly innocuous draft deed has been prepared (and follows) which allows for the withdrawal of the caveat over Stage 1 of the development and the retention of the caveat over Stage 2, along with the addition of a further caveat over Lot 405, which

(Page 7)

will be included in Stage 2, if your client so desires. An original can be forwarded once the terms are agreed upon."

The plaintiff's solicitors further advised in the letter that the new titles for Stage 1 had already issued, indicating that the new titles included lot 9002, which lot was to comprise the bulk of the proposed Stage 2 development, and noting that the caveat was already recorded on that lot. A copy of the certificate of title showing that to be so was enclosed with the letter. The letter also dealt with the sum in dispute under the contract.

17 Additionally, the letter of the plaintiff's solicitors dated 13 August 2003 enclosed a withdrawal of caveat form in respect of lots 21-25 on deposited plan 37111, lots 33-38 on deposited plan 37111, lots 4362 on deposited plan 37111, lots 26-32 on deposited plan 33566 and lots 39-42 on deposited plan 33566. The letter in par 3 referred to the form of withdrawal of caveat in these terms:

"Withdrawal of caveat for the Lots in Stage 1 has been prepared and a copy is included. The original will be forwarded for execution by your client."

18 The draft deed which followed the letter of the plaintiff's solicitors dated 13 August 2003, by cl 3.1, provided for the defendant to give the plaintiff a signed withdrawal of caveat "for the land included in Sanctuary Park Estate Stage 1."

19 By cl 1.1, "Sanctuary Park Estate" was defined to mean:

"(i) Lots 21-25, 33-38, 43-62 and 9002 on Deposited Plan 37111, being the whole of certificates of title volume and folio 2543/321-325, 2543/326-331, 2543/332-351 and 2543/352;

(ii) Lots 26-32 and 39-42 on Deposited Plan 33566 being the whole of certificates of title volume and folio 2542/381-387 and 2542/388-391; and

(iii) Lot 405 on Deposited Plan 103195 being the whole of certificate of title volume 2065 folio 76."

20 The draft deed further defined "Sanctuary Park Estate Stage 1" to mean:

(Page 8)

"Lots 21-25, 33-38 and 43-62 on deposited plan 37111, being the whole of the certificates of title volume and folio 2543/321-325, 2543/326-331 and 2543/332-351."

21 The draft deed further defined "Sanctuary Park Estate Stage 2" to mean:

"(i) Lot 9002 on Deposited Plan 37111, being the whole of certificate of title volume and folio 2543/352; and

(ii) Lot 405 on Deposited Plan 103195, being the whole of certificate of title volume 2065 folio 76."

22 It is immediately to be observed that lots 26-32 and 39-42 referred to in par (ii) of the definition of "Sanctuary Park Estate" were not included in the definitions of either "Sanctuary Park Estate Stage 1" or "Sanctuary Park Estate Stage 2". The circumstances in which this omission occurred, if it be an omission, are central to the resolution of this matter. One possibility is that the failure to refer to lots 26-32 and 39-42 in either the Stage 1 or the Stage 2 development was intentional, so that they are not included in either Stage 1 or Stage 2 of the development and stood outside the Sanctuary Park Estate development. If that were right, it would then follow that the proposed obligation in cl 3.1 on the defendant to provide a signed withdrawal of caveat for the land in Stage 1 would not include those particular lots.

23 However, if contemporaneous statements are taken into account it could appear of some significance that the form of withdrawal of caveat which was enclosed with the plaintiff's solicitor's letter of 13 August 2003 described the land the subject of the withdrawal of caveat to include lots 26-32 and lots 39-42 on deposited plan 33566 and the letter expressly stated that the withdrawal of caveat was "for the lots in Stage 1". On that basis, it is plain enough that the plaintiff's solicitors represented to the defendant's solicitors that the Stage 1 development included lots 26-32 and 39-42 referred to in par (ii) of the definition of "Sanctuary Park Estate" in the draft deed. One would have thought that, in all of the circumstances and having regard to the course of correspondence that had to that point passed between the solicitors for the parties, it would have been reasonably clear to the defendant and its solicitors that the definition of Sanctuary Park Estate Stage 1 was intended to include lots 26-32 and 39-42 referred to in that paragraph of the definition of Sanctuary Park Estate and that, by a clerical omission, those lots were omitted from the Stage 1 definition.

(Page 9)

24 After the draft deed was sent, the defendant's solicitors wrote to the plaintiff's solicitors by a letter dated 15 August 2003, also sent by facsimile. The letter refers to the letter of 13 August 2003 and notes that the defendant was not satisfied that the plaintiff is unable to make any payment to secure the claim, given the defendant's understanding that the indebtedness under the mortgage is about $1.5 million, and the value of sales exceeds $2,000,000. The defendant plainly was requiring that the security for providing the withdrawal of caveat pending the outcome of the arbitration proceedings should constitute surplus funds from the sale of lots in the Stage 1 development. The additional security proposed by the draft deed was that in cl 3.2 and cl 3.3 to the following effect:

"3.2 Sanctuary agrees that the caveat lodged by Griffin over part of the land described as Sanctuary Park Estate Stage 2 may remain in place.

3.3 Sanctuary agrees that Griffin may lodge a caveat over the balance of the land known as Sanctuary Park Estate Stage 2, being lot 405 … "

25 The solicitors for the defendant thus requested advice as to what the plaintiff proposed to do with the surplus funds following sale and discharge of the amount owing to the mortgagee. The defendant's solicitors also noted:

"I am also awaiting from you some evidence as to the value of the proposed alternate security."

That, plainly, was a reference to the value of the remaining portion of the Sanctuary Park Estate after completion of the Stage 1 development.

26 By letter dated 19 August 2003 and also sent by facsimile transmission, the plaintiff's solicitors advised the defendant's solicitors of the expected expenses on the Stage 1 development in order to satisfy the defendant that there would be no relevant surplus. Additionally, they enclosed a copy of a valuation for the land for Stage 2 noting that the value "is based on land value only on an 'as is' basis".

27 The valuation report enclosed in respect of the Stage 2 development was prepared by Burgess Rawson (WA) Pty Ltd and is dated 11 June 2003. It placed a current market value "as is" on that land of $578,000. The valuation report provided to the defendant's solicitors was unsigned and also contained a clause stating that its author does not accept "any responsibility for the whole or any part of the contents of this valuation to

(Page 10)

any other party using the same or to whom the same is communicated without written consent from this Company."

28 The plaintiff's solicitors again wrote to the defendant's solicitors by letter dated 22 August 2003, again sent by facsimile transmission, noting the defendant's further request for information. Further information was then provided as to development costs on Stage 1 (some of which also related to Stage 2). The plaintiff's solicitors noted that:

"As previously stated we are required to settle the properties and we are now not able to remove the caveat as one dealing and we will require that individual caveat withdrawals are signed for each lot of Stage 1. We have those documents prepared and they can be couriered to your office to have them signed by your client. The amended deed can also be couriered to your office for signing your client.

Our client is now at the stage where penalty interest will be charged to him by purchasers from Monday, as settlement is overdue on the sale of the Lots and we have now entered the three day grace period."

The solicitors for the plaintiff gave notice that if the defendant did not lift the caveat urgently, the plaintiff would have no option but to apply to the Court for "urgent injunctive relief".

29 On Monday, 25 August 2003, Mr Metaxas of the defendant's solicitors telephoned the plaintiff's solicitors, but in the absence of Mr Eley who was handling the matter, left a message for him, which the receptionist/outside clerk of the plaintiff's solicitors (who took the message) recorded as follows:

"[Mr Metaxas] called to say client will withdraw the caveat please prepare all documents and send them to me (Arthur) for signing call 9225 4412."

30 In light of that information, the plaintiff's solicitors, under cover of letter dated 25 August 2003, and sent by courier to the defendant's solicitors, forwarded for signature a deed of agreement (in duplicate) and withdrawal of caveat documents for individual lots. The deed was in terms of the earlier draft, save for an amendment previously agreed, which is presently of no relevance.

31 On 26 August 2003, a further letter from the plaintiff's solicitors to the defendant's solicitors sent by facsimile noted that the documents

(Page 11)

forwarded the previous day had not been executed and returned. A reply from the defendant's solicitors by facsimile on 26 August 2003 provided some explanation for the delay.

32 On 27 August 2003, the plaintiff's solicitors received from the defendant's solicitors the deed of agreement dated 27 August 2003 duly executed by the defendant, but with amendments thereon initialled, including in relation to cl 3.3. The plaintiff accepted the deed with those amendments and executed the deed. A copy of the executed deed was then sent by facsimile transmission to the defendant's solicitors. The plaintiff's solicitors then received, on the same day, the forms of withdrawal of caveat from the defendant's solicitors. However, on the form of withdrawal of caveat that included lots 20-30 and lots 41-42, the defendant had struck through the description of those 11 lots. The next day, when the defendant's solicitors were asked to provide withdrawal of caveats in respect of those lots, Mr Metaxas is said to have advised Mr Eley that his client "has complied with the deed and would not be signing any more withdrawal of caveats".

33 The plaintiff says that it was never the intention of either the plaintiff or the defendant that this omission in the description of Sanctuary Park Estate Stage 1 should have been made. Mr Hay, on behalf of the plaintiff, says that at all times in his dealings with Mr Rumenos and in dealings between the plaintiff's solicitors and the defendant's solicitors, it was the common intention of the parties that all the lots on deposited plan 33566, including the 11 lots in question, would benefit from the withdrawal of the caveats.

34 To this end, the plaintiff also points to a letter from the plaintiff's solicitors to the defendant's solicitors dated 18 July 2003 and sent by facsimile in respect of which a without prejudice privilege is waived by the plaintiff, which it says makes clear that Stage 1 includes lots 26-32 and 39-42 on deposited plan 33566.

35 Mr Rumenos, on behalf of the defendant, contends that there was never an agreement concluded between the parties that the defendant would withdraw the caveat. The defendant contends that, throughout the negotiations, the defendant wished to be satisfied as to the value of the alternate security and that nothing has ever been provided beyond an unsigned copy of the valuation in respect of which the valuers were not prepared to extend liability to the defendant.

(Page 12)

36 Mr Rumenos says that, on 27 August 2003, he attended at his solicitor's office and was presented with the deed of agreement which was reviewed, amended, executed and returned to the plaintiff's solicitors. He says he also signed withdrawals of caveat consistent with the document. He says that, prior to signing the deed of agreement, his solicitor telephoned Keith Collins of Burgess Rawson and asked if he would extend liability to the defendant in respect of his valuation of Stage 2. He says that Mr Collins said, in his hearing, that he would not extend liability and that his account had not been paid.

Plaintiff's contentions

37 It is in these circumstances that the plaintiff says that it is entitled to an interlocutory injunction requiring the defendant to sign the withdrawals of caveat in respect of lots 26-32 and 39-42. In this regard, the plaintiff says two things:

(1) That if the deed is to remain unrectified, on the basis that there was no common intention between the parties that the deed should include that land as land to be the subject of withdrawals of caveat, then the caveat was registered by the defendant against that land without reasonable cause;

(2) alternatively, in the event that this first ground fails, that the plaintiff has made out a serious issue to be tried on its claim that the deed should be rectified by including lots 26-32 and 39-42 within the definition of "Sanctuary Park Estate Stage 1" in the deed.

38 Further, the plaintiff says that the balance of convenience favours it such that an injunction should go against the defendant. If the defendant is not obliged to remove the caveat over all the Stage 1 lots, it will suffer a considerable financial hardship.

39 The plaintiff also says that the prejudice to the defendant should the interlocutory injunction ultimately be found not to have been rightly granted is limited, in that by cls 2.2 and 2.3 of the deed as executed the defendant is entitled to maintain its caveat over land within Stage 2 and may lodge a caveat over the balance of the land known as "Sanctuary Park Estate Stage 2" being lot 405. The plaintiff says that, on the financial information provided by Mr Hay in respect of the profits to be earned on the development of Stage 2, even if the defendant should be wholly successful in the arbitration proceedings, there will be sufficient funds to

(Page 13)

cover any liability. The projected profits flowing from Stage 2 of the development are said by Mr Hay to be in the order of $800,000.

Defendant's contentions

40 Against those submissions, the defendant says that there was never a common intention to do anything and that, at all times, the defendant required the plaintiff to satisfy it concerning the adequacy of the alternate security to be provided under the deed.

41 Further, the defendant says that it has a caveatable interest pursuant to an equitable lien it is entitled to claim against the whole of the land by virtue of carrying out the subdivisional works under the contract. The defendant acknowledges that the estate or interest it has claimed in the caveat as "equitable chargee" is not accurate and that it should claim an interest pursuant to an "equitable lien". However, the defendant says that, even if the current caveat were to be discharged on that basis, it should be entitled to lodge a fresh caveat claiming an interest pursuant to an equitable lien.

42 The defendant also says that the Court should not grant the interlocutory relief sought by the plaintiff because to do so would effectively be to provide final relief in the proceedings, something the Court should be reluctant to do.

Principles governing grant of mandatory interlocutory injunction

43 It is generally accepted that the principles governing the grant or refusal of interlocutory injunctions in private law litigation require the plaintiff to show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is, there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that the plaintiff will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of the injunction: Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 per Mason ACJ.

44 It is also accepted that the principles that govern the grant of a mandatory interlocutory injunction are no different from those which govern a prohibitory interlocutory injunction. Nonetheless, it is also said that, ordinarily, the grant of a mandatory interlocutory injunction is something of a rare bird, for the reason, at least partly, that a mandatory

(Page 14)

injunction is usually more onerous for a defendant to comply with and that the usual purpose of an interlocutory injunction is to preserve the status quo, a consideration inapplicable to mandatory injunctions: see generally discussion in SDS Corporation Ltd v Pasdonnay Pty Ltd [2002] WASC 276 at [13] and [14].

The caveatable interest issue

45 In this case, the plaintiff primarily says it is entitled to a mandatory interlocutory injunction because the defendant is not entitled to maintain its caveat over the 11 lots in question. It says the caveat was lodged without reasonable cause. Whether the defendant lodged the caveat without reasonable cause, in the context of this application, depends primarily on the answer to the question whether the defendant can point to an arguable caveatable interest in the land.

46 In the writ, the plaintiff seeks final relief by way of a declaration that the caveat was registered by the defendant "without reasonable cause". Such a declaration if made would appear to be referable to a claim for compensation by the plaintiff under s 140 of the Transfer of Land Act1893 (WA). However, in the proceedings to this point, no separate claim for compensation is made.

47 The question whether a caveator registered a caveat without reasonable grounds is not always coincident with the question whether the caveator can make out an estate or interest in land sufficient to support a caveat: see Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 per Malcolm CJ at 434. The question that arises here, as it does on an application to remove a caveat under s 138 of the Transfer of Land Act, or on an application to extend a caveat under s 138C(2)(a) of the Act, is whether the caveator can establish that there is a serious issue to be tried in respect of the estate or interest claimed in relation to the land: as to an application under s 138, see Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42; as to an application under s 138C, see Pindan Pty Ltd v Sunny's Redevelopment Pty Ltd [2001] WASC 104; [2002] ANZ Conv R 51; and discussion in His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15.

48 Ordinarily, if a caveator can demonstrate a serious issue to be tried, the caveat will be maintained by the Court. However, there are circumstances, unusual perhaps, in which the balance of convenience may lead a Court to conclude that it is appropriate to order the removal of a

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caveat or not permit the extension of a caveat: see Ravi Nominees (supra) at 62 per Owen J; His Grace Metropolitan Petar v Macedonian Society of Western Australia Incorporated (supra) at [75] - [78].

49 In this case, the first question raised is whether the defendant has an estate or interest capable of supporting the caveat.

50 In that regard, the defendant relies on the fact that, under the contract with the plaintiff, it carried out subdivisional works whereby the land was improved. The defendant relies in particular on the decision of Heenan J in this Court in Eades v Reilly, unreported; SCt of WA; Library No 980675; 20 November 1998, in which his Honour accepted that, in an appropriate case, a builder could hold an equitable lien over landing respect of the unpaid contract price under a relevant building contract.

51 In Eades v Reilly, his Honour made reference to what Deane J, who was one of the Judges in the majority, had said in Hewett v Court (1983) 149 CLR 639 about the circumstances in which an equitable lien may arise. Whereas Wilson and Dawson JJ, in a joint dissenting judgment, considered that an equitable lien can only arise in the case of a contract which would be specifically enforced (see CLR at 658 - 659), Deane J considered otherwise. His Honour considered that the availability of specific performance is neither a condition precedent nor a test of the implication of an equitable lien: see at CLR 667. As to the particular circumstances in which an equitable lien may arise in respect of property, Deane J considered it adequate for present purposes to identify what he considered to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. At CLR 668, he stated them (in substance) to be as follows:

(i) That there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it;

(ii) that the property be specifically identified an appropriated to the performance of the contract; and

(iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be

(Page 16)

appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged.

52 His Honour added, at CLR 669, that whether or not these circumstances exist or are satisfied in a particular case should, like most questions involved in the application of equitable doctrines, be determined by reference to the substance of the transaction, rather than its form.

53 In Hewett v Court, Deane J, as well as Gibbs CJ and Murphy J, came to the conclusion that the purchaser of a transportable home, who had made the first two payments prior to the time for delivery, had obtained an equitable lien in respect of the house for the amount of the purchase price paid. All Judges in the majority agreed that an equitable lien may arise in respect of moneys paid under a contract although the contract is incapable of being specifically enforced.

54 In Eades v Reilly, Heenan J considered it was arguable that an equitable lien could also arise in respect of real property if the circumstances described by Deane J were satisfied and so an equitable interest in land sufficient to support a caveat could thereby arise. In that case, Mr Reilly was the owner of land near Busselton. Mr Eades tendered for the construction of accommodation units, manager's residence and other facilities on the land, which was to be developed as a beach resort. A contract price of $1,960,000 was agreed upon. The plaintiffs commenced work. Following a dispute concerning payment under the contract, the plaintiffs lodged a caveat claiming an estate or interest in the land as equitable mortgagees by virtue of the building contract. The contract did not contain any charge over the land in favour of the plaintiffs. When an application was made to extend the caveat, the claim of an equitable lien, rather than an equitable mortgage, was advanced.

55 Having regard to the circumstances described by Deane J in Hewett v Court, Heenan J accepted that there was evidence before him that the construction work done by the plaintiffs had increased the value of the land from about $2,000,000 to double that amount, or more. Counsel for the plaintiffs argued that it would be unconscionable of Mr Reilly to retain the benefit of the construction work when the plaintiffs had not been paid.

56 In opposing the application, counsel for the defendants argued that there would be no injustice to the plaintiffs if the caveat were not renewed. He pointed out that, although the construction work was under way at the time, there was no evidence tending to show that the plaintiffs

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were not subject to duress or undue influence when they executed the contract, the contract which did not provide for a charge over the land.

57 In all the circumstances, Heenan J accepted that there was a serious question to be tried concerning the caveatable interest. His Honour also considered that the status quo should be maintained pending a final determination whether the plaintiffs had a caveatable interest in the land.

58 However, because the caveat lodged was defective on its face - the caveatable interest having been stated as that of an equitable mortgagee - Heenan J considered the present caveat should not be extended. However, he gave leave for a further caveat to be lodged pursuant to s 138D(1)(e) of the Transfer of Land Act1893 (WA).

59 In this case, the defendant says that, since the plaintiff acquired the land as virgin bush, it has expended money to build roads, install drainage, perform all earthworks necessary for installation of those surfaces, install road furniture, such as guide posts and street signs, which has increased the value of the land from $750,000 to the point where Mr Hay, on behalf of the plaintiff, says the plaintiff is now entitled to be paid in excess of $2,000,000 for the land in its improved state. While the defendant does not say this increase in value is due entirely to the work it has performed, it says that it has made a material contribution to it.

60 While the decision in Eades v Reilly is relied upon by the defendant, there is before me no reported case finally determining that an unpaid contractor under a contract to carry out earthworks on land is entitled to an equitable lien in respect of the unpaid purchase price and so maintain a caveat under the Transfer of Land Act or equivalent legislation. Indeed, Senior Counsel for the plaintiff submits that Eades v Reilly does not represent the recognised legal position and that a contractor who has executed work on land for the registered proprietor, even a contractor who has been granted possession of land to enable him to execute the work, has no estate or interest in the land sufficient to support a caveat. Re T P Stevens Earthmoving Pty Ltd [1975] Qd R 69 is relied upon by the plaintiff in this respect.

61 Senior Counsel for the plaintiff submits, in the alternative, that Eades v Reilly should be distinguished because the three prerequisites for the maintenance of the caveat referred to by Deane J in Hewett v Court are not met in this case. Senior Counsel accepts that, arguably, the first prerequisite as to actual or potential indebtedness of the plaintiff to the defendant has been met, but that the second and third have not. He

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contends that the second prerequisite, that the property be specifically identified and appropriate to the performance of the contract, is not met because the lots the subject of the present application, lots 26-32 and 39-42, were not specifically identified and appropriated to the performance of the contract. However, it may be observed that the contract specifically refers "Sanctuary Park Estate Toodyay". Senior Counsel for the plaintiff further contends that the third prerequisite, that the relationship between the actual and potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he 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, is also not met. He contends that this prerequisite fails because it depends upon identifying and appropriating certain property as part of the second prerequisite and, in any event, the deed executed by the parties ensures that the defendant's claims are protected by permitting it to register caveats over the lots which are subject of Stage 2. Thus, there can be no suggestion of unconscientious or unfair dealings by the plaintiff.

62 There may be a question, although not raised or argued before me, whether, if the remedy of an equitable lien arises by reference to a judicial assessment whether or not a party has acted unconscientiously or unfairly, any interest in land can be said to exist prior to a judicial pronouncement to that effect. In other words, if a Court were ultimately to determine that the defendant is entitled to an equitable lien in respect of the unpaid contract price over the land in question, whether that interest arises only at the time the order is made. In that regard, it may be that the remedy of equitable lien should be seen, in such a case, as a "remedial" equitable remedy and not an "institutional" remedy: see Ford H A J and Lee W I, Principles of the Law of Trusts, 3rd ed, Law Book Co Australia 1996 par [22060] as to the institutional or remedial nature of a constructive trust; and discussion in Lydon v Ryding [2002] WASC 308 per McLure J at [19].

63 In any event, assuming, as did Heenan J in Eades v Reilly, that, in appropriate circumstances a contractor in the position of the defendant in this case may arguably obtain an equitable lien in respect of land, a question remains whether the circumstances which Deane J said would be sufficient for the implication of an equitable lien where parties are in a contractual relationship, arguably are met.

64 In this respect, I have considerable difficulty in accepting a submission of the defendant that an equitable lien can arise in

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circumstances where the defendant has removed the caveat in respect of 31 of the 42 lots in the Stage 1 development and in consideration therefor the plaintiff, as the owner of the land the subject of the existing caveat, has granted to the defendant, as contractor in respect of any unpaid contract price for the subdivisional works carried out on the Stage 1 land, a charge over the land that will be developed as Stage 2 of the development. While the worth of that charge depends on the extent of the existing mortgage registered against the land and future subdivisional expenses, all the evidence before me suggests that the value of the land the subject of the Stage 2 development is real and not fanciful and likely to be in the order of $800,000.

65 The defendant, however, says it is not satisfied that there is sufficient security in the balance of the land yet to be developed and implies this is the reasons why it has thus far refused to withdraw the caveat over the 11 lots 26-32 and 39-42.

66 What is difficult to understand, however, is, if the defendant truly is and was concerned not to conclude any agreement with the plaintiff concerning the withdrawal of caveat until satisfied about the value of the "alternate security", why it signed the deed and agreed to release the caveat over the 31 lots described in "Sanctuary Park Estate Stage 1", as well as accept the charge over the Stage 2 land. On one view, the defendant simply took an opportunity presented by the inadequate definition of the Stage 1 land in the deed.

67 Accepting the judgment of Heenan J in Eades v Reilly that an equitable lien may arise in circumstances of the type raised in this case, I am ultimately not satisfied, on the evidence before me, that the relationship between the actual or potential indebtedness of the plaintiff to the defendant and the identified and appropriated property, being the initial lot 22048, which has been subdivided in part into lots that include lots 26-32 and 39-42, is such that the plaintiff would be acting unconscientiously or unfairly if it were to dispose of the property, or, more particularly, the lots in question, to third parties without the consent of the defendant, or without the actual or potential liability having been discharged. The defendant has always known it was the intention of the plaintiff to subdivide the land in the manner proposed and from the profits thereof meet the development expenses incurred, including its own. While the amount claimed as unpaid price under the contract by the defendant is not inconsequential, the facts of this case cannot be equated, in my view, with those of Eades v Reilly. This is not a case where the conduct of the defendant has doubled a $2,000,000 property investment

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and the caveat were removed the caveator would be left financially unsecured. Here, by the terms of the deed, the defendant is not left without any recourse to the land or form of security in respect of the unpaid contract price. It has a charge in respect of the balance of the land and is entitled to realise against the land any award which may be made in its favour in the arbitration proceedings.

68 Additionally, it is relevant to note that the Stage 1 development in respect of which new certificates of title have issued comprises 42 lots. Thirty-one of those are within the land described as "Sanctuary Park Estate Stage 1" in the deed. The other 11 are lots 26-32 and 39-42. The subdivisional works carried out by the defendant are said by the defendant to have been in respect of the whole of the Stage 1 land and, as I understand it, also in respect of parts of proposed Stage 2. The defendant has agreed, by the deed, to withdraw the caveat in respect of 31 of the 42 lots in question, but not the remaining 11 lots the subject of this application. Yet, the defendant seeks to enforce its equitable lien for the unpaid purchase price claimed by it in the arbitration proceedings in respect of the whole of the land as against the improvements it says it carried out in respect of the part of the land that is currently represented by the 11 subdivisional lots. It is clear, on the evidence before me, that the works actually carried out on the 11 lots is only a certain fraction of the whole of the subdivisional works carried out. Whether or not it is about a quarter (11/42) is not clear on the evidence, but plainly the work carried out and the price for that work carried out under the contract and claimed by the defendant is not totally referable to the 11 lots in question.

69 This factor, leaving aside the question whether or not an equitable lien can be claimed in respect of the 11 lots, is, to my mind, an additional reason both for doubting the entitlement of the defendant to an equitable lien in respect of the total sum claimed by it under the contract, as well as considering that the balance of convenience in this case does not favour the defendant.

70 In all of these circumstances, I am not satisfied that the defendant has an arguable estate or interest in lots 26-32 and 39-42 sufficient to maintain the caveat against those lots.

Balance of convenience

71 Moreover, I consider that, in all the circumstances of this case, the balance of convenience favours the plaintiff. If it is unable to complete settlement of the "pre-sold" lots in question, it will be severely affected in

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financial terms. In circumstances where the defendant has an alternative form of security, although the extent of it is not precisely calculated, the balance of convenience favours the plaintiff.

72 While it is right to observe that an interlocutory injunction of a mandatory nature is a rare bird, it is also clear that the usual principles governing the grant of an interlocutory injunction apply equally in the case of a mandatory interlocutory injunction as they do in the case of a prohibitive interlocutory injunction. In the circumstances of this case, I feel a sufficient assurance that, if the plaintiff makes out its case at trial, it will be entitled to relief of the nature I am prepared to grant on an interlocutory basis. I say that because I accept that a grant of interlocutory relief at this point will effectively constitute final relief in the proceedings and will leave the defendant in the position where it will not be able to exercise the equitable lien for which it contends. However, it will be entitled to realise on the alternate security it has obtained under the deed.

Summary and order

73 In summary, I consider the caveat should be discharged for the misdescription of the estate or interest claimed. As noted, the defendant has claimed as an "equitable chargee". It is commonplace to note that misdescription of the estate or interest claimed make a caveat defective and liable to removal: Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 per Burt CJ at 131; Eades v Reilly (supra).

74 I do not consider that the defendant is entitled, in the present circumstances, either to leave to register a fresh caveat over the 11 lots or to an interim or interlocutory injunction to prevent the plaintiff dealing with those lots pending the commencement of appropriate proceedings in this Court, because I do not consider the defendant is, in all the circumstances of this case, able to demonstrate a serious issue to be tried in respect of the estate or interest it claims.

75 To the extent that an earthmoving contractor in the position of the defendant in this case is able in equity to claim a lien in respect of the land the subject of the earthmoving contract on the basis described by Heenan J in Eades v Reilly (supra), I do not consider the third criterion specified by Deane J on Hewett v Court (supra) is satisfied. In short, in the present circumstances, I do not consider that, for the plaintiff to deal with the 11 lots without the consent of the defendant or without

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discharging the sum claimed by the defendant in the arbitration proceedings, constitutes unconscientious or unfair behaviour.

76 If the plaintiff is unable to complete the settlements on the "pre-sold" sale agreements in respect of the 11 lots in question, it will suffer possibly irreparable financial damage. While the defendant says that the plaintiff has not demonstrated it is not already insolvent, I have no compelling evidence before me to reach the conclusion that the plaintiff is insolvent. However, if the plaintiff is not permitted to effect settlement on the sales of the 11 lots, that result may be the possible outcome.

77 Even if it could be said from the defendant's point of view that there is a serious issue to be tried in respect of the equitable lien it claims, I consider this is a case where the balance of convenience significantly favours the plaintiff and justifies the refusal by the Court effectively to maintain the defendant's caveat over the land in question.

78 The equitable lien claimed is in respect of the whole of the original Stage 1 development, whereas the defendant now seeks to maintain the caveat only in respect of the remaining 11 lots of the original 42 lots, having provided withdrawals of caveat in respect of the other 31 lots in the Stage 1 development. The defendant has taken security over the balance of the land, including lot 405 that is to the subject of the Stage 2 development and may rely on that security.

79 In these circumstances, I do not need to consider the question whether the plaintiff is also entitled to relief on the ground that there is a serious issue to be tried in respect of its claim to rectification of the deed of settlement.

80 In all of these circumstances, the Court is of the view that, in the exercise of its equitable jurisdiction, the discretionary considerations favour the plaintiff and an interlocutory injunction in the terms sought in the application should be granted.