Sears v Gilpear Nominees Pty Ltd as trustee of the Princep Unit Trust - [2005] WASC 278

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SEARS & ANOR -v- GILPEAR NOMINEES PTY LTD AS TRUSTEE OF THE PRINCEP UNIT TRUST & ANOR [2005] WASC 278

CORAM: COMMISSIONER SANDERSON

HEARD: 9 DECEMBER 2005

DELIVERED : 16 DECEMBER 2005

FILE NO/S: CIV 2375 of 2005

BETWEEN: MICHAEL JOHN SEARS
KELLIE LEANNE SEARS
Plaintiffs
AND
GILPEAR NOMINEES PTY LTD AS TRUSTEE OF THE PRINCEP UNIT TRUST (ACN 008 861 872)
First Defendant
THOMAS EDWARD GILFILLAN
Second Defendant

Catchwords:

Injunction - Application to protect right acquired under contract of sale - Turns on own facts

Legislation:

Trade Practices Act 1974 (Cth), s 51A

Result:

Injunction continued until trial

Category: B

Representation:

Counsel:

Plaintiffs:     Mr I A Morison
First Defendant             :     Mr M G Pendlebury
Second Defendant         :     Mr M G Pendlebury

Solicitors:

Plaintiffs:     Lander Hynes Lawyers
First Defendant             :     Lewis Blyth & Hooper
Second Defendant         :     Lewis Blyth & Hooper

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

Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Rototek Pty Ltd v A D Engineering Pty Ltd [2004] WASC 108
Total Marine Services Pty Ltd v Waller [2002] WASC 8

Case(s) also cited:

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Bullock v Federated Furnishing Trades Society of Australia (No 1) (1985) 5 FCR 464
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
Hurley v McDonalds Australia Ltd [1999] FCA 465
Ricegrowers' Cooperative Ltd v Howling Success Australia Pty Ltd (1987) ATPR 40778
Smith v Parfit [2005] WASC 250
Telstra Corporation Ltd v Optus Communications Pty Ltd (1997) ATPR 41541
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

COMMISSIONER SANDERSON: This is the return of two chamber summons. The first in time is the plaintiffs' chamber summons seeking an interlocutory injunction. This chamber summons came on first on 25 November 2005. I granted an injunction largely in terms sought by the plaintiffs. I also made programming orders giving the defendants the chance to file affidavit material in opposition. The matter was then listed for hearing on 9 December 2005. The second chamber summons is the first and second defendants' application to remove a caveat lodged by the plaintiffs over certain property. The two applications, although separate, are interconnected. It is the plaintiffs' application for the injunction which is of prime significance.
The facts in this case are relatively straight‑forward. The plaintiffs, who are husband and wife, are resident in the southwest town of Bunbury. By offer and acceptance signed by the plaintiffs on 20 January 2004, they offered to purchase a strata unit known as Unit 4, Vista 11 Apartments, 11 Princep Street, Bunbury. A copy of the offer and acceptance for Unit 4 is found as Annexure "KS2" to the affidavit of the second‑named plaintiff, sworn 23 November 2005. On the same day, the plaintiffs also entered into a contract to purchase Unit 3 in the Vista 11 Apartments. In all respects save one, the two contracts of purchase were identical. The only difference is that the price paid for Unit 4 was $298,000; the price paid for Unit 3 was $308,000. It is convenient henceforth to refer to the "Units", not distinguishing between each of them.
At the time the Units were purchased, construction of Vista 11 Apartments had commenced but the development was incomplete. In other words, this was a purchase "off the plans". To facilitate this arrangement, two conditions were added to the offer and acceptance. They were as follows:
"7.The sellers will arrange strata titles at their expense and will be available prior to settlement.
8.Settlement will take place on or before 14 days after the above titles are available."
Each of the contracts was expressed to include the 2002 General Conditions "so far as they are not varied by or inconsistent with the express terms of this Contract".
The way in which the development proceeded is set out with admirable clarity by the second defendant in his affidavit sworn 6 December 2005. I can do no better than quote pars 8 through to 16 of his affidavit:
"8.The Property was purchased on or about 13 August 2003 by Gilpear as trustee for the Princep Trust.
9.After the purchase of the property Gilpear entered into a fixed price agreement with DE VAUGH PTY LTD ('Devaugh') to construct a 20 unit apartment block on the Property.
10.On the basis of the purchase price of the Property and the cost of the building contract with Devaugh and the anticipated holding and development costs, Gilpear set prices for the sale of the various apartments in the proposed Apartment Block.
11.Devaugh went into administration on or about 31 December 2004 when the building works on the Property were less than half completed.
12.At the beginning of January 2005 it was apparent to me that given projected increased building costs and my belief based on discussions with Martin Jones of Ferrier Hodgson the Administrator for Devaugh, Devaugh would not continue with their building contract, the apartment building on the property could not be completed and the apartments sold at the initial prices negotiated with purchasers.
13.On or about 1 February 2005 Martin Jones of Ferrier Hodgson formally advised that Devaugh would not continue with the building works on the Property and Gilpear should appoint a new builder.
14.During January 2005 Gilpear negotiated a cost plus building contract which was signed with ABN to complete the building works.
15.At the time of signing the ABN building contract the anticipated building schedule provided by ABN was for a completion date of 12 August 2005.
16.On behalf of Gilpear I requested Graham Standley of Barr & Standley Real Estate Agents in January 2005 to negotiate increased purchase prices for the apartments to defray some of the projected increased costs. If the purchasers were not prepared to pay an increased price then Gilpear would exercise what I believed to be a legal right in clause 13 of the General Conditions referred to in paragraph 17 below to terminate the sale contracts. In January to February 2005 Barr & Standley negotiated price increases with the purchasers of the various units that had been sold including the Plaintiffs subject to documentation to be prepared by Gilpear's solicitors. I refer to annexure KS6 in the Affidavit of Kellie Leanne Sears."
Annexure "KS6" to the second‑named plaintiff's affidavit is a letter from the defendants' real estate agent Barr & Standley to the plaintiffs dated 5 January 2005. This letter advises that Devaugh has gone into administration and that it is the first defendant's intention to have another builder complete construction. The letter advises that if a new builder is obtained, the construction time "may be increased until June or July of 2005". There is also a reference to stamp duty. The letter says:
"I have today been informed by the State Revenue Department that there will be no extension beyond what has already been offered for the stamp duty to your contract. This means that you need to pay your stamp duty on time and you further need to contact your settlement agent to find what date this stamp duty is due because my understanding is starting this month the stamp duty on these contracts are due and payable."
In fact, the plaintiffs paid the stamp duty on each of the contracts on 19 January 2005.
By letter also dated 5 January 2005, Barr & Standley again wrote to the plaintiffs. This letter appears as Annexure "KS7" to the second‑named plaintiff's affidavit. Barr & Standley advise that new builders have been appointed. They were Alcock, Brown & Neaves (ABN Contractors). The letter goes on:
"Unfortunately there has been a substantial increase in the construction and holding cost of this project to the tune of approximately $900,000 which is beyond the capacity of the developer to absorb.
I have sought independent legal advice and the developers under these circumstances can withdraw from all contracts, if they so desire.
This is not the case with GILPEAR NOMINEES PTY LTD and they have agreed to absorb up to $500,000 of the increase and they are prepared to honor your contract for a minimal increase of $15,000 for each of your units."
The letter asked the plaintiffs to agree to make the further payment of $15,000 for each of the Units. The agents requested the plaintiffs each sign a copy of the letter and return it to them. This was done. Annexure "KS7" shows that each of the plaintiffs signed the letter on 28 February 2005. The letter anticipated that a more detailed agreement would be drawn up by the defendants' solicitors. This was done. On or about 1 September 2005 the plaintiffs and the first defendant entered into an agreement described as "Deed of Ratification and Variation" (the "Deed"). (The Deed is dated 12 May 2005. The second‑named plaintiff says it was not signed until on or about 1 September 2005. Nothing turns on this discrepancy.) This Deed recited the events that had occurred, including the purchase of the Units by the plaintiffs and the replacement of Devaugh as the builder. The Deed purported to rectify and vary the original contract. Clause 2.2.2, which appears under the heading "Conditional Sale", is in the following terms (see Annexure "KS10"):
"The sale constituted by the Contract as varied by this Deed is conditional upon registration of the Strata Plan by the date referred to in Item 6 of the Schedule ('the Latest Date for Registration of Strata Plan').
If the Strata Plan is not registered by the Latest Date for Registration of Strata Plan either party may by written notice to the other, terminate this Contract. In the event of a termination of this Contract pursuant to the provisions of this clause, the Buyer shall be entitled to a refund of the Deposit and neither party shall have any further claim against the other arising from the Contract as modified by this Deed."
Item 6 to the Schedule gives as the latest date for registration of the strata plan the date of 30 November 2005.
In her affidavit the second‑named plaintiff sets out events which she says occurred before the signing of the Deed. Once again, I can do nothing better than reproduce what she says in her affidavit (pars 13 to 20):
"13.When I received the deeds I read condition 5 which concerned me because I had been told by a friend who was working on the building that it was unlikely that it would be finished before January or February 2006.
14.I telephone Jay Standley of Barr & Standley and expressed my concerns. He said words to the effect 'I have not seen the documentation but it is my impression that you are damned if you do and damned if you don't.' He said he would look into this matter.
15.I did not hear back from Mr Standley but later I had a telephone call from Elizabeth Anderson of Barr & Standley who said words to the effect 'We have not had your deeds back. The owner is collecting the documents from our office the next week.' I said to Elizabeth Anderson words to the effect 'I'm concerned about signing the deed because of the wording about completion by 30 November 2005. This means that they could take the unit back without consequence if it wasn't completed by that date.'
16.I said 'Has anybody else asked about this?'. I said 'I have been in contact with Jay Standley who never got back to me about this condition.'
17.Elizabeth Anderson said words to the effect 'You're the first to ask about this and I in fact haven't noticed that condition. All the other owners have signed this deed without question. Now, however I'll talk to Reece Standley and find out some more about this.'
18.Elizabeth Anderson contacted me later and said words to the effect 'I've been in contact with the owner of the complex about your concerns and he says he intends to honour the contract no matter when the complex is completed. He has given me his phone number and you can ring him about the condition if you're still not happy to accept his word. If we get the document rewritten he will agree to sign this but he has no intention of reneging the contract.'
19.I asked Elizabeth Anderson words to the effect 'Is this a good idea?' She said 'I'm sure that he'll honour his word.' I said words to the effect 'I'm still concerned but that if Barr & Standley are happy with the verbal contract I'll sign on that basis. Please make a record of your conversation about this condition. Could you get him to sign something when he comes in to collect the documents.'
20.Elizabeth Anderson called me back later and said 'I've spoken to him again and he's assured me again when he collected the documents that he'll honour the contract if the complex finishes late.' "
(The reference in par 13 to condition 5 is clearly an error. It should be a reference to cl 2.2.2. Apart from anything else, there is no cl 5 in the Deed. Moreover, throughout the argument both counsel focused on cl 2.2.2. Neither I nor counsel picked up this erroneous reference during the course of argument.)
The second defendant responds to this evidence by par 7 of his affidavit. He says:
"7.In relation to the matters deposed to in the Affidavit of Kellie Leanne Sears sworn 23 November 2005 I say that when I spoke to Elizabeth Anderson in or about the end of August 2005:
(a)Gilpear intended to settle on the contracts for apartments 3 and 4 with the Plaintiffs in the expectation in (b) below.
(b)My expectation at that time on the advice of Jason Kunkler, Construction Manager for the builder of the apartment block, ABN CONSTRUCTION PTY LTD ('ABN'), at 11 Princep Street, Bunbury ('the Property') was that the apartments would be complete in October 2005 and settlement would occur soon after.
(c)It was only in mid October 2005 after further discussions with Jason Kunkler that it became apparent to me that strata titles for the apartments in the apartment block would not be available until early 2006.
(d)Gilpear by its directors then determined to terminate the purchase contracts with the Plaintiffs pursuant to its rights contained in the Deed of Ratification and Variation being Annexure KS10 to the Affidavit of Kellie Leanne Sears ('the Deed of Ratification and Variation')."
It is important to note that the second defendant does not dispute that a discussion as alleged by the second‑named plaintiff took place between her and Ms Anderson. In one sense, that is not surprising - there is no suggestion that he was present when the discussion took place. But he does not suggest that what is said by the second‑named plaintiff in her affidavit is inconsistent with discussions he had with Ms Anderson. Nor is there any suggestion that Ms Anderson spoke without the defendants' authority. Counsel for the defendants maintained that the defendants' failure to dispute the evidence of the second‑named plaintiff was of no significance. As he correctly pointed out, if there had been a conflict on the evidence, then for the purposes of an application for an injunction the Court would have to assume that the second‑named plaintiff's version of events was correct. But, nonetheless, it remains the fact that there is on the record no denial by the defendants or Ms Anderson of the version of the conversation put forward by the second‑named plaintiff in her affidavit. In my view, in assessing the strength of the plaintiffs' case, that is a matter of some significance.
There are two other letters which complete the factual picture. On 29 July 2005 Barr & Standley wrote to the plaintiffs advising that practical completion was expected in the first week of October 2005: Annexure "KS8" to the second‑named plaintiff's affidavit. On 10 November 2005 the defendants' solicitors, Edwin Abdo & Associates, wrote to the plaintiffs (Annexure "KS9"). Relevantly, the letter read:
"Our client has been notified that practical completion of the building will not occur prior to the end of November 2005. By virtue thereof our client has been notified by the surveyor responsible for the completion of the final survey and lodgment of the strata plan that it is highly unlikely that it will be possible for lodgment of the documents to occur prior to the first week in January 2006."
The letter then went on to refer to the right of either party to terminate the contract if the strata plan was not registered by 30 November 2005. The letter advised that a formal notice of termination would be delivered on 1 December 2005 in line with the contract. Upon receipt of that letter, the plaintiffs lodged caveats over the Units. These caveats, which are absolute caveats, appear as Annexure "KS11" to the second‑named plaintiff's affidavit. In fact, the first defendant has not moved to terminate the contract pursuant to cl 2.2.2 of the Deed. They are injuncted from doing so as a consequence of the order that I made on 25 November 2005.
The principles for the grant of an interlocutory injunction are well understood. They were not the subject of debate between the parties at the hearing. It is enough if I say that a party seeking an injunction must establish that there is a serious question to be tried and that the balance of convenience favours the grant of an injunction: see generally Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153.
When the plaintiffs initiated this action, they filed a statement of claim. That statement of claim (which has subsequently been amended) pleads a number of causes of action. For present purposes, it is enough if I deal with only one. That is the obvious claim based on an allegation of misleading and deceptive conduct under the Trade Practices Act 1974 (Cth). Based on the plaintiffs' evidence, it is said that the defendants represented to the plaintiffs that it would not rely on cl 2.2.2 of the Deed if practical completion was not achieved by 30 November 2005. That is a representation as to a future state of affairs. In light of the first defendant's expressed intention to terminate the contract, it is said the representation was false. Under the provisions of s 51A of the Trade Practices Act, it is up to the first defendant to establish that when the representation was made it was made on reasonable grounds. That is an evidentiary onus carried by the first defendant. Counsel for the plaintiffs submitted that without going further there is a serious question to be tried.
Counsel for the defendants submitted that there was no serious question to be tried. The thrust of his submissions on this issue was that, even on the plaintiffs' version of the facts, they suffered no damage consequent upon the representation made to them by the first defendant through Ms Anderson. To understand the basis of this submission, it is necessary to look more closely at the contractual position between the parties.
As I mentioned above, each of the contracts was expressed to include the General Conditions (Annexure "EG‑1" to affidavit of the second defendant). Clause 13 of the Conditions deal with "Subdivision". Clause 13.2, which is headed "Contract conditional", is in the following terms:
"The Contract is conditional on the following.
(a)An application for the subdivision of the Lot from the Original Land being lodged with the Planning Commission within 3 months after the Contract Date.
(b)The Planning Commission granting approval for the subdivision of the Lot from the Original Land within 6 months after the Contract Date, or any longer period as specified in:
(1) the Contract; or
(2)a subsequent agreement in writing between the Parties."

It was the defendants' submission that as no application for subdivision had been lodged within three months of the signing of the contract, the contract was conditional. Counsel accepted that this rendered the contract voidable rather than void. However, it could be terminated. "Termination of Contract" is covered by cl 13.7 of the General Conditions. It is in the following terms:
(a)If:
(1)any condition specified in this clause is not satisfied within the time specified for satisfaction of that condition; or
(2)…
subclause (b) will apply.
(b)Where subclause (a) applies, the following apply.
(1)The Deposit and any other money paid by the Buyer under the Contract, must be promptly repaid to the Buyer.
(2)If the Deposit has been invested by the Deposit Holder in accordance with clause 1.9, the Buyer will be entitled to the interest on the Deposit.
(3)If any other money has been paid to the Deposit Holder by the Buyer, and invested by the Deposit Holder with a Deposit Financial Institution, the Buyer will be entitled to the interest on that other money.
(4)Subject to subclause (1) to (3), no Party will have any claim or right of action against the other arising from the termination, except in respect to any matter which arose before the termination."
Counsel for the defendants put the position in this way. He said that as at the date the Deed was entered into, the first defendant had the right to terminate the contract. The plaintiffs were consequently in limbo. There was nothing that they could do to reinstate their position. They were at the mercy of the defendants. So, by entering into the Deed, they were not placing themselves in any worse a position than if they had not done so. Thus, it could not be shown that they had acted to their detriment and suffered any loss.
There are a number of difficulties with this argument. The first is that it is by no means clear that cl 13 of the General Conditions would apply to these contracts. As I mentioned above, the offer and acceptance expressly states that the General Conditions apply so far as they are not inconsistent with the special conditions endorsed on the offer and acceptance. Here there were two special conditions which said that settlement was not to be effected until 14 days after the strata title issued. It is hard to reconcile such a clause with cl 13.2. It is arguable, then, that cl 13.2 would not apply to the contract and that as at the date the parties entered into the Deed, the first defendant had no right to terminate the contract. If that is so, then by entering into the Deed the plaintiffs certainly acted to their detriment. In my view, there is a serious question to be tried on this issue. There was therefore no Trade Practices Act claim.
On balance, I am satisfied that there is a serious question to be tried as to whether or not the plaintiffs have a claim against the first defendant under the provisions of the Trade Practices Act. In reaching that conclusion, I am mindful of the uncontradicted evidence of the second‑named plaintiff about the representations made to her by Ms Anderson. At the very least, on the affidavit material as it stands, the plaintiffs have a very good case for establishing that the representation complained of was made. That at least establishes a beachhead. From there the claim may lie under the Trade Practices Act, or there may be a claim in estoppel - there even may be a contractual claim although that does seem unlikely. But, in my view, there is no question but that there is a serious issue to be tried.
Having reached that point, it is a relatively straight‑forward matter to determine where the balance of convenience lies. It is the plaintiffs' case that they have an equitable right to purchase the two Units. They say the defendants' actions are an invasion of their proprietary rights. The cases establish that damages are rarely an adequate remedy for the invasion of proprietary rights: see Rototek Pty Ltd v A D Engineering Pty Ltd [2004] WASC 108 at 29. In Total Marine Services Pty Ltd v Waller [2002] WASC 8, Roberts‑Smith J (as his Honour then was) deals with a situation not dissimilar to this. His Honour concluded that a party who arguably entered into a contract to purchase units is entitled to expect to receive what they contracted to procure - that is, a new not previously occupied unit. In my view, that is the case here.
Counsel for the defendants submitted that this was a case where damages would be an adequate remedy. He submitted that the evidence established that the plaintiffs purchased the Units with a view to selling them at a profit. Counsel was assisted in this submission by an affidavit of the first‑named plaintiff sworn 24 November 2005. The first‑named plaintiff says that both Units were presently listed for sale. He then goes on, somewhat confusingly, to say that not only are the two Units for sale, but the plaintiffs' residence in Bunbury is also for sale. He says that were the house to be sold, then the plaintiffs may move into one of the Units. Counsel submitted that in the circumstances, there was no doubt that damages in this case would be an adequate remedy. If the injunction was refused, so counsel submitted, and the first defendant went on and sold the Units at more than the purchase price in the contracts, then the plaintiffs' damages, should they succeed at trial, would be easily quantified. Furthermore, the result would be nothing more or less than the plaintiffs sought in any event.
Counsel's submission was not without merit. However, it remains the fact that what the plaintiffs are asserting in this case is a proprietary right. They say they have the right - a right which equity will protect - to acquire the Units. In my view, they have an arguable case on that issue. Once the proprietary right is established, it is that proprietary right which ought be protected. Accordingly, in my view, the plaintiffs are entitled to injunctive relief.
There remains the question of the caveats. As I have indicated above, the caveats which have been lodged are absolute caveats. No matter what view is taken of the plaintiffs' rights with respect to the Units, there can be no justification for the lodging of an absolute caveat over the whole of the property on which the development is located. The caveats should be withdrawn and, if necessary, I will make orders to that effect. It would be open to the plaintiffs to forthwith lodge subject to claim caveats. However, given the fact of the injunction, that, it seems to me, is unnecessary. However, for the present, all that needs to be done is the absolute caveats need to be removed. It would be inappropriate for me to make any order which prevented the plaintiffs lodging a subject to claim caveat.
Accordingly, I am prepared to continue the injunction until trial of this action. However, it should be on the basis that an application is made to enter this matter in the Expedited List within a short period of time - perhaps seven days. There should also be an order for removal of the caveat. I will hear the parties as to the precise form of orders and as to costs.