4984/02 ROFIZA PTY LIMITED (ACN 002 685 216) v GANGLEY PTY LIMITED (ACN 098 670 985)
JUDGMENT
1 HIS HONOUR: This is an application which is brought by the owner of a parcel of Torrens Title land known as lot 2935 Pioneer Road, Hunter View, Singleton. On 22 November 2001 the owner entered a contract to sell the land to the present defendant. That contract was subject to registration of a plan of subdivision to enable the land to be subdivided into eighty four lots. It was for a price of $840,000. It contemplated that there would be a mortgage back to the vendor for $420,000 and an arrangement for sharing profits of the eventual subdivision of the land.
2 The plan of subdivision contemplated by the contract was registered on 5 April 2002. Notwithstanding that, the contract was not completed. There was a notice to complete issued by the vendor on 3 June 2002 which resulted in the contract being terminated on 21 June 2002.
3 On 4 July 2002 a second contract was entered between the same parties for the sale of the same piece of land. The terms were different this time, however. There was no provision for a mortgage back to the vendor and no provision for a profit share. The purchase price remained the same at $840,000. Under that contract completion was due to take place on 8 August 2002.
4 Completion did not take place on 8 August 2002. On 9 August 2002 the vendor issued a notice to complete. That notice to complete nominated 26 August 2002 as the time for completion and it nominated the place for completion as the offices of the National Australia Bank in George St, Sydney. That place of completion was nominated because the vendor had borrowed substantial sums from the National Australia Bank which it had not repaid and the bank was pressing it for repayment. There is no issue in the present case that the time stipulated in the notice to complete was reasonable.
5 There then followed some conversations between the two men in charge of the vendor and purchaser companies. Mr Oborn is the man who was acting on behalf of the vendor, Mr Woods the man acting on behalf of the purchaser. It is the contention of the purchaser that those conversations have resulted in the vendor being estopped from denying that the contract of 4 July 2002 is still on foot.
6 The occasion for the litigation is that on 4 September 2002 the vendor issued a notice of termination of the contract. On 24 September 2002 or sometime between then and 30 September 2002 the purchaser lodged a caveat against the title to the land. By that caveat the purchaser claimed an interest as purchaser under the contract of 4 July 2002. The present application is one by the vendor seeking an order that that caveat be removed.
7 Today the purchaser has filed in court a cross claim seeking specific performance of the contract, and various alternative and consequential orders.
8 It is common ground between the parties that the way in which the matter should be approached is that laid down by Mahoney J in Shercliff v Engadine Acceptance Corporation Pty Ltd (1978) 1 NSWLR 729. That involves the court assuming that at a trial the evidence of the person seeking to maintain the caveat will be accepted, though taking into account the extent to which the evidence is in dispute, and the extent to which the evidence is undisputed.
9 The picture which is traced by the evidence of Mr Woods is that there was a conversation between Mr Woods and Mr Oborn on 16 August 2002. Mr Woods - who had, in previous conversations with Mr Oborn, let it be known that financiers had let him down concerning carrying through arrangements which they had made - said that he had received a verbal approval for finance from a new financial organisation which might assist in settling the sale. The conversations between the two men continued until 28 August 2002 when, according to Mr Woods' evidence, Mr Oborn said to him:
"I need to have some substantial confidence, therefore in order to give you this last opportunity I require the following:
1. I want Craig Doyle [the solicitor for the vendor] to be able to confirm with your first mortgagee that the loan is in fact approved and can settle fairly quickly;
2. I want both you and Norm [the other director of the purchaser] to provide personal guarantees for my second mortgage as I am, in effect, loaning up to ninety five percent of the purchase price;
3. I want you to provide $10,000 direct into my bank account. I will give you a deposit slip.
4. I want you to keep me informed, in particular if IMF can perform even if part, after your meeting in Melbourne tomorrow."
10 I should say that the discussion between the two men had by this stage reverted to a proposal whereby there would be a substantial mortgage back on settlement of the contract. There had also been some discussion about how Mr Oborn would require some "hurt money" if he was to extend the time for completion and an amount of $10,000 was what he had said he would require.
11 The conversation on 28 August 2002 had also been preceded by a letter which the solicitors for the vendor had written to the solicitors for the purchaser on 22 August 2002 which said:
"We are instructed that the vendor will extend the notice on the following conditions:
1. The purchase is to pay a further $10,000 as consideration for extending the notice by 5pm Tuesday 27 August 2002.
2. The purchaser is to produce evidence of finance by 5pm Wednesday [28 August] 2002 satisfactory to the vendor.
3. The notice will be extended until 3pm 2 September.
Please confirm that this is agreed to."
12 Thus by the time of the conversation on 28 August 2002 the first two of those three conditions had already not been met and the discussion related, apparently, to a different basis upon which settlement of the sale might be able to be achieved.
13 An amount of $10,000 was indeed paid direct into the bank account of the vendor on 30 August 2002, using a deposit slip which Mr Oborn had given to Mr Woods. There had been some communication about how arrangements which Mr Woods was seeking to make with his financier were advancing.
14 On 2 September 2002 there was a further conversation, where Mr Woods informed Mr Oborn how he was getting on in complying with requirements of his mortgagee. According to Mr Woods, Mr Oborn said that was fine and "as long as things keep moving forward just keep me informed and send me a copy of [the letter of a particular real estate agent] if you don't mind."
15 There was a further letter passed between the two men on 3 September 2002, in which Mr Woods confirmed that his company had a formal loan approval in place with a mortgagee and various other matters concerned with getting ready for a settlement. Mr Woods requested that Mr Oborn give instructions to Mr Doyle to prepare mortgage documentation in connection with the proposed mortgage.
16 It was on 4 September that notice of termination was issued.
17 Even after that date it appears that the two men continued to talk to each other about the possibility of there being a settlement, although there were no conversations after, it seems, 10 September.
18 On 12 September 2002 a new contract of sale was entered into by the vendor with a company called Jessica Estates Pty Limited, for the sum of $966,000. That contract required completion twenty eight days after the date of the contract.
19 It was on 16 September that there was first a letter from the purchaser to the vendor, threatening to lodge a caveat. As I have said, that caveat was lodged sometime between 24 September and the end of September. The reason for this imprecision in finding of the date is that the statutory declaration verifying the caveat was made on 24 September, and there is a date of 30 September, presumably placed on the caveat by the Land Titles Office, but no explicit statement about exactly when it was that the caveat was lodged in the Land Titles Office.
20 In an application of this kind, it is necessary to consider both whether there is a serious question to be tried and, if there is, where the balance of convenience lies.
21 So far as the existence of a serious question to be tried is concerned, counsel for the vendor points to the fact that the interest that is claimed under the caveat is an interest arising under the contract of 4 July 2002. He points out that there were discussions between the two men which were to the effect that if settlement was to occur it would be on a significantly different basis to that proposed by the contract of 4 July 2002. Not only did those discussions refer to the mortgage back which I have earlier referred to, as well there was talk between them of the purchaser paying an additional $50,000 at the time that the second mortgage came to be repaid and the additional $10,000 of "hurt money" which I have mentioned. The submission is put that, when the discussion was in these terms, it was not a representation that the existing contract would not be terminated but, rather, negotiations for the entry into of some new arrangement. Further, it is put, that new arrangement is purely oral and so runs foul of s 54A of the Conveyancing Act.
22 Next, the vendor puts that the defendant has failed to prove that it is ready, willing and able to perform the contract of 4 July. There is some evidence, of a hearsay nature, that a financier has granted some approvals of finance, but that evidence is fairly thin.
23 Next, the vendor, in reliance upon the fact that on an interlocutory application of this kind it is possible to look to the strength of the respective cases of the parties, points to some facts which would he suggests, cause obstacles to be placed in the path of any success on the part of the purchaser at any final hearing. He points to the fact that there is disagreement in an affidavit filed by Mr Oborn, with significant elements of the conversations deposed to by Mr Woods. If the evidence of Mr Oborn were to be accepted in that respect, then the case would be one which it would be very difficult for the purchaser to succeed on.
24 As well, he points to the fact that this purchaser had already once failed to complete a contract to purchase this land and had also failed to complete another contract to purchase other land which it had agreed to buy from this vendor. With that history, counsel for the vendor says it is hardly likely that the vendor would be giving the purchaser another chance.
25 As well, there is evidence which shows that the vendor was being significantly pressed by its banker. On 30 August 2002 the vendor had entered an agreement with National Australia Bank whereby it promised to repay its indebtedness in full on or before 30 September 2002, in default of which the bank would be entitled to demand repayment and commence proceedings to obtain writs of possession of various pieces of land. The vendor says that, given those circumstances, agreement is hardly likely to have been entered in the way Mr Woods suggests or even that forbearance is unlikely to have been extended in the way that Mr Woods suggests. As well, the vendor points to a letter of Mr Woods of 3 September which alleged that some mortgage documentation was ready when it was not. That is something which is, presumably intended to show that there is material which might provide the basis for a credit attack on Mr Woods at an eventual trial.
26 I am not prepared to regard any of these matters which attempt to forecast the eventual outcome of the trial as ones that I will place any great weight on.
27 The vendor also relies on a letter of 20 September, well after receipt of the notice of termination which was written on the purchaser's behalf, which does not suggest that there had been any firm agreement, or, indeed, that there had been any going back on any understanding or any other improper behaviour in terminating the agreement on 4 July.
28 The case of the purchaser is that, even so, there was still a stringing along of the purchaser by the vendor. The conversations in particular of 2 September and the letter of 3 September, caused the purchaser to understand that there would not be a strict insistence on the time limits laid down in the notice to complete.
29 In response to that allegation, the vendor says that there was no reliance by the defendant on any such representation. Even if the vendor had been very clear about its intention of terminating the contract, there is nothing that the defendant could have done, to have brought about completion on the date nominated by the notice to complete.
30 In all of these circumstances it seems to me that there is a serious question to be tried, although it is a case which is not a particularly strong one. I therefore turn to the balance of convenience.
31 Initially, the vendor attacked the adequacy of the undertaking as to damages proffered by the purchaser. The purchaser is a company which was formed specifically for the purpose of carrying out this particular subdivision venture and, so far as the evidence before the court goes, has no assets worth speaking about. However, both of the directors of that company have offered an undertaking as to damages. In these circumstances, even though the offer of the undertaking of the directors was only made in the course of submissions, I would not be prepared to regard it as being an inadequate one.
32 The plaintiff then says that it will suffer real damage if it is not able to complete its contract with Jessica Estates by next Thursday. That contract is one where Jessica Estates purchased with no notice, so far as the evidence goes, of there being any outstanding interest of the purchaser. There was no caveat lodged until well after the contract with Jessica Estates had been completed. As J & H Just (Holdings) v Bank of New South Wales (1971) 125 CLR 546 makes clear, a failure to lodge a caveat can in some circumstances be disentitling conduct which affects priorities between, in this case, Jessica Estates and the purchaser. It seems to me in the present case that there is a likelihood that that principle would come to bear.
33 As well there is a prospect of the vendor suffering damages at the hands of National Australia Bank if it does not comply with the obligations which it undertook. The obligations which the vendor undertook on 30 August have already been extended once and they are due to be performed shortly.
34 Finally, the vendor suggests that damages are an adequate remedy. There are two bases for this. The first is that the case which is put forward by the purchaser is essentially an estoppel case, and Verwayen v The Commonwealth (1988) VR 203 says that the appropriate remedy for an estoppel is whatever is the minimum equity which is necessary to ensure that the expectations which have been raised by an assumption induced by the person in the position of the vendor are not defeated. The plaintiff submits that any expectations which have been defeated will be adequately recompensed by an order for any expenses thrown away.
35 Further, the plaintiff submits that this is land which was intended to be sold to a land developer, to be used as trading stock. For that reason it is submitted that damages would be an adequate remedy. The plaintiff immediately qualified the submission by recognising that the High Court in Pianta v National Finance (1964) 38 ALJR 332 recognised that even in relation to a developer a contract for sale of land was one which was a contract for the sale of a unique asset. None the less there is some force in the submission.
36 There is a sense recognised in Pianta's case that land which a developer contracts to purchase is unique, and for that reason damages would not be an adequate remedy, if specific performance of the contract to sell such land were to be sought. That means that it is not open to argue, on an application for interlocutory relief, that final relief will be denied on the ground that damages are an adequate remedy. However, the fact that the land is bought as trading stock means that it has none of the unique associations that are involved if there is, for instance, a contract for someone to sell their home. That the land lacks these unique associations is in itself a proper matter to take into account in assessing the balance of convenience, for purposes of an interlocutory injunction, or an order which decides whether a caveat remains against the title to land. Thus, in assessing the balance of convenience, the fact that the land is a unique item has less weight in the case of a contract for sale of land to a developer than is the case in other situations where the people involved truly value that particular piece of land and value it for more than what money they can make out of it.
37 In my view the balance of convenience favours not permitting the existing caveat to remain. The most important single factor here is that Jessica Estates is an innocent party which has acquired an interest in the land, without notice of the interest of the purchaser. The other factors, though, are ones which I also take into account in concluding that the balance of convenience favours the removal of the caveat.
38 I order that the defendant withdraw caveat 89914190 as soon as practicable and in any event by noon tomorrow, 15 October 2002.
39 I order the defendant to pay the plaintiff's costs connected with the disputed application to withdraw the caveat.
40 The matter can otherwise stand into the list of the expedition Judge on Friday. The orders can be entered forthwith.
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