BETWEEN : WILDGUM NOMINEES PTY LTD (ACN 083 179 579)

Caveatable interest - Specific performance - Constructive trust - Equitable estoppel - Indefeasibility - Balance of convenience - Undertaking as to damages by trustee company

Transfer of Land Act 1893 (WA), s 138C

APG Homes Pty Ltd v Primary Creations Pty Ltd [2009] WASC 227

Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty Ltd [2009] FCA 701; (2009) 257 ALR 498

Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604

Bashford v Bashford [2008] WASC 138

BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81

Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246

Citi Nominees Pty Ltd v Fenny [2006] WASC 97

Coates v McInerney (1992) 7 WAR 537

Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd [1985] HCA 13; (1985) 155 CLR 541

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Hilton v Dewi [2003] WASC 117

Horsman v M G Kailis Pty Ltd [2009] WASC 166

Iron Ore Resources Pty Ltd v Argyle Iron Ore Pty Ltd [2009] WASC 20

Jandric v Jandric [1999] WASC 22

Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419

L H K Nominees Pty Ltd v Kenworthy (as Administratrix of the Estate of Lionel Kenworthy) [2002] WASCA 291; (2002) 26 WAR 517

Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584

Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520

Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95

Neate v Parfit [2006] WASC 121

Peyton v Malnis Nominees Pty Ltd [2003] WASC 136

S & E Promotions Pty Ltd v Tobin Bros Pty Ltd [1994] FCA 1109; (1994) 122 ALR 637

Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

1 The first defendant applies to set aside orders made on 4 June 2009 pursuant to s 138C of the Transfer of Land Act 1893 (WA), extending the operation of an amended caveat over certain property being a portion of lot 3 on diagram 34920, being that portion of the land in Certificate of Title volume 1762, folio 697 marked 'Unit 12' on a plan attached to the Heads of Agreement described later in these reasons. I will refer to the whole of the land in lot 3 on diagram 34920 as 'the property', and the portion of the property in respect of which the plaintiff's claimed interest allegedly subsists as 'Unit 12'.

2 The plaintiff had originally applied, by chamber summons dated 2 June 2009, for orders extending the operation of a caveat which it had lodged on 26 August 2008. The summons was in the form of an inter partes summons, showing notice to the first and second defendants. On 2 June 2009, the plaintiff filed its generally endorsed writ in these proceedings seeking final relief with respect to its claimed interest in Unit 12. According to an affidavit of the plaintiff's solicitors, sworn 3 June 2009, the writ and chamber summons were served on the first defendant on 2 June 2009 at its registered office and, on 3 June 2009, the first defendant was notified of the listing on 4 June 2009. The chamber summons came on for hearing urgently on 4 June 2009 accompanied by a certificate of urgency by the plaintiff's solicitor and an undertaking as to damages in the usual form. At the commencement of the hearing on 4 June 2009, the court was informed by counsel for the plaintiff, in effect, that the then solicitor for the first defendant had been notified of the hearing, but that he was unable to attend, and that he had stated that he was content for the matter to proceed ex parte, on the basis that the first defendant, if it were so minded, would apply to set aside any orders made, under a liberty to apply.

3 An order was made on 4 June 2009 extending the caveat in an amended form (the caveat). In an endeavour to accelerate the elucidation and early final resolution of the issues, orders were also made on that day that a statement of claim be filed and served within seven days, and for the proceedings to be entered into the CMC List. Shortly thereafter, the first defendant appointed new solicitors, being those currently on the record for it. Those solicitors also acted for the third defendant in relation to this matter until about 16 July 2009.

4 There was some interlocutory progress in the action after the hearing on 4 June 2009. The first defendant filed an appearance on 12 June 2009, consent orders were made on 25 June 2009 in relation to pleadings and other matters, there was a defence by the first defendant, an amended statement of claim and, most recently, a minute of proposed substituted statement of claim.

5 On 28 July 2009, the first defendant applied, by chamber summons, to set aside the orders of 4 June extending the caveat. Since that time the other registered proprietor, Mr Balston, has been joined as a third defendant.

6 The third defendant appeared, without representation, at the hearing of the first defendant's application on 26 August 2009. He also swore an affidavit, filed by the first defendant, in support of the first defendant's application to set aside the order extending the operation of the caveat.

7 The plaintiff relies on the affidavits of Mr Moser sworn 29 May and 10 August 2009. The first defendant relies on two affidavits of Mr Miller sworn 14 July and 19 August 2009 respectively, and an affidavit of the third defendant sworn 12 August 2009. The plaintiff also filed an affidavit dated 20 August 2009 in relation to its assets and liabilities in connexion with its undertaking as to damages. It filed a further affidavit in that regard on 27 August 2009 in the circumstances described at [76] below. There was no cross-examination on the affidavits.

8 It was common ground between the plaintiff and first defendant on this application that the onus was on the plaintiff again to satisfy the court that the plaintiff's claim has or may have substance. Both counsel referred to Hilton v Dewi [2003] WASC 117.

9 The material background facts are, substantially, not in dispute. Given the nature of the application, to the limited extent that there are differences in the affidavit material, it is inappropriate to try to resolve those differences on the papers. The following recitation of the background facts is derived principally from the affidavit of Mr Moser, sworn 29 May 2009, save as otherwise indicated.

10 The plaintiff and the first defendant entered into a contract to purchase the property on or about 26 April 2007 for $3.5 million ('the April contract'). The terms of the April contract provided for the plaintiff to purchase one undivided half share of the property and for the first defendant to purchase one undivided half share of the property. It was conditional, amongst other things, on development approval being obtained from the City of Fremantle. The April contract required an initial deposit of $10,000 to be paid, plus a further $10,000 deposit to be paid once the purchasers were satisfied that the property could be developed. The initial deposit was paid by the plaintiff, and the further deposit was paid by the first defendant.

11 In June 2007, the first defendant provided the plaintiff with information regarding the proposed development of the property. By letter dated 1 August 2007, the City of Fremantle granted conditional town planning approval to commence development, and referred to the need to obtain a building licence. On or about 16 August 2007, the April contract became unconditional.

12 In late August or early September 2007, according to Mr Moser in his first affidavit, Mr Miller of the first defendant informed him that the first defendant wished to develop the property itself and inquired as to what the plaintiff would seek in return for the transfer of the plaintiff's interest in the property. According to Mr Miller in his first affidavit, Mr Moser for the plaintiff said the plaintiff could not afford to complete its half of the purchase. In his second affidavit, Mr Moser said, in effect, that he was told that finance to complete the purchase would not be available unless he gave a personal guarantee, and Mr Moser was unwilling to provide such a guarantee. In any event, the parties discussed the plaintiff not completing the purchase and the plaintiff indicated that it wanted a factory for its business, and said, in effect, that it would wish to receive one of the larger units from the proposed development.

13 On or about 6 September 2007, the plaintiff and the first defendant executed a document entitled 'Heads of Agreement'. The Heads of Agreement recited the April contract, the fact that each of the plaintiff and first defendant had paid a $10,000 deposit thereunder, and that the plaintiff and first defendant had agreed to certain arrangements in relation to the purchase of the property, and that the Heads of Agreement recorded those arrangements. The Heads of Agreement described the plaintiff as 'Wildgum' and the first defendant as 'LA'. The material terms of the Heads of Agreement are contained in cls 1, 2, 3, 4, 5, 6, 7, 8 and 9:

1. In this agreement 'Parties' means LA and Wildgum and 'Party' is a reference to either of them.

1. The parties are to complete the purchase of the property as tenants in common as to one undivided half share each in accordance with the requirements of the contract and each of them must execute and do all acts and things necessary or desirable to complete the purchase provided that Wildgum shall not be required to contribute any sum towards the purchase price, any GST payable in respect of the purchase price or any stamp duty payable in respect of the conveyance, the payment of the balance in respect of the conveyance, the payment of the balance of the purchase price, any GST and stamp duty being the sole responsibility of LA.

1. In consideration of LA entering into a contract for the sale transfer to Wildgum of the proposed strata titled unit in accordance with clause 5 below, Wildgum is to transfer all of its one undivided half share of the property to LA or its nominee immediately upon completion of the purchase of property ('Settlement') pursuant to clause 2 above for a consideration stipulated by LA at its sole discretion.
2. Each party must execute and do all acts and things necessary or desirable to complete the transfer of Wildgum's interest in the property pursuant to clause 3 above.

Sale Transfer of strata titled unit from LA to Wildgum

1. In consideration of Wildgum fulfilling its obligations under clauses 2 and 3 above LA is to give the strata titled unit numbered 12 on the plan attached hereto and marked 'A' for a consideration stipulated by Wildgum at its sole discretion and within 7 days from the date of this agreement is to enter into a contract with Wildgum for the sale transfer of the unit on the same terms and conditions generally applying to the sale of other units in the proposed strata scheme.
2. Wildgum shall be responsible for the payment of any GST payable in respect of sale transfer of the unit and the stamp duty payable in respect of the conveyance.

1. At settlement LA is to pay or cause to be paid to Wildgum the sum of $10,000 as reimbursement of the amount it has paid as a deposit under the contract within 14 days of this agreement.

1. LA shall be solely responsible for all costs and expenses associated with the completion of the purchase of the property pursuant to clause 2 and the transfer of Wildgum's interest in the property to LA pursuant to clause 3.
2. In reference to clause 5 unit No 12 will be transferred with free and clear title with no encumbrance for now and into the Future.

14 The Heads of Agreement had attached to it a plan showing the proposed location of Unit 12 on the property.

15 Also, in or about early September 2007, Mr Miller of the first defendant provided the plaintiff with a 'Contract for Sale and Strata Disclosure Statement' which appears, on its face, to have been prepared for the purpose of being used for the sale of individual units in the proposed subdivision of the property. I will refer to this document as the 'Strata Sale Terms'. The Strata Sale Terms comprised a standard form REIWA contract for sale, Joint Form of General Conditions for the sale of land, Annexure A, containing special conditions of contract, Annexure B being a proposed strata plan, Annexure C being building plans and Annexures D and E being disclosure statements. The special conditions in Annexure A contained terms to the effect that a contract for the sale of a strata unit was conditional on the registration of a strata plan by 1 June 2009, and that the seller would use all reasonable endeavours to procure registration of the strata plan within the time stipulated (cl 5, Schedule, item 2).

16 According to Mr Miller, on 25 September 2007, the first defendant paid the plaintiff $10,000 by way of reimbursement of the initial deposit under the April contract.

17 Mr Miller also said that on or about 22 October 2007, the first and third defendants executed a selling agency agreement, appointing a real estate agent to sell units on the property 'off the plan'.

18 On or about 25 October 2007 the plaintiff executed, as transferee as tenant in common in equal shares, a transfer form for the sale of the property to the plaintiff and first defendant. The consideration shown on the transfer form was the April contract purchase price, ie, $3.5 million.

19 Also, on or about 25 October 2007, at the request of the first defendant, the plaintiff executed a transfer form, for the transfer of its half undivided share in the property to the third defendant, as nominee of the first defendant. The third defendant signed the transfer form as transferee. The consideration shown on this transfer form was $1.75 million (ie, half the April contract purchase price).

20 On 2 November 2007 settlement occurred pursuant to the April contract. The two transfer forms, one for the transfer of the property to the plaintiff and first defendant as tenants in common in equal shares, and the other for the transfer of the plaintiff's undivided half share to the third defendant, were registered on 5 November 2007.

21 On 11 December 2007, the first defendant and the third defendant executed a partnership agreement for the purposes of property development. The agreement provided that the partnership took effect from 2 November 2007.

22 Since late October 2007, the plaintiff says that it and its solicitors attempted to ascertain the progress of the proposed development of the property, and sought information as to when the first defendant proposed to enter into a contract to transfer Unit 12.

23 Mr Miller says that between 6 November 2007 and 28 February 2009, the first and third defendants applied for, and provided information relevant to obtaining, a building licence. The first and third defendants also dealt with other statutory authorities regarding the development, and entered into a building contract. The first defendant also sought finance for the development and obtained valuations and reports for that purpose in mid to late 2008.

24 On 19 March 2008, the solicitors for the plaintiff provided to the first defendant a draft promissory note, for execution by the first defendant. The draft promissory note was in the sum of $902,000, and the intention was that if Unit 12 was not transferred to the plaintiff, the first defendant should pay the plaintiff $902,000. The promissory note was not executed by the first defendant.

25 On 26 August 2008, the plaintiff lodged a caveat over the first defendant's interest in Unit 12.

26 In January 2009, the plaintiff noticed that the property was being marketed. In March 2009 the plaintiff's searches of the website of the real estate agent marketing the property revealed that a development was under way on a half of the property.

27 On 15 May 2009, the plaintiff's solicitor received a notice from the second defendant under s 138B of the Transfer of Land Act, indicating that the caveat lodged on 26 August 2008, would lapse on 5 June 2009, unless extended.

28 On 2 June 2009, the plaintiff commenced these proceedings seeking, amongst other things, specific performance of the Heads of Agreement.

29 On 13 July 2009, according to Mr Miller's first affidavit, the first defendant wrote to the plaintiff stating, in effect, that if (which was denied) the Heads of Agreement or any contract pursuant to the plaintiff's performance of the Heads of Agreement was binding, the first defendant thereby terminated such contract by reason of the non-fulfilment of the condition requiring registration of the strata plan by 1 June 2009.

30 In response, the plaintiff in this application says that the first and third defendants failed to use reasonable endeavours to achieve registration within the stipulated time. On the question of reasonable endeavours, Mr Miller says in his affidavit:

1. Land Alliance and Balston did all they could to progress the Development prior to the approval of finance. Land Alliance and Balston were ready to, upon the approval of finance, execute contracts for the construction of the Development and obtain a building licence.
2. The NAB has declined to advance finance to Land Alliance and Balston for the Development as Land Alliance and Balston did not obtain pre-sales of strata lots to the extent that the NAB considered satisfactory The NAB will only lend an amount equal to 60% of the value of the Property plus the costs of construction and only in circumstances where Land Alliance and Balston had entered into pre-sales contracts with sales values at least equal to the total amount to be advanced by the NAB.
3. The value of the pre-sales obtained by Land Alliance and Balston was less than 60% of the value of the Property plus construction costs.
4. I have not caused Land Alliance to approach alternative financiers. I have experience in undertaking property developments and obtaining finance for property developments. Based on that experience, I did not believe that any other reputable financier would provide finance for the Development without Land Alliance and Balston first obtaining the same level of pre-sales as that required by NAB.
5. Land Alliance and Balston have not been able to progress the Development because of the lack of finance. No strata plan was registered in respect of the Property by 1 June 2009. As at the date of swearing this affidavit, no strata plan has been registered.

31 There is presently on foot a contract to sell the property to an entity related to Mr Miller. The first and third defendants entered into a contract to sell their respective interests in the property to Seacoast Holdings Pty Ltd (Seacoast) on or about 9 April 2009 (Seacoast contract). The Seacoast contract provided that it was conditional on finance being obtained from Angas Securities Ltd for $2.6 million. Seacoast is a company in which Mr Miller is the sole director. The shares in Seacoast are owned by another company. Mr Miller owns all the shares in that other company.

32 Mr Miller's evidence is to the effect that Seacoast has obtained conditional approval for finance to purchase the property from the first and third defendants from a private financier. He says, in effect, that he first met the private lender in mid-May 2009. In addition, he says Seacoast has obtained approval from National Australia Bank to finance construction. He says that the bank has changed its attitude to financing from the position previously taken when the first and third defendants applied for finance. He says that the change in attitude is because the bank is now only providing finance for construction, whereas previously its exposure would have been both to the financing of the acquisition of the property, as well as to the construction costs. Mr Miller has also said, by reference to certain correspondence which he annexed and to certain discussions with Cardiff Capital Pty Ltd, the agent for the private financier, that there is a serious risk that finance will not be available if the caveat is not lifted, and that there is a serious risk, accordingly, that the sale of the property to Seacoast will not be able to proceed. A letter from Cardiff Capital Pty Ltd dated 19 August 2009 is to the effect that finance may not be available after 2 September 2009.

33 The third defendant is anxious to sell his interest in the property. He has deposed that as the development of the property has not proceeded, he wishes to sell his interest in the property in order to reduce the financial pressures under which he currently finds himself.

34 The relevant principles are not in dispute. They are conveniently summarised in Bashford v Bashford [2008] WASC 138. The first issue is whether the plaintiff has established that there is a serious question to be tried that it has a proprietary interest. It must 'appear from the evidence on the originating summons' that the caveator's claim may ultimately succeed at trial: Jandric v Jandric [1999] WASC 22, [25]; Peyton v Malnis Nominees Pty Ltd [2003] WASC 136, [42]. The second issue is the balance of convenience.

35 The caveatable interest claimed in the caveat is as follows:

The Caveator claims an estate or interest as purchaser in fee simple as to the estate or interest of the above named registered proprietor in the land described above by virtue of its entry into and performance of a written heads of agreement made with the registered proprietor on about 6 September 2007.

36 Until recently, the plaintiff framed its interest as one in respect of the first defendant's (but not the third defendant's) interest in Unit 12, and the caveat, it appears, had been so understood in that way by the first defendant. (See plaintiff's statement of claim and amended statement of claim, first defendant's defence, and par 10 of the first defendant's written submissions dated 13 August 2009). By its recent minute of proposed substituted statement of claim of August 2009 (minute) the plaintiff seeks to allege that the third defendant also became a party to the Heads of Agreement, and/or that a constructive trust arose whereby the interests of both the first defendant and the third defendant in Unit 12 are held on trust for the plaintiff.

37 In the minute, the plaintiff contends that the plaintiff and the first and third defendants had a 'common intention' that the plaintiff would transfer its interest to the third defendant and that the plaintiff would not 'demand' that the third defendant pay the $1.75 million consideration shown on the face of the transfer form, provided the first and third defendants would complete the development of the property and transfer Unit 12 to the plaintiff. The minute also alleges that at some undisclosed time, the third defendant 'ratified and agreed to be ... bound by' the Heads of Agreement. The basis for the plea is said to be the 'common intention', the entry into the partnership agreement, and the conduct of the first and third defendants between 2 November 2007 and June 2009, by which they provided 'off the plan contracts' to potential purchasers, including the plaintiff, and went about the process of getting the property ready for development and marketing it. I note here that the plaintiff gave no evidence that it was provided an 'off the plan contract' by the first and third defendants between 2 November 2007 and June 2009.

38 It is convenient to record here that, at the hearing on 26 August 2009, the first defendant raised an issue as to the proper construction of the caveat. The words 'registered proprietor', where they first appear in describing the interest claimed, are, on one view, wide enough to refer to both the first and third defendants. On the other hand, those words, where they next appear, direct attention to the first defendant as the party to the Heads of Agreement made on or about 6 September 2007. The latter reference would indicate that the first reference should be read as though the word 'first' appeared between the words 'above' and 'named'. The potential ambiguity does not ultimately assume determinative significance in the disposition of this application because, on either construction, the same issues are raised for consideration and resolution, and the third defendant has been joined and heard on this application.

The first issue - a serious question to be tried?

39 In considering whether there is a serious question to be tried, the evidence discloses, in my view, the following arguable propositions with respect to the legal relationship between the plaintiff and first defendant.

40 First, the Heads of Agreement constitutes a binding contract.

41 Secondly, by the Heads of Agreement, it was agreed (on its proper construction, including by necessary implication), in effect, that:

(a) the first defendant would provide or procure payment of the whole of the purchase price, and be liable for the deposit and all incidental expenses associated with the completion of the purchase of the property under the April contract;

(b) the plaintiff would, for the purposes of settlement of the purchase, join with the first defendant in executing a transfer of land form recording the transfer of the property to the plaintiff and first defendant as tenants in common in equal shares;

(c) the plaintiff would execute a further transfer of land form, this time as transferor, for the purpose of transferring its undivided half share in the property to the first defendant or its nominee for a consideration stipulated by the first defendant;

(d) upon execution of the transfers in subparagraphs (b) and (c) above, the first defendant would sell or procure the sale of Unit 12 by a contract to sell Unit 12 to the plaintiff, for a consideration stipulated by the plaintiff, and otherwise on the terms set out in the Strata Sale Terms, including terms to the effect that the sale would be conditional on approval of the Western Australian Planning Commission, and the registration of a strata plan by 1 June 2009;

(e) insofar as the first defendant directed the plaintiff to transfer its half share to a nominee of the first defendant, the first defendant would procure the nominee to join in the contract of sale for the transfer of Unit 12 referred to in subparagraph (d).

42 Thirdly, at least upon performance of the plaintiff's obligations under subparagraphs (b) and (c) above, the obligations undertaken by the first defendant in subparagraphs (d) and (e) above were, prima facie, capable of enforcement by injunction and/or specific performance, subject to any applicable discretionary defences: Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419; Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604, 611 - 612, 645 - 646. The plaintiff has a caveatable interest commensurate with its entitlement to such equitable relief: Horsman v M G Kailis Pty Ltd [2009] WASC 166, [104].

43 Fourthly, a discretionary defence which might arise is if the first defendant directed the plaintiff to transfer to a nominee who was not either a bare trustee for the first defendant, or an entity controlled by the first defendant. If the nominee were an arm's length third party who had acquired a 50% undivided interest in the property and who refused to join in the sale to the plaintiff despite request by the first defendant, the first defendant's promise to procure the sale of Unit 12 would (subject to the fifth point below) probably be impossible to perform, the breach of which would probably only sound in damages. No such impossibility would probably arise if the nominee were a bare trustee for, or an entity controlled by, the first defendant. (I interpolate here that, at the hearing on 4 June 2009, there was no evidence that the third defendant had intimated to the plaintiff that it would not, upon request by the first defendant, join in a sale of Unit 12 to the plaintiff. The inference was open that the first defendant had simply failed or refused to request the third defendant to join in the sale.)

44 Fifthly, the fourth point is subject to a qualification. There would be no impossibility if the third party nominee (ie, the third defendant) bound himself by contract to join in the sale of Unit 12 to the plaintiff, or otherwise conducted himself so as to create a personal equity in favour of the plaintiff by which the third defendant was bound in equity to recognise the rights created by the Heads of Agreement for the sale of Unit 12 to the plaintiff, providing that any such equity was not inconsistent with the principle of indefeasibility under the Transfer of Land Act: see Bahr v Nicolay (613, 616 - 617, 637 - 639, 652 - 656).

45 Sixthly, if the third defendant had created such a personal equity, the plaintiff's claimed equitable interest would run not just against the first defendant, but also against the third defendant.

46 Seventhly, the third defendant's registration of the plaintiff's transfer to him, simply with knowledge of the first defendant's agreement to sell Unit 12 to the plaintiff, would not constitute fraud for the purposes of the indefeasibility provisions of the Transfer of Land Act: Bahr v Nicolay (613 - 614, 630 - 631, 654).

47 In light of the above, it is necessary to consider the third defendant's position with respect to his acquisition of the plaintiff's interest in the property. The third defendant says that as the property has not been developed, he would not join in any contract to transfer Unit 12 to the plaintiff, although had the development proceeded, he may have voluntarily participated in the transfer. His evidence is to the effect that in acquiring the plaintiff's interest in the property, he was not acting as a bare trustee for the first defendant. He said that he, together with the first defendant, jointly borrowed money from the National Australia Bank to finance the completion of the purchase of the property pursuant to the April contract. National Australia Bank registered a mortgage over the property on the same day as the transfers were registered, ie, 5 November 2007. The third defendant also says in his affidavit:

1. In or about October 2007 I was undertaking a development on North Lake Road with John Miller. Mr Miller asked me if I wanted to jointly undertake a development of the Property with him. After some hesitation, I agreed to buy a one half share in the Property and undertake a development of the Property jointly with Mr Miller, through his company Land Alliance.
2. There was no written agreement between Land Alliance and me for my purchase of a one half interest in the Property. Mr Miller and I had discussions to the effect that I would buy a one half interest in the Property for the price of $1,750,000 and that Land Alliance [and] I would jointly undertake development of the Property.
3. Mr Miller said to me words to the effect that he had agreed that Land Alliance would give a unit to be created from the development of the Property to the plaintiff. Other than Mr Miller telling me this, I had no discussions with Mr Miller regarding that agreement. At no time did Mr Miller ask me to agree to join in the transferring of the unit to the plaintiff or tell me that my agreement with Land Alliance, or my purchase of a one half interest in the Property, was conditional upon me joining in the transfer of the unit to the plaintiff. I never said to Mr Miller that I would join in the transfer of a unit to the plaintiff.

48 The first defendant's solicitors, in a letter to the plaintiff's solicitors dated 16 July 2009 said:

1. Whilst Mr Miller disclosed to Mr Balston the nature of Land Alliance's agreement with your client, Land Alliance did not agree with Mr Balston for Mr Balston to join with Land Alliance in conveying any strata lot to your client. Indeed, Mr Miller and Mr Balston never discussed Mr Balston joining in the transfer of any strata lot to your client.
2. As your client is well aware, Mr Balston has never entered into any contract with your client.

All of the above facts will be verified on oath by Mr Miller.

49 Mr Miller, in his affidavits, did not, however, verify on oath his conversations or communications with Mr Balston in relation to the matters set out in the first sentence of par 4 of the above letter.

50 The plaintiff, in its evidence, does not suggest that it had ever communicated with the third defendant. Nor is it said that it had been given to understand, when it entered into the Heads of Agreement, that the first defendant was acting, or purporting to act, as agent either for the third defendant or for a partnership between the first and third defendants. The plaintiff does not suggest that it knew of the existence of the third defendant as at 6 September 2007. The plaintiff says, with reference to an email Mr Moser received from the first defendant on 10 October 2007 (par 28 Mr Moser's first affidavit), that it understood that a 'new investor' would be the first defendant's nominee and would ultimately acquire the plaintiff's interest in the property.

51 The evidence discussed above leads to a consideration of a further question raised in submissions, namely, when the first and third defendants first entered into partnership to develop the property. The written agreement dated 11 December 2007, provided, in effect, that the partnership was deemed to have commenced as and from 2 November 2007. A partnership in these circumstances may, at least arguably, commence prior to the execution or operation of the written partnership agreement: see Lindley and Banks on Partnership 18th ed (2002), pars 2-02 and 2-024. To the extent that there was an oral agreement prior to 2 November 2007, that agreement was at least arguably, not required to be in writing: Fletcher K L, The Law of Partnership in Australia 9th ed (2007), par 3.75.

52 The third defendant (par 4 of his affidavit) says that he orally agreed with Mr Miller of the first defendant to buy a one-half share in the property and undertake a development of the property, in or about October 2007. The plaintiff, by its counsel, said that the evidence did not sustain an allegation that the first defendant entered into the Heads of Agreement as agent for the partnership on 6 September 2007. The plaintiff's counsel also said, however, that it may be inferred that a partnership arguably existed, at the latest, by 22 October 2007, when the first and third defendants instructed real estate agents to sell the units 'off the plan'. I accept that submission.

53 Even if a partnership did exist as at 6 September 2007 and the first defendant had entered into the Heads of Agreement as agent for the partnership, the agency relationship would have been that of agent and undisclosed principal, if the plaintiff was not aware of the potential involvement of a new investor as at 6 September 2007. Mr Moser does not suggest that he was so aware at that time.

54 Moreover, in this case, the Heads of Agreement is not, in my view, a contract capable of being interpreted as being entered into by the first defendant on behalf of an undisclosed principal. The terms of the Heads of Agreement, including cl 1, the obligations on the 'parties' to complete the purchase of the April contract in cl 2, and the obligation on the plaintiff to transfer its interest to the first defendant or 'its nominee', for a consideration in the 'sole discretion' of the first defendant, make it clear, in my view, that on its proper construction, the Heads of Agreement was a contract between the plaintiff and the first defendant alone. At most, even if a partnership were in existence as at 6 September 2007, the first defendant may have entered into the Heads of Agreement on trust for the partnership. In that regard, the first defendant would not have brought the partnership (even if it then existed) into a contractual relationship with the plaintiff. See Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd [1985] HCA 13; (1985) 155 CLR 541, 545 - 546.

55 For these reasons, the plaintiff has not shown a serious question to be tried that the third defendant was a party to the Heads of Agreement at inception. Nor is a novation alleged. Moreover, the mere fact that the Heads of Agreement contained a nominee provision does not, without more, signify that the nominee (relevantly, the third defendant) became a party to the Heads of Agreement: Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty Ltd [2009] FCA 701; (2009) 257 ALR 498, [9]; Citi Nominees Pty Ltd v Fenny [2006] WASC 97, [47] - [52].

56 The suggestion in the minute that the third defendant 'ratified' the Heads of Agreement assumes that the Heads of Agreement was entered into as agent for the partnership, yet it is not contended that the evidence discloses that a partnership was then in existence and, as I have said, the terms of the Heads of Agreement do not permit the conclusion that it was entered into on behalf of an undisclosed principal. The doctrine of ratification is, in any event, inapplicable to undisclosed principals: Bowstead and Reynolds on Agency 16th ed (1996), par 2-059.

57 The plaintiff had, in its written submissions, placed reliance on s 13 of the Partnership Act 1895 (WA). That provision provides, relevantly, that an act or instrument relating to the business of the firm 'done or executed in the firm-name, or in any other manner showing an intention to bind the firm' is binding on the firm and all its partners. The Heads of Agreement does not meet those criteria. The plaintiff also relies on s 16 of the Partnership Act, which provides, in effect, that partners are liable for the debts and obligations 'of the firm' incurred whilst they are partners. Reliance on this provision by the plaintiff assumes, rather than arguably demonstrates, that the Heads of Agreement created obligations 'of the firm'.

58 The plaintiff also relies upon the doctrine of part-performance. The doctrine of part-performance is, however, an equitable doctrine which, when it applies, precludes a party to a contract which was required to be in writing from taking unconscientious advantage of the Statute of Frauds. It does not assist the plaintiff in establishing that the third defendant entered into a contract with the plaintiff by which it agreed to transfer Unit 12 to the plaintiff. In any event, alleged acts of part-performance must be such as could be done with no other view than to perform some contract of the general nature of that alleged: Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520, 540, 556 - 558. In this case, the acts of 'part-performance' relied upon are, in substance, the first and third defendants' conduct in preparing the property for development and marketing it. That conduct is equally, if not more, referable to the development of the property for the purposes of the first and third defendants' partnership.

59 Accordingly, I am unable to discern an arguable case that the third defendant was or became a party to the Heads of Agreement.

60 The plaintiff also contends for a constructive trust arising from the alleged 'common intention'. The minute alleges (par 21):

1. Further, or in the alternative, pursuant to the Common Intention [the] First and Second [sic Third] Defendants hold that part of the Land comprised by Unit 12 on constructive trust for the Plaintiff.

61 The alleged 'common intention' assumes that the plaintiff was somehow entitled to 'demand' payment of $1.75 million referred to in the transfer form (see [37] above). In my view, it is plain that there was never any intention for the third defendant to pay the plaintiff $1.75 million. Such an intention could not have been contemplated as it was never intended that under, or following the execution of, the Heads of Agreement, the plaintiff would itself be required to pay $1.75 million to complete the purchase. Rather, the intention was that the third defendant, and not the plaintiff, would assume the benefits of, and discharge the plaintiff's executory obligations under, the April contract. One important consequence of the Heads of Agreement for the plaintiff was that it was no longer obliged to perform the April contract. It thereby, in effect, avoided a potential for default under the April contract, bearing in mind that Mr Moser was unwilling to give a guarantee to secure the borrowing to complete the purchase. Accordingly, I am unable to see how the 'common intention' alleged in the minute could arguably give rise to the constructive trust alleged in the minute.

62 Nevertheless, in oral submissions, the plaintiff seemed (as I understood it) to put a different argument, to the following effect. The third defendant had, by 25 October 2007, knowledge of the Heads of Agreement, either by reason of what he was told by the first defendant (see [48] above), or because knowledge would be imputed to him by reason of a then existing partnership (see [52] above). By procuring the plaintiff's execution of the transfer form, with knowledge of the Heads of Agreement, and without communicating to the plaintiff that he did not agree to a transfer of Unit 12 in accordance with the Heads of Agreement, the third defendant, it may be inferred, undertook to be bound by the Heads of Agreement, or, by his conduct, impliedly acknowledged or represented to the plaintiff that he would be bound by the Heads of Agreement. On this basis, as I understand it, the plaintiff contends that there is an arguable constructive trust of the kind, or at least similar in kind to the one, discussed by Toohey and Wilson JJ in Bahr v Nicolay at 638 - 639. See also Binions v Evans [1972] 1 Ch 359, 368 - 369.

63 The plaintiff submitted that Mr Miller's affidavit evidences the fact that there was such an undertaking or acknowledgement. In Mr Miller's first affidavit, he attached what he said was a 'table of pre-sale contracts, that were entered into by Land Alliance [the first defendant] and Balston [the third defendant]'. The table includes a reference to 'Franz', being (it is to be inferred) Mr Moser of the plaintiff, as a buyer of Unit 12. In response, counsel for the first defendant submitted that, unlike other entries in the table, the table does not record 'Franz' as having executed a contract. That fact, however, does not seem to me to be of any real significance in favour of the first defendant, given that the plaintiff's case is that it has sought, unsuccessfully, to have a contract executed in its favour for the sale of Unit 12. At this interlocutory level, I think the table does arguably provide some evidence of an acknowledgement of the kind submitted by the plaintiff.

64 The plaintiff, in oral submissions, also mentioned, fleetingly, that an estoppel was 'open' on the evidence. The plaintiff did not condescend to any particularity for this proposition, but I would observe that the argument in oral submissions referred to above could conceivably be characterised as pointing to an alleged equitable estoppel: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 406 - 407, 462 - 463; The Commonwealth v Verwayen (1990) 170 CLR 394, 444 - 445; S & E Promotions Pty Ltd v Tobin Bros Pty Ltd [1994] FCA 1109; (1994) 122 ALR 637, 653 - 654. If, by his conduct, the third defendant created an estoppel in equity whereby he was precluded from denying that he would be bound by the Heads of Agreement, the third defendant would, at least arguably, be a 'primary wrongdoer' in the sense discussed by Pullin J in L H K Nominees Pty Ltd v Kenworthy (as Administratrix of the Estate of Lionel Kenworthy) [2002] WASCA 291; (2002) 26 WAR 517, [289], as approved by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, [195].

65 An estoppel claim would require consideration of detrimental reliance. The benefit to be obtained by the plaintiff from performance of the Heads of Agreement was described by counsel for the plaintiff as a 'success fee' worth approximately $900,000 and that it was not uncommon for a 'finder' to take such a fee. That description is consistent with the proposal in 2008 for the first defendant to execute a promissory note in favour of the plaintiff for $902,000. As noted above, the plaintiff was reimbursed for the $10,000 which it had paid by way of initial deposit to the vendors under the April contract, and it was not required to meet any expenses with respect to the completion of the April contract. It was also relieved from the potential for default under the April contract. There is no evidence that it incurred any material holding costs, or suffered any lost opportunity costs, as a result of its entry into the April contract. Whilst the plaintiff was, clearly, promised the benefit of Unit 12 (as a 'success fee', as it was put by counsel for the plaintiff), a failure to fulfil a promise does not of itself amount to unconscionable conduct: Waltons Stores v Maher, 406. In these circumstances, it seems to me that the establishment of the detrimental reliance aspect of an estoppel claim would be attended by some real doubt. These matters would also, in my view, provide context to the consideration of unconscionability in relation to the constructive trust argument referred to above.

66 On balance, I would conclude that the arguments referred to in the preceding four paragraphs of these reasons are sufficient to demonstrate that there is a serious issue to be tried as to whether the third defendant is bound in equity to recognise the rights created by the Heads of Agreement for the sale of Unit 12 to the plaintiff. However, the prospects of establishing such an equity, as things currently stand before me, could not be described as particularly good.

67 The first defendant next submits that any contract as alleged is, in any event, terminated by virtue of the failure to obtain registration of a strata plan by 1 June 2009. The plaintiff, in response, submits that the first defendant failed to use reasonable endeavours to register the strata plan. The first defendant accepts that if there was a breach of the obligation to use reasonable endeavours, it would be precluded from terminating the contract on the basis that registration had not been obtained within time. The parties referred to Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, 441; Neate v Parfit [2006] WASC 121, [67]. Both parties were given the opportunity to file supplemental written submissions on this issue, in the context of strata subdivision under the Strata Titles Act 1985 (WA).

68 The first defendant submits that, having regard to ss 4, 5, 5B, 22 and 23 of the Strata Titles Act, no strata plan could be registered until the building had been constructed. It also submits that construction could not start until funding was advanced, and funding could not be obtained because sufficient pre-sales of subdivided lots were not obtained. In my view, these matters raise difficult questions of fact, including issues as to the availability of finance in the commercial property market in Western Australia in the wake of the financial turbulence of late 2008 and early 2009.

69 I am not satisfied, on the evidence, that the first defendant's asserted termination provides a clear defence to the plaintiff's claim. To my mind, it cannot be said that there is no issue to be tried in relation to Mr Miller's inability to secure finance for the partnership particularly when he demonstrated an ability, apparently shortly after his unsuccessful efforts on behalf of the partnership, to obtain a combination of private lending and bank finance for Seacoast (in effect, his own company) to acquire the property and undertake its development.

70 I turn now to the balance of convenience. In the exercise of the court's discretion, the balance of convenience is a relevant factor. There is no rule of law that once an arguable case for a caveatable interest has been established, removal of the caveat will only be ordered if it is shown that the 'circumstances are so unusual' that the caveat should be removed. The discretion is to be exercised having regard to the particular circumstances of the case. See Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95, [20] - [22], [29].

71 The apparent weakness or strength of the caveator's case is a relevant consideration in the balance of convenience or the risk of injustice: Bashford v Bashford, [104].

72 As indicated above, the plaintiff's counsel described the benefit to be obtained by the plaintiff under the Heads of Agreement as a 'success fee'. On the other hand, Mr Moser of the plaintiff said in his first affidavit that he had been attracted to the property because it was large scale, commercially zoned and was in an ideal location for the plaintiff's business to operate. Mr Moser has not, however, described or provided details as to why the location of the property was ideal for the operation of the plaintiff's business, despite these matters being entirely within the knowledge of Mr Moser. Mr Moser's evidence is, to that extent, somewhat superficial.

73 Another factor relevant to the balance of convenience is the value of the plaintiff's undertaking as to damages: Iron Ore Resources Pty Ltd v Argyle Iron Ore Pty Ltd [2009] WASC 20.

74 At the hearing on 26 August 2009, the plaintiff's evidence was to the effect that the plaintiff was a trustee company for the Moser Family Trust. According to its unaudited balance sheet as at 30 June 2009, it had net assets of approximately $119,000. Non-current assets included goodwill of $75,000, and plant and equipment of $54,000. I think it may be inferred that goodwill and plant are unlikely to provide any practical security for the purposes of the enforcement of the undertaking. The trust holds no assets by way of real property. Under the Moser Family Trust deed, Franz and Debra Moser, as appointors, may change the trustee of the Moser Family Trust at any time. The trust deed also confers wide discretionary powers on the trustee in relation to the distribution of income and advances and payments to beneficiaries. The beneficiaries include Franz and Debra Moser.

75 Prior to the hearing on 26 August 2009, the first defendant, in written submissions, submitted that, as the assets of the plaintiff were held in trust for the beneficiaries of the Moser Family Trust and its solvency depended on its right as trustee to indemnity, it was necessary to have in mind the difficulties that would be faced in attempting to enforce the undertaking as to damages and, in that regard, it would be reasonable and just to treat the plaintiff as though it were without assets to meet any such liability. The first defendant referred to Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584, 46, 729 and BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81, [14] - [17] in support of these propositions. See also Iron Ore Resources Pty Ltd v Argyle Iron Ore Pty Ltd, [40] - [44]. The plaintiff provided no submissions as to the sufficiency of its undertaking.

76 At the hearing on 26 August 2009, the plaintiff was directed to file and serve by 1 pm on 27 August 2009, any supplemental material which it wished to place before the court, including submissions, in relation to an undertaking as to damages. The first and third defendants were also directed to file and serve any responsive submissions in respect of such material, by 1 pm on 28 August 2009. The plaintiff, pursuant to that direction, filed an affidavit of Mr Moser sworn 27 August 2009 in which he deposed that the net assets of the plaintiff have increased by $45,000 by the issue of shares. The plaintiff did not, however, take the opportunity, as directed, to file any submissions dealing with the undertaking. The first defendant, pursuant to the direction, filed submissions to the effect that there was insufficient evidence that Mr Moser had actually paid the $45,000 referred to in his affidavit and that, in any event, the undertaking remained inadequate, given the trustee status of the plaintiff and the fact that, if called upon, the undertaking could be required to meet the loss or damage suffered by the first and third defendants, or Seacoast, if the $2.6 million transaction with Seacoast were jeopardised.

77 Whilst I do not accept that the plaintiff has not put on sufficient evidence to show the payment of $45,000 in subscription for shares in the plaintiff, I accept the first defendant's submissions that, in light of the plaintiff's trustee status and the provisions of the Moser Family Trust, and, in any event, having regard to its relatively meagre balance sheet, the plaintiff's undertaking as to damages is inadequate in these circumstances. Whilst any subsequent change in trustee would not deprive the plaintiff of its accrued right of indemnity (see Coates v McInerney (1992) 7 WAR 537), the potential for removal at the behest of Mr and Mrs Moser adds, I think, to the unsatisfactory nature of the plaintiff's undertaking.

78 In my opinion, the evidence discloses a serious issue to be tried, but the plaintiff's case, as things now stand, is not strong. On the balance of convenience, there is some evidence that Unit 12 has particular significance to the plaintiff, but the evidence is rather superficial. There is also evidence that in 2008 the plaintiff was prepared to accept a promissory note as security for its benefit under the Heads of Agreement, which tends to suggest that damages are not an inadequate remedy. In addition, the plaintiff's undertaking as to damages is not adequate (and the plaintiff has not advanced any submissions to suggest otherwise). Taking everything into account, the balance of convenience favours the setting aside of pars 1, 2 and 3 of the orders made on 4 June 2009 in relation to the caveat and I would so order.

79 Three other matters require mention. One is that the first defendant contended that the orders made on 4 June 2009 affected the third defendant, and they should be set aside for having been made in his absence. In my opinion, s 138C, by its terms, permits orders to be made ex parte.

80 Secondly, the first defendant submits that an ex parte order under s 138C can only be made for a fixed period as an 'interim order', and not until further order. The consequence, so the first defendant submits, is that there was material non-disclosure if that limitation was not drawn to the court's attention on 4 June 2009. Even if there were, relevantly, material non-disclosure, I would not, in the circumstances outlined in [2] - [4] above, exercise my discretion to set aside the orders on that basis.

81 The third is that the plaintiff, on 28 August 2009, filed written submissions going well beyond the matters in respect of which leave had been given to file supplemental submissions. It is inappropriate to raise matters without leave once the hearing has been concluded: Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246, 258; APG Homes Pty Ltd v Primary Creations Pty Ltd [2009] WASC 227, [110].