Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd

Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd - [1972] HCA 36 - HCA 1972 case summary — Zoe

[20]

It is perhaps difficult to apply to the examination of title to land held under the Real Property Act all the concepts current in connexion with the examination of title to land held under common law title. A vendor of a fee simple of which he is the registered proprietor does not face the uncertainties of title which might obtain in the case of land held under common law title. He should have no difficulty in showing title or of making it. If there is a caveat lodged against dealings with his land, he must know of it at the time he sells unless he should chance to sell in the interval between the lodgment of the caveat and the Registrar's notification of it to him pursuant to s. 97 (1) of the Real Property Act. Consequently, the occasions for resort to cases decided on sales on land held under common law title must indeed be rare in the case of sales of land held under Torrens title. But, nevertheless, I think that it is possible to maintain the distinction between an objection to title and an objection to conveyance in respect of land held under the Real Property Act. An objection to title involves an assertion that there is a defect in the vendor's title to the estate in the land which he has sold. An objection or requisition as to conveyance is an objection or requirement as to the form of the memorandum of transfer as, for example, the absence of or the need for parties to join in the transfer. But solicitors are accustomed, it seems to me, to make both demands and inquiries which cannot be fitted into either of these categories. Some of these requisitions may relate to structures on the land or to physical features connected with it which may not accord with the contractual terms as, for example, the connexion of water or sewerage services through common facilities. These are, in my opinion, truly requisitions demanding something of or some action on the part of the vendor. Other "requisitions" are merely inquiries for information. Some of this information the purchaser might have been able to ascertain by his own endeavours: perhaps he really seeks the vendor's admission of the facts. Then, it seems to me, that there are other so-called "requisitions" which are no more than reminders to the vendor of his obligations under the contract. Paragraphs 2 and 33 of the appellant's requisitions in this case, in my opinion, form a good example of this class of so-called "requisition". They are not objections to title nor demands as to the form of conveyance, nor do they relate to the physical condition of the land or the structure thereon. They do no more than remind the vendor of what is expected of him according to the terms of the contract as a performance of his obligations. The respondent's answers to requisitions so treated them.

[37]

The events which led to the suit may be stated as follows. On 31st October 1969 the respondent agreed to sell certain land, of which it was the registered proprietor under the provisions of the Real Property Act, to one Doris Parkinson. According to an allegation made by the respondent in a subsequent suit between it and Doris Parkinson, the respondent gave notice on 12th May 1970 calling on her to complete the agreement on or before 2nd June 1970. On 4th June 1970 Doris Parkinson lodged a caveat. On 17th June 1970 the respondent purported to rescind its contract with her. On 25th June 1970 it entered into the contract which is the subject of the present proceedings. I shall refer later to some of the terms of that contract. On 10th July 1970 the respondent's solicitors gave formal particulars of title. On 31st July 1970 Doris Parkinson commenced a suit against the respondent for specific performance of the agreement of 31st October 1969. On 6th August and 17th August 1970 the respondent entered an appearance and put on a statement of defence and counterclaim, by which it sought a declaration that that agreement had been duly rescinded. On 27th August 1970 the appellant's solicitors sent requisitions to the respondent's solicitors. The relevant parts of this letter and of the reply sent on 2nd September 1970 are set out in the judgment of the Chief Justice herein. Correspondence took place between the solicitors for the parties concerning a request that an obligation to pay interest should be waived. This continued from September 1970 to January 1971. The respondent did not accede to the request. On 8th March 1971 the appellant gave notice to the respondent that the appellant was ready and willing to complete the contract and required the respondent to complete it on or before 30th March 1971. It stated that should the respondent fail to comply the appellant would institute proceedings to enforce the contract and to recover damages with respect to any breach of it. On 12th March 1971 the respondent advised the appellant that the respondent -

[45]

It seems plain that the term "requisition" is not always used in what has been said to be its strict sense, namely, a demand addressed to the vendor in relation to some specific matter arising out of the title shown by the vendor or some objection taken to that title: see Voumard, The Sale of Land, 2nd ed. (1965), p. 449. The term is used in varying senses. Its meaning in cl. 14 is a question of the construction of the contract upon a consideration of all its terms, including cll. 7 and 10. In the present case it is not necessary, in my opinion, to decide whether or not cl. 14 includes within its scope the statements by the appellant that at settlement the vendor should be registered as proprietor of the property "free from encumbrances and caveats" and that the caveat "should be removed from the vendor's title". If that question had to be decided, I should not feel satisfied that it would be correct to hold that the words used in cl. 14 can have no application to any request made to a vendor, if by that request he is merely called upon to do something which he would be obliged in any event to do in order to fulfil his obligations in accordance with the terms of the contract. In my opinion such a view would not be in accordance with authorities of long standing dealing with such a clause, some of which were discussed by Isaacs J. in Gardiner v. Orchard [1] . It has been doubted, however, whether such a clause should be construed as applying to an objection or requisition which goes "to the root of the whole subject matter of the contract": see Baines v. Tweddle [2] , per Lord Evershed M.R. [3] and Pearce L.J. [4] . But I need not pursue the question whether or not cl. 14 does apply to the "requisitions" made in this case by the appellant. If it be assumed that the appellant did make an objection or requisition within the meaning of cl. 14, I am of opinion that the respondent was not entitled to exercise the power of rescission, which on that assumption was conferred by the clause, at the time at which and in the manner in which the respondent purported to exercise that power.

[47]

The principles by which limitations have been imposed upon the right of a vendor to exercise the power conferred by such a clause as cl. 14 are well known and they were of course recognized by the learned primary judge, who referred in his judgment to some of the authorities on this subject. But with due respect to his Honour I am of opinion that he did not give sufficient weight, in deciding whether the respondent did attempt to use the power arbitrarily or unreasonably, to some features of the case to which I shall now refer. In the first place, the contract into which the parties entered was one under which it was plainly the duty of the respondent to have the caveat removed: see s. 57 (1) (d) of the Conveyancing Act and see Thomson v. Richardson [5] . Secondly, if the appellant had waived its objection, as proposed by the respondent's letter of 12th March 1971, the consequence would have been that the appellant would have become obliged to complete the contract paying the full purchase price, in return for a memorandum of transfer executed by the vendor which could not have been registered so long as the caveat remained in force: see Real Property Act, s. 74. If the contract had been completed on those terms, the respondent would have had no further interest requiring it to defend the pending suit in which Doris Parkinson was plaintiff and the appellant could have been placed in the position of embarking upon litigation to establish that a contract to which it was not a party had been validly rescinded and that Doris Parkinson was not entitled to any beneficial interest in the property. It has been argued that in form the caveat was defective and that on that ground its removal could have been procured without litigating the substantial question as to the validity of Doris Parkinson's claim to be entitled to specific performance of the contract made with her. But even if that could have been done, the removal of the caveat on that ground would not have extinguished any equitable estate to which she was entitled and in any event it was the respondent's obligation to have the caveat removed: see Taylor v. Land Mortgage Bank of Victoria [1] , where there is a useful discussion of the duty of a vendor upon whose title a caveat against dealings has been lodged. The respondent endeavoured to use cl. 14 to require the appellant, either to give up its contract altogether without any recourse against the respondent for breach of it, or to complete the contract upon radically disadvantageous terms. I do not mean to assert that the circumstance that the waiver of an objection will have drastic consequences will always be sufficient to make it unreasonable for a vendor to exercise a power of rescission under such a clause. But it is an important circumstance, to be weighed with the other facts of the case, in determining whether or not the respondent was disentitled to make that use of the clause.

[49]

The next important fact is that the respondent was fully aware when it made the contract with the appellant that Doris Parkinson had lodged her caveat and had done so after the expiry of the time fixed in the notice to complete which the respondent claimed had been given to her. This provides one important ground of distinction between the present case and that of Woolcott v. Peggie [2] , and on appeal to the Privy Council [3] . The learned primary judge recognized the principle that the freedom of a vendor to rely upon such a clause may be affected by his conduct before and at the time of entry into the contract. But he observed that the respondent had consistently maintained the validity of the notice of rescission which it claimed to have given to Doris Parkinson. In my respectful opinion that has little bearing upon the question which has to be resolved. It may be that a vendor who enters into a contract without disclosing an earlier contract can be considered less reckless if he believes that the earlier contract has been validly rescinded than he would be considered if he believed it to be still in force. But whatever his belief may be in that regard, it remains no less true, in my opinion, that if he enters into a contract under which it is his responsibility to carry out the task, whether it turns out to be easy or difficult, of getting rid of a caveat which has already been lodged, his knowing acceptance of that obligation has an important bearing upon the reasonableness of his subsequent attempt to use cl. 14 to rid himself of it. The learned judge observed also that the caveat represented what might be described as a blot on the respondent's title, but he said it was "a blot that was there for all to see". But, in my opinion, the respondent can obtain no assistance from the fact that a search of the title would reveal the existence of the caveat. It is well settled that the conduct of a vendor may disentitle him to exercise the power of rescission although he is not guilty of fraud or dishonesty. It may disentitle him, although there is no ground for suggesting that he hoped to be able to pass off a title having a defect which would not be discovered before completion. It should be observed also that the fact that the caveat was there to be seen upon a search of the title was not a fact which placed any responsibility or obligation upon the appellant. It has been said that a caveat is not a blot on the title: see Thomson v. Richardson [1] . The respondent's title was defective only if Doris Parkinson had a valid and subsisting equitable interest in the land. If she did not the respondent's title was entirely good. But whilst the caveat remained that title could not be effectively transferred to the appellant. Webb J. said in Taylor v. Land Mortgage Bank of Victoria [2] , that a caveat throws a cloud on the title. Whether or not that is a useful metaphor, the importance of a caveat for present purposes is, as Webb J. there observed, that "it forms, until removed, an effectual obstacle to making a good title to (a purchaser)". It forms an obstacle to making a title, in the sense that it prevents registration of a transfer and registration is necessary to vest the estate in the land in the purchaser. If the vendor carries out his obligation to remove the caveat, as the purchaser is entitled to expect, there is no difficulty. But if the purchaser waives that requirement, what he obtains upon completion of the contract is something very much less than that which he agreed to buy.

[52]

It is necessary to consider whether the appellant's conduct placed the respondent in such a position that it was reasonable for it to act, in order to extricate itself, in a way which would otherwise have been unreasonable. I have referred to correspondence concerning the payment of interest on the balance of the purchase money. I am of opinion that the appellant's requests for the waiving of the obligation to pay interest were quite reasonable and afforded no justification to the respondent for taking any action to bring the contract to an end. The appellant on its part may have felt aggrieved at being required to pay interest during a long period of delay for which it was not responsible. But it was not thereby justified, in my opinion, in taking up the attitude that the respondent must complete the contract within a short time, when it was known that this could not be done until the litigation with Doris Parkinson had come to an end. If the appellant had persisted in its demand made in the letter of 8th March 1971 for the completion of the contract by 30th March and in its threat that upon failure to comply with that demand it would take proceedings to enforce the contract, there would have been a great deal to be said for the view that the appellant tried to force the respondent into a corner in such a manner as to justify the use of cl. 14: see Woolcott v. Peggie [2] . It may well have been the delivery of the notice to complete that provoked the respondent into giving the notice of 12th March 1971 to the appellant. But the appellant did not persist in its demand for the completion of the contract by 30th March 1971. On 24th March it withdrew that demand. Ultimately it is the reasonableness of the action taken by the respondent on 7th April 1971 that has to be assessed. The question is not whether it was justified on 12th March 1971 in giving the notice which was then given. By 7th April it was known that the notice of 8th March 1971 was of no effect. It had been withdrawn before the time for completion mentioned in it had elapsed. It was not operative to create an obligation to complete the contract on a specified day. Still less was it effective to make completion within a specified time the essence of the contract. In these circumstances, I am of opinion that it was the duty of the respondent under its contract with the appellant to abide the outcome of the pending suit, doing what it could reasonably do to expedite the hearing of that suit. It was not entitled, in my opinion, to rescind the contract at a time when it had not yet been established whether it would be able or unable to carry it out, but when, as the respondent was found always to have maintained, it expected to be successful in resisting the claim of Doris Parkinson.

At a glance

Court

Decision date

Before

Source

Judgment (93 paragraphs)

Parties