Starkey and Burns v Savilind Pty Ltd

[2006] QSC 201

SUPREME COURT OF QUEENSLAND

CITATION:	Starkey and Burns v Savilind Pty Ltd & Others [2006] QSC 201
PARTIES:	GRAHAM LINDSAY STARKEY and ROBERT JOHN FRED BURNS (applicants) v SAVILIND PTY LTD ACN 105 671 494 as trustee of the Sunshine Coast Equine Retreat Investment Fund (first respondent) LYNNE MARGARET DAVISON (second respondent) MARK ROBERTS DAVISON (third respondent)
FILE NO:	BS6073 of 2006
DIVISION:	Trial Division
PROCEEDING:	Application
DELIVERED ON:	21 August 2006
DELIVERED AT:	Brisbane
HEARING DATE:	2 August 2006
JUDGE:	Mackenzie J

ORDER:	1.	That the caveat be removed
2.	That the first respondent pay the applicants’ costs of and incidental to the application to be assessed.

CATCHWORDS:	CONVEYANCING – RELATIONSHIP OF VENDOR AND PURCHASER – BREACH OF CONTRACT – RESCISSION – where contract is for sale to buyer ‘or nominee’ – where
buyer indebted is mortgagor indebted to mortgagee – whether demands greater than the contract price can give rise to rescission – whether nomination of a purchaser amounts to affirmation of a contract – whether repudiatory conduct with respect to nominee.
Land Title Act 1994 (Qld), s 124(1A), s 129 Property Law Act 1974 (Qld), s 39, s 40
Spencer v Cali (1986) 2QdR 456, followed
COUNSEL:	R I Lilley for the applicant S Sheaffe for the first, second and third respondents
SOLICITORS:	Synkronos Legal, Lawyers & Business Counsel for the applicants
Sunlaw Solicitors for the respondents

1. MACKENZIE J: This application is framed as an application for removal of two caveats, the first lodged by the first respondent on 28 April 2006 and the second by the first respondent on 5 July 2006. For reasons that need not be elaborated on, the first was rejected for failure to comply with requisitions. The second remains on the Land Title Register. Although the focus of the application in its original form was s 129 of the Land Title Act 1994 which forbids lodgement of a further caveat on the same or substantially the same grounds by the one person, both outlines of argument address the issue of whether the first respondent has a caveatable interest.

2. The original application was in the form described not withstanding s 124(1A) of the Act and that a search would have shown that the first caveat was not on the register. How it morphed into the form in which it was argued was not gone into. The only perceived disadvantage from the first respondent’s perspective was that, if the balance of convenience became an issue, it might wish to adduce further evidence. For reasons that will appear, that issue does not become a critical one.

3. On 3 March 2005 the applicants were appointed joint and several statutory trustees for sale of the relevant property, for Limaz Investments Pty Ltd (in liquidation), one-half interest, and the present second respondent, one-half interest. The statutory trustees offered the property for sale at auction on 22 October 2005. The second respondent was permitted to bid and was the successful bidder which resulted in a contract of sale being entered into with her (or nominee). The settlement date of the contract was 22 December 2005.

4. On 7 December 2005 the solicitors for the statutory trustees wrote a letter to the second respondent’s solicitors appointing a time and place for settlement and informing them of the cheques required from the second respondent as buyer. The amounts set out in the letter exceeded the actual purchase price by a considerable sum and were calculated by reference to the second respondent’s pre-existing obligations to the mortgagees rather than the second respondent’s obligations under the contract. The breakdown of the various components was itemised in a letter.

5. On 14 December 2005, the applicants, having not received transfer documents by that time, inquired by fax when the documents might be received. On 15 December 2005 the solicitors for the second respondent faxed the applicants’ solicitors stating that, until the receipt of their fax, they had been endeavouring to determine the proper amount due to the registered mortgagees and would be writing to the mortgagees the following day. The letter continued “… However your letter seems to ignore that Savilind as nominee of Mrs Davison agreed to purchase the property for $995,000 and this is the amount expressed in the contract.” They referred to the order of 3 March 2005 and requested full details, calculations, receipts and invoices for the costs referred to in the order, namely “all costs charges and expenses properly incurred” so that their clients might satisfy themselves or have determined that the same were properly incurred. The emphasis on “properly” was highlighted in the letter. It was said that early response would be appreciated to avoid them having to request an extension of time to resolve the matters.

6. By a letter dated 12 December 2005, received by the applicants’ solicitors on 19 December 2005, the second respondent’s solicitors purported to nominate the first respondent as purchaser under the contract and submitted transfer documents showing the first respondent as transferee, for execution by the applicants. The first respondent is a company of which the second respondent is secretary and director and the sole shareholder. It was stated that the transfer documents were submitted at that stage for convenience only and without prejudice or waiver to “our client’s” rights contained in the contract and were not to be taken as an acceptance of the trustees’ title. The letter also requested that the transfer documents be returned as soon as possible upon the usual undertaking to permit stamping.

7. On 19 December 2005 the applicants executed the transfer documents which were returned by express post on 19 December 2005.

8. On 22 December 2005, at approximately 11.50am, the applicants’ solicitors sent a fax to the solicitors acting for the respondents referring to a telephone call between them the previous afternoon and confirming details of the cheques required for settlement, which totalled the contract price.

9. On the same day, in a fax that appears to have been sent at 12.02pm from the markings on it, the solicitors for the respondents said the following:

   “I refer to my letter in relation to the above of 15 December 2005
   and your confusing response to my telephone call yesterday.

   In case your clients of apparently recent date did not receive a copy of a note to their ‘former’ Solicitors of yesterday, I attach same.

   I note the following:

   1.            We have received no written response from you in relation to our 15 December 2005 facsimile.

   2.            You requested bank cheques exceeding the Contract Purchase Price by in excess of 135% which on the face of your request comes from Your Clients and the ANZ Bank; and

   3.            Despite our last paragraph, you did not endeavour to contact us until we left messages with you.

   Accordingly, Your Clients have repudiated the October 22, 2005 Contract for Sale of the above property. We reserve Our Clients rights to recover any damage they have or may suffer or to take any other action that may be advised to them, including specific performance.”

10. The note referred to in that letter bears the date 20 December 2005 and is actually written not by Mr Friend but by the third respondent, who is a member of the same firm as Mr Friend. Amongst other things, it said that no response had been received to the facsimile of 15 December 2005 and that their client’s rights in relation to the sale of the contract of October 22, 2005 were reserved “in the sense we consider it has either been repudiated by the Trustees or extension of time to resolve these issues needs to be agreed …”.

11. That does not express a concluded view that a decision has been made whether to accept the alleged repudiation or to affirm the contract, so far as Savilind is concerned. It merely poses possible options. The real thrust of the letter was in succeeding paragraphs, making allegations against the “clients” of Minter Ellison (including the applicants), and asserting that there was liability on their part towards the first and second respondents and perhaps others claiming a derivative right under them.

12. The propositions that the matters raised in that correspondence related to the affairs of parties who were not parties to the contract and that whether or not there had been any response to those parties did not affect the obligation of the first respondent to settle the contract were raised in a fax sent on 22 December 2005 at 1.05pm by the applicants’ solicitors. It was reiterated that settlement of the contract would take place at 2.30pm that afternoon at a nominated place and that the total value of the three cheques referred to, required to settle the contract, was equal to the contractual purchase price exactly. It was also reinforced that time remained in all respects of the essence of the contract. That produced a response, apparently sent at 1.25pm, that the contract was repudiated by the applicants and that the assertions in relation to the letter of 15 December 2005 were “emphatically denied and are irrelevant”.

13. The applicants and their representatives attended at the place appointed for settlement at the time appointed for settlement and until close of business that afternoon but the representative of the first respondent did not. The following day the applicants’ solicitor advised that the applicants regarded the buyer’s failure to attend settlement as a repudiation of the buyer’s obligations and that the applicants elected to terminate the contract pursuant to clause 9.1. That was met with a response from the respondent’s solicitor on the same day stating that, as the contract had already been repudiated by the applicants, it was:

    “… quite obvious that there was no contract to be settled, nor could your clients have been ready, willing and able to settle a contract already repudiated by them.

    It follows that our client could not repudiate a contract already repudiated by your clients’.”

14. On 12 January 2006, the solicitors for the respondents wrote advising that the first respondent wished to enter a new contract on agreed revised terms, which were stated in the letter. An undertaking that the applicants not enter into another contract of sale without 10 clear business days written notice was demanded by 3pm the following day. If not, the instructions were to place a caveat on the property on behalf of the first respondent. It appears that that letter was not responded to since there were further letters on 25 January 2006 and 23 February 2006, the latter of which stated again the instructions to lodge a caveat on behalf of the first respondent and asked for the applicants to consent to its lodgement in the interests of negotiating a settlement.

15. On 3 March 2006 the applicants’ solicitors advised that the applicants did not consent to the first respondent lodging a caveat since it did not have a caveatable interest. One reason advanced was that the first respondent had terminated the contract. The second was that, even though the applicants were confident that the first respondent’s purported termination was invalid, they had terminated the contract for failure to complete the contract. The letter advised that the applicants were considering their options with regard to reselling the property.

16. On 9 March 2006 the solicitors for the first respondent advised they intended to lodge the caveat on 13 March 2006. They said they also reserved the second respondent’s right to lodge a caveat.

17. On 28 April 2006, a caveat with the first respondent as caveator was lodged with the Land Registry. The interest being claimed was an equitable interest in the property and in relation to a beneficial owner’s interest as to 50% ownership of the property. The grounds of the claim were stated to be “to protect rights as purchaser under a contract for purchase dated 22 October 2005 which was repudiated by the vendor on 22 December 2005 and to protect certain rights and entitlements due from an associate under an order of the Supreme Court Queensland dated 3 March 2005”.

18. On 4 May 2006 Registrar of Titles requisitioned the caveat. On 16 June 2006 it was rejected because the requisition had not been complied with. The next relevant event was that, on 23 June 2006, the applicants entered into another contract with buyers named Robinson. Then on 5 July 2006, the first respondent again lodged a caveat, which was duly registered.

19. Under the caveat now registered, the interest being claimed is expressed as follows:

    “An equitable interest in the property and in relation to a claim for the Statutory Owners and Mortgagees repudiation of or conspiracy to repudiate a Contract for Sale to the Caveator dated 22 October 2005. These actions have established an equitable interest in the fee simple to arise through the fee simple been (sic) held under a constructive trust for the Caveator.”

20. The grounds of the claim are as follows:

    “Pursuant to a constructive resulting or implied trust for the benefit of the Caveator due to the actions of the Statutory Owners and the Mortgagees in conspiring to prevent the Caveator obtaining its interest in the land as agreed by the said owners.”

21. These are explained further in the affidavit of the third respondent filed by leave at the hearing. I have supplied correct dates in lieu of incorrect and missing dates in the affidavit. The first step in the argument is that on 7 December 2005 solicitors for the statutory trustees repudiated the contract entered into by the first and second respondents. It is said that the letter referred to in paragraph [4] in conjunction with the contract evidences this.

22. The second step is that by the letter of 15 December 2005 referred to in paragraph [5] above, the solicitors for the respondents had sought information affecting the first and second respondents, which was not forthcoming from the applicants. The third step is that on 22 December 2005, the letter and the annexure to it referred to in paragraphs [9] and [10] above “concerning the repudiation” were sent by the solicitors for the respondents to the applicants’ solicitors.

23. The fourth step is that, because the second respondent is the beneficiary of fifty percent of the property and the contract of 22 October 2005, the first respondent has an equitable interest in the property by reason of the applicants’ breach of that contract and s 40 of the Property Law Act 1974. Section 40 is concerned with the power of a court to regulate the right of co-owners of the property to purchase and the terms of their participation, so far as it is relevant for present purposes.

24. There is also an allegation of “flagrant breach” of s 39 of the Property Law Act 1974. The complaint is that there was a telephone call on 15 February 2006, almost two months after the proposed completion date, in which the second applicant telephoned to speak to the second respondent. The response from the third respondent, who had taken the call, referred to misleading and deceptive conduct and asserted that the second respondent would not speak to Mr Burns. The third respondent advised him to speak to Mr Friend, the solicitor for the second respondents, about a request to meet real estate agents on site. The burden of the complaint seems to be that, to the third respondents’ knowledge, that was the only communication with the second respondents since 22 October 2005. The “flagrant breach” appears to relate to alleged failure to consult in terms of s 39. That issue is at best peripheral to the issue to be determined.

25. In my view the respondent’s argument in resistance to the relief sought fails at the point of the allegation that the applicants had repudiated the contract. Assuming that the second respondent was entitled to rescind the contract as a result of the applicants’ demands in the letter of 7 December 2005 for more than the agreed purchase price, she affirmed the contract by exercising her right to nominate the first respondent as purchaser. Any right she had to rescind was lost in consequence of that nomination.

26. In Spencer v Cali (1986) 2QdR 456, 469, Connolly J listed principles deducible from the authorities in relation to election to affirm a contract notwithstanding a breach which had given rise to a right to rescind. Of those relevant to this case, the first is that it is not necessary to elect to rescind at once so long as nothing is done to affirm the contract. The second is that unless there be an act affirming the contract with knowledge of the facts which give rise to rescind, the right will not be lost. The third is that the question whether an election has been made may be tested by asking whether the act or omission relied on is of such a nature as to be justified only on the footing of an election made.

27. When the letter relating to nomination of the first respondent as purchaser, dated 12 December 2005, was received by the applicants’ solicitors on 19 December 2005 it was accompanied by the transfer documents for signature and returned by the applicants. Once the first respondent had that status, there would need to be repudiatory conduct on the part of the applicants in relation to the first respondent if the first respondent was to have a right to rescind. There was a concern, operating concurrently, about the proper amount due to the registered mortgagees and an insistence expressed on the part of the first respondent that the contract price was $995,000, which was what the first respondent was required to pay.

28. With respect to the first respondent, there was never a requirement that it pay more than the contract price. On 22 December 2006, and, according to the contents of the letter of that date, on the day before as well, it was confirmed that cheques totalling $995,000, the contract price, were required at settlement. With respect to the first respondent there was no right to rescind the contract on the basis of those facts.

29. Even if it is important to have regard to the sequence of correspondence, the letter of 20 December 2005 referred to in paragraph [10] above did not purport to exercise a right to rescind. On 22 December 2005, prima facie, the letter referred to in paragraph [8] to the respondent’s solicitor, advising what cheques were needed at settlement, preceded the respondent’s solicitors’ letter alleging repudiation by the applicants. The absence of any evidence disputing the chronological sequence of the two faxes reinforces the inference that the sequence is as the markings on them suggest.

30. It follows from this that, upon the first respondent failing to settle the contract, the applicants acquired a right to rescind which they exercised promptly. No equitable interest of the kind alleged as the basis for the caveat exists. It is therefore appropriate to make the following orders:

    1.     That the caveat be removed; and

    2.     That the first respondent pay the applicants’ costs of and incidental to the application to be assessed.