Springvale Property Holdings Pty Ltd v Sandhurst Trustees Limited
[2000] VSC 571
•28 January 2000
| SUPREME COURT OF VICTORIA | Not Restricted | |
| COMMON LAW DIVISION | ||
No. 8065 of 1999
| SPRINGVALE PROPERTY HOLDINGS PTY LTD (KFL SUPERMARKET PTY LTD) | Plaintiff |
| v | |
| SANDHURST TRUSTEES LIMITED & KADOO PTY LTD | Defendant |
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JUDGE: | Nathan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 January 2000 |
DATE OF JUDGMENT: | 28 January 2000 |
CASE MAY BE CITED AS: | Springvale Property Holdings Pty Ltd v Sandhurst Trustees Ltd and Anor |
MEDIUM NEUTRAL CITATION: | [2000]VSC 571 |
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr P. Riordan | |
| For the Defendant | Mr M. Bevan-John with Mr M. Robins |
HIS HONOUR:
This matter is the return of an originating motion, in which the plaintiff, Springvale Property Holdings, seeks an order consenting to the registration of a plan of subdivision on behalf of the defendants, Sandhurst Trustees ("Sandhurst") and Kadoo Pty Ltd ("Kadoo"), pursuant to s.22(1F) of the Subdivision Act 1988.
Identification of the parties will make the narrative comprehensible. The plaintiff, Springvale Property Holdings, is the registered proprietor of land in Buckingham Avenue, Springvale, which is the site of a shopping centre complex. In 1996, it entered into an agreement for a lease. Later, it entered into an agreement for a lease of a portion of the shopping centre complex with Lay Bros, a company which was succeeded in title by the second named plaintiff KFL Supermarket ("KFL").
Both Sandhurst and Kadoo, the defendants, are mortgagees of the entire shopping centre complex. There is a certified plan of subdivision which, in effect, excises the business premises of KFL Supermarket from the whole title. In order to effect registration of this excision, either the consent of the defendants or a court order is required.
Part 4 of the Subdivision Act 1988 deals with the registration of certified plans and it is under this section that the originating motion has been brought. Section 22(1A) details the persons whom must consent before a certified subdivision is registered. Sub-section (1A)(a) requires the consent of a registered mortgagee, which both defendants in this case are.
Where consent is either refused or not notified, an application may be made to this court. If the court is satisfied that the refusal is unreasonable, the court may make an order, displacing the consent of the non-consenting parties and substituting the decision of the court s. 22(1F). It is under this section that the matter has proceeded. It should be immediately noted that Sandhurst, the first defendant, has actively refused consent whereas Kadoo, the second name defendant, is agnostic in the matter.
The application is affected by the provisions of the Transfer of Land Act 1958, in particular s.42. Section 42(1) raises the matters of indefeasibility of title. Section 42(2) provides exceptions to that indefeasibility. Sub-section 2(e) makes reference to the interest of a tenant in possession but excludes any option to purchase. I make reference to this section immediately because it is contended by Sandhurst that the foundation upon which KFL seeks the court's discretion in its favour is lacking, in so far as it holds an option to purchase the supermarket premises.
Thus, the substance of the reason for invocating the court's discretion is revealed. It is a matter of whether, in the circumstances, the defendants have been unreasonable in failing to signify positive consent to the registration of the certified plan. For reasons I shall go on to deliver, I am satisfied in these circumstances that consent has been unreasonably withheld and I will be granting the relief sought in the originating motion.
The plaintiffs say that their lease over the premises is in fact of dual character – a lease pro tem with a purchase to follow. I am satisfied that this characterisation of their commercial arrangements is correct. I refer to clause 16.1.6 of the lease. It recites:
"If the contract of sale, (that is for the supermarket premises), has not been forwarded to the tenant or the plan of subdivision has not been registered or the title of the premises has not issued from the Lands Titles office by the last sale date, the landlord grants a power of attorney to the tenant for a period of one year from the last sale date to do everything necessary to be done to obtain registration of the plan of subdivision. Notwithstanding anything to the contrary, the power of attorney granted to the tenant cannot be exercised by the tenant if the tenant has not remedied any default under this lease of which the tenant has received written notice from the landlord. If the tenant is entitled to exercise the power of attorney, the landlord will confirm and ratify the actions of the tenant, provided such actions are exercised strictly in accordance with the power of attorney."
The reference to the last sale date is significant because there is a limited period in which the power of attorney may be invoked. That period expires on 2 February this year and, accordingly, the plaintiffs must proceed within that time frame, otherwise the foundation of their power to enforce the sale contract will itself efflux.
Some further facts are necessary and I will, perforce, truncate them. The agreement between the parties, which I have characterised as a lease pro tem with a sale to follow, contained, as I have noted, a special condition, as noted above in clause 16.1.6. However, the special condition is broader in its ambit than would appear from a reading of this clause alone. The obligation was upon Springvale Property Holdings to arrange for the plan of subdivision to be registered, thereby creating the separate title for the supermarket. The parties would then execute a contract for the sale of the supermarket in the form attached to the agreement for the sum of $2.5 million. If the plan of subdivision had not been registered then, power of attorney was effectively given by Springvale Property Holdings to KFL, the successor of Lay Bros, to do everything necessary to obtain registration of the plan.
In July 1996, a caveat was lodged on the title claiming an interest by Lay Bros, the predecessors of KFL, as a lessee and purchaser pursuant to an agreement to lease and to sell. This is significant because the terms of the caveat should, and as I have found did, as a matter of fact, signal to the income mortgagees that the property in question was subject to an agreement to sell. The predecessors, as mortgagees of Sandhurst and Kadoo, namely the Metway Bank, were probably aware of the nature of the commercial arrangement between the parties. Is that so necessary to decide? In my view, it is not. What is necessary to decide is whether Sandhurst and Kadoo were aware of the full nature of the commercial arrangements between their clients, Springvale Property Holdings (the mortgagor) and KFL Supermarket (the prospective purchaser) under the contract of sale. It will be apparent from what I have just said that Lay Bros, pursuant to a nomination clause in its contract, did nominate KFL as its nominee.
In July 1997, Springvale Property Holdings and KFL executed the lease of the supermarket, identifying it and incorporating the special conditions to which I have also referred. There was a variation of that lease, which affected the purchase price to a minor degree.
In the following month, Springvale Property Holdings executed a mortgage to Sandhurst, which included a special condition 37, requiring certification of the subdivision of the supermarket premises. On the same day, a similar mortgage was executed in favour of Kadoo. Correspondence between the parties followed, to which I shall only tangentially refer. But, it does seem that there is some substance to the contention of Sandhurst that Springvale Property Holdings and KFL misunderstood their rights under the contract and that there was an obligation on the part of Sandhurst to consent. It would appear that that is not strictly correct. But I do not see any malevolence on the part of the firm that wrote the correspondence. Rather, they expressed a more robust view of their legal position than that to which they were strictly entitled, but this is immaterial in the given circumstances.
The defendants' arguments, which are manifold, turn on some further facts to which I must refer. It is said that an underlying dispute in this case concerns competing equities, that is, the equities of KFL and of Sandhurst and as to which might be first in time. It is not necessary for me to dispose of that issue, which will be assigned to another time and place. Suffice it to say, in my view, the issue of the competing equities seems to fall in favour of KFL Supermarket.
It is argued that if the subdivision proceeds and consent is given, the interests of Sandhurst and Kadoo will be compromised because under the variation agreement, the sale will proceed on very favourable terms to Springvale Property Holdings, or at least on terms which could compromise the security and the interests of Sandhurst and Kadoo. Be that as it may, and I do not dispose of the issue, the fact is, in my view, that the contractual terms between Springvale Property Holdings and KFL were clear and were of the character to which the mortgagees committed themselves when they extended the financial facilities by way of mortgage.
It was argued that clause 16 falls within the exclusion provisions of the Transfer of Land Act 1958 referred to above, in so far as it creates an option rather than a sale agreement. In my view, that is simply not so. Powers of attorney, when granted in conditional terms, always depend upon the circumstances arising giving potency to the Power. In this case, the prospective purchaser has been empowered to do that which the prospective vendor will not. It therefore gives efficacy and potency to the agreement to sell. Rather than creating an option, it is merely the mechanism by which the interests of the prospective purchaser are safeguarded. The prospective purchasers, Springvale Property Holdings and KFL, have merely triggered the legal provisions available to them to enforce the agreement to sell.
It has also been argued that the conditions precedent to the exercise of the power of attorney have not been satisfied in so far as there may have been a default by the tenant which has not been remedied. I am not satisfied that any default has been proven to my satisfaction. The default alleged is a matter of high contention, and not a matter to which the plaintiffs in this case have conceded. The correspondence from Dellios, the solicitor for the plaintiffs, traverses the alleged obligation under the agreement that audited details of gross sales be rendered. However, the request for rent on the due date was delivered in equivocal and courteous terms, rather than being the assertion of a breach. In any event, now, when the court is to exercise its discretion, there is no breach. So much appears to have been conceded, even by the defendants.
Therefore, I find on the balance of probabilities, and it need be no higher than that, that the plaintiffs have properly acquitted the requirements in clause 16 for the exercise of the power of attorney and that when they did so, they were also in compliance with the terms of the contract.
The court, in coming to a conclusion as to what is reasonable in the circumstances, is guided by a further factor. That is, that the interests of the mortgagees will not be unduly prejudiced if the certified plan of subdivision is registered. It may be that their commercial position would prosper if the sale were to be aborted, but I am satisfied that the mortgagees were aware of the true nature of the commercial arrangement between the parties. Furthermore, when they granted the mortgage, they did so in the knowledge, whether direct or implied, of the concomitant agreement to sell.
Therefore, the circumstances dictate that it is unreasonable to withhold consent and, accordingly, the relief sought in the originating motion will be granted.
The difficulty in addressing the issue of costs in this case arises out of the fact that Sandhurst was asking for information which, in effect, KFL said Sandhurst already has or should have or, otherwise, does not need. Whereas, Sandhurst submitted that as a trustee company, it was required to proceed with caution.
The fractiousness between the parties is to be regretted. However, the effluxion date of 2 February 2000 meant that, whatever happened, the issue had to be resolved between the parties by that date. It was in Sandhurst's interests (because Springvale Property Holdings was the reluctant vendor) to possibly attune itself to Springvale Property Holdings' interest and therefore to delay. It was vital to KFL's interests that it proceed with speed and therefore, KFL should have been doing everything to accommodate whatever it was Sandhurst wanted to know, do or see. It was not really appropriate for KFL to stand back and be anything less than pliant in so far as Sandhurst's request was concerned. Nevertheless, it had to come to this court to get the relief it wanted and to get it on time.
I am satisfied that this is a case, where in addressing those matters, I should make a percentage award of costs in favour of the plaintiffs and I shall. I order that the plaintiffs be entitled to 75 per cent of their taxed costs, which shall be paid by the defendant Sandhurst Trustees. I make no order in so far as Kadoo is concerned, which shall bear its own costs.
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