KEYTOWN CONSTRUCTIONS PTY LTD (formerly known as JADESTAR INVESTMENTS PTY LTD)

Torrens land - Caveat - Application for injunction to restrain dealings with land - Contract of sale - Condition subsequent for defeasance - Provision in contract that purchaser would not lodge any caveat - Dispute over alleged termination of contract - Purchaser claiming interest in land

Transfer of Land Act 1893 (WA)

Australian Property & Management Pty Ltd v Devefi (1997) 7 BPR 15,255

Fernandes v Houstein (1963) 4 FLR 355

Hamdan v Widodo [2004] WASC 123

Hewett v Court [1983] HCA 7; (1983) 149 CLR 639

Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140

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

Lintel Pines Pty Ltd v Nixon [1991] VicRp 20; [1991] 1 VR 287

Municipal District of Concord v Coles [1905] HCA 35; (1905) 3 CLR 96

1 EM HEENAN J: On this application I propose: to grant leave to the plaintiff to lodge a further caveat over the subject land claiming an interest in the same, or similar, terms to that of the original caveat; to grant an injunction restraining the first defendant from producing the duplicate certificate of title for registration of any new interest in the land; and, to prevent the second defendant from creating, assigning or disposing of any interest in the subject land until further order. I will also direct that these proceedings be referred for entry to the CMC list and there heard together with the proceedings for specific performance recently commenced by the plaintiff.

2 I will leave it for the Judge dealing with the matter in the CMC list to decide whether there should be joint trials, or consolidation or other concurrent management of the two sets of proceedings. I also direct that notice of these proceedings and of the writ recently issued by the applicant should be formally served upon the purchasers under the second contract of sale which I am about to describe.

3 As these orders involve, to a not insignificant extent, a departure from a number of the assumptions and orders made by Jenkins J at the hearing of an earlier application in this matter brought on urgently on 21 December 2006 when there was very little opportunity for the matter to be fully investigated it seems to be necessary that I should explain, in somewhat greater detail, the basis of the background and the reasons for the slightly different view which I have taken about the appropriate disposition of the proceedings.

4 In doing that I stress that the hearing before Jenkins J involved, as her Honour herself observed, applications brought without adequate prior consultation between the parties and in circumstances where it is clear that her Honour was not referred to relevant authorities which bore on the issues then being dealt with.

5 I will say something of the origin of these proceedings. The initiating process was an originating motion filed on 20 December 2006 and supported by an affidavit. That motion sought extension of a caveat over the subject land in circumstances where the registered proprietor had issued, or had caused to be issued, a statutory notice leading to the lapse of the caveat unless it were to be renewed by order of this Court.

6 The original caveat is number J928136C, lodged on the register book on what appears to be 24 September 2006. It was filed on behalf of the caveator, the present plaintiff, Henry Gerald Betlehem, and it claims:

"An estate or interest in fee simple as purchaser pursuant to a contract of sale dated 28 October 2005 made between the registered proprietor as Seller and the caveator as Buyer of part only (air space) with a fee simple interest in the whole of the land as tenant in common with others, in proportion to the lot entitlements set forth in the Contract of Sale."

7 The registered proprietor is recorded as Jadestar Investments Pty Ltd, which is the previous name of the present first defendant, Keytown Constructions Pty Ltd. The interest claimed (whether in the whole of the land or in part of it, which is something of an issue between the parties) arises from a contract of sale between those parties, being a contract for the sale of land or strata title by offer and acceptance made 19 October 2005 and accepted 28 October 2005 for the sale and purchase of a unit in commercial apartments then planned for construction at 190 Scarborough Beach Road, Mount Hawthorn, for a price of $322,000, of which $16,100 was paid therewith.

8 The special conditions attaching to the contract of sale include condition 4 which is somewhat extensive and of which it is only necessary to mention part. Condition 4.1 provides:

"The Seller's acceptance of this Contract is subject to and conditional upon the Seller being granted all approvals within twelve (12) months of the Date of Contract on terms and conditions to the Seller's absolute satisfaction."

"The Seller's acceptance of this Contract is subject to and conditional upon the Seller entering into contracts for the sale of at least eight (8) Apartments or Units in the Development within twelve (12) months of the Date of Contract upon terms and conditions to the Seller's absolute satisfaction."

9 Condition 4 goes on to identify other terms which would operate to defeat, or terminate the effect of, the contract so it is a contract which is capable of defeasance should any of those conditions subsequent occur.

10 The affidavits establish that on 31 August 2006 the registered proprietor issued a notice of termination of this contract of sale, apparently asserting: that events specified under condition 4 had not been fulfilled; that the contract was thereupon terminable; and, that by that notice it was terminated. Consequent upon that notice the plaintiff lodged the caveat in September 2006, as already mentioned. On 1 December 2006 the registered proprietor filed an application for the removal of the caveat pursuant to s 138B of the Transfer of Land Act 1893 (WA). Next, the application to extend the caveat came before Jenkins J of this Court as an urgent matter.

11 On the return of that application in Chambers without, it seems, any appreciable opportunity to review the matter, the learned Judge was faced with submissions by the first defendant that the caveat could not, or should not, be extended for two reasons. The first of the reasons submitted was that the interest claimed under the caveat, namely, an estate in fee simple, was defective because it was larger, that is, more extensive, than any right which the caveator could legitimately advance under the contract of sale. The rationale for this was a contention that it was an interest as purchaser in part only of the land and not in the whole, so, consequently, the caveat overstated the claim.

12 I have already quoted from passages in the caveat and it seems to me to be very much an open contention whether that submission should be accepted because the description of the interest claimed expressly delineates an interest in part only of the land. Be that as it may, the second reason submitted for a refusal of an order extending the caveat was that the original contract of sale contained a term by which the purchaser had agreed not to lodge any caveat, and the lodgment of the caveat, so it was submitted, was in breach of contract.

13 In these circumstances, counsel appearing for the registered proprietor, the first defendant, submitted that in lieu of an order extending a caveat, an injunction should be granted preventing the registered proprietor from dealing with any interest in the land until further order and conditional upon proceedings being commenced, within a limited time, for the plaintiff to vindicate the interest, if any, which he asserted in the caveat.

14 In the course of argument before her Honour, reference was made by counsel for the registered proprietor to the decision of Hamdan v Widodo [2004] WASC 123, an earlier decision of her Honour dated 9 June 2004, in which her Honour concluded that an assertion of an estate in fee simple by a purchaser under an executory contract of sale was not a claim in respect of which a caveat could be lodged because it was equitable rather than a legal interest. It appears from her Honour's reasons at [21] and [22] that the so-called equity said to support such a claim was only a purchaser's lien, and that such a lien was not applicable in that case where the deposit had been paid to a stakeholder. In the result, in Hamdan's case (supra) her Honour granted an injunction rather than an extension of the caveat. Her Honour was invited by counsel to follow and apply that same decision in the present case, and that was done.

15 As far as I can discern her Honour's reasons for decision in the present case from reading the transcript of the proceedings on 21 December 2006, it does not appear that her Honour refused to extend the caveat because of the alleged discrepancy between the interest claimed and the interest capable of being asserted, although, as mentioned, that was one of the two foundations advanced by the registered proprietor for refusing that relief. Rather, it seems that the extension of the caveat was refused because of the application of the decision in Hamdan v Widodo (supra) and, quite possibly, also because of the existence of the covenant against lodgment of a caveat.

16 I am obliged to say, however, with the greatest of respect, that I am not able to agree with the principles apparently applied on 21 December 2006 or in Hamdan v Widodo (supra). The point in Hamdan v Widodo (supra) which I do not accept is the view apparently taken that a purchaser who, before completion, claims an interest in land under an executory contract of sale and who by his caveat asserts "an interest in an estate in fee simple by reason of a contract to purchase" is thereby overstating his claim by failing to specify expressly that he then has only an equitable interest and not a legal interest in the claimed land. His interest may only be equitable - Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 per Deane J at 665 and Breskvar v Wall (1971) 126 CLR 376, but that has nevertheless long been accepted as sufficient to support a caveat in this form. This has been recognised for many generations and is acknowledged in all the principal textbooks.

17 To cite but a few of the decisions which recognise this principle, there is the decision of the Federal Court of Australia in Fernandes v Houstein (1963) 4 FLR 355. The rule even applies in the case of an interest of a purchaser under a conditional agreement for sale as in Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140, Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 and many other cases, some of which are noted in Professor Butt's 4th edition of "Land Law", at 636 - 637, and in Halsbury's Laws of Australia, vol 22 at par 355-8280, including the decision of the High Court of Australia in Municipal District of Concord v Coles [1905] HCA 35; (1905) 3 CLR 96 per Griffith CJ at 107.

18 It seems to me that there was and remains an arguable case that the plaintiff has a caveatable interest in the subject land and the real question is whether or not the contract was properly or justifiably terminated in reliance on the defeasance provision under condition 4, which I have already mentioned.

19 In relation to the submission that this contract of sale contains a term prohibiting the purchaser from lodging a caveat, but where the purchaser nevertheless lodged a caveat, there is also authority; and I note that this was not brought to her Honour's attention. The accepted rule is that a contractually binding agreement by a person possessing a caveatable interest not to lodge a caveat does not deprive that person of the statutory right to lodge a caveat; although doing so will involve a breach of contract. The court will take the contractual provision into account when deciding whether to make an order extending the caveat and, alternatively, there remains the option of the court enforcing the interest under the contract by an injunction. The authorities which support those propositions are the decision of Nathan J in the Supreme Court of Victoria in Lintel Pines Pty Ltd v Nixon [1991] VicRp 20; [1991] 1 VR 287 and the decision in Australian Property & Management Pty Ltd v Devefi (1997) 7 BPR 15,255 at 15,257.

20 It seems to me that if this caveat was lodged in breach of contract, the principal remedy for the registered proprietor/first defendant would be for damages. While relief by way of extension of caveat might well be refused in circumstances where the existence of a caveat would impede the registration of subsequent encumbrances, such as mortgages vital to the task of constructing the units which were to be erected, nothing of that nature has been suggested in this case.

21 Rather, the situation is that the first defendant, by making this submission, appears to rely on a term in the contract which would deprive the plaintiff of the most effective means of disputing a termination of the contract which the first defendant is intent upon asserting. If it came down to a matter of discretion, on this occasion I would exercise my discretion in favour of the preservation or relodgment of the caveat.

22 To make matters more complicated, the time scale set by the order of Jenkins J on 21 December 2006 for the institution of proceedings by the plaintiff to establish the alleged interest in the land was not observed. By [3] of her Honour's order of 21 December 2006, the plaintiff was required to commence and serve proceedings in this Court for the purpose of determining whether the first defendant validly determined the said unit contract on or before 15 January 2007. Paragraph 4 provided that, should the applicant fail to comply with [3], then the injunction would cease to be of effect.

23 It is apparent that the plaintiff's solicitors attempted to issue a writ to commence the necessary proceedings after the holiday period on 15 January 2007, but, because of some misunderstanding about the fees payable, were not able to file the writ before the registry closed that day. Instead they filed and issued the writ the following day - 16 January 2007 - and the writ has since been served.

24 Once 15 January 2007 passed without any writ having been issued the first defendant/proprietor, who no doubt was keeping a close watch on developments, believed itself free to sell the land. By a second contract for the sale of land or strata title by offer and acceptance, dated 18 January and accepted on 19 January 2007, the first defendant purported to sell the same property to third parties, Mr and Mrs Emmanuel, or their nominee, for $412,500 with a deposit payable in two instalments totalling $20,000. The first defendant now asserts that a binding contract for the sale of the property to the Emmanuels has now been effected and this provides another reason to refuse the relief which the plaintiff is seeking by this application.

25 At an early stage in the argument in these proceedings it became acknowledged as common ground that whether or not the plaintiff had a caveat over the subject land, or whether or not the plaintiff had an injunction to protect the interest claimed, that would not affect the existence or otherwise of the interest in the land claimed by the plaintiff under the first contract but, instead, would leave the plaintiff with less protection to vindicate that interest than he would otherwise have had.

26 Equally, it became apparent and acknowledged in the course of argument on this application that the purported sale of the subject land to the second purchasers would, of itself, not affect the existence or effect of a valid contract for the sale of the same land to the plaintiff, if that indeed is what the first contract is, but rather would leave a situation where the registered proprietor had sold the land to two separate purchasers, resulting, presumably, in a disputed claim for priority as to which of these should be specifically performed, and leaving the loser of that contest in a situation where he or they might maintain a claim for damages against a vendor who sold without being able to deliver a registrable title. It seems that there is looming, as a very real and immediate prospect in this case, the probability that the Emmanuels will assert the validity of their second contract, or attempt to protect it by lodgment of a caveat or, perhaps, by applying to the Court for an injunction. So the imminent progression of this dispute will include an involvement by the Emmanuels, who presumably would seek to support the first defendant's contention that the Betlehem contract has been terminated or, even if it has not, that they should be accorded priority.

27 Because of the very high probability of the dispute between the present parties taking on this added dimension, it seems to me that I am faced with a choice of whether or not to grant a second injunction to the plaintiff to protect his present position (because I am satisfied that the loss of one day at the commencement of the proceedings was caused by an unfortunate mistake which should not go to the destruction of any interest which is claimed) or whether, instead, I should grant leave to lodge a new caveat in the same or similar terms to the caveat which her Honour Jenkins J refused to extend.

28 For the reasons which I have already given I am satisfied that the first plaintiff has an arguable claim to an enforceable interest in the land which is capable of supporting a caveat, notwithstanding that her Honour took a different view. I say that with the greatest of respect to her Honour and with considerable sympathy for the position in which she was placed in dealing with this matter on an urgent basis and without recourse to the authorities which she could otherwise have expected to have been brought to her attention.

29 The advantage of allowing a new caveat to be lodged is that not only does it give notice to the first defendant and to the Registrar of Titles, but it will also constitute notice to the Emmanuels and to all the world of the existence of this disputed, but asserted, unregistered interest in the land.

30 Having regard to the fact that the purported contract of sale to the third parties, the Emmanuels, was entered into by the first defendant so quickly after the somewhat contentious assertion that the protection given by this Court had terminated, and in what should have been the knowledge that the existence of Mr Betlehem's claim could not be eradicated by so simple a measure, it seems to me there is every reason for me to prefer the remedy of caveat to an injunction because of the factor already mentioned that it is notice to all the world of the existence of such a claim.

31 That is the course which I have decided upon, but I shall also couple it with an injunction and direct, as I have already explained, that this matter be entered into the CMC list as a matter of priority and notice of the proceedings be given to the Emmanuels and I will make orders accordingly.