Plaintiff v First Defendant

2 Ms Lettieri lodged a caveat dated 18 September 2008 ("18 September caveat") in respect of a purported equitable interest in fee simple arising under a contract of sale dated 4 August 2008. Erden, which claims an equitable interest in fee simple under an earlier contract dated 20 June 2008, has applied under s 90(3) of the Transfer of Land Act 1958 (Vic) ("TLA") for an order for removal of the 18 September caveat.

3 The second defendant, the Registrar of Titles, did not participate in the proceeding.

4 For the reasons set out in this judgment, I have concluded that, as I am not satisfied that Ms Lettieri had an equitable interest in the Land as at 18 September 2008, the 18 September caveat must be removed.

5 On 19 January 2008, Krater entered into a contract to sell the Land to Ms Lettieri for $1,000,000 ("19 January contract"). Ms Lettieri paid a deposit of $100,000. However, she failed to settle the purchase, resulting in Krater serving a notice of rescission dated 1 May 2008. On 19 May 2008, upon receiving a further letter from Krater informing her that, as the time prescribed in the notice of rescission to rectify her breach of contract had lapsed, the contract was at an end, Ms Lettieri lodged a caveat claiming an interest in fee simple under a contract of sale. The date of the contract was not specified. The caveat was subsequently removed and is not relevant to this proceeding.

6 On 20 June 2008, Krater entered into a contract to sell the property to Erden for $1,000,000 ("20 June contract"). Prior to entering into the 20 June contract, Erden asked for and was given a copy of the letter of 19 May 2008 from Krater to Ms Lettieri. Under the 20 June contract, the deposit of $50,000 was payable on 15 September 2008. The deposit was paid by Erden on 27 June 2008. The contract provides that the balance of $950,000 is payable:

on the 15th day of December, 2008 or at the expiration of 14 days upon the issue of a Building Permit for the development of an Aged Care Facility in accordance with Town Planning Permit No. 2006-366 issued by the Moorabool Shire Council and dated 21 May, 2007 annexed to the Vendor's Section 32 Statement, whichever shall be the later.

7 On 14 June 2008, in anticipation of its purchase of the Land, Erden had entered into a contract with a building company to construct the aged care facility. Erden also retained an architect. There is evidence that Erden has made payments to the building company and the architect totalling approximately $100,000. Construction of the aged care facility has commenced. The nature of the work performed and when it started is not clear.

8 On 19 August 2008, Erden entered into a contract with Sandhurst Trustees under which Erden sold the Land to Sandhurst Trustees for $12,500,000 on the basis that Erden would complete the aged care facility prior to settlement.

9 In the meantime, on 4 August 2008 Krater entered into a contract to sell the Land to Ms Lettieri for $1,350,000 ("4 August contract"). The $100,000 that Ms Lettieri had paid under the 19 January contract was treated as having been paid towards the deposit of $135,000 payable under the 4 August contract.

10 It appears that on 8 August 2008, Mr Christopher Ind agreed with Ms Lettieri to purchase a completed aged care facility for $13,800,000. The only evidence of this agreement is a short confirmatory letter dated 8 August 2008 signed by Mr Ind and addressed "To Whom It May Concern".

11 Ms Lettieri deposed that in mid August 2008, she was informed by Mr Ind that he had heard that the Land had been sold to another purchaser. She also deposed that she was assured by Maryan Brajkoski, the son of Dusko Brajkoski, who is the sole director of Krater, that this was not the case.

12 Ms Lettieri failed to settle under the 4 August contract on 15 August 2008. Krater served a notice of rescission on Ms Lettieri on or about 18 August 2008.

13 On 18 September 2008, Ms Lettieri lodged the 18 September caveat.

14 On 22 September 2008, Dusko Brajkoski and Ms Lettieri signed the following written agreement, which I will refer to as the 22 September agreement:

We Marie Lettieri and Dusko Brajkoski, (being a director of Krater Developments Pty. Ltd, acn no: 100653049), hereby enter into the following agreement in regards to the purchase of property 49 Main St., Bacchus Marsh. Victoria.

I, Dusko Brajkoski being a director of Krater Developments Pty. Ltd, ACN No. 100 653 049, acknowledge that I have received cash payment of $30,000.00 from Maria Lettieri of 14 Chestnut Drive, St. Albans, being part payment for purchase of property at 49 Main St., Bacchus Marsh, pursuant to contract of sale dated 4th August, 2008.

I also acknowledge that although a rescission notice was sent to Ms Lettieri due to settlement not taking place on the 15th August, 2008, and notice sent that the contract had come to an end, I hereby advise that I am still willing to proceed with the sale of the abovementioned property, providing that full settlement be completed within 14 days of this agreement.

15 Pursuant to the 22 September agreement, Ms Lettieri paid Dusko Brajkoski $30,000. However, settlement did not take place within 14 days as required by the 22 September agreement.

16 On 24 September 2008, Erden lodged a caveat claiming an interest in fee simple under the 20 June contract. The caveat erroneously states the date of the contract as 15 June 2008. Nothing turns on this for the purposes of this proceeding.

17 On 2 October 2008, Mr Erden Hassan, the sole director of Erden, received a telephone call from Ms Lettieri advising him that she had entered into a contract of sale to purchase the Land from Krater.

18 On 7 October 2008, Mr Hassan received an electronic communication from Mr Torrick Ouaida, the managing director of the building company, advising him that Ms Lettieri had contacted him, claimed to be the owner of the Land and threatened to sue the building company unless works ceased. Mr Ouaida informed Mr Hassan that construction work would cease until matters were clarified. Construction work has in fact ceased.

19 On 21 October 2008, Erden issued an originating motion seeking, among other relief, an order for the removal of the caveat and an order restraining Ms Lettieri from lodging any further caveats.

Section 90(3) of the TLA and applicable legal principles

20 Section 90(3) of the Act provides:

Any person who is adversely affected by any ... caveat may bring proceedings in the Court against the caveator for the removal of the caveat and the Court may make such order as the Court thinks fit.

21 In Goldstraw v Goldstraw,[1] Dodds-Streeton J stated:

Section 90(3) is in the nature of a summary procedure analogous to the determination of interlocutory injunctions. The Court's power under s.90(3) is discretionary. In that context, it is recognised that the caveator bears the onus of establishing that there is a serious question to be tried that he or she does have the estate or interest in the land claimed. That is, 'in order to resist successfully the applications for removal of caveats (the caveator's) arguments must be directed towards the assertion of an interest in the subject land in the light of relevant principles of property and equity law'. Further, if the caveator does establish the serious question to be tried in relation to the estate or interest claimed, the weight of authority indicates that the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.

22 Given the summary nature of this proceeding and the prospect of further litigation between Erden or Ms Lettieri or both of them against Krater, I will confine myself to making only such findings as are necessary for the determination of the issues before me. Those findings are based only on the necessarily limited material before me.

23 The parties made detailed submissions as to the nature of the interests of Erden and Ms Lettieri in the Land and which interest has priority. In my opinion, however, priority issues do not arise for determination in this proceeding, as I am not satisfied on the evidence before me that at the time Ms Lettieri lodged the 18 September caveat, she had a caveatable interest in the Land. This is because, as at that date, the 4 August contract, pursuant to which the 18 September caveat was lodged by Ms Lettieri, had been the subject of a rescission notice and had come to an end. The 22 September agreement could only have effect as a new contract operative from that date. Even if it incorporated aspects of the 4 August contract, it could not change the fact that as at 18 September 2008, the 4 August contract was no longer in force. The 22 September agreement acknowledges that the 4 August contract had come to an end.

24 As I am not satisfied that Ms Lettieri had an equitable interest in fee simple in the Land under the 4 August contract as at 18 September 2008, it follows that I am not satisfied that the 18 September caveat can support such an interest. I have therefore concluded that there is no serious question to be tried.

25 If I am wrong and Ms Lettieri had an equitable interest in the Land under the 4 August contract as at 18 September 2008, that interest arose subsequent to Erden's interest under the 20 June contract. As between two competing equitable interests, the interest that arose first in time prevails unless a consideration of all the circumstances warrants a finding that the interest of the first interest holder should be postponed to the interest of the second interest holder. A mere failure by the first interest holder to lodge a caveat prior to the second interest holder acquiring their interest, without consideration of all the other relevant circumstances, does not warrant postponement of the first interest holder's interest.[2] In this case, Ms Lettieri has not pointed to any conduct by Erden, in addition to its failure to lodge a caveat prior to 4 August 2008, that warrants a postponement of Erden's prior interest.[3] Ms Lettieri did not depose that prior to entering into the 4 August contract, a title search of the Land was obtained by her or her solicitor.

26 Mr Clarke, who appeared for Ms Lettieri, submitted that this proceeding should be dismissed, as Erden did not have an equitable interest in the Land and therefore was not a "person who is adversely affected by" the 18 September caveat within the meaning of s 90(3) of the TLA. Mr Clarke relied on two bases for this submission.

27 The first basis was that the 20 June contract was conditional upon the obtaining of a building permit and therefore until a building permit was obtained, no specifically enforceable contact could come into existence, and therefore Erden could not acquire an equitable interest until such time. He submitted that there was no evidence that a building permit had been obtained by Erden. In support of his submission, Mr Clarke relied on the decision of Warren J, as her Honour then was, in Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd.[4] In that case, her Honour held that a purchaser of lots on an unregistered plan of subdivision under a contract that was subject to approval of the plan did not acquire an equitable interest in the lots prior to the approval of the plan.

28 Mr Wikrama SC, who appeared for Erden, submitted that Law Mortgagees is irrelevant, as it is governed by s 9AA of the Sale of Land Act 1962 (Vic), which imposes restrictions on the sale of lots prior to registration of a plan of subdivision. He emphasised that the 20 June contract was not subject to a condition in respect of the obtaining of a building permit. He submitted that the building permit was only relevant in determining when the balance of the purchase price is payable.

29 Law Mortgagees is not relevant to this proceeding. The clause in the 20 June contract that refers to the obtaining of a building permit (which is set out in paragraph 6 of this judgment) does not make the contract conditional upon the obtaining of a building permit. The contract was only subject to the condition that Erden obtain finance within 14 days but this condition was expressly for the benefit of Erden only and does not prevent Erden having the right to seek specific performance of the contract if it is ready, willing and able to comply with all its obligations under the 20 June contract. Ms Lettieri has not satisfied me that Erden is not ready, willing and able to comply with its obligations under that contract.

30 The second basis relied upon by Mr Clarke was that the 20 June contract was void as a result of Erden's failure to pay the amount of $600,000 as required by special condition 16. That condition states as follows:

Notwithstanding anything hereinbefore contained the purchaser shall pay a further sum of six hundred thousand dollars ($600,000.00) or such greater sum as shall be advanced by the vendor in reduction of the residue upon the expiration of 90 days from the date hereof. PROVIDED that the vendor shall:

1. Produce a Discharge of Mortgage and withdrawal of all caveats affecting title; and
2. Title is transferred to the purchaser subject to a second mortgage back to the vendors for the unpaid residue.

31 Mr Wikrama submitted that unless Krater produces a discharge of mortgage and withdrawal of caveats affecting the Land, as required by special condition 16, Erden's obligation to pay $600,000 is not enlivened and therefore Erden cannot be treated as having breached special condition 16. I am not persuaded, based on the evidence before me, that Erden has breached special condition 16. I note that there was no evidence before me that Krater has served a default notice on Erden under general condition 5 in Table A of Schedule 7 to the TLA.

32 Mr Clarke also relied on a letter dated 27 October 2008 from Krater's solicitor to Erden's solicitor asserting that the 20 June contract is void. The letter gives no reasons for the assertion. It simply refers to two old English cases and an old Tasmanian case that appear to deal with incomplete or informal contracts of sale of land, without stating how those cases relate to the 20 June contract. There is nothing in the abovementioned letter that persuades me that the 20 June contract is void.

33 Mr Clarke also submitted that it is inappropriate to grant any relief to Erden in the absence of Krater as a party to the proceeding. I reject that submission. In the circumstances of this case, relief can be granted notwithstanding that Krater is not a party. Even if it is added as a party, Krater may choose to avoid active participation in the proceeding.

34 I therefore conclude that by virtue of the 20 June contract, Erden is a person who is adversely affected by the 18 September caveat and is entitled to seek relief under s 90(3) of the TLA.

35 As I am not satisfied that Ms Lettieri had a caveatable interest to support the 18 September caveat, it is not necessary for me to determine where the balance of convenience lies. Had it been necessary, I would have found in favour of Erden for the following reasons:

(a) Erden has entered into contracts with a building company and an architect pursuant to which construction work for the aged care facility has commenced. That construction work is currently being held up by the 18 September caveat. In contrast, Ms Lettieri has not entered into contracts with third parties for the construction of an aged care facility.

(b) Erden has expended approximately $150,000 in relation to the Land and has contracts with third parties which require further expenditure whereas Ms Lettieri has expended $130,000 and does not have any such contracts.

(c) Erden has on-sold the Land to Sandhurst Trustees under a contract of sale which has been produced to the Court whereas Ms Lettieri has not produced any contract with a subsequent purchaser. The nature and status of the agreement, if any, referred to in the letter discussed in paragraph 10 of this judgment is unclear.

36 Before me, Mr Wikrama sought an order permanently restraining Ms Lettieri from lodging a caveat in respect of the Land. Such an order would be too wide. The order must be confined to any caveat claiming an interest in fee simple under any agreement, matter or thing entered into or occurring on or before 7 November 2008.

37 Mr Wikrama also sought an order permanently restraining the Registrar of Titles from registering any caveat in respect of the Land, irrespective of who lodges the caveat. In argument before me, Mr Wikrama resiled from his pursuit of this relief.

38 Subject to any further submissions from the parties, I will make the following orders:

(a) The caveat lodged by the First Defendant in the Land Titles Office in Dealing No. AG092426W on the land more particularly described in Certificate of Title Volume 9872 Folio 990 be removed from the register book by the Second Defendant.

(b) Until further order, the First Defendant, whether by herself, her servants or agents or otherwise be restrained from lodging any further caveat in respect of the land more particularly described in Certificate of Title Volume 9872 Folio 990 claiming an estate in fee simple arising under any agreement, matter or thing entered into or occurring on or before 7 November 2008.

39 I will also hear from the parties in relation to the costs of this proceeding, including whether I should certify that this was a matter suitable for the appearance of Senior Counsel.

[1] (2006) V ConvR 54-712; [2002] VSC 491, [30] (citations omitted).

[2] Jacobs v Platt Nominees Pty Ltd [1990] VicRp 14; [1990] VR 146.

[3] Compare Mimi v Millennium Developments Pty Ltd [2003] ANZ ConvR 556; (2004) V ConvR 54-687; [2003] VSC 260, [28]-[39].

[4] [1999] VSC 360 ("Law Mortgagees").