Zanee Pty Ltd v C G Maloney Pty Ltd

[1992] QCA 69

IN THE COURT OF APPEAL	[1992] QCA 069
SUPREME COURT OF QUEENSLAND	No. 1818 of 1989
Before the Court of Appeal The President Mr Justice Pincus Mr Justice McPherson
BETWEEN:

ZANEE PTY. LTD.

(Plaintiff) Respondent

AND:

C.G. MALONEY PTY. LTD.

(First Defendant) Appellant

AND:

D.J. CUSSAN PTY. LTD.

(Second Defendant) Appellant

JUDGMENT - THE PRESIDENT and McPHERSON J.A.

Delivered the 14th day of April, 1992

By a contract dated 16 January 1989 in the printed REIQ form (1982 ed.), the appellants as vendor agreed to sell to the respondent as purchaser five registered lots on a building plan comprising residential units in the "Golden Sands" development at Main Beach for a total purchase price of $1,000,015 dollars. By the terms of the contract, completion was due between 9.00 a.m. and 5.00 p.m. on 28 April 1989 at the office of the solicitors for the vendor, time being of the essence.

The contract was not completed and, in an action in the Supreme Court, judgment was given in favour of the purchaser for the return of the deposit totalling $300,000 paid by it under the contract. The vendor's counter-claim in the action for specific performance of the contract was dismissed. This appeal is brought by the vendor against those orders. Clause 2 of the printed terms of the contract provided that the balance of purchase price after deposit should be paid on the date for completion in exchange for possession "together with a duly executed transfer in favour of the Purchaser capable of immediate registration ... in the appropriate office free from encumbrances ... ." On the day fixed for completion, the vendor was registered in the Office of the Director of Freehold Land Titles as proprietor of the lots, but the purchaser refused to complete because of a number of registered and unregistered dealings.

On 9 February 1988, the Commonwealth Bank had lodged a caveat, number J371976K, claiming an interest under an equitable mortgage dated 1 August 1985 in respect of a loan of a sum of money. The certificates of title deposited to create the equitable mortgage had not been produced with the caveat as required by s.30A of the Real Property Act 1877. Accordingly, the caveat, which was registered on 15 February 1988, had lapsed three months after it was lodged in accordance with s.39 of the Real Property Act 1877. The lapsing of the caveat had not been recorded on the certificates of title but had been recorded on the caveat itself on 23 May 1988.

Another caveat, number J372684, had been lodged on 10 February 1988 by D.J. Cussan Pty. Ltd. (one of the vendors and a defendant in the action) and Margaret Mary Cussan, a director of that vendor company. That caveat, which claimed an interest as chargee of an estate in fee simple pursuant to an agreement dated 8 February 1988 entered into the between the caveators, the other vendor, C.G. Maloney Pty. Limited, and Cyril Gardner Maloney, was still unregistered

on the date for completion.

Before that date, withdrawals of both caveats had been lodged. A withdrawal of the Commonwealth Bank's caveat was lodged on 18 April 1989 and a withdrawal of the other caveat was lodged on 27 April 1989. Both withdrawals of caveat were still unregistered on the date fixed for completion of the contract.

The purchaser's solicitors were unwilling to accept before completion undertakings to answer requisitions, or anything less than registration of the unregistered caveat and both withdrawals of caveat. A facsimile letter sent by the solicitors for the purchaser at 9.00 a.m. on the date for completion stated their intention to attend at 3.00 p.m. that day at the office of the solicitors for the vendor "subject to registration by the Titles Office" of the unregistered dealings by 2.00 p.m. that day. At 3.00 p.m. the mortgagee's representative was present at the vendors' solicitors' office prepared to hand over the certificates of title and a release of the mortgage, but the purchaser's solicitors did not attend for settlement because the unregistered dealings had not been registered. The mortgagee's representative had departed from the vendor's solicitor's office at 4.00 p.m. when an employee of the purchaser's solicitors attended with bank cheques for the balance of purchase monies but with instructions not to complete the contract unless the unregistered dealings had been registered. At 4.20 p.m., a letter was delivered from the purchaser's solicitors asserting that the vendor's solicitors "had been unable to give us unencumbered title in accordance with clause 2 of the contract because the ... dealings had been lodged against the title", which "prevent our transfer being capable of immediate registration in the Titles Office". The same letter noted that "your client is in breach of contract" and reserved the purchaser's rights.

The time for completion of the contract expired at 5.00

p.m. that day without anything further being done.

On 2 May 1989, the purchaser communicated to the vendor's its election to determine the contract by a letter which relied upon the unregistered dealings shown in the Titles Office at the time fixed for completion against the certificates of title in respect of the lots agreed to be sold.

In opposing the vendor's appeal before the Court, the purchaser sought to rely upon the absence of the mortgagee's representative at 4.00 p.m. when the employee of the purchaser's solicitors was present with the bank cheques. However, both before and on the date fixed by the contract for completion, the purchasers had made it plain that nothing less than registration of the unregistered dealings before completion would suffice. Unless the purchaser's insistence upon registration of those dealings was justified, the consequence was to relieve the vendor of the duty to make efforts to complete that day: Ireland v. Leigh [1982] Qd.R. 145,143. The only question is whether the purchaser was entitled to insist upon compliance with its demand as a prerequisite to completing the contract.

There was some confusion in the purchaser's arguments. Possibly because of statements in Cawood v. Infraworth Pty. Ltd. [1990] 2 Qd.R. 114, solicitors experienced in conveyancing were called at the trial to give their opinions. The solicitors differed from each other as well as from the attitude adopted at the time by the purchaser's solicitor as the basis for the purchaser's refusal to complete. The solicitor whose evidence was preferred by the trial judge supported the purchaser's contention that it was not obliged to complete, but he did so substantially by reference to the transactions underlying the caveats rather than the unregistered dealings. Further confusion was introduced because it was unclear from the purchaser's argument whether it based its claim to terminate the contract upon an implied term sought to be derived from statements in Cawood, supra, or upon clause 2 of the contract; and, if the latter, whether it contended that the transfer from the vendor was not "capable of immediate registration" or that the purchaser would not be registered "free from encumbrances".

While the purchaser did not expressly abandon the contention that the transfer from the vendor was not capable of immediate registration, it is plain that the transfer from the vendor which was available to the purchaser would have been a transfer directly from the registered proprietor. The purchaser accepted the view expressed in Cawood, at 120-121, that immediate registrability did not have a temporal connotation but was an aspect of a rule that -

"in the absence of specific contractual provision to the contrary, a purchaser is not entitled to require that a vendor shall be registered as proprietor at

completion but is entitled to have delivered to him a
memorandum of transfer directly in his favour from
whoever is the registered proprietor."

The purchaser's approach to this aspect of the matter dispenses with the need for consideration of that proposition in this case.

Nor did the purchaser make clear the basis for its contention that, if the transfer to it was registered, it would not be registered "free from encumbrances". No basis for such a contention exists. Although a caveat may provide a warning of an encumbrance, it is not itself an encumbrance on registered land. As Barwick CJ said in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529, at 537:

"A caveat against dealings ... is not a defect in a register any dealings ... ."

vendor's title. It is in its nature a notice to the

The only potentially material encumbrances were the interests asserted in the caveats; that is to say, the equitable mortgage asserted by the Commonwealth Bank and the charge asserted by the other caveators. Once the purchaser was registered, it would have been registered "free from encumbrances". Any unregistered encumbrance in favour of either caveator would then be of no significance to the purchaser because it would not be enforceable against it or the land: Rands Development Pty. Ltd. v. Davis (1975) 133 CLR 26, 34-35. There was nothing in the circumstances of this case suggesting that the purchaser could have been required, after registration, to recognize an interest created by the vendor; cf. Bahr v. Nicolay (No.2) (1988) 164 CLR 604, Valbirn Pty. Ltd. v. Powprop Pty. Ltd. [1991] 1 Qd.R. 295; Snow Long Pty. Ltd. v. Choe (1991) 23 NSWLR 198.

In such circumstances, the only legitimate concern of the purchaser at completion was that one or other of the caveats might prevent or delay its registration, or that, whether because of delay or otherwise, such an interest would be successfully asserted before registration of the transfer to it was effected. A purchaser at completion is entitled to "all reasonable protection" against that eventuality (Rands Development, at 34) and, where a caveat is present, "is clearly entitled to refuse to settle until the caveat has been removed or its removal certainly assured.": Godfrey Constructions, at 537.

It may be that neither a caveat nor a withdrawal of a caveat is required to be registered, although the practice in Queensland for many years has been to register caveats which are lodged, perhaps because a caveat is considered to be an "instrument" within the definition in S.3 of the Real Property Act 1861: see Re Scanlan's Application (1887) 3 QLJ 43, 45; cf. also Re Gough [1950] QWN 9. If neither a caveat nor a withdrawal of a caveat is required to be registered, nothing remained to be done to ensure the removal of the caveats in this case.

Even accepting that caveats are registered in practice and that the Commonwealth Bank caveat had been registered, that caveat had also lapsed and nothing remained to be done to obtain its removal. As is noted in Byrne's, "Titles Office Practice", para.9.13, a lapsed caveat is correctly treated as not being able to be withdrawn. The effect of a caveat is, so far as relevant, defined by s.101 of the Real Property Act of 1861, which prohibits registration of an instrument purporting to transfer or otherwise deal with or affect any land, estate or interest to which the caveat relates; but it does so only for as long as "any caveat shall remain in force ...". A caveat which has lapsed is not one which is "in force". On any view, therefore, the Bank caveat could have had no effect on the register at the date of settlement, and could not have prevented registration of the transfer to the purchaser: ex parte Clarke (1891) 17 VLR 82, 84.

The state of affairs resulting from the other caveat was substantially different from that which existed in Cawood, in which the Full Court held that the purchaser was not obliged to complete because of two caveats, one registered and one unregistered, in respect of both of which

withdrawals had been lodged. In Cawood, the caveats were
lodged by the purchaser under an earlier contract of sale to
protect his interest as purchaser. Here, the second caveat
was lodged jointly by one of the vendors and a person
associated with that vendor to protect their interest as
chargees. The vendor's solicitors were acting for the
caveators as well as for the vendors themselves when they
proffered undertakings to attend to any requisitions in
respect of that caveat. Further, the evidence was that,
because that caveat was unregistered, the withdrawal which
had been lodged would be acted on in the same manner as a
letter requesting withdrawal of a caveat. The removal of
this second caveat was therefore also "certainly assured"

Any vulnerability in the purchaser, against which it was entitled to "all reasonable protection" (Rands Development, at 34), really depended upon the possibility that one or other of the caveators would successfully assert the interest upon which its caveat was based before registration of a transfer from the vendors to the purchaser. Any assessment of that risk should take account of factors such as the time likely to be required for registration and the nature and history of the unregistered interests that might theoretically be asserted.

The withdrawal of the Commonwealth Bank caveat, which had been lodged although not registered before the date for completion, reduced to insignificance any risk to the purchaser that the unregistered equitable mortgage referred to in that caveat might be asserted by the Bank in the interval between completion under the contract and registration of the transfer. That equitable mortgage was stated in the caveat to have been dated 1 August 1985. A caveat relating to it had been lodged more than a year earlier and had automatically lapsed three months later. Quite recently, the Bank had executed a withdrawal of the caveat. There was no basis upon which it could reasonably have been contemplated that the interest referred to in the caveat might be asserted against the purchaser by the Bank.

The risk presented by the interest referred to in the other caveat was only slightly more substantial. Neither the caveat nor the withdrawal of the caveat had been registered.

The evidence of a senior examiner from the office of the Director of Freehold Land Titles was that, in the case of an unregistered caveat, a letter requesting withdrawal would be acted upon; and where, as here, a formal but unregistered withdrawal had been provided by solicitors who had originally lodged the caveat, it would be acted upon in the same manner as a letter. As the solicitors for the purchaser knew, the solicitors for the vendor were in possession of instructions from both caveators (one of which was a vendor and the other of whom was a director of that vendor), to withdraw the caveat. There was also an undertaking to answer requisitions upon the withdrawal which had been lodged. In the circumstances, there was no realistic prospect that the caveators would or could successfully assert their interest against the purchaser prior to registration of its transfer.

At the time of settlement the position, therefore, was that the removal of the caveats was "certainly assured"; there was no real risk that the interests referred to in the caveats might be asserted between completion of the contract and registration of the transfer in favour of the purchaser; there were no circumstances that might have prevented immediate registration of the transfers; nor were there any encumbrances to which, after registration, the purchaser's ownership of the lots would be subject. Given these circumstances, there was no basis on which the purchaser was justified in refusing to complete the contract.

The trial judge considered that the question was "very much a matter for judgment at the time of settlement", and he preferred the more "conservative" opinion which was expressed by one of the solicitors called at the trial. However, the obligation on the vendor under the contract was not to match the most extreme requirements which could be formulated in order to eliminate even the most theoretical risk. The purchaser was not entitled to insist, as it did, upon the registration of the second caveat and both withdrawals of caveats before completion, or to insist, in accordance with the evidence given at the trial by the solicitor whose approach was preferred, that it be established that the interests referred to in the caveat could not be asserted before registration of the transfer in favour of the purchaser. In any event, this latter question did not really arise in this case because any obligation which might have existed upon the vendor to put forward other proposals to eliminate or diminish the concerns of the purchaser or its solicitors at completion was excluded by the purchaser's solicitors' insistence upon registration of the second caveat and of both withdrawals of caveat before completion in circumstances where the purchasers were not entitled to require that course. Indeed, the purchaser's insistence on registration of a withdrawal of the lapsed bank caveat was, without more, sufficient to relieve the vendors of the necessity of tendering performance of their obligations.

The vendors were not in breach of their obligations under the contract, and the purchaser was not entitled to terminate the contract as it purported to do.

The appeal must be allowed and the judgments set aside. In lieu, there should be judgment for the defendants on the plaintiff's claim in the action, and a decree of specific performance of the contract dated 18 January 1989 in favour of the defendants against the plaintiff on the defendants' counter-claim. The defendants should have liberty to apply to a judge for further orders to give effect to that decree. The respondent must pay the appellant's costs of and incidental to this appeal and the action to be taxed. There should be a certificate in favour of the respondent under the Appeal Costs Fund Act 1973.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 1818 of 1989
Before the Court of Appeal The President Mr Justice Pincus Mr Justice McPherson
BETWEEN:

ZANEE PTY. LTD.

(Plaintiff) Respondent

AND:

C.G. MALONEY PTY. LTD.

(First Defendant) Appellant

AND:

D.J. CUSSAN PTY. LTD.

(Second Defendant) Appellant

JOINT JUDGMENT - THE PRESIDENT and McPHERSON J.A.

Delivered the 14th day of April, 1992

MINUTE OF ORDER:	Appeal allowed. Judgment below set aside. In lieu, enter judgment for the defendants on the plaintiff's claim in the action, and a decree of specific performance of the contract dated 18 January 1989 in favour of the defendants against the plaintiff on the defendants' counter-claim. The defendants are granted liberty to apply to a judge for further orders to give effect to that decree. The respondent is to pay the appellant's costs of and incidental to this appeal and the action to be taxed. Order that there be a certificate in favour of the respondent under the Appeal Costs Fund Act 1973.
CATCHWORDS:
Counsel:	Mr G. Gibson Q.C. with him Ms. D. Spence for the Appellants
Mr L. Bowden for the Respondent
Solicitors:	Messrs. Lees, Marshall and Warnick for the Appellant Messrs. Brown and Fowler for the Respondent

Hearing Date: 17th March, 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 1818 of 1989
BETWEEN:

ZANEE PTY. LTD.

(Plaintiff) Respondent

AND:

C.G. MALONEY PTY. LTD.

(First Defendant) Appellant

AND:

D.J. CUSSAN PTY. LTD.

(Second Defendant) Appellant

The President
Mr Justice Pincus
Mr Justice McPherson

Reasons delivered by the President and McPherson J.A. with separate reasons by Pincus J.A. on the 14th day of April, 1992

Appeal allowed. Judgment below set aside. In lieu, enter judgment for the defendants on the plaintiff's claim in the action, and a decree of specific performance of the contract dated 18 January 1989 in favour of the defendants against the plaintiff on the defendants' counter-claim. The defendants are granted liberty to apply to a judge for further orders to give effect to that decree. The respondent is to pay the appellant's costs of and incidental to this appeal and the action to be taxed. Order that there be a certificate in favour of the respondent under the Appeal Costs Fund Act 1973.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1818 of 1989

BETWEEN:

ZANEE PTY LTD

(Plaintiff) Respondent

AND:

C.G. MALONEY PTY LTD

(First Defendant) Appellant

AND:

D.J. CUSSAN PTY LTD

(Second Defendant) Appellant

JUDGMENT - PINCUS J.A.

Delivered the Fourteenth day of April, 1992

I have read the reasons for judgment prepared by their Honours propose.

The Commonwealth Bank caveat, claiming an interest under an equitable mortgage, had lapsed well before 28 April 1989, the date on which settlement was to take place under the contract of sale which is in question. The purchaser's solicitors repeatedly, on and before the date of settlement, made it clear in writing that they would not settle unless a withdrawal of the bank caveat, as well as the Cussan caveat discussed below, were registered prior to settlement. That stance plainly could not be justified as to the bank caveat, for at least two reasons.

First, the bank caveat could have no effect on the register, at the date of settlement, as it had lapsed. We were referred to no provision which could entitle the Registrar to refuse to register a dealing on the basis of a caveat which is no longer in force.

It should be noted that here there was no reason to think that the Registrar would treat the lapsed caveat as not having lapsed. The lapse had been noted by the Registrar on the caveat but, owing to an administrative slip, not noted on the certificates of title. I should add that s.39 of The Real Property Act of 1877 uses the word "lapsed" in an intransitive sense; it says that in the circumstances there set out "such caveat shall be deemed to have lapsed". The statute contains nothing to authorise the introduction of a doctrine, inconsistent with this section, keeping the caveat alive until the registered proprietor takes steps to "lapse" the caveat.

The second reason is that registration of a withdrawal of a lapsed caveat can have no significance.

The second caveat, which I call the "Cussan" caveat, gives rise to issues of substance, as the bank caveat does not. But it is important to notice that the purchaser's insistence on registration of a withdrawal of the lapsed bank caveat before settlement was, in itself, enough to relieve the vendor of the necessity of tendering. This is not to say that an assertion that a party is entitled to settle, under a contract of sale, on a basis inconsistent with the contract necessarily entitles the other party to repudiate: D.T.R. Nominees Proprietary Limited v. Mona Homes Proprietary Limited (1978) 138 C.L.R. 423 at 433. The vendors in this case have not attempted to repudiate. They have affirmed and they rely upon the purchaser's insistence on withdrawal of the lapsed caveat as an excuse for not having tendered performance themselves. In my opinion, they are entitled to so rely.

I agree with Fitzgerald P. and McPherson J.A. that, for the reasons their Honours give, the decision in Cawood v. Infraworth Pty Ltd [1990] 2 Qd.R. 114 should be distinguished, with respect to the caveats.

One may be able to postulate various ways in which the purchaser's position here could have been rendered more impregnable. If it were thought that the withdrawal of the Cussan caveat were not a sufficient indication of the caveators' intention, as to the claim to a charge, the vendor might have requested a written assurance from the caveators that the claim was abandoned. It might have sought such an undertaking as was mentioned in Cawood, to apply for removal of the Cussan caveat if for some reason the withdrawal failed to achieve its intended result. Such requests were not made. It is possible that the purchaser's concern was not that it was subject to a risk that the claim of charge might be reasserted, so much as that there was a risk that if the vendors acceded to requests for further undertakings, the purchaser might be obliged to settle.

It appears to me that, had it settled with such security as it was given by the lodgment of the withdrawal of the Cussan caveat, backed by the undertakings of the caveators' solicitors, the purchaser would have been at least as safe as if there had been no Cussan caveat. Had there not been a caveat and withdrawal, the purchaser would not have had available to it, in resisting a claim after settlement by the alleged chargees, the contention that the chargees could not resile from the representation implied by the withdrawal. The circumstances in which a purchaser may be required to hold subject to an unregistered interest created by his vendor have recently been examined in Valbirn Pty Ltd v. Powprop Pty Ltd [1991] 1 Qd.R. 295 and Snow Long Pty Ltd v. Choe (1991) 23 N.S.W.L.R. 198. A purchaser could not be bound if nothing more were shown against it than knowledge that a caveat intended to assert the unregistered interest had been withdrawn.

Some of the evidence went so far as to suggest that, even after registration of withdrawal of a registered caveat based upon an interest created by the vendor, the purchaser's solicitors would be expected to investigate the underlying interest before settling, to ascertain if it still existed. Whether or not that is so, it is clear that the mere existence of an unregistered interest, of a kind which is defeated by registration (for example, an unregistered mortgage), cannot under the standard form of contract entitle the purchaser to refuse to settle.

In my opinion, the presence of a caveat entitles the purchaser to refuse to settle "until the caveat has been removed or its removal certainly assured", in accordance with the dictum in Godfrey Constructions Pty Ltd v. Kanangra Park Pty Ltd (1972) 128 C.L.R. 529 at 537. It is not the law that the presence of a caveat on the title, of itself, entitles the purchaser to refuse to settle. It may be objected that one could never say that the removal of a caveat is absolutely certain. That may be so, just as it is true that a purchaser may be affected by a caveat lodged after settlement, even if the most extreme precautions are taken. It may seem unsatisfactory that there is no simple rule that the presence of a caveat either does or does not entitle a purchaser to refuse to settle; but it is my opinion that if a withdrawal of the caveat has been lodged in such circumstances, including any undertakings offered, as to remove any practical risk to the purchaser, it must settle.

For these reasons, I agree as I have said with the orders proposed by the President and McPherson J.A.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1818 of 1989

Before the Court of Appeal
The President
Mr. Justice Pincus

Mr. Justice McPherson

BETWEEN:

ZANEE PTY LTD

(Plaintiff) Respondent

AND:

C.G. MALONEY PTY LTD

(First Defendant) Appellant

AND:

D.J. CUSSAN PTY LTD

(Second Defendant) Appellant

JUDGMENT - PINCUS J.A.

Delivered the Fourteenth day of April, 1992

MINUTE OF ORDER: Appeal allowed. Judgment below set aside. In lieu, enter judgment for the defendants on the plaintiff's claim in the action, and a decree of specific performance of the contract dated 18 January 1989 in favour of the defendants against the plaintiff on the defendants' counter-claim. The defendants are granted liberty to apply to a judge for further orders to give effect to that decree. The respondent is to pay the appellant's costs of and incidental to this appeal and the action to be taxed.

Order that there be a certificate in favour of the respondent under the Appeal Costs Fund Act 1973.

CATCHWORDS:

Counsel:	G. Gibson Q.C., with him, Ms D. Spence for the Appellants L. Bowden for the Respondent
Solicitors:	Messrs Less, Marshall and Warnick for the Appellant Messrs Brown and Fowler for the Respondent
Hearing Date(s):	17 March 1992