Plaintiffs v Defendants

2 The first defendant says its caveatable interest in the property is based upon the contract of sale.

3 The applicable principles for removal of a caveat are uncontroversial. They are analogous to an application for interlocutory injunctive relief. On an application to remove a caveat the onus is on the caveator to establish first that there is a serious question to be tried as to whether they have the claimed estate or interest in land, and second that the balance of convenience favours maintenance of the caveat until trial.[1]

4 For the reasons that follow I have determined that the first defendant ('purchaser') has established that there is a serious question to be tried whether they have the caveatable interest that they assert and, notwithstanding that the vendors have entered into a later contract of sale with a third party, that the balance of convenience favours maintenance of the caveat.

5 The plaintiffs' solicitor, How Yee Loh under the supervision of the principal, Mr Michael Lee, has sworn an affidavit[2] as to instructions from the plaintiffs. The first defendant relies on four affidavits, one sworn by the purchaser[3], one by his wife[4] and two sworn by the vendor's real estate agent (Mr Cheng)[5].

6 The first defendant asserts that shortly after the contract was signed in July 2018 he sought an extension of the settlement date. This was largely through communications between his wife and the vendors' real estate agent Mr Cheng. The contemporaneous emails between the real estate agent for the vendors, Buxton Real Estate and the solicitor for the purchaser that are exhibited to affidavits, document an agreement to extend the settlement date to 22 August 2019 without penalty. No conditions are documented. This was confirmed by a statement of the purchaser's solicitor in an email of 12 June 2019.[6] Mr Loh's affidavit[7] deposes to instructions that the offer to extend settlement to 22 August 2019 was subject to specific conditions, namely payment of a further 20% of purchase price and signing of an early release of deposit authority in accordance with s 27 of the Sale of Land Act 1962 for release of deposit monies. These conditions are not reflected in any documentation prior to an email from the vendor's solicitors dated 12 June 2019. It is not apparent that Mr Loh had any direct involvement in the arrangements of August 2018.

7 Mr Cheng has sworn that the instructions were conveyed by the second plaintiff and did not contain any conditions for granting an extension. Following the exchange of emails in June 2019, there were further attempts to negotiate an alternate settlement date without agreement being reached. This culminated in Mr Loh's email of 19 July 2019 stating that the vendors were not agreeable to any extension and that he held instructions to issue a default notice on 22 July 2019.

8 Further, the affidavits relied on by the defendant assert that the vendor's imposition of a condition requiring payment of an additional 20% of purchase monies arose when the purchaser sought access to the property for their architect in November or December 2018 and were unrelated to the settlement date. The affidavit of Mr Loh also details controversially that the purchaser withdrew his caveat in December 2018 to allow the vendor to obtain a bridging loan, thereafter re-lodging it later in December.

9 The first defendant's position is simple. It says it had a contract of sale with an agreement that the transfer of title was to occur on 22 August 2019. The vendor's notice of default and rescission issued on 22 July 2019 is therefore invalid as there had been no breach by the purchaser at the time it was issued.

10 The existence or otherwise of a caveatable interest by the purchaser depends entirely on whether or not there is a contract validly on foot. There is clearly a contractual dispute. If there is a binding agreement, then the first defendant says he has an equitable interest in land and is entitled to enforce the contract.

11 I am satisfied that, on the factual dispute as to when, and on what terms, settlement was agreed to be extended beyond 22 July 2019 as provided for in the written contract, does give rise to a serious question to be tried as to whether the purchaser has a caveatable interest.

12 The plaintiffs say that if the vendors have wrongfully terminated the contract as alleged by them then there is no interest in land and the purchaser's remedy lies in damages, or in equity where specific performance of the contract might be available. The plaintiffs submit that the equitable remedy is a ship that has sailed. I do not accept that this is so.

13 The plaintiffs' solicitors requested removal of the caveat by 22 August 2019 to enable the plaintiffs to 'mitigate losses arising from [the purchaser's] default, reserving all rights of the vendor'[8]. Although the purchaser did so, it was made clear on 23 August 2019 that it did so without prejudice to any rights under the contract or at all.[9] It is clear that by 23 August 2019 there is a brewing dispute as to the continued existence of or termination of the contract.

14 Had the purchaser not lifted the caveat as requested, there would be to my mind a clear balance of convenience in retaining the position until trial. Consequent on lifting the caveat, with the reservation of rights as identified, the vendors then resold the property by contract of sale dated 27 August 2019. The purchaser renewed his caveat on 3 September 2019. As a result the rights of a third party are now affected by the retention of the caveat. However removal of the caveat will have the practical effect of leaving the purchaser without the remedy of specific performance when he is otherwise intent on meeting his obligations under the contract if he ultimately establishes that the contract remains valid. The purchaser has also deposed to incurring significant costs associated with the interest in land accorded him by the contract. This includes various expenses including architect fees associated with his intent to develop the site. He has also suffered forfeiture of the deposit paid. In the circumstances, notwithstanding the rights of a third party to the later contract of sale may have, I am persuaded that the balance of convenience does favour the maintenance of the caveat.

15 I should also say that the vendor relied on an argument that the caveat lodged was prohibited by reason of s 91(4) of the Act. Section 91(4) presently provides:

A caveat that has lapsed or been removed by an order of a court shall not be renewed by or on behalf of the same person in respect of the same interest.

This argument relied on a decision of R & L Bell Pty Ltd v Casboult[10] ('Casboult'), where Bongiorno J considered the wording of the provision as it read at the time. The first defendant relied on Re Leighton Properties as authority for the proposition that where withdrawal of a caveat was not by court order there was no prohibition on lodgement of another caveat by the same person on directly or substantially the same grounds.[11]

16 The provision prohibited renewal of a caveat that had 'lapsed or been removed'[12]. The facts in Casboult are worth noting. The removal of earlier caveat was done by the caveator and not by order of the Court although in compromise of proceedings between the same parties for removal of the earlier caveat. In that case his Honour held that removal of a caveat could be construed as removal by court order or by an act of the caveator. His Honour noted that 'the lodging of a second caveat in respect of the same interest by the same person has, so far as I am aware, always been regarded in conveyancing practice as inappropriate or impermissible'[13]. However, since Casboult was decided the provision of s 91(4) of the Act was amended[14] to prohibit renewal of a caveat that has 'lapsed or been removed by an order of a court'. In those circumstances the plaintiffs' counsel accepted that s 91(4) did not provide a basis to say the caveat could not have been lodged. In light of the serious question to be tried as I have determined, it is not necessary for present purposes to comment more generally on conveyancing practice.

17 I will hear the parties on the form of orders that are necessary.

[1] Piroshenko v Grojsman & Ors [2010] VSC 240; (2010) 27 VR 489.

[2] Affidavit of How Yee Loh (Affidavit, 16 September 2019).

[3] Affidavit of Zhenzhu Liu (Affidavit, 18 September 2019).

[4] Affidavit of Yumei Feng (Affidavit, 18 September 2019).

[5] Affidavit of Mr Xuehang (Jerry) Cheng (Affidavit 18 September 2019); Affidavit of Mr Xuehand (Jerry) Cheng (Affidavit 19 September 2019).

[6] Plaintiffs' Exhibit 'HYL-5', Affidavit of How Yee Loh (Affidavit, 16 September 2019).

[7] Affidavit of How Yee Loh (Affidavit, 16 September 2019).

[8] Plaintiffs' Exhibit 'HYL-18', Email from How Yee Loh to Xin Katsu, 23 August 2019.

[9] Plaintiffs' Exhibit 'HYL-17', Email from Xin Katsu to How Yee Loh, 23 August 2019.

[10] [2003] VSC 169; (2003) 6 VR 271 ('Casboult').

[11] Re Leighton Properties (Qld) Pty Ltd [1990] 2 Qd R 230.

[12] Transfer of Land Act 1958 s 91(4).

[14] By amendments in 2009 (Act No 80 2009) s 48.