Tim Davies Landscaping Pty Ltd v Perron Investments Pty Ltd - [2008] WASC 178

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TIM DAVIES LANDSCAPING PTY LTD -v- PERRON INVESTMENTS PTY LTD [2008] WASC 178

CORAM: MASTER SANDERSON

HEARD: 11 AUGUST 2008

DELIVERED : 21 AUGUST 2008

FILE NO/S: CIV 2349 of 2007

BETWEEN: TIM DAVIES LANDSCAPING PTY LTD (ACN 112 257 404)
Plaintiff
AND
PERRON INVESTMENTS PTY LTD (ACN 000 003 976)
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Property law - Application to discharge caveat - Romalpa clause in subcontractor's agreement with builder - Whether sufficient to allow subcontractor to lodge caveat - Turns on own facts

Legislation:

Nil

Result:

Caveat to remain pending trial

Category: B

Representation:

Counsel:

Plaintiff:     Mr D H Solomon
First Defendant              :     Mr M C Hotchkin
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Solomon Brothers
First Defendant              :     Hotchkin Hanly
Second Defendant         :     No appearance

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

In Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50
In Re Samuel Allen & Sons Ltd [1907] 1 Ch 575
Kay's Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429
Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1989) NSW ConvR 55‑437

MASTER SANDERSON: On 3 January 2008, Hasluck J extended the operation of two caveats lodged by the plaintiff over land owned by the first defendant. At the time of making the order, his Honour programmed the matter, allowing each of the parties to file further affidavits and submissions in support of their position. The case has followed a leisurely course since the orders were made. The question that I have to determine is whether or not the order made by his Honour ought be discharged.
It is important to note that what I am to determine is not the outcome of the dispute between the parties. The point at issue is whether the caveats - one or both of them - ought remain in place. What I am called upon to decide is whether or not there is a serious question to be tried as to the right of the plaintiff to lodge the caveats. There was no dispute between the parties as to the applicable test. Nor was there any discussion about what is necessary to satisfy the requirements that there be a serious question to be tried. That question has been considered in countless authorities and the test is well understood.
The nature of the claim made by the plaintiff which it says justifies the lodging of the caveats can be ascertained by referring to the statutory declarations which accompanied the lodging of the caveats. Copies of these statutory declarations can be found as annexures TBD‑5 and TBD‑7 to the affidavit of Timothy Bryan Davies sworn 20 December 2007 and filed in support of the application. Dealing with the first caveat, the statutory declaration identifies Mr Davies as a director of the plaintiff and says that the nature of the interest claimed in the first defendant's land is 'as equitable chargee'. The way that the interest arises is then set out as follows:
5.Attached hereto and marked 'TBD‑1' is a copy of a quotation prepared by TDL and sent to Oldfield Knott Architects, architects for Link Projects Australasia Pty Ltd ACN 009 378 273 ('Link Projects') dated 8 June 2007 (the 'Quotation'). Link Projects, through Oldfield Knott Architects, requested that TDL quote on performing various landscaping works at the Gateways Tavern of Lot 203 Wentworth Parade, Success. The Gateways Tavern is located on Lot 203 on Deposited Plan 29050 and being the whole of the land comprised in certificate of title volume 2219 folio 463 (the 'Property').
6.Attached hereto and marked 'TBD‑2' is a copy of a facsimile from Link Projects to TDL dated 13 June 2007 accepting the Quotation and providing a purchase order in respect of the accepted Quotation. The works the subject of the agreement (formed on acceptance of the Quotation) between Link Projects and TDL (the 'Agreement') were to be performed for a total amount of $219,563.58.
7.Attached hereto and marked 'TBD‑3' is a copy of tax invoice from TDL to Link Projects dated 31 August 2007 and numbered 33906.
8.Attached hereto and marked 'TBD‑4' is a copy of a tax invoice from TDL to Link Projects dated 5 October 2007 and numbered 34281.
9.The terms of the Agreement include a retention of title clause which provides that ownership of and title to the goods supplied by TDL under the Agreement shall remain with TDL until payment in full has been received and the Agreement conferred on TDL the right to enter where the goods may be stored or in use to retake possession and remove the same.
10.TDL has provided the services and supplied the goods under the Agreement, which are in use and affixed on the Property, set out in the invoices being attachments 'TBD‑3' and 'TBD‑4' (collectively the 'Unpaid Invoices') and has not been paid for the same. Accordingly, ownership of the goods supplied under the Agreement to the Property remains with TDL and therefore Link Projects could not convey ownership or title to the goods in use and affixed to the Property under the principle nemo dat quod non habet.
11.Since the goods have been supplied and affixed to the Property under the Agreement, TDL claims, as set out above, an estate or interest as equitable chargee in the Property in respect of and concerning the Unpaid Invoices.
(All of the annexures referred to in this statutory declaration form part of exhibit TBD‑5.)
The statutory declaration supporting the second caveat says that the plaintiff claims an interest in the land as 'equitable lien holder' (TBD‑7). The facts recited are then essentially the same as the facts found in the earlier statutory declaration. The difference is to be found in par 9. It reads as follows:
TDL has provided the services and supplied the goods under the Agreement, which goods are in use and affixed on the Property, set out in the invoices being attachments 'TBD‑3' and 'TBD‑4' (collectively the 'Unpaid Invoices') and has not been paid for the same. If, contrary to TDL's primary contention (which is the subject of another caveat as against the title to the Property) that ownership of and title to the goods supplied under the Agreement and in use and affixed to the Property has not been transferred to the registered proprietor of the Property, the title and ownership to such goods has been transferred to the registered proprietor of the Property, then [TDL] claims an estate or interest as equitable lien holder in the Property as unpaid vendor in respect of and concerning the Unpaid Invoices.
To summarise then, the position is this. The plaintiff engaged Link Projects as builder to undertake certain work on the subject land. Link Projects through Oldfield Knott, who were architects appointed by the plaintiff to supervise the construction works, obtained a quote for landscaping works from the plaintiff. The 'Landscape Works Quotation' was sent to Oldfield Knott by the plaintiff. The quote was accepted and the contract to undertake the works was entered into between the plaintiff and Link Projects. It was common ground between the parties that there was no direct contractual relationship between the plaintiff and the first defendant.
The quote from the plaintiff contained a clause which the parties accepted was a Romalpa clause. It was in the following terms:
The ownership of the goods supplied by the contractor to the customer shall remain with the contractors until payment in full has been received by the contractor. If such payment is overdue in whole or in part the contractor shall have every right (without prejudice to any other rights) and is hereby authorised by the client to enter into and upon the premises (between 8am and 5pm) where the goods may be stored or in use (with or without others) to retake possession and remove the same. The customer hereby indemnifies the contractor against any claim action or damages arising out of any such action against the cost of the same.
If the customer defaults in payment then (A) the debt shall be subject to collection charge which will be added to the account and interest at the rate under section thirty two of the supreme court act 1932 [sic] will be claimed up to and including the date on which the debt is paid in full and (B) all expenses incurred by the contractor in recovering the monies due, inclusive of solicitors charges, debt collectors fees and disbursements, any costs of charges relating to security documents and any fees on dishonour shall be a debt and owing by the customer. (emphasis added)
This clause appears in the body of the quote. There is no definition clause setting out who is 'the contractor' or 'the customer' or 'the client'. The first of the definitions need cause no concern. Clearly the plaintiff is the contractor. The parties proceeded upon the basis that 'the customer' was Link Projects. They, after all, were the contracting party. For the purposes of this argument, counsel for the first defendant accepted that the reference to 'the client' was a reference to the first defendant. I should emphasise that the concession made by counsel was made only for the purposes of this application. That being so, the concession was clearly properly made. It is arguable that the reference to 'the client' is a reference to the first defendant.
At this point it is necessary to look a little more carefully at the contractual relationship between the plaintiff, Link Projects, Oldfield Knott and the first defendant. The contract pursuant to which the first defendant engaged Link Projects is found as annexure GJP1 to the affidavit of Geoffrey John Pinkus sworn 1 May 2008. The contract itself is a standard Australian Building Industry Contract SW‑1 2002 'Simple Works Contract'. Pursuant to cl F1.1 of the contract, the owner (the first defendant) is required to give the contractor (Link Projects) possession of the site within 10 days of the contract being executed by the parties. There is no dispute between the parties that as at the date the plaintiff and Link Projects entered into the landscaping contract, Link Projects had possession of the land. In other words, Link Projects were in a position to determine who could and could not enter on to the land and remove from the land property belonging to a party. As I understand the submissions put on behalf of the first defendant, that fact was not in issue.
Returning to the contract, the section marked 'Introduction' refers in item 2 to 'the architect'. The item says:
This contract is to be administered by: Oldfield Knott Architects Pty Ltd.
It would appear then that Oldfield Knott, as architects administering the contract, were the agents of the first defendant. Again, I need make no findings of fact in relation to that issue. For the purposes of the argument, counsel for the first defendant was prepared to accept that the architects were the agents of the first defendant.
The primary submission of the plaintiff can be summarised in this way. A Romalpa clause such as the one in the quotation confers an express right to enter on land where the plaintiff's goods are located. Such a Romalpa clause has been held to give rise to an enforceable equitable interest in the subject land, even in the event the goods became fixtures. The fact that the architects, the first defendant's agents, were aware of the Romalpa clause and consented to the plaintiff entering into a contract containing such a clause ensures that the first defendant is bound by the clause and the plaintiff has an equitable interest in the land.
The plaintiff would go further. It was submitted that as Link Projects had possession of the land as at the date they entered into the contract with the plaintiff, they were able to convey an equitable interest and did so by entering into the contract. It was said that this equitable interest in land arose even when the owner of the land was not a party to the applicable contract.
On behalf of the first defendant it was said that nothing in the contractual arrangements could give rise to an equitable interest in the land. So far as the plaintiff was concerned, it was contracting with Link Projects. Link Projects had no interest in the land and they could not convey to the plaintiff an interest they did not have. This, it was submitted, was nothing more than an example of the legal principle that a party cannot convey a better title than he himself possesses.
The plaintiff placed particular emphasis on the decision of Parker J in In Re Samuel Allen & Sons Ltd [1907] 1 Ch 575. The facts of that case, as taken from the headnote, were as follows:
A company hired machinery, fixed on its business premises, from L and H on terms of a hire‑purchase agreement which provided that the company was to pay a monthly rent for the hire of the machinery, and should become the purchaser on payment of a certain sum, in which event credit would be given for the previous payments of rent. Until the purchase the company was a mere bailee of the machinery, and in case of default in making the monthly payments or breach of the conditions of the agreement L and H were empowered to enter and remove the machinery.
Subsequently the company gave to a bank an equitable mortgage of the business premises by a deposit of the deeds thereof, accompanied by a written charge under the common seal of the company containing an agreement to give a legal mortgage on demand. The bank took without notice of the hire‑purchase agreement. The company failed to pay the instalments and committed breaches of the conditions of the hire‑purchase agreement; L and H demanded delivery up of the machinery, and a winding‑up order was made against the company. The principal secured to the bank was due, with an arrear of interest.
Parker J held that the bank being merely an equitable mortgagee, and L and H having an equitable interest in the machinery under their hire‑purchase agreement, the interest under that agreement had priority over the interest of the bank. Counsel submitted that this case was authority for the principle that a Romalpa clause could give rise to an enforceable interest in the subject land even in the event the goods became fixtures as against persons who were not parties to the applicable contract. Counsel also referred to In Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50, Kay's Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 and Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1989) NSW ConvR 55‑437.
Counsel for the first defendant submitted that none of these authorities dealt specifically with the fact situation in this case. Counsel pointed out that the Samuel Allen decision involved a situation where the bank had merely an equitable mortgage over the land. The case then was one of competing equities. It was submitted it said nothing about a situation where an equitable interest was imposed upon a legal interest such as that held by the first defendant.
It is not appropriate for me to take an analysis of the legal position any further. I am satisfied it is arguable that the architects on behalf of their principal, the first defendant, agreed to a Romalpa clause in the contract between the plaintiff and Link Projects which they knew or ought to have known would create an equitable interest in the land. Once that point is reached, the necessary conclusion is that there is a serious question to be tried. It is not a matter that I should attempt to resolve on the evidence as it stands.
That then leaves the question of the second caveat. Given that I have concluded that there is a serious question to be tried with respect to the first caveat, there is nothing to be gained by dealing with the second caveat. That is a matter which can be conveniently dealt with when the issues relating to the first caveat are canvassed. No useful purpose would be served in dealing with that caveat, particularly in light of the orders that I intend to make.
I would order that the two caveats remain on the subject land, but conditional upon the plaintiff instituting proceedings to determine whether or not it has a caveatable interest in the property. The proceedings, once issued, should be pursued with proper dispatch. I will hear the parties as to the precise form of orders relating to those future proceedings. I will also hear the parties in relation to the costs of this application.