Mitrangas v Makalias and Ors [2003] VSC 251

Supreme Court of Victoria|2003-06-04|Before: CUMMINS J

By summons on originating motion the plaintiffs seek the removal of a caveat upon two titles pursuant to s.90(3) Transfer of Land Act 1958. The titles relate to two distinct properties, 6 Murray Street, Prahran, Certificate of Title Volume 10672 Folio 906, and 63 York Street, Prahran, Certificate of Title Volume 10672 Folio 907.

I have had regard on the plaintiffs' side to the primary affidavit which is that of the second plaintiff, Ms Kathy Mitrangas, of 2 May 2003 and a further affidavit of hers of 12 May 2003, those of her brother, the first plaintiff, Mr Constantine Mitrangas, of 6 and 28 May 2003 and a number of other affidavits, that of Mr Kalyvas, solicitor, of 13 May 2003 who appears before me today, of Mr Karvala, solicitor of 2 and 28 May and 2 June 2003, of a real estate agent, Mr John Boling, of 5 May 2003 and of a builder, Mr Chris Potriadis of 5 May 2003.

For the defendants I have regard to affidavits of the first defendant, Mr Theofanis Makalias, of 27 May and 2 June 2003 and of Ms Lusi, solicitor for the first defendant of 28 May 2003.

The essential dispute between the parties is whether the works have been completed. The critical nature of that issue for today's proceedings is that the Charge over the relevant property (and which is provided by Clause 11.6 of the Special Conditions to the Contract of Sale of Real Estate, exhibited as KM2 to the affidavit of Ms K. Mitrangas of 2 May 2003) fixes upon the completion of the works. The term "completion" is not defined in the Contract.

"Charge: (a) The purchaser grants to the vendor a charge over the property which charge will constitute security in favour of the vendor for all costs that may be incurred by the vendor if it is required to complete the construction of the two townhouses on the remaining land arising from the failure by the purchaser to complete their construction for any reason whatsoever. The Charge will be in the form of a caveat over the property and the purchaser hereby authorises the vendor to lodge or cause to be lodged a caveat on its behalf over the property. The vendor must remove that caveat or caveats when the two townhouses on the remaining land are completed. (b) The purchaser must not encumber the property in any way whatsoever (except for the grant of the Charge pursuant to special condition 11.6(a)) until the two townhouses to be constructed on the remaining land are complete."

Notably the final word of Clause 11.6(a) is "completed" and of (b) is "complete."

"Vendor to make good. The purchaser must, at its own expense, make good all defects in the works arising from defect in materials or workmanship notified to the purchaser by the vendor within 18 months after the date the purchaser completes the construction of the townhouses on the remaining land, including but not limited to, works which are due to defective materials or faulty workmanship".

Essentially the dispute between the parties is as to, first, the identification and quantum of works which are defective or not complete, and second, the characterisation of such defects or incompletion as defects post-completion under clause 11.3 or lack of completion under clause 11.6.

On behalf of the plaintiffs, reliance is had upon the various indicia of completion - the granting of certificate of occupancy for the defendants' two townhouses, Units 1 and 2 issued by the City of Monash on 20 November 2001, Exhibit KN5, the payment of damages for late completion in the sum of $6,720 on 6 December 2001, the provision or at least proffering of keys to the Units 1 and 2 on 3 December 2001, the possession of Units 1 and 2 by the defendants since January 2002, and the lack of access for the plaintiffs to those premises since that time and, lastly, the assumption of insurance risks by the defendants, a matter which of itself does not involve the conclusion sought because it would be a prudential step in any event, whether the premises were complete or not.

On the other side the defendants rely upon the multitudinous faults specified in the BSS report of 18 January 2002 exhibited as Exhibit CP1 to Mr Potraidis' affidavit of 5 May 2003. The report is by BSS Design Group, architects and building consultants. Its author is Mr R.T.P. Arends. It is detailed and comprehensive and states "the building has been of average construction and matters noted do need attention" (page 2). The plaintiffs say that has now been overtaken by events.

Given the state of the material before me I consider there is a serious question to be tried as to whether the works are complete within the purview of Clause 11.6 or not. In so concluding I have regard to the affidavit material and exhibits I have referred to and the well-known criteria stated in Lewenberg & Pryles v Direct Acceptance Corporation Ltd[1] and Smith v Callegari & Ors[2].

I turn to the matter of the balance of convenience.

Notable here is that the Charge provided by 11.6 is the protection agreed by the parties for the benefit of the defendants. I agree with Mr Panna that a second order solution of damages does not meet the agreement between the parties of the protection provided by Clause 11.6. The very caveats here lodged are what was contemplated by the parties and, accordingly, should be given substantial priority.

Mr Panna also relied upon a decision of Batt, J. in Bunning v. Building Supplies Pty. Ltd.and Sgro and Ors[3] particularly at 66.363, where His Honour, reviewing the matter before him said, "The plaintiffs should not at this stage be forced, in my view, to take the risk that any judgment they obtain in the County Court may not be fruitful". However that was a case where there was no other security than that before His Honour, different from the case before me where there are, as I have said, two securities because there are two properties, Folio 906 and Folio 907, as to which the caveat applies.

Mr Panna further relied upon Porter v. McDonald and the Registrar of Titles, a decision of the Supreme Court of Western Australia (1984) W.A.R. 271, particularly the judgment of Burt, C.J.at 272. However, as was noted by Young, J. in Gibson v Co-Ordinated Building Services Pty. Ltd[4], particularly at 58490, the practice in Victoria and New South Wales is different from that laid down in Porter v. McDonald, because here and on the east coast the question of the balance of convenience is attended to.

Tadgell, J. in Wright v. Bridge Wholesale Acceptance Corporation (Aust) Ltd[5] said as to the matter before him:

"I should say that I am not persuaded that I should, in an application such as this, order that the caveat removed simply because the caveator has another caveat ....which might amply support his security". I agree that the mere circumstance that there is another security does not, ipso facto, warrant the removal of the caveat from the first security.

However, I do consider in the present case, given the history of the matter that is set forth in the affidavits, that the balance of convenience favours the lifting of the caveat from the property at 6 Murray Street, Prahran, that is Folio 906, but the retention of the caveat upon the property at 63 York Street, Prahran, that is Folio 907. That is because, in the case of Murray Street, the property has been offered for sale and settlement is due on 30 June 2003. According to the affidavit material the caveats were not notified to the plaintiffs until sale of the 6 Murray Street development had been advertised and attempted. The sale price is $710,000. If the caveat is not removed by 30 June 2003 the second plaintiff will not be able to effect settlement under that contract and thus the purchaser will be able to rescind the contract with the return of the deposit and other consequences. If the sale does come to fruition the proceeds can be applied to the discharge of the mortgage over that property in relation to the St George Bank and also over York Street which will then be unencumbered, and the caveat over York Street will be, on the figures, sufficient to cover the interests of the plaintiffs in relation to defects or non completion, however ultimately it is characterised in the substantive proceedings. I consider that the balance of convenience is clearly in favour of the removal of the caveat on Folio 906, but the retention of the caveat on Folio 907.

Accordingly I order, pursuant to s.90(3) Transfer of Land Act 1958 that the caveat on 6 Murray Street, that is Title 10672 Folio 906, be removed. I refuse the application that the caveat over York Street, Volume 10672 Folio 907 be removed. It remains in place. The normal process should occur that the caveators initiate proceedings within a month to establish their claim in a month to prevent any removal of it, and I make consequential orders to fulfil that decision.

MR PANNA: In those circumstances, Your Honour, the usual order is that the costs become part of the costs in the substantive proceeding, that's the Smith v. Calagary order for costs, the Wee Jasper and the other cases that follow it.

HIS HONOUR: Yes. Mr Kalyvas, do you submit otherwise than that?

MR KALYVAS: I do, Your Honour. If I could just say why our submission ought be that this is different in the two following senses in that the plaintiffs have been successful insofar as obtaining relief sought in their originating motion and summons, if one turns to paragraph 4 of the summons and paragraph 4 of the originating motion where the alternative is sought on behalf of the plaintiffs as an alternative paragraph 3 of the relief that the order be limited to the removal of the caveat which affects 6 Murray Street.

And secondly, Your Honour is familiar with the letters which were submitted to the first defendants on three occasions making an offer to remove the caveat over 6 Murray Street and to leave the caveat over 63 York Street. They are Exhibits KM23, KM24, letters of 4 April, 9 April and 22 April, and in those circumstances, Your Honour, we submit that in your discretion you ought exercise your discretion to award costs in favour of the plaintiffs.

I am not persuaded that I should make the order. I entirely understand what Mr Kalyvas has said: on the other hand the success of the plaintiffs is the alternative that they originally sought, and I think it would be prudent to let the Judge who makes the orders in the substantive matter deal with these issues when all the material is in.

The letters relied upon, and properly relied upon by Mr Kalyvas, will remain available to him to present to the Judge at the conclusion of all the proceedings and he may well be successful in his submission at that time in relation to today's proceedings. The Judge then will have all the material before her or him. Accordingly, I will reserve the costs from today to be determined at the conclusion of the main action as contemplated by Smith v. Callegari.

[1] [1981] VicRp 36; (1981) VR 344 at 347 per O'Bryan, J.

[2] (1988) V.Conv.R. 54 - 300 at 63858 - 859 per Phillips, J.

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