Supreme Court of WA|2005-11-15|Before: Scott J, Hasluck J

Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor [2005] WASC 245 (15 November 2005)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MARIO CASELLA & SONS BUILDERS PTY LTD -v- DUCKWORTH & ANOR [2005] WASC 245

BETWEEN : MARIO CASELLA & SONS BUILDERS PTY LTD (ACN 008 862 431)

Caveats - Application to extend operation of caveat - Interest of purchaser under an uncompleted contract of sale - Effect of subject to purchase clause and special conditions as to subdivision - Nonfulfilment of conditions held to give rise to voidable contract - Whether vendor entitled to rescind contract - Purchaser held to have caveatable interest

Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129

Egan & Ors v Christina Margaret Chugg as Executor of the Will of Roy McKenzie Paton & Anor [2005] WASC 170

Fay v Sheridan [1999] WASCA 61

Hamdan v Widodo & Anor [2004] WASC 123

Jandric v Jandric [1999] WASC 22

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

Leros Pty Ltd v Terara Pty Ltd & Anor [1992] HCA 22; (1992) 174 CLR 407

Plumor Pty Ltd v Handley (1996) 41 NSWLR 30

Porter v McDonald & Registrar of Titles [1984] WAR 271

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

Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42

Depsun Pty Ltd v Tahore Holdings Pty Ltd [1990] ANZ ConvR 334

J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546

Kheng v Secola [2001] ANZ ConvR 118

Lohregger v Francis Broady Investment Corporation Pty Ltd, unreported; SCt of WA (Scott J); Library No 920600; 19 November 1992

Sargent v ASL Developments Ltd; Turnbull v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

Sulinmo Properties Pty Ltd v Maloney [1985] ANZ ConvR 25

1 HASLUCK J: The plaintiff, Mario Casella & Sons Builders Pty Ltd, commenced proceedings by way of an originating summons dated 8 June 2005 seeking an order that the operation of caveat JO24963 be extended until further order of the Court.

2 The land affected by the subject caveat is a portion of Lot 3913 on deposited Plan 210001 being part of the land in Certificate of Title Volume 1553 Folio 661. For ease of reference, I will call the land affected by the caveat the "subject land". I will call the larger piece of land owned by the first defendant, Neil James Duckworth, of which the subject land forms a part, the "whole land".

3 The plaintiff relied upon the affidavit of Mario Casella sworn 8 June 2005. The first defendant relied upon his answering affidavit sworn 30 June 2005. I understand that the second defendant is prepared to abide any ruling made by the Court.

4 I understand from the evidentiary materials before me that the whole land is situated within the Shire of Gingin in the vicinity of Ocean Farm Drive. It appears from a letter dated 12 March 2001 that the Western Australian Planning Commission approved a proposed subdivision of the whole land on the basis that certain conditions were to be complied with including provision for lots to be connected to a road system and other conditions of the usual kind. The approval was valid for a period of 3 years from the date of the letter. Condition 21 provided for certification from the Water Corporation that arrangements have been made with that body so that connection to a water supply service was to be available to the lots proposed by the subject application.

5 The first defendant contracted to sell the subject land (being 32 lots within the proposed subdivision) to the plaintiff pursuant to a contract of sale constituted by an offer and acceptance form dated 30 October 2003 which incorporated into the contract the 2002 Joint Form of General Conditions for the Sale of Land. The purchase price was described as $1,006,000 with provision for payment of a deposit of $10,000 within 7 days of acceptance. The contract of sale was said to be subject to finance with the proposed lender being named as Challenge Bank, Perth. The amount of the loan was described as $800,000, and the "Latest Time" for approval of the finance was given as "7 days after acceptance of this offer". I will come back to the precise terms of the clause concerning finance in due course.

6 The contract for sale included certain special conditions reflected in various annexures to the contract. Annexure C was to this effect:

"The vendor agrees to install fencing, roads, electricity, water and phone to each Lot as required by the Shire of Gingin and the Department of Land and Information and any other relevant government department.

All works are to be completed 30 days prior to settlement.

Settlement of this contract to take place within 14 days from individual titles being issued for the individual lots as described in annexure A but not later than 31/01/04 unless such date agreed by the purchaser."

7 The clause concerning finance contemplated that the plaintiff, as buyer, would notify the vendor if no finance approval was obtained prior to the latest time; that is, in the present case, prior to 6 November 2003. It is not clear from the evidentiary materials before me what steps were taken by the plaintiff in order to obtain finance.

8 It is an undisputed fact that the plaintiff did not provide any information about finance to the first defendant within the prescribed 7 day period. However, by letter dated 12 November 2003 the plaintiff advised the first defendant's agent that it had finance available for the subject land. The plaintiff purported to "confirm the condition regarding finance is waived". On the same day the plaintiff provided a cheque in the sum of $10,000 to the first defendant's agent as payment of the deposit specified in the contract. No step was taken by the first defendant or his agent to suggest that the contract between the parties was at an end.

9 On or about 16 January 2004 the plaintiff wrote to the first defendant's agent to enquire about the date of settlement. He said that settlement for the subject land was due on 31 January 2004. He said that he would "like to know if the settlement will take place on this date as I need time to organise my finance". The first defendant's agent advised the plaintiff by letter dated 19 January 2004 that the agent had been in contact with the first defendant as vendor who had provided advice as follows:

"Settlement is not expected by 31/01/04 but he expects to be able to give a firm settlement date by the end of this week and is happy to grant any reasonable extension to settlement.

As soon as I have any further information, I will advise you."

10 Then, by letter dated 12 March 2004 the first defendant's agent (Select First National Real Estate) wrote to the plaintiff to say that the contract of sale was "hereby terminated" and enclosed a cheque for the amount of $10,000 as a refund of the initial deposit. The agent's letter did not outline the grounds upon which the first defendant purported to terminate the contract of sale. However, I note in passing that the letter was written on the day the Planning Commission's 3 year period for compliance with the conditions of approval came to an end.

11 The plaintiff said in his affidavit that he did not accept that the contract had been validly terminated by the first defendant and he returned the cheque for refund of the deposit to the first defendant's agent.

12 By letter dated 12 July 2004 the first defendant's agent enclosed a letter from the first defendant to the agent of the same date which proceeded from the premise that all contracts concerning the subdivision of the whole land had expired. However, it was open to persons who had entered into contracts at the "give away price" to negotiate for new contracts in accordance with a new price list. The first defendant advised his agent also that "the previous contract with your Mr Mario Casella is also at an end and this contract will not be entertained in the future".

13 It was against this background that on or about 17 September 2004 the plaintiff instructed his solicitors to lodge a caveat over the subject land. In due course caveat JO24963 was prepared and lodged. The estate or interest being claimed by the plaintiff was described as "an estate or interest in fee simple as purchaser". Reference was made to a contract for sale of land by offer and acceptance dated 30 October 2003 made between the registered proprietor and the caveator in respect of the subject land. The caveat forbade the registration of any instrument affecting the estate or interest absolutely.

14 By letter dated 29 April 2005, the first defendant's solicitors wrote to the plaintiff's solicitors stating that the first defendant was not able to comply with the requirements imposed by the Western Australian Planning Commission with respect to the subdivision of the land. The solicitors said that the contract was at an end. The relevant letter reads in part as follows:

"Although the subdivision had been approved prior to the contract it was not possible to comply with the conditions imposed by the Western Australian Planning Commission to enable titles to issue by 31 January 2004 as required by the contract. In fact, it was not possible to comply with those conditions prior to the development approval lapsing despite our client's best endeavours.

As a consequence the contract is terminated pursuant to Condition 13.7 and your client has no interest in the land.

We request that you immediately arrange for the withdrawal of the caveat which can no longer be sustained."

15 I pause here to note that the first defendant referred to this aspect of the matter in his affidavit. He said that an application for subdivision and the approval for subdivision had been obtained prior to the date of the contract but the subject land was not a lot at the date of the contract and is still not a lot. He referred to Condition 21 concerning certification by the Water Corporation and to a letter from the Planning Commission dated 15 May 2001 varying the condition in question to provide that the service would be supplied by Nilgen Water Supply not the Water Corporation.

16 The first defendant went on to say in his affidavit that he entered into negotiations with Nilgen to extend its water service to the proposed subdivision. Initially, it agreed to do so, as indicated by certain letters from Nilgen confirming the company's agreement to provide the water service. However, on 24 November 2003 the consultant for Nilgen notified the first defendant that it would not extend its water service to the subject land despite the first defendant having used his best endeavours to arrange for them to do so including payment of the sum of $12,000 to its consultant and numerous meetings with representatives of that company and the consultant with the expectation that Nilgen would provide the necessary water service.

17 The first defendant said further that the only alternative was for him to approach the Water Corporation or to establish is own entity to provide the water service. This required applications for licences from various authorities to install a bore and draw water and to provide a water service. A process of that kind was bound to take a considerable period of time.

18 The first defendant concluded by saying that it was not possible for him to comply with Condition 21 of the conditions imposed by the Planning Commission and therefore not possible for him to arrange for the Planning Commission to endorse its approval on any subdivision plan. As a consequence, it was not possible to comply with Condition 13.3(a)(2) prior to the proposed date for settlement, namely, 31 January 2004.

19 The first defendant said that despite his best endeavours he was not able to comply with the condition in relation to the provision of water prior to the date that the development approval lapsed in March 2004 and it was necessary for him to reapply for approval to subdivide the property. Exhibited to his affidavit was a letter dated 14 October 2004 containing approval from the Planning Commission for a period of 3 years from the date of the advice. He said that he was still negotiating with the Water Corporation to provide a water service to the subdivision so that he could satisfy the conditions imposed under the new approval.

20 Put shortly, the stance of the first defendant at the hearing before me was that the contract of sale was terminated automatically due to the failure of the plaintiff to comply with the requirements of the subject to finance clause. Further, and in any event, the contract was terminated by the agent's letter dated 12 March 2004 which spoke of the contract being "hereby terminated" in that, despite his best endeavours, the first defendant was not able to comply with the condition concerning the provision of water prior to the proposed date for settlement, namely, 31 January 2004, or prior to the date the original development approval lapsed on 12 March 2004 (being 3 years from the date on which the approval was given). On the first defendant's case, the caveat should not be extended because, as a consequence of the contract of sale being terminated, the plaintiff does not have a caveatable interest in the land.

21 It was common ground at the hearing that in addition to seeking an extension of the caveat the plaintiff has now commenced legal proceedings with a view to obtaining specific performance of the contract of sale or other relief referable to alleged breaches of contract by the first defendant.

22 Section 137 of the Transfer of Land Act 1893 (WA) provides that any person claiming "any estate or interest in land" under any unregistered instrument, document or writing may lodge a caveat in an approved form forbidding any dealing with the land.

23 Section 138B allows for a notice to be served upon the caveator to the effect that unless the caveator obtains an order from the Supreme Court extending the operation of the caveat within 21 days or such period as is specified in the order the caveat will lapse.

24 Section 138C(2) provides that the Supreme Court may make an order for extension or such other orders as it thinks fit concerning the caveat if it is satisfied that the caveator's claim has or may have substance.

25 In Jandric v Jandric [1999] WASC 22 Commissioner Buss QC said at par 24 to par 26 that an applicant for extension must demonstrate on the evidence that his claim to a caveatable interest in the land raises a serious question to be tried. If there is a serious question to be tried, the question will not, except in the most exceptional circumstances, be determined on originating summons as it is not appropriate to attempt to resolve conflicts of evidence on affidavit: Porter v McDonald & Registrar of Titles [1984] WAR 271 at 276; Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 at 141.

26 It follows from the decided cases that the jurisdiction to remove a caveat should not be exercised unless the case is one in which it is patently clear that the estate or interest sought to be protected cannot be made out.

27 Accordingly, if a caveator is able to demonstrate a reasonably arguable case as to the existence of a caveatable interest, the ordinary course is for the caveat to remain and the disputed questions of fact be left for trial by writ of summons with pleadings. However, it must appear from the evidence on the originating summons that the caveator might ultimately succeed in establishing his caveatable interest.

28 There have been various cases concerning the form of caveats. In Leros Pty Ltd v Terara Pty Ltd & Anor [1992] HCA 22; (1992) 174 CLR 407 Mason CJ, Dawson and McHugh JJ said at 422 that the purpose of requiring the caveator to specify the estate or interest claimed is to enable the registered proprietor to know, or find out, the claim which he or she will have to meet. The term "specify" should be understood in the sense of "mention definitely or explicitly".

29 In Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 the estate or interest claimed was "an estate or interest as purchaser of an estate in fee simple as to the estate or interest of the abovenamed registered proprietor in the land above". Malcolm CJ held at 429 that the statement in the caveat was sufficiently explicit. The interest of a purchaser under a contract of sale is said to be commensurate with the availability of specific performance. His Honour said further at 432 that, in his opinion, the estate or interest claimed by the purchasers under the contracts in question was sufficient to ground a caveatable equitable interest in the relevant land, notwithstanding the conditional nature of the contracts. In his view, the caveat was substantially in the form provided in the 18th Schedule.

30 I note in passing that, in the present case, counsel for the first defendant relied upon certain decided cases which to some extent doubted the line of reasoning reflected in Kuper's case (supra), namely, Hamdan v Widodo & Anor [2004] WASC 123 and Egan & Ors v Christina Margaret Chugg as Executor of the Will of Roy McKenzie Paton & Anor [2005] WASC 170.

31 Commission Buss QC concluded in Jandric's case (supra) that if the caveat is defective in form it should not be extended, and nor would it be appropriate to grant the plaintiff leave to lodge a further caveat in the proper form. However, in that case, the learned Commissioner was prepared to grant an injunction 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 was expressly subject to any proprietary estate or interest which the plaintiff may have had in the land. This form of relief was approved also by Jenkins J in Hamdan's case (supra).

32 It emerges, then, that in some circumstances a vendor can be restrained by injunction from dealing with the land in question inconsistently with the purchaser's right to specific performance of the contract if the claimant is able to establish 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. In such a case, of course, consideration must be given to where the balance of convenience lies.

33 The first issue to be determined is whether the contract of sale was brought to an end as a consequence of the plaintiff's failure to advise the first defendant that finance had not been obtained prior to the "latest time" specified in the finance clause; that is, by 6 November 2003, being 7 days after acceptance of the plaintiff's offer. This requires me to look closely at the terms of the finance clause.

34 Clause 1 on the offer and acceptance concerning finance reads 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.

DEFINITIONS

1.7 In this Contract the following shall apply:

"Finance Approval" means 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" means either the Lender nominated below (if any) or any other Lender acceptable to the Buyer."

35 In dealing with this issue it will be useful to begin by looking at some of the previously decided cases concerning conditional clauses in a contract of sale, for it is apparent that the finance clause in the present contract has been drafted with an eye to these cases.

36 In Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 a contract for the sale of a pastoral property provided that in the event of the consent of the Treasurer not being obtained within 2 months of a nominated date, or within such further period as might be mutually agreed, the contract should be deemed to be cancelled. The High Court held that the non-receipt of the Treasurer's consent within the prescribed period did not effect an automatic cancellation of the contract because the condition in question should be construed as making the contract not void but voidable with the question of who might avoid it depending on the relevant event. The condition in question was described as a condition subsequent.

37 Latham CJ, Williams and Fullagar JJ observed at 438 that specific performance is not a remedy which should lightly be refused when the plaintiff has established the existence of a contract capable of specific performance which the defendant has refused to complete. They indicated at 440 that it is undoubtedly competent for the two parties to a contract to stipulate by a clause in it that the contract shall be void upon the happening of an event over which neither of the parties shall have any control. However, if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong.

38 Thus, where the event in question is one which cannot occur without default on the part of one party to the contract, the position is clear. The provision is then construed as making the contract not void but voidable: only the party who is not in default can avoid it, and he may please himself whether he does so or not.

39 Their Honours said that the provision in the case before them was to be construed as making the contract not void but voidable. The question of who may avoid it depends on what happens. If one party has by his default brought about the happening of the event, the other party alone has the option of avoiding the contract. If the event has happened without default on either side, then either party may avoid the contract. But neither need do so, and, if one party having a right to avoid it does not clearly exercise that right the other party may enforce the contract against him.

40 This approach was followed in Zieme v Gregory [1963] VicRp 34; [1963] VR 214. In that case a contract of sale provided by a special condition that the contract was conditional upon the purchaser obtaining a first mortgage loan of a specified amount from a lending institution. The Full Court held that the special condition was a condition subsequent or resolutive condition and was one intended to operate for the benefit of the purchaser. The condition was not self-executing but was to be construed as making the contract voidable and not void. The purchaser's rights under the condition were conditional upon his not being in default, and it was to be implied that he take all reasonable steps on his part to obtain the loan. The onus was on the purchaser, if he wished to rely on this resolutive condition, to establish that he had taken all reasonable steps to obtain a loan and he should not unreasonably refuse or fail to take advantage of any mortgage loan that was available to him.

41 In Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418 Taylor, Menzies and Owen JJ made these observations at 441:

"Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of courts to treat nonfulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the nonfulfilment of a condition bringing the contract to an end."

42 Cases of this kind gave rise to discussion by commentators bearing upon the use of the term "condition precedent" to describe an event upon which the formation of the contract depended and a condition subsequent as one operating merely to suspend performance of an already binding contract. A condition subsequent or resolutive condition was often used to mean that a contract will be terminated if the condition is not satisfied. The important point about conditions subsequent was thought to be that a contract is in being and certain obligations will therefore be created: see Cheshire & Fifoot's Law of Contract (8th Aust ed) at par 5.25.

43 In Fay v Sheridan [1999] WASCA 61 Steytler J made various observations about cl 1.4 of the agreement before him which provided that the agreement was "deemed to have come to an end" if, the purchaser having used best endeavours to obtain the loan, the loan was rejected or not approved on or before the specified date and that there had been no waiver.

44 His Honour observed that while the utility of the distinction between a condition precedent to completion and a condition subsequent in agreements of this kind has been doubted (see Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 at 572, per Gibbs CJ and Mason J at 592) there is support for the proposition that the distinction does bear upon the issue of onus and that it is for a plaintiff to prove the fulfilment of a condition precedent whereas it is for a defendant to show that an obligation has been discharged by the fulfilment of a condition subsequent. Steytler J said further that:

"Whatever may be the utility of the distinction it seems clear that the purchasers, in this case, sought to bring themselves within an exemption and, that being so, it was for them to show that they fell within it. There is a considerable body of authority to support that proposition."

45 When one turns to the finance clause in the present contract of sale it appears that the contract is "conditional upon finance approval being obtained before the Latest Time". By cl 1.2 the buyer is to make an application for finance approval and to use best endeavours to obtain approval and to notify the seller when approval is obtained whereupon the condition will then be satisfied.

46 By cl 1.3 if no finance approval is obtained before the Latest Time then the buyer shall immediately notify the seller of such rejection. By cl 1.4 unless the buyer has waived the condition and communicated such waiver prior to the Latest Time then if the condition as to finance has not been satisfied and the buyer has complied with his obligations, the contract shall be deemed to have come to an end without the necessity of either party giving to the other notice to that effect.

47 On the other hand, by cl 1.5, if the buyer fails to notify the seller that finance approval has been obtained or not obtained the buyer shall be in default and the seller may terminate the contract. Clause 1.6 is explicit that the finance 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 the clause at any time before the Latest Time shall be deemed to have received finance approval.

48 When the finance clause is considered in the light of the reasoning in the decided cases there can be little doubt that upon its proper construction the clause was intended to operate as a condition subsequent; that is, as a condition giving rise to certain obligations within a concluded contract.

49 In other words, it is clear that various obligations came into play upon the signing of the contract and thus, prima facie, if a certain event did not occur the contract was not to be regarded as coming to an end automatically but remained in force and was voidable at the election of a party not in default. That basic concept, of course, remains subject to any specific provision in the finance clause such as cl 1.4 which provides specifically that the contract shall be deemed to have come to an end if finance approval has not been obtained before the Latest Time and the buyer has performed certain prescribed obligations including notification to the seller of the outcome.

50 However, cl 1.5 underlines the basic concept derived from the decided cases, namely, that if the buyer fails to notify the seller of the outcome or communicate a waiver of the condition as to finance prior to the Latest Time then the seller may terminate the contract. Put shortly, the contract is not void, but voidable. The seller, as the party not in default, may elect to bring the voidable contract to an end.

51 In the present case, I do not have any evidence before me that the plaintiff as buyer applied for or obtained finance approval before the Latest Time. Moreover, it is clear from the evidence before me that the plaintiff failed to communicate in writing with the seller or his agent as to any aspect of the matter before the Latest Time. The plaintiff cannot be said to have exercised its entitlement to communicate a waiver of the finance clause within the prescribed time. The plaintiff as buyer was undoubtedly in default when the prescribed time limit expired.

52 However, in those circumstances, where the plaintiff as buyer has simply failed to communicate at all with the seller prior to the Latest Time, to my mind, there can be little doubt, having regard to the reasoning in the decided cases and to the terms of cl 1.5, that the contract remains on foot after the prescribed period has expired, notwithstanding the plaintiff's default. Quite clearly, as from 6 November 2003 (being 7 days after acceptance of the offer), it was open to the first defendant as seller, and as the party not in default, to rescind the contract because, by that time, the contract was voidable at its option.

53 It is clear from the evidence that the first defendant took no step to rescind the contract prior to 12 November 2003. On that date the first defendant was advised in writing that the plaintiff was prepared to waive the condition as to finance. The condition in question was said by cl 1.6 to operate for the benefit of both the seller and the buyer, and thus could undoubtedly be waived by the plaintiff as buyer. Indeed, waiver of the condition as to finance by the buyer is expressly allowed for by cl 1.4 of the contract.

54 I pause to say that this sequence of events might be thought to give rise to a further question as to whether a waiver could properly be effected by a letter written after the time limit had expired, bearing in mind that cl 1.4 appears to contemplate that a waiver by the buyer was to be communicated prior to the Latest Time. However, it follows from my earlier reasoning that such a question cannot displace the conclusion that the contract remained on foot after the prescribed time had expired notwithstanding the plaintiff's default.

55 There is certainly some evidence before me to suggest that the first defendant was willing to allow the contract to remain on foot because the exchange of correspondence between the parties in January 2004 as to the settlement date is consistent with that view of the matter. Moreover, the first defendant accepted the plaintiff's deposit that was forwarded to the first defendant's agent at that stage.

56 It emerges, then, that by operation of cl 1.5 the first defendant was put to his election to immediately terminate the contract or to keep it on foot. The first defendant through the conduct of its agent in accepting the deposit of $10,000 and agreeing to extend the date for settlement elected to keep the contract on foot and arguably waived the plaintiff's failure to obtain finance approval before the Latest Time. Alternatively, it might be held that the conduct of the parties is consistent with a variation to the contract whereby the Latest Time for finance approval was extended to 12 November 2003.

57 For present purposes, the plaintiff need only establish with respect to the first issue that it has a reasonably arguable case that the contract did not come to an end because of an alleged failure to obtain finance or communicate a waiver of the finance clause prior to the Latest Time.

58 I consider that the plaintiff has an arguable case as to the first issue in that once notification of the plaintiff's purported waiver of the finance condition was received, the first defendant, in turn, appears to have waived its entitlement to rescind the contract of sale which, prior to receipt of the putative waiver, had been voidable at the option of the first defendant. In other words, the first defendant's entitlement to rescind the contract owing to nonfulfilment of the condition as to finance and default on the plaintiff's side, had arguably been waived by the first defendant prior to the delivery of the letter dated 12 March 2004 which purported to bring the contract to an end.

59 I must now proceed to the next issue concerning Annexure C of the contract of sale.

60 A further question arose as to whether the contract of sale was brought to an end as a result of events bearing upon the proposed settlement date and fulfilment of the condition concerning water. This obliges me to look closely at the terms of the special condition set out in Annexure C to the offer and acceptance and at cl 13 of the General Conditions concerning subdivision.

61 I described Annexure C in earlier discussion. In its material parts, the clause in the general conditions concerning subdivision reads as follows:

"13.1 When Clause applies

This clause applies only if the Land is not a Lot at the Contract Date.

13.2 ...

13.3 ...

13.4 Application and Subdivision Plan

(a) The Seller must, if the Seller has not already done so, lodge an application with the Planning Commission for the subdivision of the Subdivision Lot, from the Original Land, within 15 Business Days after the Contract Date.

(b) Following the lodgement of the application in accordance with subclause (a), the Seller must use best endeavours to:

(1) obtain the approval of the Planning Commission, to the subdivision of the Subdivision Lot from the Original Land; and

(2) subject to the approval of the Planning Commission to the subdivision, arrange for preparation of a Subdivision Plan including the Subdivision Lot, and for the Subdivision Plan to be:

13.5 Unacceptable condition imposed by Planning Commission

If the Planning Commission grants approval for the subdivision of the Lot from the Original Land subject to a condition with which either the Seller or the Buyer, acting reasonably:

(a) is unwilling to comply with; or

(b) considers it to be prejudicial,

the Party who:

(c) would be bound to comply with the condition; or

(d) is prejudiced by the condition;

may within 10 Business Days of being notified of the condition elect by Notice to the other Party to withdraw from and terminate the Contract.

13.6 ...

13.7 Termination of Contract

(1) any condition specified in this clause is not satisfied within the time specified for satisfaction of that condition; or

(2) a Party withdraws from, and terminates the Contract, following the imposition of a condition by the Planning Commission,

subclause (b) will apply.

"(b) Where subclause (a) applies, the following apply:

(1) The Deposit and any other money paid by the Buyer under the Contract, must be promptly repaid to the Buyer.

(2) If the Deposit has been invested by the Deposit Holder in accordance with clause 1.9, the Buyer will be entitled to the interest on the Deposit.

(3) If any other money has been paid to the Deposit Holder by the Buyer, and invested by the Deposit Holder with a Deposit Financial Institution, the Buyer will be entitled to the interest on that other money.

(4) Subject to subclause (1) to (3), no Party will have any claim or right of action against the other arising from the termination, except in respect to any matter which arose before the termination."

62 In dealing with this issue I must begin by looking at the terms of the special condition in Annexure C. The effect of the condition is that the first defendant as vendor agrees to install certain services including water with all works to be completed 30 days prior to settlement. It is said that settlement of the contract is to take place within 14 days from individual titles being issued for the individual lots but not later than 31 January 2004 "unless such date agreed by the purchaser".

63 The last few words of the relevant sentence are badly expressed but, to my mind, they are to be construed as meaning that the settlement date is to be not later than 31 January 2004 unless some date beyond 31 January 2004 is agreed to by the purchaser. I remind myself that in mid-January 2004 the plaintiff as purchaser pressed for information as to whether settlement would take place at the end of January and was informed by the first defendant's agent, in effect, that settlement was likely to take place on a date to be advised lying beyond 31 January 2004. No objection was raised by the plaintiff to this approach and there is some basis for supposing that these events gave rise to a tacit agreement between the parties for settlement to take place on a forthcoming date to be advised by the first defendant. Indeed, the letter dated 12 March 2004 written by the first defendant's agent, which purports to terminate the contract, appears to proceed from the premise that the contract remained in force as at that date.

64 At the hearing before me, counsel for the first defendant submitted that upon its proper construction the effect of the special condition in Annexure C was to bring the contract to an end automatically if settlement did not take place upon 31 January 2004. However, it follows from earlier discussion concerning conditional contracts, and the observations about the meaning of the special condition and related evidence I have just made, that, in my view, the special condition must be regarded as a condition subsequent or resolutive condition with the result that the contract was voidable and could only be terminated by a party not in default. There is a basis for arguing that the settlement date had been extended by agreement. Certainly no specific step was taken by the first defendant to bring the contract to an end at that stage on the ground that the date for settlement has passed.

65 This brings me to the further question of whether the contract was brought to an end by the operation of cl 13 of the General Conditions concerning subdivision and the letters dated 12 March 2004 and 29 April 2005 whereby the first defendant purported to terminate the contract.

66 Clause 13.4 imposed upon the first defendant as vendor an obligation to use "best endeavours" in obtaining planning approval and lodging a plan of subdivision at DOLA in order for dealing. It follows from the decided cases that, in the absence of any specific provision in the contract overriding the characterisation of a condition subsequent at common law, the first defendant as defendant would only be at liberty to set aside a voidable contract if he could be characterised as a party not in default.

67 The first defendant contended that cl 13 does contain a specific provision which can be regarded as overriding the approach to such conditions at common law and in equity and which had the effect of bringing the contract to an end automatically. Reliance is placed upon cl 13.7 concerning termination of contract where it said that if any condition concerning subdivision is not satisfied within the time specified for satisfaction of that condition the deposit and any other money paid by the buyer under the contract must be promptly repaid to the buyer and other related steps must be taken. It is said that this amounts to a provision that the contract comes to an end automatically.

68 However, as to this line of argument, I note that cl 13.7 does not expressly provide for the contract to be terminated automatically and the presence of earlier provisions imposing obligations upon the seller weighs against such a conclusion. To my mind, if it be found that the first defendant failed to use his best endeavours to ensure that the requirements concerning subdivision were fulfilled the plaintiff has prospects of obtaining relief. In circumstances where a further approval for subdivision has now been obtained by the first defendant there is arguably a prospect that the plaintiff will be able to obtain relief by way of specific performance.

69 The first defendant submitted, having regard to the facts and matters referred to in his affidavit, that he did use his best endeavours to arrange for a water supply and thus to comply with Condition 21 of the Planning Commission approvals in that regard. The first defendant's stance at the hearing before me was that in these circumstances, even if it be held that the contract did not come to an end automatically, he could not be characterised as a party in default and was therefore at liberty to rescind the contract on the grounds that the event conditioning a performance of the contract had not been fulfilled. It is said that rescission was effected either by the letter dated 12 March 2004 or by the later letter dated 29 April 2005.

70 Counsel for the first defendant relied upon Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 for the proposition that where a party claims an entitlement under the contract to rescind upon the occurrence of a specified event, the onus of proof as to whether that party induced the occurrence lies on the party resisting rescission. He said that the plaintiff had failed to adduce any or any sufficient evidence concerning the best endeavours issue.

71 I noted in earlier discussion that in regard to applications for an extension of time pursuant to s 138B of the Transfer of Land Act 1893 (WA) a court responding to such an application was usually not inclined to resolve disputed issues of fact upon the basis of affidavit evidence. It appears from the evidentiary materials before me that, at one stage, there appeared to be prospects of a water supply to the subject land being provided. Furthermore, that aspect of the matter was under active consideration by the first defendant at the time he contracted to sell the subject land to the plaintiff. Accordingly, in these circumstances, it seems to me that there is a live issue between the parties as to whether the first defendant can be said to have used his best endeavours to comply with the condition in question.

72 Having regard to the reasoning in Zieme v Gregory (supra), I consider that in the circumstances of this case the onus lies upon the first defendant to establish that best endeavours were used because it is the first defendant who is seeking to bring himself within an exemption. I give weight to the observations of Steytler J in that regard in Fay v Sheridan (supra) at par 23, notwithstanding the reasoning in Plumor Pty Ltd v Handley (supra) being the authority to the contrary relied upon by the first defendant.

73 It follows that, in my view, the plaintiff has made out a reasonably arguable case as to this aspect of the dispute and established that it has prospects of obtaining relief by way of specific performance of the subject contract of sale. The corollary of such an conclusion is that for present purposes the plaintiff can be said to have a caveatable interest in the land, subject only to an issue raised by the first defendant as to the form of the caveat.

74 The first defendant placed reliance upon the decision of Jenkins J in Hamdan v Widodo (supra) in submitting that the plaintiff's caveat was defective in form.

75 It was said in Hamdan's case (supra) that a caveat claiming an estate "in fee simple as purchaser" by virtue of a contract of sale was defective because it purported to claim a legal estate in the property when the claimant, at best, had only an equitable interest. Her Honour was not prepared to extend the caveat in that case in what was said to be a defective form, notwithstanding a line of reasoning by Malcolm CJ which was arguably to the contrary in the earlier case of Kuper v Keywest Constructions Pty Ltd (supra).

76 For myself, in resolving this issue in the circumstances of the present case, I am inclined to give weight to that passage in the reasoning of Malcolm CJ in Kuper's case (supra) at 429 in which he notes that the interest of a purchaser under a contract of sale is said to be commensurate with the availability of specific performance. I am of the view, having regard to the relevant provisions of the Transfer of Land Act and to the form of the subject caveat itself, that the matter to be described in the caveat is the estate or interest being claimed rather than a characterisation of the nature of the rights presently vested in the claimant. In the case of a purchaser of land under an offer and acceptance incorporating the General Conditions, being a purchaser who has prospects of obtaining specific performance, the ultimate objective or end point of the claim will be to obtain an estate in fee simple and to become the registered proprietor of the same. Accordingly, I am not persuaded that the caveat is defective in its form.

77 However, if I be wrong in that conclusion, I would, in any event, be minded to grant an injunction restraining any dealing with the land pending the resolution of the matters in issue between the parties.

78 I consider that the subject caveat, being caveat JO24963 is in an appropriate form. I am satisfied that the plaintiff has made out an arguable case that the subject contract of sale has not been terminated by the first defendant as alleged or come to an end by operation of law. It follows from this conclusion that the plaintiff can be said to have a caveatable interest in the subject land in that it has prospects of obtaining an order for specific performance.

79 It follows from the decided cases concerning caveats that I would normally be inclined to require that the plaintiff commence proceedings in order to substantiate its claim. However, it was common ground at the hearing before me, that such proceedings have been commenced, and there is therefore no need to make a specific order of that kind in the circumstances of the present case.

80 It was put to me at the hearing that I should give certain directions requiring the plaintiff to make application to the Court to deal with the matter on an expedited basis. However, upon reflection, I consider that an order of that kind might be thought to interfere with the exercise of the Court's discretionary power concerning applications for expedition. Accordingly, I am not persuaded that I should make any order in that regard. I will hear from the parties as to whether any further orders and directions are required. The first defendant will be allowed liberty to apply as to the adequacy of the plaintiff's undertaking concerning damages.

Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor [2005] WASC 245

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Judgment (126 paragraphs)

Mario Casella & Sons Builders Pty Ltd v Duckworth & Anor [2005] WASC 245 (15 November 2005)

Parties

Legislation Cited (1)

Cases Cited (9)