Sodhi v Whitby Land Company Pty Ltd (in Liquidation) (Receiver and Manager Appointed)
[2024] WASC 437
•25 NOVEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SODHI -v- WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED) [2024] WASC 437
CORAM: LUNDBERG J
HEARD: 13, 18 & 19 NOVEMBER 2024
DELIVERED : 25 NOVEMBER 2024
FILE NO/S: CIV 2332 of 2024
BETWEEN: JASKARAN SINGH SODHI & PUSHPINDER KAUR
Plaintiffs
AND
WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED)
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real Property - Application to extend operation of caveat pursuant to s 138C(1) of the Transfer of Land Act 1893 (WA) - Plaintiffs entered into a contract for purchase of land with the first defendant - Land subject to subdivision development - Contract subject to finance - Whether finance approved pursuant to contract - Lengthy delay involved before first defendant purported to terminate the contract - Plaintiffs maintain they complied with the contract, that the contract is valid, and they intend to seek specific performance thereof - Alternatively, plaintiffs maintain the first defendant's exercise of the termination power was ineffective on several grounds - Whether serious question to be tried - Whether balance of convenience favours extension of caveat - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA), s 138B, s 138C
Result:
Caveat extended until further order
Plaintiffs to commence substantive proceedings within 7 days
Category: B
Representation:
Counsel:
| Plaintiffs | : | B W Duckham |
| First Defendant | : | P Mariotto |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiffs | : | Duckham & Co |
| First Defendant | : | HWL Ebsworth |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57
Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38
Bashford v Bashford [2008] WASC 138
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39
Bride v The Registrar of Titles [2015] WASC 11
Cobbold v Barrett [2006] WASC 252
Developments (WA) Pty Ltd v Whittle-Herbert [2008] WASC 261
Dodds v Kennedy (No 2) [2011] WASCA 131; (2011) 42 WAR 16
Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; (2019) 101 NSWLR 679
Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292
Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor [2005] WASC 245
National Australia Bank v McCourt [2010] WASC 237
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418
Table of Contents
A. Introduction
B. Procedural history
C. Threshold arguments raised by the plaintiffs
D. Affidavit evidence and rulings
E. Issues arising on the application
F. The evidence
G. Relevant legislation and principles
H. Disposition
I. Orders
ATTACHMENT A SUBJECT TO FINANCE CLAUSE IN THE CONTRACT
LUNDBERG J:
A. Introduction
These reasons concern the plaintiffs' urgent application, by originating summons filed on 12 November 2024, for orders to extend the operation of a caveat which was lodged by the plaintiffs on 13 June 2024 (Caveat).
The Caveat was lodged in respect of a property situated in Novelli Parade, Piara Waters (the Property), more particularly described as Lot 2 on Deposited Plan 424428, Volume 4051 Folio 406. The Property was originally part of Lot 9007 and Lot 9504.[1]
[1] Lot 9007 on Deposited Plan 67676 being the whole of the land in Certificate of Title Volume 2797 Folio 630 and Lot 9504 on Deposited Plan 415594 being the whole of the land in Certificate of Title Volume 2965 Folio 241.
The first defendant, which is a property development company, is the registered proprietor of the Property, which forms part of an area of land which was the subject of a proposed residential subdivision. That subdivision process appears to have been delayed.
The first defendant is under external administration. Specifically, the first defendant is in liquidation and a receiver and manager has been appointed over its assets. The liquidators were appointed in September 2017 and the receiver and manager was appointed from around June 2020 in respect of one of the lots, and then in May 2023 in respect of the other lot. The appointed receiver and manager, Kimberley Stuart Wallman, has filed an affidavit in opposition to the application, affirmed on 14 November 2024 (Wallman Affidavit).
The orders for extension of the Caveat are sought by the plaintiff pursuant to s 138C of the Transfer of Land Act 1893 (WA) (TLA). The Caveat was set to expire at midnight on Monday, 18 November 2024, hence the urgency of the application. I understand the second defendant has adopted a neutral position to these proceedings, although no formal notice has been filed.
The plaintiffs are husband and wife. The plaintiffs entered into a contract with the first defendant for the purchase of the Property more than three years ago, on 2 August 2021 (Contract).[2] The Contract was executed after the receiver and manager was appointed and, indeed, well after the liquidation commenced. The purchase price stated in the Contract was $320,000. The Contract was subject to finance, and included the usual 'subject to finance' conditions one finds in standard REIWA contracts.[3] Time was of the essence under the Contract.[4]
[2] Sodhi Affidavit sworn 12 November 2024, Attachment SOD 1; Wallman Affidavit, Attachment KSW-7.
[3] Recognising that the terms of those standard contracts have been amended over the years.
[4] Wallman Affidavit, Attachment KSW-7 (2018 General Conditions, cl 22).
In essence, the plaintiffs maintain that in April 2022 they obtained the necessary finance approval required by the Contract and have, since then, been ready, willing and able to settle on the Contract. The plaintiffs thus maintain the Contract is valid and say they intend to commence proceedings seeking specific performance of the Contract. The plaintiffs accordingly seek orders to extend the operation of the Caveat until the substantive dispute between the parties can be heard and determined at trial. The plaintiffs have not yet commenced the foreshadowed proceedings, although a draft writ of summons has been provided to the Court.[5]
[5] Sodhi Affidavit sworn 7 October 2024, Attachment L.
In contrast to the plaintiffs' position, the first defendant maintains that the finance approval was not compliant with the terms of the Contract and the first defendant was thus at liberty to, and did, terminate the Contract by written notice on 15 April 2024.[6] The first defendant asserts that the Contract is not only no longer on foot, but the Property is now the subject of a more recent sale to another purchaser entered into on 5 June 2024, with a much higher purchase price of $500,000.[7] The receiver and manager seeks the removal of the Caveat.[8]
[6] Wallman Affidavit, Attachment KSW-9.
[7] Wallman Affidavit, Attachment KSW-13.
[8] Wallman Affidavit, Attachment KSW-16 (Application for caveat removal dated 7 October 2024 and the statutory declaration of Mr Wallman made on 7 October 2024).
B. Procedural history
In order to commence the present proceedings, given the first defendant is in liquidation, it was necessary for the plaintiffs to first obtain the leave of the Court in separate proceedings. The plaintiffs obtained that leave from the Master on 12 November 2024, pursuant to s 471B(1) of the Corporations Act 2001 (Cth).[9]
[9] Supreme Court COR 151 of 2024: see in particular the orders of Master Russell dated 12 November 2024. I will refer to these proceedings as the COR 151 Proceeding.
Through their solicitors (Allens), the liquidators adopted a neutral position to the grant of leave under s 471B(1). In contrast, the receiver and manager has most definitely assumed an adversarial attitude to the present application and I accept that the solicitors for the receiver and manager (HWL Ebsworth) have maintained that stance at all times.
The present application was heard on 18 and 19 November 2024, with programming directions made on 13 November 2024, and with interim orders made on both 18 and 19 November 2024 to extend the caveat pending the determination of this application. Those interim orders were made pursuant to s 138C(2)(c) and s 138C(3) of the TLA without any conclusion or finding being made by the Court as to the substance of the plaintiffs' claim, but simply to preserve the plaintiffs' position pending the determination of the extension application.
The plaintiffs' application is explained in their outline of submissions dated 18 November 2024,[10] and is supported by an undertaking as to damages given by Mr Sodhi. I received an outline of submissions from the first defendant dated 18 November 2024.[11]
[10] Plaintiffs' submissions dated 18 November 2024 (PS).
[11] First defendant's submissions dated 18 November 2024 (DS).
At the conclusion of the hearing on 19 November 2024, I gave the parties leave to file additional submissions in relation to the decision of this Court in Cobbold v Barrett.[12] I received submissions from both parties on 20 November 2024.[13]
[12] Cobbold v Barrett [2006] WASC 252 (Jenkins J).
[13] Plaintiffs' supplementary submissions dated 20 November 2024 (PSS); and first defendant's supplementary submissions dated 20 November 2024 (DSS).
To some extent, the plaintiffs' further submissions have sought to raise a fresh point, namely as to whether equity should relieve against forfeiture of the plaintiff's interest. I agree with the submission advanced by the first defendant that the plaintiffs are seeking to raise a fresh cause of action in this regard, not previously identified,[14] and I will put the plaintiffs' submissions on that issue to one side in fairness to the first defendant.
[14] DSS [7(d)].
C. Threshold arguments raised by the plaintiffs
There are two threshold points raised by the plaintiffs.
First, the plaintiffs assert that the liquidators' approach to the COR 151 Proceeding before the Master has somehow impaired the ability of the receiver and manager to oppose the extension of the Caveat, or perhaps even now precludes the first defendant from being heard in these proceedings.
There is no basis for that submission and I reject it. The receiver and manager of the first defendant is entitled to oppose the present application. The plaintiffs' argument confuses the stance taken in the proceedings before the Master seeking leave, with the more substantive question as to whether the Caveat should be extended. The questions are obviously quite distinct.
Second, the plaintiffs assert that the receiver and manager has failed to demonstrate a proper basis for his appointment as the receiver and manager. I also reject that submission. I have evidence before me of the appointment of the receiver and manager, pursuant to two mortgage instruments, which were granted by the first defendant over two parcels of land.[15]
[15] Wallman Affidavit [4] - [10], Attachments KSW-1, KSW-2, KSW-3, KSW-4, KSW-5 and KSW-6.
The plaintiffs' contention as to a lack of standing rests on a spurious reading of one of the ASIC documents, which I simply reject.[16] To briefly explain; the date of the instrument referred to in the ASIC document (being a Form 505) is plainly the date of the appointment of the receiver and manager to the property in question, not a reference to a 'missing' third mortgage. The plaintiffs contend this 'missing' mortgage demonstrates a defect in the appointment process. The submission is without merit.
[16] Wallman Affidavit, Attachment KSW-6, pg 105.
In any event, it is a curious submission to advance given the Contract, which the plaintiffs seek to enforce, was executed by the receiver and manager. It might be thought that the plaintiffs' challenge to the receiver and manager's appointment, if it was to succeed, would be something of 'an own goal'.
In addition, and only for completeness, I note there were references in the plaintiffs' material to alleged non-compliance by the first defendant with provisions of the Sale of Land Act 1970 (WA). These allegations were not developed in any substantive fashion during the course of the hearing.
D. Affidavit evidence and rulings
The first defendant relies on the affidavit affirmed by Mr Wallman which I have already mentioned. No objections were raised in relation to the Wallman Affidavit.
The plaintiff relied on several affidavits, as identified in the table below. I note the first two affidavits had been sworn for the purposes of the COR 151 Proceeding, with leave granted for the affidavits to be relied upon in the present proceeding. All of the affidavits were the subject of numerous objections from the first defendant, which were addressed by rulings on 18 and 19 November 2024.
I approached those rulings on the basis that the proceedings were interlocutory in nature and the parties were permitted to adduce evidence on information and belief in accordance with the requirements of O 37 r 6(2)(c) and O 37 r 6(3A) RSC.
The affidavits filed by the plaintiffs are as follows:
No.
Deponent
Date
Rulings
1
Mr Sodhi
7 October 2024
Rulings contained in separate table.[17]
2
Mr Sodhi
4 November 2024
All objections overruled.
3
Mr Sodhi
12 November 2024
Par 5 struck out.
4
Mr Duckham
13 November 2024
Whole of affidavit inadmissible.
5
Mr Sodhi
13 November 2024
Rulings contained in separate table.
6
Mr Duckham
15 November 2024
Whole of affidavit inadmissible.
7
Mr Sodhi
15 November 2024
Rulings contained in separate table.
8
Mr Duckham
18 November 2024
All objections overruled.
9
Mr Sodhi
19 November 2024
Leave refused to rely on this affidavit.
[17] A table of the Court's rulings on evidentiary matters has been prepared by the Court and provided to the parties, and need not be further dealt with in these reasons.
On 18 November 2024, I ruled that the affidavits sworn by Mr Duckham on 13 and 15 November 2024 were irrelevant and wholly inadmissible.
On 19 November 2024, I declined leave to permit the plaintiffs to rely on the further affidavit of Mr Sodhi sworn 19 November 2024, which had been filed shortly before the resumed hearing.
At the hearing on 18 November 2024, short supplementary viva voce evidence was given by Mr Sodhi as to the circumstances concerning his application for finance from the Commonwealth Bank of Australia. At the resumed hearing on 19 November 2024, I declined leave to permit Mr Sodhi to give further viva voce evidence in support of the application.
E. Issues arising on the application
I have already addressed (and rejected) two preliminary issues raised by the plaintiffs: see [15] to [20] above. Having regard to the evidence adduced by the parties and their submissions, the following further issues arise for determination on the application:
(1)Whether there is a serious question to be tried as to the plaintiffs' claim for specific performance of the Contract. There are two sub-issues to consider in this regard.
(a)The first sub-issue is whether there is a serious question to be tried that the plaintiffs satisfied the finance approval requirements of the Contract. This is fundamentally a contractual question, focused on the proper construction of the Contract and the terms of the finance approval obtained by the plaintiffs, upon which they rely.
(b)The second sub-issue, which is an alternative point raised by the plaintiffs, is whether there is a serious question to be tried that the first defendant's exercise of the termination right was ineffective in the circumstances. This issue focuses on the delay after April 2022 and the conduct of the first defendant in this period.
(2)Whether the balance of convenience favours the maintenance of the Caveat in the circumstances.
(3)Whether the undertaking as to damages proffered by the plaintiffs is adequate.
I propose to address the matter by first outlining the factual background to the matter then addressing the relevant principles which the Court must apply in determining the application.
F. The evidence
The review of the evidence below does not involve any final findings of fact in the matter. It is nonetheless necessary to properly assess the evidence for the purposes of determining the question as to whether the Caveat should be extended.
The Property
The Property in question originally formed part of a proposed subdivision development in Piara Waters, in respect of which the first defendant was the property developer. The Property originally comprised part of Lot 9007 and Lot 9504.
The Contract
As already noted, and it is not in dispute, the plaintiffs executed the Contract more than three years ago, on 2 August 2021, for the sum of $320,000.[18] The Contract appears to have been signed by Mr Wallman on behalf of the first defendant, on 12 August 2021. The plaintiffs paid the deposit of $2,000 in August 2021, which was held by the first defendant until July 2024 when it was sought to be returned.[19]
[18] Sodhi Affidavit sworn 12 November 2024, Attachment SOD 1.
[19] Sodhi Affidavit sworn 15 November 2024 [12] – [13].
The Contract contained a 'subject to finance' clause (see cl 1), the full terms of which are set out in Attachment A to these reasons. It is not in dispute that the 'subject to finance' clause was applicable, and that the 'Amount of Loan' in the schedule to the Contract was blank.
On the face of the Contract, it was necessary for the plaintiffs to satisfy the 'subject to finance' clause, on or before the 'Latest Time' as stated in the Contract, which was 4.00pm on 2 October 2021, although a failure to do so would not lead to an automatic termination of the Contract. As will be explained, the effect of cl 1.3 and cl 1.5 is that the Contract would continue in those circumstances, subject to the Seller's right to terminate the Contract.
The Contract included several 'Special Conditions'. Clause 7 of the Special Conditions provided that the 'titles are due in 6 – 8 months from the contract date'. As events transpired, titles were not available for almost 30 months following execution of the Contract.
Seller's agent
There is a dispute in these proceedings as to whether Mr Sanjeev Gupta from GMAC Realty was acting as the Seller's agent for the purposes of the Contract, or whether he held a different position and role.
It is curious this issue is not capable of easy resolution.
Given the dispute, the determination of this issue must await trial, but at this stage I accept it is seriously arguable that GMAC Realty was the first defendant's representative. That is, Mr Gupta represented the seller on the transaction. I refer in this regard to:
(a)the inclusion within the Contract of the logo of the business 'GMAC Realty' at the top of the document;
(b)the fact the offer contained in the Contract is addressed to 'GMAC Realty' as 'Agent for the Seller/Buyer'. I assume one of those references would ordinarily have been struck through, but it was not; and
(c)the various emails sent by Mr Gupta, mentioned below, which reveal he occupied a role as a conduit for the seller to communicate to the plaintiffs.
In the circumstances, there is a strong inference the offer was addressed to GMAC Realty as the agent for the seller.
Extension of the Latest Time
It is not in dispute that the parties agreed to extend the 'Latest Time' for the purposes of the 'subject to finance' clause from 2 October 2021 to 30 January 2022. The parties executed a formal variation to the Contract for this purpose which stated that the extension was 'Due to delay in title'.[20] The instrument was signed by Mr Wallman on 6 December 2021 and by the plaintiffs on 29 November 2021. The instrument contains the logo of the business 'GMAC Realty' at the top of the document, indicating that GMAC Realty prepared the document.
[20] Wallman Affidavit, Attachment KSW-8.
By the same variation instrument, the parties also changed the settlement date to '21 days after the approval of finance or after the issue of title whichever is later'.[21]
[21] Wallman Affidavit, Attachment KSW-8.
It is not in dispute that the plaintiffs did not obtain finance approval by the extended 'Latest Time' under the Contract. However, they contend they obtained the finance approval as required by the Contract on 20 April 2022 and gave notice to the seller's agent the following day, the evidence as to which is addressed in the following paragraphs.
Approval of finance in April 2022
The mortgage broker for the plaintiffs, Mr Balpreet Bal, sent an email to Mr Gupta on 21 April 2022, to which he attached a finance approval from the Commonwealth Bank of Australia (the CBA).[22] In the email, Mr Bal stated that he was 'pleased to advise that the finance for the above clients [being the plaintiffs] has been approved'. The email indicated that the Bank had requested some missing details, being the full lot and plan details, not unexpectedly given the title had not then issued.
[22] Wallman Affidavit, Attachment KSW-15.
The email attached two letters from the CBA addressed to each of the plaintiffs, in similar terms. In substance, the letters state as follows:
Good News! Your home loan is approved subject to settlement conditions
We've approved your loan application subject to the following condition(s) being satisfied prior to settlement:
·Subject to satisfactory title search to confirm acceptable security/title for property at Lot 2, Novelli Parade, Piara Waters, WA, 6112 prior to settlement.
The letter includes a summary of the loan details on the second page, which detailed the plaintiff's personal information, the fact security will be over the property, the loan amount, the loan type, the interest rate, the initial monthly repayment, and the loan term.
The amount stated as the 'loan amount' was $284,450. That represents approximately 89% of the purchase price.
Conduct after 21 April 2022
The affidavit evidence includes several emails which appear to have been sent by Mr Gupta to Mr Sodhi between 13 September 2022 and 10 April 2023. As will be seen, the provenance of the contents of each email is unclear.
What can be said at this early stage is that the documents show that Mr Gupta dispatched, from time to time, updates to Mr Sodhi by email about the land acquisition. On their face, the emails appear designed to keep Mr Sodhi informed about the progress of the creation of the title to the property and the communications with local councils and with Landgate.
Emails sent in September 2022
I refer to the email from Mr Gupta to Mr Sodhi which was sent on Tuesday, 13 September 2022 at 10.08am. The email appears to contain an extract from another source, which Mr Gupta has inserted into the email so as to provide Mr Sodhi with an update. The extract is in italics below, although it is not possible to be precise as to which parts of Mr Gupta's email represent his own words and which represent the extract.
The email from Mr Gupta to Mr Sodhi relevantly reads:[23]
Hi Jaskaran
This is the update I have received from the seller this week. Thanks.
Sanjeev , it's all on course
We are waiting for clearances
If you have any question, please feel free to contact me. Thanks.
Kind regards,
Sanjeev Gupta
Your Local Agent
[23] Sodhi Affidavit sworn 15 November 2024 [4], Attachment SOD 4, pg 21.
Next, I refer to the email from Mr Gupta to Mr Sodhi which was sent on Friday, 23 September 2022 at 1.27pm. The email from Mr Gupta to Mr Sodhi relevantly reads:[24]
[24] Sodhi Affidavit sworn 15 November 2024 [4], Attachment SOD 4, pg 22.
Good afternoon Jaskaran Bhai
Hope you doing great, I am pleased and excited to inform you that I have started my own Real Estate Agency. I have been working on this for a while.
As I am aware of the fact that we are still waiting for the existing contract to settled. I am writing to inform and advise you that I will be looking after those contracts till settlement.
I will be in contact with you, seller, finance broker and settlement agent to make sure the contract gets settled when title arrived. I am in continuous touch with seller to make sure that happens as soon as possible.
I will be available on my previous email as well however I will request you to please contact me on my new details provided below in the future;
[details included]
I hope your support and assistance will be with me in new venture and I will be looking to serve you with more dedication, affordability, and satisfaction.
If you have any questions, requests please feel free to contact me. Thanks
Sanjeev Gupta
Principal/Licensee
Finnmark Property Group
Emails sent in January, February and April 2023
Next, I refer to the email from Mr Gupta to Mr Sodhi which was sent on Friday, 20 January 2023 at 9.40am. The email appears to contain an extract from another source, namely Ms Laura Gonzalez, although it is unclear what role Ms Gonzalez plays in these proceedings. Mr Gupta has inserted this extract into the email so as to provide Mr Sodhi with an update. The extract is in italics below.
The email from Mr Gupta to Mr Sodhi relevantly reads:[25]
[25] Sodhi Affidavit sworn 15 November 2024 [4], Attachment SOD 4, pg 27.
Good morning Jaskaran
Please see below update, I have spoken and written to all stakeholder about my and buyers frustrations on this matter.
Hope to see some outcome soon, as this issue is now know to all
"
Hi Sanjeev
As mentioned on the phone just now, we unfortunately are in the same boat and awaiting an update as to when titles will be available. We have not been provided a date so are unable to provide the same.
We will be able to provide an update once we get one.
If you have any queries, please let me know.
Kind regards,
Laura Gonzalez
"
Sanjeev Gupta
Principal/Licensee
Finnmark Property Group
I refer to the email from Mr Gupta to Mr Sodhi which was sent on Thursday, 2 February 2023 at 12.31pm. The email appears to contain an extract from an unnamed source, which Mr Gupta has inserted into the email so as to provide Mr Sodhi with an update. The extract is in italics below, although again it is not possible to be precise as to which parts of Mr Gupta's email represent his own words and which represent the extract.
The email from Mr Gupta to Mr Sodhi relevantly reads:[26]
[26] Sodhi Affidavit sworn 15 November 2024 [4], Attachment SOD 4, pg 29.
Hi Jaskaran
Please see below update …..
Hi Sanjeev
Further to the below email, there have been some matters with the City of Armadale that are close to being finalised.
We have been advised that these issues will be sorted and in a position to be able to lodge the applications with Landgate within the next two weeks.
If you have any queries, please let me know.
Kind regards,
Sanjeev Gupta
Principal/Licensee
Finnmark Property Group
Finally, in respect of this series of emails, I refer to the email from Mr Gupta to Mr Sodhi which was sent on Monday, 10 April 2023 at 1.42pm. The email appears to contain an extract from another unnamed source, which Mr Gupta has inserted into the email so as to provide Mr Sodhi with an update. The extract is in italics below, and again it is not possible to be precise as to which parts of Mr Gupta's email represent his own words and which represent the extract.
The email from Mr Gupta to Mr Sodhi relevantly reads:[27]
[27] Sodhi Affidavit sworn 13 November 2024 [12], Attachment SOD 7, pg 9.
Good Morning
See below update I have received on asking on daily basis. I am doing my best to resolve this issue and you can understand my frustrations as well.
Hi Sanjeev
Please refer to the highlighted sentence in my last email below.
To minimise the costs of the receivership, further follow ups will not be responded to unless titles are ready and we have an update to provide.
We understand the frustration but we are doing all we can to expedite the process however it is out of our control.
Regards
16/03/2023 Response
I expect the next update you will get from me is when the titles are ready. We do not know realistically how long Landgate will take once applications are lodged so do not want to give another expected timeline when it's a timeline that is completely out of our control.
Sanjeev Gupta
Principal/Licensee
Finnmark Property Group
The communication trail goes somewhat cold at this point. There is no evidence at this stage of communications between 10 April 2023 and 15 April 2024. The email communications described above at least demonstrate that the plaintiffs and the seller's agent, Mr Gupta, both considered the Contract remained on foot and that things were 'on course', up until 10 April 2023.
Further, Mr Sodhi has deposed that he made 'monthly contacts' with Mr Gupta as to the availability of titles, from August 2021 to May 2024, and at no time after finance approval was obtained from the CBA in April 2022 'was there any indication by the Seller Agent or [First] Defendant that the finance approval provided was not accepted'.[28]
New title for the Property
[28] Sodhi Affidavit sworn 13 November 2024 [10] and [13], [14] and [15].
It appears that new titles were obtained for the Property on or about 11 April 2024. This is evident from the certificate of title.[29] The land itself was not subdivided until 9 May 2024.[30]
Termination by the first defendant in April 2024
[29] Wallman Affidavit, Attachments KSW-11 and KWS-12.
[30] Wallman Affidavit [18].
A termination notice was issued by the first defendant on 15 April 2024.[31] On its face, it was given pursuant to cl 1.3 of the Contract although cl 1.5 would seem the more apt provision. The termination notice was, according to the first defendant, sent to the address provided for in the Contract. Under the service provisions of the Contract, the notice was deemed to have been served on 19 April 2024. The plaintiffs say that the notice did not come to their attention for some time, as they had changed address.
[31] Sodhi Affidavit sworn 12 November 2024, Attachment SOD 3.
The immediate catalyst for the termination notice being prepared and sent is presently unclear. The notice relies upon a failure to comply with the finance approval requirement, but that failure would have been evident (at least on the first defendant's case) some two years previously.
The termination notice issued by the first defendant states as follows (the notice contains some infelicities in drafting):
The Buyers and the Seller executed a Contract of Sale of Land by Offer and Acceptance on 12 August 2021 for the property described as Proposed Lot 2 Novelli Parade, Piara Waters, WA 6109.
The Contract of Sale of Land by Offer and Acceptance included a Finance Clause condition, agreed by the parties, being the Buyers must apply for and provide to the Seller, a letter of Offer of Finance, confirming an Approval or a Decline of Finance from a financial institution on or before 4.00pm on 2 October 2021.
The Seller has received no notification of an Approval or Decline of Offer of Finance in accordance with the Finance Clause Condition or in accordance with Clause 1.6 of the Contract of Sale of Land by Offer and Acceptance, keep the Seller Informed.
The Buyers requested from the Seller for an Extension of Time to 30 January 2022 to comply with the Finance Clause Contract of Sale of Land by Offer and Acceptance.
In accordance with Clause 1.3 of the Contract of Sale of Land by Offer and Acceptance, the Seller hereby gives Notice of Termination to the Buyers of Contract of Sale of Land for Proposed Lot 2, Novelli Parade, Piara Waters, WA 6109, dated 12 August 2021 for failing to satisfy the agreed Finance Clause condition and is now at an end.
In accordance with 1.7(c) of the Contract of Sale, the Seller Agent is instructed to and must arrange for any deposit paid and held in trust, be refunded to the Buyer.
An exchange of emails between the plaintiffs' settlement agent and the first defendant took place in early June 2024, in which the settlement agent advised that settlement was due on 19 June 2024. The email response from the first defendant pointed out that the Contract had already been terminated on 15 April 2024. To round out the communications, the settlement agent sent through to the first defendant copies of the earlier finance approvals from April 2022.[32]
Finance approval in May 2024
[32] Wallman Affidavit, Attachments KSW-14 and KSW-15 (emails on 5 June 2024 and 6 June 2024).
Evidence has been adduced that further finance approval was obtained by the plaintiffs from the CBA in May 2024, in the amount of $320,000, with several conditions attached.[33] I refer to the letter from the CBA to the plaintiffs dated 29 May 2024. This approval was for the full amount of the purchase price. This approval letter appears to have been sent by the first defendant to the settlement agent on 6 June 2024, as explained in Mr Wallman's affidavit.[34]
[33] Wallman Affidavit, Attachment KSW-14, pg 196 - 197.
[34] Wallman Affidavit [25], Attachment KSW-14, pg 195.
It is not clear how or when this updated finance approval was first provided to the first defendant but it was necessarily sometime between 29 May 2024 and 6 June 2024.
Further contract for sale of the Property
The first defendant has filed evidence to demonstrate that the Property is the subject of a fresh contract for sale. The new contract was signed on 5 June 2024, for the sum of $500,000.[35] That new contract is also subject to finance. Mr Wallman has deposed that the purchaser under this contract wants to complete on that purchase.[36]
Caveat lodged by the plaintiffs
[35] Wallman Affidavit, Attachment KSW-13.
[36] Wallman Affidavit [22].
The plaintiffs lodged the Caveat on 13 June 2024. The Caveat is an absolute caveat, claiming an interest in 'fee simple as purchasers'.[37]
[37] Sodhi Affidavit sworn 7 October 2024, Attachment K.
The plaintiffs lodged the Caveat on the title to the Property, on the basis they contend their Contract for the purchase of the Property is valid notwithstanding the conduct of the first defendant in purporting to terminate the Contract.[38]
[38] Sodhi Affidavit sworn 12 September 2024 [2] and [6].
On or about 29 October 2024, the first defendant, as the proprietor of the Property, served a notice on the Registrar of Titles pursuant to s 138B of TLA which in effect required that the plaintiffs, as caveators, take action to obtain an order from this Court to extend the operation of the Caveat, failing which the Caveat would lapse.[39] The Caveat was initially due to lapse at midnight on 18 November 2024, in the absence of any such order.
[39] Wallman Affidavit, Attachment KSW-16.
G. Relevant legislation and principles
Section 138B of the TLA states:
138B.Requiring caveator to seek court order extending s. 138A caveat
(1) If a section 138A caveat has been lodged then the proprietor of the land in respect of which the caveat was lodged, or the judgment creditor named in a property (seizure and sale) order registered under section 133 in respect of the judgment debtor's saleable interest in such land, may apply, in an approved form and on payment of the prescribed fee, for the Registrar to serve the caveator with a notice to the effect that, unless the caveator takes the action referred to in subsection (2) within 21 days after the day on which the notice is served, the caveat will lapse.
(2) If the notice referred to in subsection (1) is served on the caveator then the caveat lapses 21 days after the day on which the notice was served unless, before that time, the caveator has —
(a) obtained from the Supreme Court an order extending the operation of the caveat —
(i) for such further period as is specified in the order; or
(ii) until the further order of the court;
and
(b) lodged with the Registrar a copy of the order.
Section 138C(2) of the TLA empowers the court to extend the operation of a caveat. The terms of s 138C TLA are as follows:
(1)A caveator who is served with a notice under section 138B(1) may apply to the Supreme Court, in accordance with rules of the court, for an order extending the operation of the caveat.
(2)On the hearing of an application under subsection (1), the Supreme Court -
(a)if satisfied that the caveator's claim has or may have substance -
(i)may make an order extending the operation of the caveat for such period as is specified in the order; or
(ii)may make an order extending the operation of the caveat until the further order of the court; or
(iii)may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;
and
(b)if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and
(c)may make such ancillary orders in relation to the application as it thinks fit.
(3)An interim order under this section may be made ex parte unless the court orders otherwise.
(4)The applicant shall ensure that the Registrar is served with a copy of each order made by the court on an application under subsection (1).
The principles this Court will apply in determining an application such as the present are well settled and were summarised by Beech J (as his Honour then was) in Bashford v Bashford.[40] As his Honour explained, the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists: Bashford at [47]. Further, it is not appropriate to attempt to resolve conflicts of evidence on affidavit: Bashford at [48].
[40] Bashford v Bashford [2008] WASC 138.
The caveat will not be removed unless the claim to an estate or interest in the land appears to be without foundation: Bashford at [49].
The balance of convenience is a factor to be considered in an application to extend the operation of a caveat. However, interlocutory removal of a caveat will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat: Bashford at [50].
I refer also, and respectfully adopt, the observations expressed by Edelman J in Bride v The Registrar of Titles[41] regarding caveat extension applications. It is unnecessary in the present case to repeat them.
[41] Bride v The Registrar of Titles [2015] WASC 11 [12] ‑ [16].
H. Disposition
Serious question to be tried – compliance with the subject to finance clause
The first issue to address is whether the plaintiffs' claim has or may have substance. As explained above, this involves an analysis as to whether the caveator can show that there is a serious question to be tried, or whether the caveator can prove a prima facie case. The plaintiffs bear the onus in this regard.
The first question raised by the plaintiffs concerns satisfaction of the 'subject to finance' clause in the Contract. The 'subject to finance' requirements in contracts for the sale of land such as this operate as a condition subsequent, in the sense explained by Hasluck J in Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor,[42] by reference to the long standing observations of the High Court in Suttor v Gundowda Pty Ltd.[43]
[42] Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor [2005] WASC 245 [45] - [49] (Hasluck J) (Mario Casella & Sons).See also Dodds v Kennedy (No 2) [2011] WASCA 131; (2011) 42 WAR 16 [47] - [48] (Murphy JA).
[43] Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418.
It can be said that, by reference to cl 1.5 of the Contract, if by the 'Latest Time' the buyer has not given an 'Approval Notice' or a 'Non Approval Notice' to the seller, the seller may terminate the contract. The contract is not void in those circumstances, but voidable. The seller, as the party not in default in that scenario, may elect to bring the voidable contract to an end.[44]
[44] Mario Casella & Sons [50] (Hasluck J).
The plaintiffs' contend that the 'subject to finance' requirements of the Contract were satisfied in April 2022. The plaintiffs rely upon the finance approval letter from the CBA sent to Mr Gupta on 21 April 2022. In essence, the plaintiffs contend that, prior to any attempt by the first defendant to terminate the Contract (which occurred on 15 April 2024), the plaintiffs had complied with cl 1.4 of the Contract. The plaintiffs submit they had obtained 'Finance Approval' (as required by cl 1.4(a)) and had given an 'Approval Notice' to the seller's agent (being Mr Gupta of GMAC Realty), being the communication sent on 21 April 2022.
As to the definition of the term 'Finance Approval', the plaintiffs submit the approval letter from the Commonwealth Bank dated 20 April 2022 represented a 'written approval by the Lender of the Finance Application' (see par (a) of the definition) and was for the 'Amount of the Loan' (see par (b)). Further, there were no terms and conditions imposed by the Lender other than the usual terms and conditions (par (c)). As to this last point, I did not understand the first defendant to take issue with whether there was compliance with par (a) or par (c) of the definition of 'Finance Approval'.
The plaintiffs submit that there is a serious question to be tried as to whether cl 1.4 of the Contract was satisfied. If the plaintiffs are ultimately correct on this point, the Contract was in 'full force and effect' from 21 April 2022 and the first defendant's purported termination by notice dated 15 April 2024 would be wrongful.
The essence of the first defendant's resistance on this issue is that the finance approval was not for the full amount of the purchase price, and thus par (b) of the definition of 'Finance Approval' was not satisfied. Plainly, the approval obtained at that point in time was for only $284,450, when the purchase price was $320,000. Properly construed, the first defendant submits the approval was required to be for the full amount. The first defendant places emphasis on the definitions of 'Amount of Loan' and 'Finance Approval' in the Contract, and the terms of cl 1.4 and cl 1.5 of the Contract.
At least initially, the first defendant also sought to rely on a failure by the plaintiffs to comply with cl 1.6 of the Contract, but that was not pressed at the hearing. Clause 1.6, in general terms, requires the buyer to keep the seller informed of the progress of the finance application.
Whether the definition of 'Amount of Loan' required, in the present circumstances, the full amount of the purchase price to be the subject of the approval involves a question of construction. The first defendant submits that, where the Schedule is blank, this is the effect of the second sentence in the definition. The definition is extracted below:
Amount of Loan means either the amount referred to in the Schedule or any lesser amount of finance referred to in the Finance Application. If the amount referred to in the Schedule is blank, then the amount will be an amount equivalent to the Purchase Price.
There is much to be said in favour of the first defendant's construction.
A natural reading of the definition is that the first sentence is engaged where the amount of the loan has been included in the contract. This is clear from the first part of the first sentence, and implicit in the second part, in that there can be no 'lesser amount of finance' referred to in the finance application where no amount has been stated in the contract itself.
Further, the second sentence of the definition is engaged, to the exclusion of the first sentence, where the parties have failed to include a figure in the Schedule. The second sentence represents the applicable part of the definition where the amount is blank. The second sentence, in effect, dictates that a failure by the parties to state any amount in the schedule to the contract means the finance required is for the full amount of the purchase price. The parties can avoid this consequence by including the amount of the finance in the contract. In the present situation, they failed to do so.
The plaintiffs submit there is some tension between the first defendant's construction and the operation of the first sentence. That tension is more apparent than real. I accept there is no language within the definition which expressly excludes the operation of the second part of the first sentence where the amount is blank, but as I presently read it, this part of the definition can only apply if an amount has been identified in the contract itself. Absent a stated amount, the second part of the first sentence cannot be engaged for the simple reason that one cannot then identify the 'lesser amount of finance referred to in the Finance Application'. For there to be a 'lesser amount', there must be a figure stated in the contract.
For my part, I would therefore prefer a construction of the definition, and the associated operative provisions of the Contract, which holds that the first sentence of the definition of 'Amount of Loan' is engaged where the parties have stated an amount. At this stage, while I cannot wholly exclude the construction advanced by the plaintiffs, my assessment at this stage, as explained above, is that the plaintiff's contention is very weak and I would not assess it as rising to the level of a prima facie case. That is, there is no serious question to be tried in this regard.
Serious question to be tried – whether the termination right was validly exercised by the first defendant
Given the foregoing, it is necessary to analyse the alternative line of argument developed by the plaintiffs. The plaintiffs assert there is a serious question to be tried as to whether the first defendant was able to validly exercise the termination right, given the delay in doing so and the several instances of written communications sent to the plaintiffs by Mr Gupta over this period.
The Court has not been favoured with a draft pleading which outlines the claims in this regard, which would have assisted a consideration of the issues. Rather, the plaintiffs' counsel advanced rather general submissions in support of these contentions, which were not well developed and lacked clarity, with respect. The plaintiffs' position seems to rest upon broad notions of waiver, promissory estoppel (rather than conventional estoppel), and an assertion there had been misleading or deceptive conduct contrary to the Australian Consumer Law.
The last of these arguments can be put to one side, in my view, for the reason that an acceptance of the contention there was misleading conduct would not entitle the plaintiffs to the remedy of specific performance. The plaintiffs did not point to any statutory remedy to this effect. It might be said that injunctive relief under the Australian Consumer Law would lie, to prevent the first defendant relying upon the termination notice, but that is not how the plaintiffs articulated their position.
There was also a belated attempt by the plaintiffs to introduce a 'relief against forfeiture' argument, which I have put to one side, as earlier noted. It was not raised until after the hearing and the first defendant had no opportunity to meet that case.
What then, is the state of the available evidence before the Court? The evidence reveals a rather unusual set of circumstances. In summary:
(a)It is not in dispute that the plaintiffs obtained finance approval from the CBA for an amount of 89% of the purchase price, as long ago as April 2022.
(b)The first defendant's agent did not raise any criticism as to whether this approval was sufficient for the purposes of the Contract. One might reasonably think that the first defendant's agent would expressly identify a concern in this regard, if one existed. Indeed, prior to approval being provided, the emails from Mr Gupta to the plaintiffs and their broker reveal a growing concern as to when finance approval would be forthcoming and a concern as to the delays in this regard.[45] In one email from Mr Gupta, sent on 8 April 2022, there is an exhortation to Mr Sodhi to work on obtaining the finance approval because 'the seller might not give any extension'.[46]
[45] Sodhi Affidavit sworn 15 November 2024, Attachment SOD 4, pages 10, 13, 15 and 16.
[46] Sodhi Affidavit sworn 15 November 2024, Attachment SOD 4, page 15.
(c)So, no criticisms were raised by the first defendant or Mr Gupta to the finance approval which was obtained and, instead, some 12 months' of communications followed which, on their face, were all predicated on the Contract being on foot, with the parties moving towards settlement. After that, Mr Sodhi has deposed he remain in monthly contact with Mr Gupta, with no indication from Mr Gupta or the first defendant that the finance approval obtained from the CBA in April 2022 was insufficient.
(d)Among other communications, Mr Gupta:
(a)relayed to the plaintiffs a statement that it was 'all on course';
(b)informed the plaintiffs he was waiting for the titles to arrive so that settlement could be arranged;
(c)expressed to the plaintiffs his frustrations with the delays with settlement;
(d)informed the plaintiffs that he had been asking for updates on a daily basis; and
(e)relayed to the plaintiffs an indication, as at April 2023, that the titles were not yet ready.
(e)Throughout this period, the first defendant retained the deposit. The deposit was only sought to be returned in April 2024.[47]
(f)I should note the plaintiffs approached Mr Gupta to obtain an affidavit from him for the purposes of the proceeding. Mr Gupta declined to do so.[48] One might have expected the first defendant to put on affidavit evidence from Mr Gupta given he is in their camp, at least on my present view. However, as this is an urgent interlocutory application, I would not in any event be prepared to draw any inferences from the failure by the first defendant to file an affidavit from Mr Gupta.
[47] Sodhi Affidavit sworn 15 November 2024 [12] - [14].
[48] Sodhi Affidavit sworn 15 November 2024 [15].
The evidence before the Court concerning the period after April 2022 does not reveal, and the plaintiffs could not specifically identify, an express representation or assertion on the part of the first defendant that it would not exercise the termination right in the Contract. As noted above, the communications are focused on updating the plaintiffs about the progress of the development and the securing of titles. The promissory estoppel claim thus suffers from the lack of any representations emanating from the seller's side as to the exercise (or non-exercise) of the termination right.[49]
[49] See the discussion as to the necessity for clarity in relation to alleged representations in Cobbold v Barrett [51] (Jenkins J).
Rather, the plaintiffs' claim rests on the overall effect of the conduct of the first defendant together with the extensive delay (which is around two years) which followed the giving of the finance approval to the first defendant's agent on 21 April 2022. Given what I have said above as to the difficulties with the other asserted bases of the plaintiffs' claim for relief, I will focus my analysis at this point on the strength of the waiver argument.
As I observed to the plaintiffs' counsel during the hearing, the concept of waiver can give rise to uncertainty, and some precision is required to identify the manner in which the concept is being asserted: Agricultural and Rural Finance Pty Ltd v Gardiner.[50] The boundaries of the concepts need not be explored in the present reasons, given the interlocutory nature of the issue before the Court. The following exposition of the concept of waiver and the related concept of election is sufficient for present purposes:[51]
[324]One such meaning is “an intentional act, done with knowledge, whereby a person abandons a right by acting in a manner inconsistent with that right”: Gardiner at [56]. It has been said that “[p]erhaps the most common usage of waiver is to describe an unequivocal decision by a party, communicated to the other party, not to insist upon a right or not to exercise a power”: Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38 (Delor Vue) at [28] per Kiefel CJ, Edelman, Steward and Gleeson JJ.
[325]While it has been said that there is no meaningful difference between the concepts of “waiver” and “election” (Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256 at [152] per Payne JA (Stern JA agreeing)), in Delor Vue Gageler J at [155]-[156] preferred the following schema, mapped out by Brennan J in Commonwealth v Verwayen (1990) 170 CLR 394 at 421-424; [1990] HCA 39 (omitting footnotes):
The schema involves treating election as a doctrine which applies where the law confers on a person a choice between inconsistent rights or sets of rights and which “ensures that there is no inconsistency in the enforcement of [the] person's rights”. The schema further involves treating waiver as a distinct doctrine which “recognizes the unilateral divestiture of certain rights”. The schema necessarily admits of overlap between waiver and election in the case of an affirmation of a contract.
[50] Agricultural and Rural Finance Pty Ltd v Gardiner(2008) 238 CLR 570; [2008] HCA 57 [54] (Gummow, Hayne and Kiefel JJ). See also Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 [96] (Newnes JA) and National Australia Bank v McCourt [2010] WASC 237 [92] (Corboy J).
[51] Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292 (Meek J) citing Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38 [28] - [29] (Kiefel CJ, Edelman, Steward and Gleeson JJ).
I will therefore approach the question on the basis that the plaintiffs may be able to successfully establish a waiver of the right to terminate the Contract, in the sense of demonstrating a unilateral and unequivocal decision, communicated to the counterparty, not to insist on that right. Waiver in this sense may overlap with the concept of election, as well as the concept of affirmation of the contract.
Before addressing the available evidence in this regard, a particular term of the Contract should be noted. The terms of cl 1.5 of the Contract allow the seller to terminate 'at any time' until a compliant 'Approval Notice' or a 'Non-Approval Notice' is given. The use of the phrase 'at any time', at least separated from its context, might suggest a perpetual ability to terminate into the future. That cannot be right. A termination right such as the present will typically be subject to a requirement that it be exercised within a reasonable time.[52] What constitutes a reasonable time is a question of fact which will depend on the context in which the right arises and the circumstances of each particular case.
[52] Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; (2019) 101 NSWLR 679 [99] – [109].
An example of a waiver case involving a REIWA contract is the decision of this Court mentioned above, Mario Casella & Sons. At [56], Hasluck J observed that the seller in that case had failed to terminate the contract after the expiry of 2 to 3 months following the expiry of the 'Latest Time', thereby electing to keep it on foot, and arguably waived the buyer's failure to obtain finance approval before the 'Latest Time'. Importantly, the terms of the REIWA contract in that case required the buyer to 'immediately terminate the Contract'. The adverb 'immediately' does not appear in the present Contract: see cl 1.5. That is a point of distinction which should be borne in mind.[53]
[53] See also Developments (WA) Pty Ltd v Whittle-Herbert [2008] WASC 261 [44] (McKechnie J).
Ultimately, the exercise of the termination right, and its timing, needs to be judged in the context of the factual matters which are relied upon. At all times after 30 January 2022, on the first defendant's case, the Contract was voidable. At no time until the termination notice dated 15 April 2024 was issued did the first defendant raise any objection or criticism (in writing or at all) of the terms of the CBA finance approval which had been communicated to Mr Gupta on 21 April 2022. The communications from Mr Gupta which followed the receipt of that finance approval are all predicated on the Contract being on foot, with the parties moving to settlement once titles were available. And yet, by the terms of the termination notice, the first defendant communicated a position for the first time that the finance approval obtained some two years prior to that was inadequate, on the basis that it was only for 89% of the loan, not the full amount.
In my view, it is seriously arguable that a delay of two years (in a contract in which time was of the essence) in exercising the right was excessive and sufficient to constitute a waiver by the first defendant of any right to terminate the Contract under cl 1.5 on that basis, particularly when seen in the context of the series of written communications from Mr Gupta. Whether this is seen at present as an election between inconsistent rights, an affirmation of a voidable contract, or a waiver of the right of termination, need not be concluded. There is an overlap between the concepts, as I have noted. For my part, I prefer to rest my conclusion at this stage on the 'waiver' analysis.
Thus, it is seriously arguable that the termination right in cl 1.5 of the Contract was waived by the first defendant through the combined effect of the delay and terms and effect of the communications from Mr Gupta, together with the absence of any objection from the first defendant to the adequacy of the finance approval obtained by the plaintiffs in April 2022.[54]
[54] See the evidence of Mr Sodhi in his affidavit sworn 13 November 2024 [10] and [13], [14] and [15].
The foregoing interlocutory conclusions are not displaced by the evidence which shows the plaintiffs obtained further finance approval in May 2024. I do not accept this amounts to an implicit concession that the earlier approval was inadequate. It is at least open to conclude, after a delay of some two years, that a buyer might wish to obtain a 'fresh' finance approval from his or her lender, without prejudice to the status of a much earlier finance approval.
This analysis is sufficient for the Court to be satisfied that the plaintiffs have a serious question to be tried at the ultimate trial of the matter, an acceptance of which might entitle the plaintiffs (subject to any discretionary considerations) to specific performance of the Contract.
Balance of convenience
I turn to consider the balance of convenience.
I accept that the interlocutory removal of a caveat will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. As earlier explained, this is because the purpose of a caveat is the protection of a proprietary interest and the removal of the caveat would have the effect of destroying the benefit of the proprietary interest claimed in the caveat.
There is a strong case here for the caveat to remain in place pending the determination of the plaintiffs' substantive claims, thereby allowing the plaintiffs an ability to pursue the relief of specific performance. I have noted above that I consider the plaintiffs' claim is seriously arguable, at least in respect of the alternative line of argument which has been developed, focused on waiver or analogous concepts. There are additional matters present which point in favour of retaining the Caveat pending trial.
First, the removal of the caveat would consign the plaintiffs to a damages claim, based perhaps on the difference in value of the Property when acquired and a similar property in the current market. Although the first defendant says there is nothing inherently unique about this Property in Piara Waters, I think that rather misses the point. The critical question is whether the plaintiffs ought be precluded from pursuing the remedy of specific performance in respect of a parcel of land which they have identified as suitable for them, at a price they considered appropriate. That is the primary remedy they wish to pursue. The maintenance of the caveat would prima facie preserve the availability of that remedy.
Second, I recognise the first defendant is a company in liquidation with a receiver and manager appointed. To leave the plaintiffs to their monetary remedies exposes them to the solvency risks associated with a company presently under external administration.
Third, there is no evidence before the Court that the first defendant would be unable to find a seller for the Property in the event the Caveat remained in place, but the plaintiffs were ultimately unsuccessful at trial (assuming the new contract entered into on 5 June 2024 was terminated in the meantime).
Fourth, it appears at this stage that, if the extension of the Caveat leads to the termination of the new contract entered into on 5 June 2024, that circumstance would not expose the first defendant to legal liability. I refer to the contractual protection afforded to the first defendant by cl 16, cl 17 and cl 18 of the 'Special Conditions' to that contract.[55]
[55] Wallman Affidavit, Attachment KSW-13, pg 159.
Fifth, the first defendant criticised the failure by the plaintiffs to file the substantive proceedings it had foreshadowed or to, at least initially, proffer an undertaking to file those proceedings. This is a relevant factor to the assessment of the balance of convenience.[56] Ultimately, I understand counsel for the plaintiffs to say that proceedings would be instituted by the plaintiffs and that represented his instructions, but no formal undertaking in this regard was given.[57] To avoid any doubt in this regard, I will impose a condition that the proceedings must be brought within 7 days.
Undertaking as to damages
[56] Cobbold v Barrett [62] (Jenkins J).
[57] ts 155.
An undertaking as to damages dated 19 November 2024 was proffered by the first named plaintiff, Mr Sodhi. There was some challenge to the adequacy of that undertaking by counsel for the first defendant, given the lack of evidence as to the net asset position of Mr Sodhi. As the undertaking is in the correct form and given by an individual rather than a corporate entity, I would not be prepared to conclude at this stage that the undertaking is inadequate.
The absence of evidence as to Mr Sodhi's net asset position may be a factor relevant to the balance of convenience, but in the circumstances it strikes me that its effect is rather minimal, given the other factors relevant to the balance of convenience. Overall, the balance of convenience favours the retention of the Caveat.
Orders
For these reasons, I consider the Caveat should remain on foot and the plaintiffs ought be permitted to proceed with their proposed action to establish the interest they claim.
I will order that the Caveat be extended until further order, to facilitate the hearing and determination of the plaintiffs' claims. The plaintiffs must prosecute those claims with reasonable expedition, of course, and I will impose a condition that the plaintiffs must file their proposed proceedings within 7 days of this order being made.
I propose to order as follows, subject to hearing from counsel:
1.Pursuant to s 138C(2)(a) of the Transfer of Land Act 1893 (WA), it is ordered that Caveat number Q026027, being an encumbrance against the whole of the land described as Lot 2 on Deposited Plan 424428, registered on Certificate of Title Volume 4051 Folio 406 (Caveat), be extended until further order of this Court.
2.By no later than 4.00pm on Monday, 2 December 2024, the plaintiffs are to file and serve proceedings with respect to the estate or interest specified in the Caveat, relating to the contract for the sale of land by offer and acceptance dated 13 August 2021 made between the plaintiffs and the first defendant.
I will hear from the parties as to the costs orders which should be made in relation to the caveat extension proceedings.
ATTACHMENT A
SUBJECT TO FINANCE CLAUSE IN THE CONTRACT[58]
[58] Based on REIWA Form 810, as it was on 2 August 2021.
SUBJECT TO FINANCE
If the Buyer signs the "Finance Clause is not Applicable" box in the Schedule or if no information is completed in the "Finance Clause is Applicable" box in the Schedule, then this clause 1 does not apply to the Contract.
If any information is completed in or the Buyer signs the 'Finance Clause is Applicable' box in the Schedule then this Clause 1 applies to the Contract.
1.1Buyer's Obligation to Apply for Finance and Give Notice to the Seller
(a)The Buyer must:
(1)immediately after the Contract Date make a Finance Application to the Lender using, if required by the Lender, the Property as security; and
(2)use all best endeavours in good faith to obtain Finance Approval.
(b)If the Buyer does not comply with clause 1.1(a) or 1.1(c)(1) then the Contract will not come to an end under clause 1.2 and the Buyer may not terminate the Contract under clause 1.3. The rights of the Seller under this Clause 1.1 will not be affected if the Buyer does not comply with Clause 1.1.
(c)The Buyer must immediately give to the Seller or Seller Agent:
(1)an Approval Notice if the Buyer obtains Finance Approval; or
(2)a Non Approval Notice if the Finance Application is rejected;
at any time while the Contract is in force and effect.
1.2No Finance Approval by the Latest Time: Non Approval Notice Given
This Contract will come to an end without further action by either Party if on or before the Latest Time:
(a)written Finance Approval has not been obtained or the Finance Application has been rejected; and
(b)the Buyer gives a Non Approval Notice to the Seller or Seller Agent.
1.3No Finance Approval by the Latest Time: No Notice Given
If by the Latest Time:
(a)the Buyer has not given an Approval Notice to the Seller or Seller Agent; and
(b)the Buyer has not given a Non Approval Notice to the Seller or Seller Agent;
then this Contract will be in full force and effect unless and until either the Seller gives written Notice of termination to the Buyer or the Buyer terminates this Contract by giving a Non-Approval Notice to the Seller or Seller Agent.
1.4Finance Approval: Approval Notice Given
If by the Latest Time, or if clause 1.5 applies, before the Contract is terminated:
(a)Finance Approval has been obtained; and
(b)the Buyer has given an Approval Notice to the Seller or Seller Agent;
then this Clause 1 is satisfied and this Contract is in full force and effect.
1.5Notice Not Given by the Latest Time: Seller's Right to Terminate
If by the Latest Time the Buyer has not given an Approval Notice or a Non Approval Notice to the Seller or Seller Agent then at any time until an Approval Notice or a Non Approval Notice is given, the Seller may terminate this Contract by written Notice to the Buyer.
1.6Buyer Must Keep Seller Informed: Evidence
(a)If requested in writing by the Seller Agent the Buyer must:
(1)advise the Seller or Seller Agent of the progress of the Finance Application; and
(2)provide evidence in writing of the making of a Finance Application, in accordance with clause 1.1(a) and of any loan offer made, or any rejection; and
(3)if applicable, advise the Seller or Seller Agent of the reasons for the Buyer not accepting any loan offer.
(b)If the Buyer does not comply with the request within 2 Business Days then the Buyer authorises the Seller or Seller Agent to obtain from the Lender the information referred to in 1.6(a).
1.7Right to Terminate
If a Party has the right to terminate under this Clause 1, then:
(a)termination must be effected by written Notice to the other Party;
(b)Clauses 23 and 24 of the 2018 General Conditions do not apply to the right to terminate;
(c)upon termination the Deposit and any other monies paid by the Buyer must be repaid to the Buyer;
(d)upon termination neither Party will have any action or claim against the other for breach of this Contract, except for a breach of clause 1.1 by the Buyer.
1.8Waiver
The Buyer may waive this Clause 1 by giving written Notice to the Seller or Seller Agent at any time before the Latest Time, or if Clause 1.5 applies, before the Contract is terminated. If waived this clause is deemed satisfied.
1.9Definitions
In this Clause:
Amount of Loan means either the amount referred to in the Schedule or any lesser amount of finance referred to in the Finance Application. If the amount referred to in the Schedule is blank, then the amount will be an amount equivalent to the Purchase Price.
Approval Notice means a Notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been obtained.
Finance Application means an application made by or on behalf of the Buyer to the Lender to lend any monies payable under the Contract.
Finance Approval means:
(a)a written approval by the Lender of the Finance Application or a written offer to lend or a written notification of an intention to offer to lend made by the Lender; and
(b)for the Amount of Loan; and
(c)which is unconditional or subject to terms and conditions:
(1)which are the Lender's usual terms and conditions for finance of a nature similar to that applied for by the Buyer; or
(2)which the buyer has accepted by written communication to the Lender, but a condition which is in the sole control of the Buyer to satisfy will be treated as having been accepted for the purposes of this definition; or
(3)which, if the condition is other than as referred to in paragraphs (1) and (2) above includes:
(i)an acceptable valuation of any property;
(ii)attaining a particular loan to value ratio;
(iii)the sale of another property; or
(iv)the obtaining of mortgage insurance;
and has in fact been satisfied.
Latest Time means:
(a)the time and date referred to in the Schedule; or
(b)if no date is nominated in the Schedule, then 4pm on the day falling Business Days after the Contract Date.
Lender means:
(a)the lender nominated in the Schedule; or
(b)if no lender is nominated in the Schedule, any bank, building society, credit union or other institution which makes loans and in each case carries on business in Australia.
Non Approval Notice means a Notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that the Finance Application has been rejected or has not been obtained.
Acceptance of this offer will be sufficiently communicated to the Buyer if verbal or written notification is given by the Seller or Seller's Agent to the Buyer that the acceptance has been signed by the Seller
The 2018 General Conditions are incorporated into this Contract so far as they are not varied by or inconsistent with the Conditions or Special Conditions of this Contract.
If GST is applicable to this transaction then the relevant GST provisions should be outlined in the Special Conditions or in an attached GST Annexure, which forms part of this Contract.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TL
Associate to the Honourable Justice Lundberg
25 NOVEMBER 2024
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