Transfer of Land Act 1893, s 137, s 138B, s 138C

Aberfoyle Plantations Ltd v Cheng [1960] AC 115

Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537

Queensland Estates Pty Ltd v Co-ownership Land Development Pty Ltd [1969] Qd R 150

Re Longlands Farm [1968] 3 All ER 552

Scott v Rania (1966) NZLR 527

Tait v Bonnice [1975] VicRp 9; [1975] VR 102

Woodward & Anor v Nagel [2003] QSC 100

1 JENKINS J: Pursuant to s 138C of the Transfer of Land Act 1893 ("the Act"), the plaintiff applies, by originating summons dated 30 October 2003, for the extension of a caveat.

2 On 5 September 2003, caveat numbered 1623368, was lodged by the plaintiff over the first defendant's land. The land is known as 20 John Street, Bentley and is described as Lot 2 on Strata Plan 38346, being the whole of the land in Certificate of Title Volume 2199 Folio 430. The caveatable estate or interest claimed by the plaintiff in the caveat is "an estate in fee simple" stated to arise out of a contract of sale dated 30 July 2003 made between the plaintiff, as purchaser, and the first defendant, as vendor.

3 The first defendant denies that the plaintiff has a caveatable interest. The first defendant required the second defendant to serve a notice on the plaintiff pursuant to s 138B of the Act. The plaintiff then commenced these proceedings.

4 In July and early August 2003 the plaintiff and the first defendant negotiated the sale and purchase of the first defendant's land. On 30 July 2003 the plaintiff offered to purchase the land for the sum of $221,000. The offer was made on the standard form REIWA contract, 2002 Revision. The offer contained standard conditions relating to the approval of finance. The conditions were as follows:

"1.1 This Contract is conditional upon Finance Approval being obtained before the Latest Time.

1.2 The Buyer shall:

(a) make an application for Finance Approval to at least one Lender using, if required by the Lender, the Property as security;

(b) use best endeavours to obtain Finance Approval and if required in writing by the Seller or the Seller's Agent provide evidence in writing of the making of an application in good faith for Finance Approval, any loan offer made, and the reasons for the Buyer not accepting any loan offer made;

(c) on receipt of the Finance Approval immediately notify in writing the Seller or the Seller's Agent whereupon the condition in paragraph 1.1 will then be satisfied.

(a) the Buyer is notified by the Lender that the application for Finance Approval is rejected; or

(b) no Finance Approval is obtained then the Buyer shall immediately in writing notify the Seller or the Seller's Agent of such rejection or non receipt as the case may be, and provide evidence in writing of the rejection.

1.4 UNLESS the Buyer has waived this condition and communicated such waiver in writing to the Seller or the Seller's Agent prior to the Latest Time, then if:

(a) the condition in paragraph 1.1 is not satisfied; and

(b) the Buyer has complied with paragraphs 1.2(a), 1.2(b) and 1.3

THEN this Contract shall be deemed to have come to an end without the necessity of either party giving to the other notice to that effect. The Deposit and all other monies (if any) paid pursuant to this Contract shall then be refunded to the Buyer (less all bank and government charges) and there shall be no further claim under this Contract by either party in law or in equity against the other.

1.5 If the Buyer fails to notify the Seller or Seller's Agent in accordance with paragraphs 1.2(c) or 1.3 the Buyer shall be in default and the Seller may without prejudice to any other remedies and rights available immediately terminate the Contract by notice in writing to the buyer.

1.6 This clause shall operate for the benefit of both the Seller and the Buyer except that the Buyer by waiving the Buyer's rights pursuant to this clause at any time before the Latest Time shall be deemed to have received Finance Approval."

"... an offer to lend made by the Lender on reasonable terms and conditions or an approval of a finance application by the Lender to the Buyer, by the Latest Time for a loan of an amount not less than the Amount of Loan shown below. An approval that is subject to the Lender's usual terms and conditions shall be deemed to be Finance Approval."

"Lender" is defined to mean "any Australian bank" or any other lender acceptable to the buyer.

5 The "Latest Time" was stipulated to be 4.00 pm on the date 10 working days from date of acceptance of the offer.

6 The first defendant rejected that offer and made a counteroffer on the same written form. Further negotiations took place between the parties. On or about 3 August 2003 the plaintiff made a written offer in the sum of $225,000 on the same standard form contract. On the evening of 6 August 2003 the vendor's agent left a telephone message at the plaintiff's office advising that the first defendant had accepted that offer on the same terms as detailed in the initial offer. The plaintiff returned the telephone call on the morning of 7 August and the first defendant's agent confirmed the first defendant's acceptance.

7 On 8 August 2003 the plaintiff paid a deposit of $1,000 to the first defendant's agent, apparently as stakeholder, pursuant to cl 1 of the Joint Form of General Conditions for the Sale of Land, 2002 Revision, which were incorporated into the contract.

8 The plaintiff had already applied for finance with which to purchase the property through Your Finance Group Pty Ltd ("Your Finance"). On 15 August 2003 the plaintiff received an unsigned letter from ING Bank (Australia) Ltd ("ING") offering the plaintiff a loan of monies with which to purchase the first defendant's property.

9 On 19 August 2003 Your Finance sent a facsimile to the first defendant's agent in the following terms:

"Please find an ING loan approval for [Jamal Hamdan].

The final letter of offer from ING will follow as soon as the valuation is completed.

..."

10 The facsimile included a document from ING titled "Approval Advice". It was in the following terms:

We refer to the recent application for finance for the above applicants and confirm that ING Bank has approved the credit facility referred to above.

File and instructions will be forwarded to Sydney TONIGHT for the issue of a formal letter of finance to the borrower."

11 On 22 August 2003 the first defendant's agent sent a message by facsimile to the plaintiff advising him that the first defendant had instructed her agent to advise that the contract had been terminated on the ground that unconditional finance approval "has not been received until the due date, which is 20 August 2003".

12 The parties now agree the facsimile of 19 August 2003 was within the time period stipulated by the contract for approval of finance. However, the first defendant says that the facsimile does not constitute a "Finance Approval" as that term is defined in the contract.

13 The plaintiff attempted to persuade the first defendant to keep the contract on foot. However the first defendant maintained that the information contained in the facsimile of 19 August did not meet the terms of the contract. Thus she refused to settle.

14 The plaintiff lodged the caveat the subject of these proceedings and these proceedings were subsequently commenced.

15 The plaintiff seeks to extend the caveat because he says he complied with the finance conditions on the contract and thus he has a valid contract for the purchase of the first defendant's land.

16 The first defendant submits that the plaintiff failed to comply with the finance conditions and thus, pursuant to par 1.4 of the contract, the contract between the parties is deemed to have come to an end. She submits that the plaintiff has no caveatable estate or interest in her land.

Principles Governing the Extension of Caveats

17 Section 137 of the Act enables a person claiming any estate or interest in land to lodge a caveat forbidding the registration of any dealing affecting the claimed estate or interest. The purpose of a caveat is to act as a statutory injunction to the Registrar General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he or she may have against any person lodging a dealing for registration: J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546 at 552 per Barwick CJ.

18 In 1996 the Act was amended to provide that the proprietor of land in respect of which a caveat has been lodged may apply for the caveator to be served with a notice to the effect that unless the caveator applies to extend the operation of the caveat it will lapse within 21 days. Section 138C of the Act provides that on the hearing of such an application this Court, if satisfied that the caveator's claim has or may have substance, may, amongst other things, make an order extending the operation of the caveat.

19 It is clear from the statutory scheme that in an application under s 138C of the Act the onus is upon the caveator to satisfy the court that the caveator's claim has or may have substance. This has been interpreted as an onus to satisfy the court that there is a serious question to be tried as to whether a caveatable interest exists. The caveator must also satisfy the court that the balance of convenience favours the retention of the caveat. However, if there is a serious question to be tried it will be unusual for the balance of convenience to lie in the refusing of an application to extend a caveat: Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.

A Purchaser's Caveatable Interest under a Contract for Sale of Land

20 A person who does not have a legal estate or interest in land is only entitled to lodge a caveat if equity recognises that they have an interest in the land.

21 Equity recognises what is known as a "purchaser's lien" where a purchaser of land has paid the, or some of the, purchase price and through no fault of his or her own, the vendor refuses to complete. The purchaser is said to have a lien in equity to the extent of the purchase money paid: Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 at 645 per Gibbs CJ at 643-654 per Wilson and Dawson JJ at 663-664 per Deane J. There is no purchaser's lien if the deposit is paid to and kept by a stakeholder, as it was in this case; Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 at 430 per Malcolm CJ.

22 However equity recognises that damages are usually not an adequate remedy for failure by a vendor to complete a contract for the sale of land: Adderley v Dixon [1824] EngR 376; (1824) 1 Sim & St 607 at 610; [1824] EngR 376; 57 ER 239 at 240; Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142 at 150 per Dixon J. Consequently equity will normally decree specific performance in respect to contracts to convey land: Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 at 478; [1982] 3 ALL ER 1 at 6. In such cases equity requires that the vendor holds the land for the benefit of the purchaser. This may also give rise to a caveatable interest in land; Kuper v Keywest Constructions Pty Ltd (supra) at page 432 per Malcolm CJ.

23 The first defendant does not dispute that if it is arguable that the facsimile of 19 August constitutes a "Finance Approval" there is a serious issue to be tried between the parties.

24 In my opinion the facsimile was a "Finance Approval" as defined by the contract. The express terms of the document from ING are that the bank had "approved the credit facility". The facsimile was stated to be an "Approval Advice". This document satisfies the definition of "Finance Approval" in that it is "an approval of a finance application by the lender to the buyer ..."

25 I do not regard it as significant that the document from ING refers to the subsequent issuing of a "formal letter of finance to the borrower". This is because the remainder of the document is unequivocal in its terms these being that ING had approved the finance.

26 Neither is it fatal to the plaintiff's case that the covering facsimile from Your Finance states that "the final letter of offer from ING will follow as soon as the valuation is completed". The definition of "Finance Approval" expressly provides that "an approval that is subject to the Lender's usual terms and conditions shall be deemed to be Finance Approval".

27 ING's standard loan conditions state that the bank may refuse to lend monies unless it has obtained a valuation which satisfies it of certain matters. The obtaining of a satisfactory valuation is a usual term and condition of an ING approval. Thus the facsimile falls within the definition of a "Finance Approval".

28 The first defendant relies upon the decision of Wheeler J in Sampson v Clifford & Ors [2001] WASC 102 as authority for his submission that the facsimile did not constitute a finance approval. At issue in that case was whether the relevant finance condition had been complied with. The condition required a lender to give "Approval" of the granting of a loan to the purchaser. "Approval" was defined to mean "approval by the Lender ...". The facts were that a mortgage broker wrote to the purchasers stating: "We confirm that finance has been approved ...". The letter went on to say that "the details of the formal loan approval will be issued today ...". The evidence was to the effect that the mortgage broker had not obtained an agreement to loan the monies from any potential lender and did not believe that there would be a binding loan agreement until a particular lender had agreed to the relevant terms. This did not occur prior to the latest date for approval, primarily because of the absence of a written valuation.

29 Her Honour, at par 44, found that the "approval" which was contemplated by the finance condition could only be an approval of a kind "which actually binds a person to 'hand the borrower a cheque'. That is, it must be an enforceable approval". She went on to state that there may be an argument as to whether the letter from the mortgage brokers constituted such an approval. However, there was no need for her to determine that question as it was written subsequent to the latest date for approval of finance. Prior "approvals" purportedly given orally by the mortgage broker were conditional upon, at the least, the receipt of a written valuation and therefore in her Honour's view did not constitute approvals as defined.

30 There are at least two points of distinction between this case and Sampson's case. First, the definition of approval in this case is substantially broader than in Sampson's case and specifically includes a conditional approval. Secondly, the written approval in this case was given by the lender itself rather than by the broker. I also note that in Sampson's case no actual lender or lenders had agreed to lend money. Consequently her Honour's statements to the extent that they indicate that a conditional agreement is not an approval do not apply to the fact of this case.

31 I am of the opinion that the plaintiff has demonstrated that there is a serious issue to be tried between the parties as to whether he has an equitable interest in the plaintiff's land as a purchaser of the land under an uncompleted contract for sale.

32 It appears to be accepted by the first defendant that if, as I found, there is a serious issue to be tried, the balance of convenience is in maintaining the status quo and extending the caveat. No matters were raised either by affidavit or in submissions which lead me to the contrary view.

33 In the caveat the plaintiff claims an estate "in fee simple as purchaser" by virtue of the contract of sale. It is obvious that the plaintiff does not have such a legal estate or interest in the land.

34 The misdescription of the plaintiff's interest was not raised by the parties at the hearing of this application. I first noticed it when I was preparing this judgment. I called the matter back on and gave the parties an opportunity to make written submissions as to whether the caveat was defective and if so, the consequences that flowed from the defect.

35 The plaintiff's submissions dated 16 April 2004 submit that the form of the caveat complies with s 137 of the Act and that the use of the term "fee simple" does not derogate from the nature of that interest as being an equitable interest as purchaser of the estate.

36 If he is wrong in this submission the plaintiff submits that the Court has power to amend the caveat. Alternatively, he submits the Court may grant an injunction restraining the first defendant from selling the property. The plaintiff has filed the usual undertaking as to damages.

37 The first defendant's submission dated 28 April 2004 submits that the caveat is defective because it claims a legal estate in the property when the plaintiff only has, at best, an equitable interest. The first defendant further submits that the Court does not have power to amend the caveat and is obliged to order its removal. The first defendant submits that in these circumstances it would be inequitable to grant an injunction against her and that damages are the appropriate remedy.

38 The plaintiff submits that the caveat in so far as it claims as estate or interest "in fee simple as purchaser" complies fully with the legal requirements and its description does not derogate from the nature of the interest "as being an equitable interest as purchaser of the estate". I do not accept this submission. A "fee simple" is the most expansive and absolute of all estates and confers the lawful right to exercise "every act of ownership which can enter into the imagination"; The Commonwealth of Australia v The State of New South Wales and Anor [1923] HCA 34; (1923) 33 CLR 1 at 42 per Isaacs J. To assert such a legal estate is incompatible with the admitted nature of the equitable interest that the plaintiff claims as a purchaser of a fee simple under an uncompleted contract for sale of land.

39 In Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407 at 422-423 Mason CJ, Dawson and McHugh JJ said that the word "specify" as used in statutory form of caveat required the caveator to "mention definitely or explicitly" the nature of the estate claimed.

40 The caveat specifies a completely different and much broader interest or estate than that which the plaintiff has claimed in these proceedings. In coming to this view I have considered Kuper v Keywest Constructions Pty Ltd (supra) at 428-429 where Malcolm CJ found that the description of the estate or interest claimed as "an estate or interest as a purchaser of an estate in fee simple ... in the land above described" was sufficient specification of the estate or interest claimed. The other members of the Full Court agreed with the Chief Justice. Initially I considered that there was a similarity between the wording in that and the present case. However, on reflection, although the same words are used, they are used in a different order and in my view give a different meaning to the two phrases. In this case I can only conclude that in the caveat the plaintiff claims to presently have an estate in fee simple in the land. Whereas in Kuper's case, it is possible to interpret the words as the caveator claiming a (lesser) estate or interest as a consequence of being a purchaser of an estate in fee simple. That interpretation is not open on the wording of the subject caveat.

41 Consequently I would not extend the caveat in its current defective form.

42 The power of the Court to amend a caveat pursuant to s 138C of the Act was recently considered by Le Miere J in Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASC 30. I agree with his Honour's conclusion that the Court does not have power under s 138C of the Act to amend a caveat so as to change the estate or interest claimed in the caveat. This is because once it is established that the wrong estate or interest is claimed then the finding necessary for the exercise of the powers in s 138C, that is that "the caveator's claim has or may have substance", can not be made.

43 The plaintiff relies upon Depsun Pty Ltd & Anor v Tahore Holdings Pty Ltd (1990) NSW ConvR 58,902 as authority for the contrary position. McLelland J's, obiter, comments were:

"In my opinion the Court is empowered to make an order for amendment of the prohibitory provisions of a caveat [authorities omitted] although not of the provisions defining the interest claimed [authorities omitted]."

The defect in this caveat is in respect to the definition of the interest claimed. Consequently that case does not support the plaintiff's submissions.

In the Alternative Can and Should the Court Grant Injunctive Relief?

44 There are a number of unreported single Judge decisions of this Court to the effect that where a caveat is defective and cannot be amended the Court may, instead of extending the caveat, grant injunctive relief; Giacci Bros Pty Ltd v Tyrrell, unreported; SCt of WA; Library No 980106; 18 February 1998; Hughan v Gray & Anor [2002] WASC 164; Jandric v Jandric & Anor [1999] WASC 22 and Midland Brick Company Pty Ltd v Welsh & Anor [2002] WASC 248.

45 These authorities appear to be consistent with the dicta in Kuper's case, supra at 432, where Malcolm CJ decided that the caveators did not have a purchaser's lien because the deposit had been paid to a stakeholder. Despite that fact and despite the contract for sale of land being conditional he said:

"In my opinion, in appropriate circumstances, a Court would be prepared to protect a purchaser's interest under a contract such as that in the present case, at the so-called inchoate stage, both by granting specific performance in the sense of requiring the vendor to do all things necessary to be done to procure registration of the strata plan, as well as restraining the vendor by injunction from dealing with the land inconsistently with the purchaser's right to specific performance of the contract, both in the special sense and, subject to fulfilment of the condition, in the ordinary sense: cf Pakenham Upper Fruit Co Ltd v Crosby [1924] HCA 55; (1924) 35 CLR 386 at 396-399, per Isaacs and Rich JJ."

46 The first defendant does not deny that the Court has power to grant an injunction but opposes the grant of an injunction. The grounds of opposition are that the first defendant has been prevented from dealing with her land since 11 September 2003, a further extension of the restriction would be inequitable and that damages are the appropriate remedy.

47 The plaintiff has established a serious issue to be tried as to whether he has an equitable interest in the land as a purchaser under an uncompleted contract for sale of the land. I am satisfied that the balance of convenience presently lies in maintaining the status quo until the plaintiff's claim is determined by the Court. However, that must be done with expedition. The plaintiff has not yet commenced proceedings seeking a final determination as to whether he has an equitable interest in the land. The balance of convenience would not lie in a continued restraint of the first defendant in respect to dealings with the land unless the plaintiff commences such a proceeding forthwith and diligently prosecutes it.

48 The plaintiff's application to extend the caveat is refused. Upon amendment of the plaintiff's application to include an application for an injunction, I am prepared to order:

(a) That an injunction be granted, until further order, restraining the first defendant from creating, disposing of or dealing with any estate or interest in the land, unless the creation, disposition or dealing is expressly subject to any estate or interest which the plaintiff may have in the land as a purchaser of the land under an uncompleted contract for sale of the land entered into on or about 6 august 2003.

(b) It will be a condition of the grant of the injunction that:

(i) the plaintiff file an undertaking as to damages in the usual form; and

(ii) the plaintiff promptly commence proceedings in this Court for the purpose of determining whether the plaintiff has an estate or interest in the land.

(c) Each party is to have liberty to apply on seven days' notice in relation to the discharge or variation of the injunction.

49 I consider that these orders require the plaintiff to commence a proceeding within 14 days. If the plaintiff fails to do that then any application by the first defendant to discharge the injunction is likely to be successful. If the plaintiff fails to diligently prosecute his action then the first defendant is also at liberty to apply to discharge the injunction.