Plaintiff v Defendant

Supreme Court of Victoria|2009-04-27|Before: HANSEN J

REAL PROPERTY - Sale of Land - Contract - Conditions - Rescission or non-completion by purchaser - Fencing removed by third party prior to settlement - Subsequent sale to another purchaser - Caveat by original purchaser - Transfer of Land Act 1958, s 90.

2 The subject property is at 1 Gratz Street, St Albans. It was sold by the plaintiff as mortgagee in possession pursuant to a contract of sale dated 27 November 2008. The property was sold for a price of $1,355,000 payable as to 10 per cent by way of deposit and the balance being due on 26 January 2009. The purchaser was Fadil Ajro and/or nominee. Subsequently, indeed on 6 February 2009 following the plaintiff serving a notice of rescission and while the period to remedy default was current, the first defendant Lindlirim Pty Ltd was nominated as co-purchaser under the contract.

3 Ultimately the plaintiff rescinded for failure of the purchaser to complete. The plaintiff issued a notice of rescission on 29 January 2009 which required settlement by 11 February 2009. The purchaser failed to complete and the contract was rescinded. The correctness of the rescission is challenged by the first defendant.

4 The caveat in question was lodged on 23 February 2009 based on the contract of sale.

5 On 1 April 2009 the plaintiff entered into a new contract for the sale of the property for $1,125,000, which is due for completion on 1 June next.

6 The question is whether the caveat should be removed or remain, as the parties respectively submit.

7 On the hearing of the application in the first instance of course, the caveator is required to demonstrate that there is a prima facie case or serious question to be tried as to the existence of the ground stated in the caveat or, to put it another way, as to the right on the basis of which the caveat is lodged, and if that be so, then the question is whether, on the balance of the convenience, having regard to the relevant factors, the caveat should or should not go.

8 The particular thing that occurred in relation to the property, which has a showroom and car-park, is that subsequent to entering into the contract, a fence which ran along the street boundary was removed except for the uprights to which the panels were fixed. When I say panels, I am not sure of the material by which they were constructed, but it was a fence of an open type with vertical narrow bars being placed on horizontal rails. The fence was intact at the time when the contract was signed but appears to have been removed on 29 November 2009.

9 It is said by counsel for the first defendant that the fence constituted a fixture on the property and that without the fence, a major component of that which was sold is missing.

10 The plaintiff, it was said, was obliged to sell the property with the fence included and that without the fence, the property was substantially not the same and the consequence was that it was not open to the plaintiff to rescind for non-performance by the first defendant in failing to complete, rather it was the plaintiff that had not performed. Hence the rescission was ineffective and the contract remained on foot. The defendant wishes to complete the contract.

11 In support of these contentions, counsel pointed to the law concerning fixtures and what he said in this regard is more particularly outlined in his written submission. In essence, he submitted that the fence was a fixture and thus part of the property to be conveyed.

12 As to these matters, counsel for the plaintiff pointed to the general conditions and a special condition in the contract of sale. Pertinently, in the general conditions, that which appears in the standard form contract as condition 2 under the heading "Loss or Damage Before Settlement" was deleted in the contract. Clause 2.1 had stated:

The vendor carries the risk of loss or damage to the property and the chattels until settlement.

The vendor must deliver the property and the chattels to the purchaser at settlement date in their present condition (fair wear and tear excepted).

If any chattel is not in its present condition, (fair wear and tear excepted) at settlement, the purchaser is only entitled to compensation from the vendor.

16 In the special conditions attached to the contract, clause 8.5(b) provided that:

The purchaser must make no objection, claim compensation or delay payment of the residue because of anything in connection with ... (b) any loss, damage, dilapidation, infestation, defect (latent or patent) or mechanical breakdown which may affect the Property.

17 It was submitted by counsel for the plaintiff that the effect of these provisions firstly, the deletion of clause 2 of the general conditions, and, secondly, clause 8.5(b) of the special conditions, was to preclude any liability in the plaintiff for loss of the fence.

18 Counsel also referred in this respect to condition 1 of Table A which provides for a period of 21 days in which the purchaser may make objection concerning any matter appearing in the particulars or conditions. Although the purchaser knew of the removal of the fence within the period of 21 days, no objection was made in respect of that matter. Indeed, the purchaser did not raise it until 23 February 2009, following rescission. Hence, the first defendant could not rely on removal of the fence.

19 In essence, counsel for the plaintiff said that if the first defendant had any right at all in relation to the removal of the fence, it was to compensation but not to refuse to complete the contract.

20 It should be said that counsel for the defendant made an alternative submission to the effect that the plaintiff had not been entitled to rescind because it had failed to make time of the essence. I think there is no substance in that submission. It seems to me to turn on a misreading of the letter that is contained in Exhibit 14 to Mr Hinton's affidavit. That letter made it clear that the reinstatement of the contract was not thereby effected but was conditional upon completion being effected that day by the purchaser.

21 I am of the view that the first defendant has not established to the requisite degree, or indeed at all, a serious question to be tried as to the continuing subsistence of the contract. In my view the position is clear that the contract was rescinded for non- performance by the first defendant in failing to complete, that the first defendant's right was for compensation, if anything, having regard to the provisions of the contract, and that on failure to complete and the contract being rescinded, it lost its rights in the contract.

22 Let it be assumed, however, for present purposes, that there was established, or there is to be regarded as being established, that there was a serious question to be tried as to the caveat. I nevertheless consider that in the circumstances of the case, regarding them overall, the balance of convenience favours removal of the caveat.

23 Not only are there the circumstances that I have referred to but following the plaintiff's recision, it has resold the property to another purchaser. Unfortunately for the plaintiff, it is at a lesser price than that payable by the first defendant, but there it is, these things happen. The fact is that the plaintiff has committed itself and it would be in breach of that contract if it did not proceed. That third party is a bona fide purchaser for value and has acquired rights. To these circumstances may be added the fact that it is open to the first defendant to seek damages, if it wishes.

24 I consider, having regard to all of these circumstances, that the balance of convenience favours removal of the caveat.

25 For these reasons, which doubtless are not expressed as felicitously as they might be if I reserved, I will order that the second defendant remove the caveat and I think it must follow that the first defendant pay the plaintiff's costs of the application.

26 I think myself that this was a pretty clear case, that people have to be very careful with caveats and I propose to order that the costs be paid as between solicitor and client.

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