BETWEEN : D&M (AUSTRALIA) PTY LTD (ACN 102 773 722)

Conveyancing - Real property - Caveats - Application for removal of caveat

Transfer of Land Act 1893 (WA) s 138(2)

(These reasons are an edited version of the reasons delivered extemporaneously on 28 July 2008.)

1 On 18 April 2008 the defendant lodged a caveat over land owned by the plaintiff at 1 Dunedin Street, Mount Hawthorn (the property). By originating summons dated 12 June 2008, the plaintiff applies for an order removing the caveat. The plaintiff seeks that the caveat be removed conditionally upon and following the deposit of funds by the plaintiff into a joint interest bearing account set up in the names of the parties' solicitors. For the reasons which follow I accept the substance of the plaintiff's claim, although I do not accept the amounts the plaintiff submits should be deposited in the interest bearing account.

2 The plaintiff filed two affidavits in support of its application, sworn by its general manager Mr Kevin Chen on 11 June 2008 and 24 July 2008. Counsel for the defendant objects to the affidavit of Mr Chen sworn 24 July 2008 for two reasons. First, the defendant says leave was not given to the plaintiff to file a further affidavit, and secondly, the affidavit annexes 27 contracts for sale which have not been stamped.

3 As to the first objection, the content of the affidavit responds to the defendant's evidence and submissions and is therefore relevant to the plaintiff's application. To the extent that any further leave is required by the plaintiff to file Mr Chen's affidavit sworn 24 July 2008, I grant that leave.

4 The plaintiff accepts that the copies of the contracts put before the Court are not stamped, and therefore accepts that those contracts are not admissible.

5 Counsel for the defendant submits that the whole of the affidavit which annexes these contracts is thereby rendered inadmissible. I do not accept that that is so. A number of topics in the affidavit of 24 July 2008 seem to me to be quite distinct from the contracts for sale of the apartments. See, for example, paragraphs 7 and following of the affidavit, although paragraph 14 is inadmissible because it refers to a clause in the contracts for sale.

6 It does not seem to me to be necessary that the contracts of sale be before me and, accordingly, I will proceed to decide the matter. Had I taken a different view, I would have allowed the plaintiff to file a further affidavit which did no more than annex stamped copies of the same contracts. However, because I have formed the view that that is not necessary, I do not propose to condition the orders which I am about to make by the filing of such an affidavit.

7 On 24 January 2006 the plaintiff entered into a building contract with the defendant for the defendant to build 27 apartments on the property. By cl 26 of the building contract, the plaintiff charged the property with due payment to the defendant of all moneys that may become payable to the defendant, by virtue of the building contract or otherwise, arising from the carrying out of the works.

8 On 11 April 2008 the plaintiff served a notice of default under the building contract on the defendant. On 29 April 2008 the plaintiff terminated the building contract. On 5 May 2008 the defendant commenced arbitration proceedings under the building contract. By letter of its solicitors dated 9 May 2008, the plaintiff offered to pay the disputed sum into a trust account and requested particulars of the amount claimed by the defendant builder.

9 On 16 May 2008 the defendant's solicitors wrote enclosing a statement which claimed an amount of approximately $300,000 as being outstanding. Later that month the plaintiff's solicitors wrote offering to pay the disputed sum into a trust account.

10 On 10 June 2008 the defendant's solicitors responded, stating that an amount of just under $347,000 was outstanding. It was also said that further sums totalling $185,000 which reflected further outstanding liabilities should also be covered by the deposited amount. The letter also stated that there were further invoices pending. The letter concluded that the defendant sought immediate payment of the sum of just under $347,000 and the sum of $185,000 into an interest bearing trust account pending the outcome of the arbitration.

11 On or about 16 June 2008 the defendant filed points of claim in the arbitration in which it is the claimant. Its claim for moneys due under the building contract was for the amount of just under $347,000 already referred to. There was also a claim for damages. The damages were not quantified.

12 The plaintiff is intending to sell at least some, if not all, of the 27 apartments which have been constructed, perhaps to an incomplete extent, on the property.

13 On the evidence before me, it is not clear when settlement of the sales of those apartments will be ready to proceed. Settlement will not be able to happen until practical completion has occurred, but settlement will also not be able to happen until strata titles have issued for the development. As I have said, it is not clear on the evidence before me when these steps will be completed so as to allow settlement to occur.

14 Mr Darrell Crouch, a director of the defendant, has sworn in his affidavit that he would not expect settlement to occur before the end of this year. Mr Chen's affidavit dated 24 July 2008 suggests a more optimistic timetable. He says that he is working to a timeline for a planned settlement on 27 August 2008.

15 Even taking Mr Chen's affidavit on its face, and without having regard to Mr Crouch's evidence, what Mr Chen says can be seen as no more than the aim of the plaintiff. Certainly, it is not evidence which would mean that one can be fairly confident that the timeline will be met.

16 What is clear is that two different matters are proceeding in parallel. First, there are arbitration proceedings on foot, and secondly, the plaintiff is pursuing the completion of the development, the issue of titles and the sale of apartments within the development. It is unclear on the evidence when each of those steps will be complete. There is also little evidence as to the likely timing of the completion of the arbitration.

17 It seems to be to be somewhat unfortunate that this matter has required judicial resolution. Each party has proposed what it says is an appropriate means of accommodating both parties' respective interests. It appears that in each case the opposing party has been somewhat hard-pressed to identify any real prejudice flowing from the adoption of the other party's proposed means of proceeding.

18 It might have been hoped that the solicitors may have been able to reach a resolution of the matter. However, that has not proved to be possible.

19 The defendant submits that it has an undoubted caveatable interest in the property arising from cl 26 of the building contract. That is not disputed by the plaintiff.

20 Further, the defendant submits that it would be inappropriate to order the removal of the caveat at this stage. The defendant says the caveat should not be removed unless and until the caveat is preventing a legitimate dealing in the property. However, the defendant accepts that when that point is reached, the caveat should be removed and the defendant's interest could properly be protected by an interest-bearing account in the parties' joint names or in their solicitors' names.

21 The defendant has not pointed to any real or significant prejudice to it, or even the likelihood of such prejudice, were a suitably quantified interest-bearing account be set up at this stage in substitution for the caveat, rather than at the later stage as proposed by the defendant.

22 The defendant's submission would require the matter to come back before the court at a point closer to the settlement process being completed, rather than the court disposing of the matter at this time.

23 The defendant submits, however, that the law favours the course which it proposes. I do not accept that the law requires me to approach the matter in the way advocated on behalf of the defendant.

24 I take the relevant law as to the significance of questions of balance of convenience to be that stated by the Full Court in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50. In that case, Owen J stated that the balance of convenience is a factor to be considered in an application to extend the operation of a caveat. His Honour observed that interlocutory removal of a caveat would be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat.

25 In this case it seems to me that conditional removal of the caveat can be ordered in a way that will protect the benefit of the proprietary interest claimed by the defendant in the caveat. The interest claimed in the caveat is in the nature of a security. The provision of the trust fund seems to me to provide appropriate protection for the defendant's interest.

26 The plaintiff proposed an order that, upon the setting up of a trust account in the sum of just under $347,000, the caveat be removed. However, it seems to me that the full amount of sums claimed by the defendant should be protected. I am not in a position to determine that the claim made for damages in the arbitration proceedings is incapable of succeeding.

27 I note that in the correspondence it was said by the defendant that further invoices would be rendered. However, I also note that there has been no claim in the arbitration proceedings in respect of any further invoices. Nor is there any evidence as to why further claims have not been made in the arbitration.

28 For those reasons, I would make the following orders:

1. Within seven days of the plaintiff depositing into a joint interest-bearing account to be set up in the names of the solicitors for the plaintiff and the defendant the sum of $535,000, pending the final determination of the arbitration brought by the defendant as claimant against the plaintiff as respondent, the defendant withdraw the caveat dated 18 April 2008, lodged in respect of the land being the whole of the land contained in Certificate of Title vol 2616 folio 542.
2. There be liberty to apply upon 48 hours written notice.