[2004] NSWSC 643
Commissioner of Taxes (Qld) v Camphin (1937) 57 CLR 127
Source
Original judgment source is linked above.
Catchwords
[2004] NSWSC 643
Commissioner of Taxes (Qld) v Camphin (1937) 57 CLR 127
Judgment (3 paragraphs)
[1]
Judgment
HER HONOUR: This is an application by summons filed on 3 June 2021 for an extension pursuant to s 74K of the Real Property Act 1900 (NSW) of certain caveats on properties situated on the Pacific Highway at Pymble.
In support of the application, the plaintiff has relied upon an affidavit affirmed 2 June 2021 of its solicitor, Bill Weiping Lee.
The defendant opposes the extension of time for the caveat and has filed an affidavit of its solicitor, Hao (David) Fan, that affidavit being affirmed on 4 June 2021 and has tendered various documents in relation to it.
The background to the application is that the defendant and the plaintiff entered into a joint venture agreement dated 11 March 2021 pursuant to which they set out the terms on which they agreed to participate in an unincorporated joint venture to undertake a project involving the development of the Pacific Highway land. On the same day, they entered into a put and call option deed pursuant to which the defendant granted a call option to enable the grantee to require the grantor to sell the property on the terms of the document.
Relevantly, cll 2.1 and 2.2 of the put and call option deed provide that (Mr Lee's affidavit affirmed 2 June 2021, Annexure I):
2.1 Grant of Call Option
In consideration of payment of the Call Option Fee and the payment of the Encumbrances, the Grantor grants the Grantee an option to compel the sale of the Property to the Grantee on the terms in the Contract.
2.2 Call Option Exercise Period
The Call Option may only be exercised by the Grantee during the Call Option Exercise Period.
The definition of the Call Option Exercise Period makes it clear that it is only exercisable once the Call Option Fee ($1.2 million) has been paid.
Clause 2.3 contains the call option fee payment schedule which acknowledges that a payment of $50,000 has already been paid and the second tranche ($950,000) was due eight weeks after the date of the document.
Clause 7 of the put and call option deed makes clear the interdependency between the put and call option deed and the joint venture agreement.
There was a default notice issued on 16 April 2021 by the plaintiff to the defendant, alleging default under cl 8(m) of the joint venture agreement. Relevantly, cll 8(f) and (m) provide (see Mr Lee's affidavit affirmed 2 June 2021, Annexure H):
8. First Participant's Obligations
…
(f) The First Participant agrees that the Land shall be part of the security required for the Second Participant to enter into a construction loan with a financial institution, at terms reasonably satisfactory to the First Participant, acting reasonably. The First Participant shall not withhold consent unreasonably and execute all necessary documents within one week;
…
(m) For the avoidance of doubt, the First Participant agrees to execute documents necessary for the purpose of obtaining council's approval for development of the Land, and any loan documents provided that the First Participant consents to the terms of the Loan.
The defendant denies that there has been a breach of either of those obligations.
On 1 June 2021, the defendant gave notice of termination of the joint venture agreement, relying upon a failure by the plaintiff to pay the second tranche of consideration due under cl 9(l) of the joint venture agreement and following a default notice that had been issued on 7 May 2021 in relation thereto (Mr Lee's affidavit affirmed 2 June 2021, Annexure J).
Pursuant to cl J of the notice of termination, the defendant terminated, effective immediately, the joint venture agreement, relying on the occurrence of a default event under cl 18.1(a) of the agreement and repeated breaches of the fundamental terms of the agreement.
The termination of the joint venture agreement also operates to terminate the call option deed by reason of the interdependency between the two (put and call option deed, cl 7.1(d)).
On 16 April 2021, the plaintiff lodged a caveat or caveats over the respective properties the subject of the agreements between the parties (see Ex 1 at 112-119). The estate or interest claimed in the land was noted as "restrictive covenant by virtue of agreement" and relied upon the joint venture agreement as supporting that claim. Counsel for the plaintiff quite properly concedes that that is an infelicitously worded caveat at best and that it would be necessary in order properly to notify the caveatable interest that the plaintiff claims for the caveat to be amended (see T 7.40). In this regard, the plaintiff referred to Business Australia Capital Mortgage Pty Ltd v Randwick Nominees Pty Ltd (2004) 11 BPR 21,649; [2004] NSWSC 643 (Business Australia), where Young CJ in Eq, as his Honour then was, suggested in obiter that the Court might have power itself to amend a caveat.
The relevant caveatable interest that is identified by the plaintiff is the right under the put and call option deed to purchase the property. It is noted by counsel for the plaintiff that there may be factual situations in which a put or call option does not give rise to a caveatable interest but it is submitted that where equity would perfect such an interest, such as pursuant to a valid put or call option, an equitable interest will arise and will ground a caveatable interest. Reliance is placed in this regard on Commissioner of Taxes (Qld) v Camphin (1937) 57 CLR 127; [1937] HCA 30 at 132.
The plaintiff maintains, but the defendant denies, that there is a prima facie case that the defendant has repudiated its obligations under the joint venture agreement.
The test that must be applied in determining whether to extend a caveat is similar, at this stage, to that which applies in an application for an interlocutory injunction (see, for example, what was said by Slattery J in Peters t/as Rodd Peters Lawyers v Lithgow Forge Pty Ltd [2010] NSWSC 283 at [35]). What must be shown is that there is a serious question to be tried as to the existence of the caveatable interest and then that the balance of convenience favours the extension of the caveat.
In circumstances where the subject matter is real property, it would ordinarily be assumed that, given the unique nature of real property, damages would not be an adequate remedy.
As to the issue of the serious question to be tried, the first difficulty is that the estate or interest claimed in the caveats, that of a restrictive covenant, is clearly not one that the plaintiffs have. The interest that the plaintiffs, in fact, claim is an interest arising under the put and call option deed.
The argument for the defendant is that there is no serious question for trial as the call option was granted in consideration of payment of the option fee of $1.2 million and the option fee has not been paid in accordance with the tranches that are required under the schedule of payments contained in the put and call option deed. Reference is made to authority that the conditions for exercise or the existence of an option must be strictly complied with. It is noted that when the joint venture agreement was terminated by the defendant the sum of $50,000 that had been paid (as acknowledged in the put and call option deed) was returned. It is noted that the payments were a requirement of the joint venture agreement (see, for example, clause 9(l) of the joint venture agreement).
The defendant argues, that even if the alleged breach of the joint venture agreement that the plaintiff contends has occurred could be established, the plaintiff is not ready, willing and able to pay the consideration required for the Call Option Fee. It is submitted that, in the absence of an offer to make payment of the Call Option Fee (by analogy with claims for relief against forfeiture) the caveats should not be extended. Alternatively, the defendant submits that if there were to be some form of relief against the termination of the joint venture agreement and the put and call option deed, it would be required to be a condition of relief that the plaintiff pay the consideration for the put and call option deed without delay.
The defendant takes issue with the suggestion that any of its conduct has prevented the payment of the Call Option Fee, referring to cll 8(f) and (m) of the joint venture agreement in this regard; and says that there is no issue in relation to breach of an implied obligation to cooperate of the kind considered in Mackay v Dick (1881) 6 App Cas 251.
The detriment to the defendant if the caveat is extended (or, perhaps more accurately, if there is leave granted for the filing of a new caveat or for an amendment to the caveat) is that there has been an offer made by a third party to purchase the property.
The plaintiff has proffered the usual undertaking as to damages in relation to the extension of the caveat and the relief that is sought. A notice to produce was issued to the plaintiff for production of documents relevant to the ability of the plaintiff to secure that undertaking, including a requirement for the most recent financial statement of the company and the most recent bank statements of the company. The answer to that notice to produce was that there was nothing to produce (see T 2).
It is accepted that the plaintiff company is a special purpose vehicle and would not be in a position to make good the undertaking as to damages if called upon. The plaintiff contends that that should not preclude its obtaining relief in the present circumstances and points to the fact that the offer made by the third party purchaser occurred at a time when the joint venture agreement and put and call option deed were on foot.
However, it seems to me that it is unarguable that if, as it appears on its face to be, this is a bona fide offer for purchase of the property, and the defendant loses the benefit of that offer by reason of the extension of the caveat, then there is a real risk that any claim on the undertaking as to damages that might later be able to be made if the plaintiff does not establish its case would be unable to be satisfied. Even though the defendant's counsel says it is possible that there may be loans that would be able to be obtained to secure the undertaking as to damages, he quite fairly says that there is no evidence of that at the moment; and the directors of the company who stand behind the company on this application have not proffered any security themselves.
In the circumstances, balancing those issues, I am of the view that the relief should be refused. I will dismiss the summons seeking an extension of the caveats.
As to the plaintiff's submission, by reference to Business Australia, that the Court may have the power to amend the caveat itself, I note that had the issue had arisen, I would not have amended the caveat; rather I would have given leave for an amended caveat to be filed. In the circumstances, however, I am not satisfied that it is appropriate to do so in given that I would not extend the caveat even if it had properly named the estate or interest that is here claimed.
On the basis that costs follow the event, I will order the plaintiff to pay the defendant's costs of the proceedings.
[2]
Orders
For those reasons, I make the following orders:
1. Dismiss the summons seeking an extension of the caveats.
2. Order the plaintiff to pay the defendant's costs of the proceedings.
[3]
Amendments
18 June 2021 - Amendment to coversheet
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Decision last updated: 18 June 2021