Blog 99. Specific performance and mortgages – Court of Appeal overturns Blog 73, restores Blog 63.

Parwan Investments Pty Ltd (recs apptd) v Hooper & Anor [2024] VSCA 86, McLeish, Walker and Macaulay JJA, (6 May 2024).

In this case the Court of Appeal exhaustively considered the remedy of specific performance, and the nature of a Torrens system mortgage and of the equitable interest of a purchaser.

The facts were –

In 2015 the Commonwealth Bank lent the appellant (Parwan) $850,000 to purchase an 88 ha. parcel of land (‘Lot 2’). Parwan became registered proprietor. The bank registered its mortgage.
On 21 October 2016, without the consent of the bank and so in breach of the mortgage, Parwan entered into a contract to sell 11 ha. of Lot 2 (the ‘Purchased Land’) to the first respondent (Hooper) for $900,001 with a deposit of $1. The contract –
- made settlement conditional on registration of the plan of subdivision by 21 April 2018, obliging Parwan to use its best endeavours to obtain this and giving Hooper a right of termination if this date was not met;
- specified settlement by the later of 21 March 2018 or 14 days after notice of registration of the plan;
- was subject to a contemporaneous 24 month lease to Hooper of the Purchased Land.
Hooper paid the deposit and the parties entered into the lease which provided that unless terminated it would thereafter continue as a periodic tenancy.
In 2017 Hooper caveated over Lot 2 claiming an interest as purchaser.
21 April 2018 passed without Hooper electing to exercise the right of termination of the contract of sale. It remained on foot with Lot 2 unsubdivided and so unable to be transferred to him.
In 2018 Parwan executed an equitable charge over Lot 2 in favour of Hooper for $350,000, said to reflect the value of Hooper’s improvements. In 2018 Hooper caveated based on this charge.
Parwan subsequently defaulted on the loan and the money secured became immediately payable. On 13 March 2020 the bank appointed receivers of Lot 2. Pursuant to the mortgage and their terms of appointment the receivers had power to take possession of and sell the land. The bank instructed the receivers to sell Lot 2 and recover the secured money.
In February 2021 Hooper commenced a proceeding seeking inter alia specific performance of the contract of sale. Parwan counterclaimed seeking orders for vacant possession and a clear title. Parwan sought summary judgment and gave Hooper a notice to vacate.
Matthews AsJ granted partial summary judgment, namely on those aspects of the claim and counterclaim concerning specific performance, finding that the contract was not amenable to such relief, and so dismissing that claim as having no real prospect of success (Blog 63). Forbes J. vacated these orders, allowing Hooper’s claim to proceed (Blog 73). Parwan now sought leave to appeal against the orders of Forbes J.

The Court of Appeal granted leave to appeal and allowed the appeal, holding –

A mortgage registered under the TLA constituted the mortgagee as the registered proprietor of a security interest in the land. Except in the case of fraud, the registered proprietor of land (including a registered mortgagee) held it absolutely free from all encumbrances, with two exceptions not presently relevant, but subject to various specified rights including the interest of a tenant in possession. [48], [49]
Until the discharge from the secured money, the registered first mortgagee had the same rights in law and equity as a mortgagee of general law land in whom the legal interest was vested (with the mortgagor retaining the right to quiet enjoyment until default). [50]
A registered mortgagee had, upon default in payment of the principal sum or interest secured, statutory powers to enter and sell the land to enforce its security interest. But the mortgagee could instead appoint a receiver to the land and vest that receiver with powers of sale. Where a mortgage was (as here) made by deed and the power of sale was activated the mortgagee had a statutory power to appoint a receiver. This power may also (as here) be conferred by the mortgage document itself following non-compliance with a default notice. [50]-[52]
Receivers appointed pursuant to such mortgage provisions were the agents of the mortgagor. This, however, was a ‘special and limited agency’ eg. because the receiver was appointable and removable by the mortgagee and could in many ways act independently of the mortgagor or at the direction of the mortgagee. It was not an ordinary agency because in exercising powers (including of sale) the receiver was appointed for the mortgagee’s not the debtor’s benefit. [53], [54]
Specific performance in its narrow and strict sense assumed an executory or preliminary agreement to do something to put the parties in the legal position which the agreement intended, eg specific performance of a contract of sale of land to compel the vendor to execute and deliver a transfer, enabling its registration. [55]
Enforcement of the performance of an executed contract was not specific performance in this strict sense, nonetheless described as ‘relief approximate to specific performance’. [56]
Specific performance was unavailable if damages were an adequate remedy; but damages were generally an inadequate remedy against a vendor failing to complete a sale. [57]
Possible defences to an action for specific performance were –
1. that fulfilment of the contract was likely to require continual curial supervision: however, this was not an automatic bar – much depended on the period of performance of the obligations and the number and detail or complexity of the terms to be performed. Courts often exercised a supervisory jurisdiction on applications by trustees, receivers and administrators; and completion of a contract had been ordered against vendors who were also required to use best endeavours to register a plan of subdivision – the prospect of some supervision in those circumstances had not prevented the specific performance order; [58]
2. impossibility of performance, ie a prospect that the defendant would lack power to comply with the proposed order. The rationale for this defence was that equity would not specifically enforce the impossible, eg obtaining the apparently unobtainable consent of a third party. So, although a vendor must use best endeavours to obtain any necessary consent to sale, including taking necessary proceedings, and an order for specific performance could be made conditional on such consent being obtained, there would be no such order if it was sufficiently clear that consent was unobtainable; [59]-[61]
3. futility of performance, ie a possible insufficient probability that the order would sufficiently benefit the plaintiff to render it just; [59]
4. hardship suffered by a third party, eg where specific performance of a contract of sale of an interest in land would prejudice another person interested therein but not a party to the contract. A court may also refuse specific performance if it was probable that this order would involve a breach of contract with a third person. [62], [63]
Although it was often said that a contract of sale of land gave the purchaser an equitable interest therein, this only meant that the purchaser had acquired certain equitable rights to its specific performance, and that these and related rights extended, for example, to rights to obtain injunctions and other such relief against the vendor and third persons in appropriate circumstances. So, under a specifically enforceable contract of sale of land an equitable interest was created immediately. In other words, in this context, a purchaser’s equitable interests were commensurate with the extent of equity’s protection of them. [64], [65]
In this case, the circumstances in which a trial court would exercise its discretion included:
1. the bank (not a party to the proceeding) was the registered proprietor of a first mortgage with an indefeasible legal security interest in the land;
2. by contract subsequent to this registration Parwan sold a part of Lot 2 conditional on registration of a plan of subdivision creating the title to the land sold;
3. the contract was without the bank’s consent and so Parwan’s entry into and performance of it would breach the mortgage;
4. following Parwan’s default the bank appointed receivers to enforce its security interest, who wished to sell Lot 2 and who had given notice to terminate the lease;
5. it could not be assumed that registration of the plan of subdivision could or would occur;
6. Parwan had possibly breached it obligation to use best endeavours to obtain such registration;
7. the bank was not obliged to discharge its mortgage until fully paid;
8. the mortgage debt would not be discharged by payment of the amount owing to Parwan under the contract of sale; and
9. after the proceeding commenced the bank refused consent to the sale. [67]
An order for specific performance in the strict sense would be that Parwan execute and deliver to Hooper a transfer of the subdivided portion of Lot 2 corresponding to the Purchased Land. But, before that, Parwan would have to perform the following contractual promises:
1. use its best endeavours to prepare and register a plan of subdivision containing a lot corresponding with the Purchased Land (the ‘subdivision obligation’), and;
2. assuming this succeeded, procure a discharge of mortgage enabling Hooper’s registration as proprietor free of encumbrances (the ‘mortgage discharge obligation’), and;
3. to do this, either pay out the whole mortgage debt, and so compel discharge, or not so pay but persuade the bank to discharge the mortgage at least partially – in this sense completion of the contract depended Parwan’s ability to compel the bank (a third party to the contract of sale) to discharge the mortgage at least in part or the bank consenting to doing so. [68]-[70]
Having found that Parwan had not established that subdivision was impossible, Forbes J. in effect assumed successful navigation of performance of the subdivision obligation. [73]
Forbes J. –
1. assumed that, once subdivision occurred, the bank might (perhaps should), because Parwan could raise money to pay it out from sale of lots, consent to discharge the mortgage insofar as it affected the lot comprising the Purchased Land (ie. a partial discharge), even though the sale of the Purchased Land would not suffice to discharge the mortgage debt; [76]
2. and reasoned that so, because hypothetically the bank might agree to release the mortgage, this possibility met the argument that specific performance had no reasonable prospect of success. [77]

The proposition that, for Parwan to show Hooper’s lack of such real prospect, it should also show that the bank would not consent to the sale, which it was not obliged to do, after a subdivision it was actively resisting, appeared somewhat fantastic and artificial. In any event, the proper inference from the evidence was that the bank would not give such consent. This sufficed to require that the appeal be allowed. [79]

Accordingly, the judge ought not to have allowed the appeal from the associate judge’s decision on the basis that, in order to demonstrate Hooper’s lack of a real prospect of obtaining an order for specific performance, Parwan was required, but failed, to expressly address the bank’s attitude to a partial discharge of mortgage on the assumption that a plan of subdivision had been registered. [81]
However, a more fundamental barrier to an order for specific performance was that –
1. the bank’s interest had priority to Hooper’s potential equitable interest (ie to the extent that the contract was amenable to an order for specific performance) and so this potential interest could not defeat the bank’s immediate entitlement to enforce its legal interest; [83]
2. an order for specific performance would cause the bank hardship because the caveats referable to Hooper’s right to specific performance would prevent the bank recovering its debt while (presumably funded by it) the receivers pursued registration of the plan of subdivision, with the bank then waiting to see whether the subdivided lots (including the Purchased Land) could be sold in such a sequence that the entire mortgage debt was recovered before the mortgage was discharged. Such an order would safeguard the interest of a subsequent, unregistered interest-holder (Hooper), contrary to Parwan’s obligations under its mortgage, in preference to the immediately exercisable rights of the prior registered proprietor (the bank). An order with this effect would upend priorities in the Torrens title system; [84]
3. hardship to a third party being a reason for declining specific performance, such hardship to the bank would be virtually certain to lead a court to so decline. [85]
There was accordingly no real prospect of Hooper obtaining an order for specific performance at trial. Summary judgment would be granted on Hooper’s claim for specific performance and for injunctions restraining sale of the Purchased Land, and on the counterclaim. Orders would be made enabling sale of the Purchased Land including for removal of the caveats and distribution of the proceeds of sale. [86], [87]

Philip H. Barton

Owen Dixon Chambers West

Wednesday, October 8, 2025

Blog 79 Caveator who adopted conflicting positions left unsatisfied.

Colony Constructions Pty Ltd v Zain Homes Pty Ltd & Ors [2023] VSC 529, Ginnane J.

This short case is an illustration of the importance, when faced with a serious breach of contract by the other party, of either accepting the breach and thereby terminating the contract or declining to accept the breach and asserting your intention to go on with the contract. Confusion between these options possibly contributed to this caveator claiming the wrong interest and grounds. The first defendant was a purchaser under a contract which did not settle on the due date, following which the vendor served a 14 day Notice of Default and Rescission and the third defendant (invalidly because it was the nominee transferee) served a 14 day Default Notice based on alleged deterioration to the premises and an inadequate planning permit. Following expiry of both Notices the first defendant: wrote stating that the alleged breach had not been rectified and that the contract was at an end; and caveated claiming an interest as chargee on the grounds of implied, resulting or constructive trust. On the plaintiff vendor applying under the Transfer of Land Act s. 90(3) to remove the caveat the purchaser adopted conflicting positions: its director deposed that “the caveat was lodged to protect my interests in the property namely the return of the deposit and or to purchase the property”; its counsel submitted that its conduct demonstrated that it wished to settle the contract; and in written submissions the purchaser relied on the right of rescission under ss. 32K and 34 of the Sale of Land Act 1962. Ginnane J. held it arguable that the vendor had breached the contract, raising an arguable issue of whether it had the right to serve its Notice, but as the caveat had not claimed an interest as a purchaser the caveator only arguably had asserted an equitable lien for the return of the deposit. Accordingly, appropriate relief was removal of the caveat with the deposit to be held in the vendor’s solicitor’s trust account. His Honour stated –

“I have noted and considered the emphatic submissions of the defendant’s counsel that if the caveat is removed it will lose its right to settle the property, a right which may be later established. However, … I can only consider the claims described in the caveat and they do not rely on the contract of sale …”

The facts were –

On 18 February 2022 the plaintiff entered a contract to sell a property to the first defendant for $727,270, with a deposit of $77,000 which was paid, due for settlement on 18 February 2023. The conditions included that: the “contract is subject to the vendor providing the purchaser endorsed plans and permits” (Special Condition 6); the vendor must deliver the property to the purchaser at settlement in the same condition as it was in on the day of sale, except for fair wear and tear (General Condition 24.2).
The first defendant nominated the third defendant as transferee.
A planning permit was issued allowing partial demolition of a building and erection of six units.
The contract did not settle on the due date. On 20 February 2023 the vendor served a 14 day Notice of Default and Rescission describing the default as “failure to settle per the terms of the contract”. On the same day the nominee served a Default Notice describing the default as “non-compliance of general condition 24.2 & special condition regarding endorsed planning permit” and stating that the purchaser intended to exercise its rights unless within 14 days the default was remedied and legal costs were paid.
On 9 March the first defendant by its lawyers emailed the plaintiff’s conveyancer stating that the alleged breach had not been rectified and that the contract was at an end. It also caveated claiming an interest as chargee on the grounds of implied, resulting or constructive trust.
The plaintiff resold the property and applied under the Transfer of Land Act s. 90(3) to remove the caveat. The first defendant’s director deposed to damage to the property alleged to have occurred after the date of the contract. The first defendant submitted that the plans provided did not contain a valid planning permit as stipulated in Special Condition 6 so as to enable performance of the building works.
The plaintiff argued that the first defendant had adopted conflicting positions concerning whether the contract was still on foot. The first defendant submitted that its conduct demonstrated that it wished to settle the contract, but its director also deposed that “the caveat was lodged to protect my interests in the property namely the return of the deposit and or to purchase the property”. In written submissions the first defendant also relied on the right of rescission under ss. 32K and 34 of the Sale of Land Act 1962.

Ginnane J. ordered removal of the caveat on condition that the deposit was held in the vendor’s solicitor’s trust account until final determination of the proceeding or further order and on condition that the purchaser counterclaimed to substantiate its claim to the deposit –

The third defendant’s Notice was invalid because it was a nominee who could not exercise rights under the contract. [7]
The first defendant’s contentions that the plaintiff had breached the contract in failing to provide a valid planning permit and because of damage to the property raised an arguable issue as to whether the plaintiff had the right to serve its Notice. [8]
Although the caveat had not claimed an interest as a purchaser (the claim of an implied, resulting or constructive trust did not claim an estate or interest arising under the contract) the caveator had established a serious question to be tried of an interest in the land in the form of an equitable lien for the return of the deposit – the caveat asserted such an interest when it referred to the first defendant’s interest as a chargee. [10]-[11]
The first defendant’s arguable interest in the $77,000 deposit could be protected by a removal of the caveat on condition as stated above. The balance of convenience favoured that course. This removal would deprive the first defendant of its right (which may later be established) to settle the contract but the caveat had not relied on the contract. [12]-[13]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, December 19, 2023

Blog 77. No prima facie case of a contract of sale.

Ritz Bitz Pty Ltd & Anor v Cumming & Ors [2023] VSC 418, M. Osborne J.

This is the longest Blog because of the complexity of the facts and the desire of the registered proprietors to amend their Defence substantially. This case largely concerns whether there was a prima facie case that a contract of sale existed. An interesting twist is how his Honour dealt with misdescription in the caveat of the claimed interest in land. Undisputed evidence was given that this was due to the PEXA options. M. Osborne J. stated that this misdescription “would be put to one side” and did not consider possible amendment of the caveat, but noted that the caveator could have sought an interlocutory injunction which in practical terms would have secured the same outcome (but nonetheless the case remained one of caveat removal). This appeared in turn to lead to some greater consideration than usual in a caveat case of the necessity and value of the undertaking as to damages offered.

The facts were as follows –

The defendants Daniel and Amanda Cumming (the couple) were registered proprietors of a property in Footscray improved by a former dance hall (the Property), at which as at mid 2015 his mother lived.
Daniel’s brother John was the second plaintiff and controlled the first plaintiff (Ritz Bitz).
In about 2015 the brothers discussed possible subdivision of the Property and the sale of part of it to John. John alleged that an oral contract was made at this time to sell to him that part of the Property “later known as lot 1” (Lot 1) on a particular plan of subdivision (the 2015 contract).
In August 2015 John purchased a property in Braybrook, where their mother then lived, registered in the names of siblings of the brothers.
In early 2016 (John subsequently deposed) it was agreed, at Daniel’s request, to change the proposed two lot subdivision to a three lot subdivision, with John bearing one third and the couple bearing two thirds of the costs (the one third/two thirds agreement).
On about 22 August 2016 a plan for a three lot subdivision was lodged with the local Council. On 23 August 2016 it advised that it would approve the plan of subdivision, subject to compliance with requirements principally concerning fire safety including provision of a fire safety report.
In 2017 John proffered a standard form of contract for the sale of Lot 1, which the couple refused to sign.
In 2019 John obtained a fire safety report. By this time the Property was largely vacant and dilapidated.
In 2020 the Braybrook property was sold. The proceeds of sale were paid to the plaintiffs.
In April 2022 John caveated over the Property claiming an implied, resulting or constructive trust. In September the Council issued a building order for minor work requiring compliance that month. On 10 December Daniel and Amanda entered a contract of sale of the Property to a third party, Nikolce Talevski, under which the deposit was paid, due for settlement in February 2023. Settlement had not occurred.
In December 2022 the plaintiffs commenced a proceeding against the couple and, because of other transactions not presently material, a company controlled by Daniel. The pleadings were a Statement of Claim and Defence which the defendants subsequently sought leave to amend. The relevant pleadings were broadly:
- The Statement of Claim paragraph 52 pleaded that in about July 2015 the couple agreed to sell to John part of the Property later known as lot 1 a particular plan of subdivision for $2 m. “on vendors terms”. The agreement was particularised as oral and implied, insofar as oral being contained in discussions between the John, the couple, and their mother at the Croatian Club in Footscray. The Defence admitted this allegation but leave was sought to amend the Defence to deny this allegation and also plead: (a) that although John had at about that time offered to purchase lot 1 on a proposed plan of subdivision for $2 m. the offer was on terms including that: (i) he would arrange and pay for lodgment of the plan of subdivision (the “condition precedent”); (ii) he would pay a deposit of $800,000 to the couple to enable them to purchase a property at which their mother could live; (iii) the balance of the price would be paid within 12 months of entry into a contract; (b) the condition precedent was never fulfilled because the plan of subdivision was rejected by the Council for want of a fire safety plan; (c) non-compliance with s. 126 of the Instruments Act.
- Paragraph 53 of the Statement of Claim alleged that on or about 22 August 2016 the Council advised the couple that the plan of subdivision had been lodged and that lot numbers had been allocated. However, paragraph 55 pleaded that on 23 August 2016 the Council advised that subject to its requirements (principally directed at fire safety) it would “give agreement for the plan of subdivision to be lodged”. The Defence admitted these paragraphs but in paragraph 55 went on to plead “that upon the issue of the [requisite fire report] to John in 2019 he decided not to proceed with the purchase”. The Defence also pleaded that the subdivision was not approved “by council as per the council’s requirement for the fire safety report to be provided”.
- The Statement of Claim paragraph 56 pleaded that the terms of the contract included that: (a) the price for Lot 1 would be $2 m.; (b) the deposit was $800,000, to be paid in kind “by John providing a property for his mother to live in (she then residing at the … Property)”; (c) the balance of the price was to be paid on terms, with John developing a backpackers hostel at Lot 1 and to pay $1.2 m. 12 months after its establishment; and (d) that John would be responsible for obtaining planning permits and procuring registration of the plan of subdivision.
- The Defence admitted the allegations in paragraphs 56(a), (b) and (d). It did not admit the allegations in paragraph 56(c) and added that it was a term that the balance of price was payable within 12 months, subject to approval of the plan of subdivision, and there was no agreement concerning a backpackers hostel. Leave was sought to amend the Defence to: plead that no contract was ever formed and replace the admission of paragraph 56(a) with a denial, adding that John agreed to pay a deposit of $800,000 in cash to the couple so that the couple could purchase a property in which their mother could reside.
- The Statement of Claim paragraph 57 pleaded that the alleged vendors represented and warranted that “part of the purchase price being $800,000 should be paid in kind by John purchasing a property for John and Daniel’s mother such that she would have a place to live” and that in reliance upon the representations, John acquired the Braybrook property for his mother. Paragraph 58 of the Defence pleaded that John had purchased the Braybrook property for $665,000, being less than the agreed deposit of $800,000, and had subsequently used it as security for Ritz Bitz to purchase a hotel. It was sought to amend the Defence to add (paragraph 58(a)) that the $800,000 was to be paid in cash to the couple, and that John had since sold the Braybrook property and applied the proceeds to his own use.
- The Statement of Claim paragraph 60 pleaded that in 2017 John proffered a draft contract of sale to Daniel and Amanda to give effect to the 2015 contract. The Defence pleaded that they did not sign it because it “was completely different to the original offer”.
- The Statement of Claim paragraph 62 pleaded that the couple had breached the contract because they had “failed to convey [lot 1] to John upon payment of $1.2 million”.
- Specific performance was sought of the 2015 contract requiring the plan of subdivision to be registered (and for the couple to do all that was necessary to register the plan) and for Lot 1 to be transferred to John upon his payment of $1.2 m. to the couple.
- The Statement of Claim did not advert to any agreement to share the costs of a contemplated two lot subdivision equally, or of any agreement to split the costs of a contemplated three lot subdivision, but his Honour noted that the most logical reading of the pleading was that John was to bear the costs.
In June 2023 the Council served an emergency order on the couple requiring vacation of the building and performance of demolition works by 21 June. Daniel subsequently deposed that the couple lacked the resources to undertake these works.
The defendants applied under the Transfer of Land Act s. 90(3) for removal of the caveat and for leave to amend their Defence and Counterclaim.
John argued that his interest did not arise under an implied, resulting or constructive trust but was that of a purchaser under the 2015 contract. His solicitor deposed that those words were used in the caveat because when it was lodged John could not recall (and thereby nominate) the exact date in July 2015 of the contract, which inability meant that the only PEXA option for the grounds of claim was that nominated. This evidence was not challenged.
John deposed –
- to a conversation with his mother before and to similar effect as that at the Croatian Club referred to in the Statement of Claim in which he offered $2 m. to her for the front half of the Property (the Property being, according to John, in fact his mother’s property, notwithstanding that it was registered in the names of the couple), that he agreed to pay $800,000 immediately to her which she could use to acquire a property to live in, and that he would then pay her the balance of $1.2 million once the property was operating as a backpackers hostel;
- that “as part of the relief [to be obtained in the proceeding he] will also need to pay over the ‘deposit’ from the sale of the Braybrook Property”;
- to an agreement to change the proposed two lot subdivision to a three lot subdivision, on the basis of the one third/ two thirds arrangement;
- that he believed that the value of Lot 1 was significantly above $2 m.
John exhibited to certain emails to his affidavit.
Daniel exhibited to his affidavit a copy of the written contract provided by John, which was largely inconsistent with the alleged 2015 contract. Although John deposed that the contract provided by him in 2017 was not inconsistent with the alleged 2015 contract he did not depose that the document exhibited by Daniel was not the contract provided. However John’s counsel stated from the Bar table that his instructions were that the document exhibited by Daniel was not the contract provided in 2017, and that John no longer had a copy of it.
Daniel and Amanda tendered a fire engineering report dated 5 March 2019.
The plaintiffs offered an undertaking as to damages.

M. Osborne J. ordered removal of the caveat, holding –

The misdescription in the caveat of the grounds of claim would be put to one side because the true alleged interest had been asserted in a solicitor’s letter and, even if the court had not had power (which it did have) to amend the caveat, the caveator could have sought an interlocutory injunction to restrain settlement of the third party sale which in practical terms would have secured the same outcome. [34]-[35]
Although completion of the alleged 2015 contract was conditional on registration of the plan of subdivision, and thus on consent of a third party, a court would, in appropriate circumstances, make orders in the nature of specific performance compelling the vendor to do what was necessary to obtain approval for the subdivision and, if approval was granted, to settle the contract. This interest was sufficient to support a caveat. [36]-[38]
There was not a prima facie case that a contract existed, because even allowing for the admissions in the Defence, the contract as alleged was attended with difficulty, as follows –
1. The Statement of Claim lacked precision, in particular:
  1. the allegation that the subject matter of sale was land later known as a particular lot number on a plan of subdivision could not accurately reflect the particularized July 2015 discussions, because this plan was not yet prepared; [43]
  2. notwithstanding consensus in the pleadings that the plan was uncertified because Council’s fire safety requirements remained unaddressed, the Statement of Claim did not directly engage with the fact that settlement was impossible pending certification and subsequent registration of the plan, nor with what was necessary to procure certification or with who was responsible for securing certification and registration; [44]-[45]
  3. the reference in paragraph 52 to “vendors terms”, unidentified and unclear, seemed to suggest settlement at an undefined point not linked to registration of the plan; [46]
  4. the allegation in paragraph 62 that the alleged vendors had breached the contract by failing to convey Lot 1 to John upon payment of $1.2 m.: did not reflect that the obligation to convey was dependent on registration, did not plead tender of this sum, and did not clarify how reference to this sum was reconciled with the sale on the ‘vendors terms’, whatever they might be; [46]
  5. The pleas concerning the deposit and its payment were unclear; [47]
  6. The relevance of the allegations in paragraph 57 were unclear: they appeared to set the scene for pleas of estoppel or part performance without following through; [48]
  7. A fair, but not the only, reading of the Statement of Claim was that the deposit of $800,000 was to be paid in kind. However, the question of who was to own the Braybrook property was left unsaid, much less how the purchase of a property otherwise than for the couple could amount to part performance of an obligation to pay them $2 m. for Lot 1; [49]
  8. The relevance of the provision of the later written contract to the claim for specific performance was unclear, and that document contained myriad inconsistencies with the alleged 2015 contract. [50], [53]
2. John’s evidence of a conversation with their mother in which he offered her $2 m. for the front half of the Property was inconsistent with his pleading that $1.2 m. was be paid to the couple. [57]
3. In broad terms, the emails exhibited by John supported an interpretation of the 2015 contract as containing a term that payment the deposit of $800,000 was to be effected in some way by the purchase of a property for their mother. [58]
4. Notwithstanding the purchase of the Braybrook property for their mother and its registration in the names of the brothers’ siblings the plaintiffs received the proceeds of sale. Although the Statement of Claim sought an order in effect requiring the transfer of Lot 1 to John upon his payment to the couple, he had deposed that “‘as part of the relief, [he] will also need to pay over the ‘deposit’” from this sale, thus implicitly recognising that the couple were entitled to the $2 m., which was not the same as part of the $2 m., namely the $800,000 ‘deposit’, being paid to their mother to buy the Braybrook property and was inconsistent with the plaintiffs’ ultimate receipt of the proceeds of sale. On the case that John now sought to advance, the couple, not John (or his mother’s estate), were entitled to the $800,000. [59]
5. It was undisputed that responsibility for obtaining registration of the plan of subdivision, fell on John not, as was usual, on the vendors. And, although John deposed to an agreement to change the proposed two lot to a three lot subdivision, he had not pleaded this agreement nor one to share the costs equally on the basis of a contemplated two lot subdivision. [60]
6. In summary, even if the court was to assess the question of a prima facie case by reference to the alleged admissions in the Defence, there were significant impediments to the establishment of a legally binding contract in the form of the alleged oral 2015 contract. In particular:
  1. The alleged 2015 contract failed sufficiently, arguably at all, to take account of the sale being conditional because dependent upon certification and registration and was entirely unclear on the date of payment of the price or whether this payment was conditional. [62]
  2. The only form of written contract in evidence was quite inconsistent with the alleged 2015 contract, or with the parties becoming legally bound before its execution, and as John had not deposed that the document in evidence was not the document proffered no weight could be attributed to his instructions conveyed from the Bar table to the contrary. [63]
  3. As to the deposit, the Statement of Claim was most unclear. It was ambiguous as to whether John would pay $800,000 to the vendors (suggested by the pleading and the relief which John now accepted he would be entitled to at final hearing) or whether (as pleaded in paragraph 57(c)) it be paid in kind by John purchasing a property for their mother (and so suggestive of the $800,000 being paid in effect to their mother) which was consistent with the version in John’s affidavit. Whatever the true interpretation, it was difficult to see how John could have paid the $800,000 deposit, whether to his mother, or to the couple by being used to buy a house for their mother (which presumably meant that the couple did not have to do so), but still somehow received the proceeds of sale of the Braybrook Property. [64]
  [42], [61], [65]

The question of the prima facie case was not confined to whether there was a binding sale agreement for Lot 1 but extended to whether specific performance would be granted for the sale of a lot in a plan of subdivision which remained unregistered some 8 years after the date of the alleged contract. As to this:
1. Contracts for the sale of lots in unregistered plans of subdivision were amenable to orders for specific performance because of the normal implied term requiring the vendor to do everything reasonably necessary to procure registration. However, here John bore the burden of obtaining registration. [67]
2. Even if the court was to accept for the purposes of this Application that (although unpleaded) the contract had been varied to change the proposed two lot to a three lot subdivision with the one third/two thirds arrangement, there was uncertainty about the costs, nature and extent of the required tasks. The report tendered was long and required performance of a range of measures to attain certification of the plan of subdivision. And it appeared in 2023 that further works would be required. In sum, the works required were complex, unidentified, and at some indeterminate and potentially large cost, to be met on John’s case as to one third by him and two thirds by the couple. [68], [70], [71]
3. Accordingly, a series of further orders for their performance and payment would be required antecedent to any order for specific performance. Although a court would supervise a contract the performance of which required costs to be met in agreed proportions, in this case the costs related to, at least in part, performance of building works of uncertain scope. A building agreement was one requiring continual supervision in respect of which a court was reluctant to grant orders for specific performance. If specific performance were granted the court would likely have to supervise potentially significant building works not yet identified or delineated by the alleged 2015 contract. [72], [73], [78]
4. John had also failed to establish a prima facie case that he was ready, willing and able to perform the obligations imposed on him by the alleged 2015 contract. Even assuming in his favour that his non-payment of a deposit in the traditional sense was not itself a disentitling breach of contract, he had led insufficient evidence of ability to meet future necessary payments. [74]-[78]
[66]

In conclusion John has not established a prima facie case at a sufficient level of certainty to justify the maintenance of the caveat. [78]
The balance of convenience also favoured removal of the caveat. Ordinarily, because contracts for the sale of land were the subject for orders for specific performance, land being of a unique character such that damages were not an adequate remedy, the balance of convenience favoured a caveator with a prima facie case and priority over any relevantly competing interest. However here the balance of convenience was against John because:
1. Of his Honour’s concerns about the adequacy of the undertaking as to damages offered by Ritz Bitz and John – the insufficiency of an undertaking as to damages being a powerful discretionary factor against the grant of an interlocutory injunction – there being a very real possibility that the couple would suffer significant losses by reason of their inability to settle the third party contract; [82]-[84]
2. If the caveat remained in place the Property would likely deteriorate or the couple would have to finance rectification works in order to deal with the building order and the emergency order or face prosecution; [88]
3. Talevski’s interests would be effected; [89]
4. Notwithstanding John’s emotional connection with the Property he had not pursued his claim with alacrity and if his assessment that Lot 1 was worth substantially more than $2 m. this would sound in damages. [90]
[80], [91]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, December 5, 2023

Blog 75. Masters v Cameron

Stathopoulos v Cremin & Anor [2023] VSC 238, Barrett AsJ.

Unlike most previous Blogs this Blog does not concern an Application under the Transfer of Land Act (TLA) s. 90(3) but rather concerns a proceeding commenced following a notice by the Registrar of Titles under s. 89A(1), the plaintiff having caveated over the first defendant’s land claiming an equitable interest as purchaser under a contract of sale. The registered proprietor applied for summary dismissal of the proceeding with consequential removal of the caveats.

Barrett AsJ considers at length principles of contractual interpretation, the law on the Instruments Act s. 126, and in particular the law where parties reach agreement on terms of a contractual nature but also agree that the matter of their negotiation shall be dealt with by a formal contract. The foundational law is contained in the High Court judgment in Masters v Cameron (1954) 91 CLR 353 at 360 – 362 as follows –

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. …

Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: … The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, … or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. …

The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: … Nor is any formula, such as “subject to contract”, so intractable as always and necessarily to produce that result: … But the natural sense of such words was shown by the language of Lord Westbury when he said … “if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation”. …

This being the natural meaning of “subject to contract”, “subject to the preparation of a formal contract”, and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract.”

There is arguably a fourth category, being a variation upon the first category, ie a class of case in which the parties are content to be bound immediately and exclusively by the agreed terms whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

The facts were –

The first defendant (the vendor) was registered proprietor of Lots 1 and 2, 343 McGlone Road, Drouin. On 3 September 2018 she and the plaintiff (Stathopoulos) entered into a contract of sale of, according to the document, Lot 2 but Stathopoulos pleaded it was of Lot 1 (the First Contract). $5,000 was paid under this contract, which however did not proceed.
Stathopoulos deposed that between 30 March and 9 April 2020 he dealt with a Mr Shnall, who, in the week beginning on 30 March telephoned him saying that he was an estate agent calling on behalf of the vendor and in this conversation Stathopoulos offered $8m. for both lots. (The vendor did not allege that Schnall was not acting for her, but deposed that on 9 April she received an offer in draft under cover of a letter from Schnall stating that his company was instructed to present this offer on behalf of a significant investor etc, without naming that investor). Stathopoulos deposed that on 7 April Schnall told him that the vendor had rejected this offer to which he orally responded with four alternate offers.
Stathopoulos alleged: that later on 7 April Schnall emailed that these offers had been presented to the vendor, and Schnall sought four separate letters of offer in the terms set out in Schnall’s email, saying that, if these letters were provided by midday the next day, he would have the offer that the vendor selected signed off on the following Monday. Schnall concluded “[l]ook forward to executing this deal for you George next week”.
Four letters of offer in the terms set out in Schnall’s email were emailed by Stathopoulos. Offer 3 was in substance: the property to be purchased was 343 McGlone Road including the 1 acre lot improved by the vendor’s house; the price was $9m. payable as to $1.8m. on execution and the balance on 1 September 2021; it included a condition requiring the purchaser to pay $10,000 to cover the costs of contract preparation, refundable if the vendor did not execute the contract of sale and non-refundable if the purchaser did not execute it.
On 9 April Stathopoulos advised Schnall that his details were as on the First Contract, ie “George Stathopoulos and or nominee”. Stathopoulos alleged that later that day Shnall contacted him, saying that he was with the vendor at her house, and that she accepted offer 3 for both Lots 1 and 2 and Schnall said:

“he would draw it up and get [the first defendant] to sign it, and that he would then meet me to get me to sign it. He also told me that [the first defendant] wanted $20,000.00 for the contract preparation costs, which I communicated that I agreed to, to Mr Schnall, while he was in [the first defendant’s] presence. In response to this, he then informed me that [the first defendant] said ‘Congratulations!”

On 9 and 10 April 2020 the parties respectively signed a short document headed ‘Offer to Purchase – Key Terms and Conditions’, which Stathopoulos alleged was the “Second Contract”. Its substantive terms included: the “Properties” were both Lots; the price was $9m. payable as to $1.8m. “on the execution of the Contract of Sale” and the balance on 1 September 2021; “Contract This offer is subject to the purchaser and vendor executing a legally enforceable Contract of Sale”; “Exclusivity The vendor confirms that they will immediately upon acceptance of this offer cease any other negotiations and will not start any new negotiations in respect of the property [whilst] contract negotiations with the Purchaser are underway”; “Contract Preparation Payment” being in substance as in Offer 3 with the amount increased to $20,000; a term imposing confidentiality on the vendor. The vendor signed this document under the words, headed “Acknowledgment by the Vendor”, “I, the undersigned, agree to the above-mentioned purchase details, key terms and conditions”.
Stathopoulos deposed that between 12 and 29 June 2020 the vendor congratulated him on completing the deal, enjoyed discussing his development plans, stated that she was particularly happy that the Precinct Structure Plan allowed for a school to be part of the development, and on 23 June said that she would tell her solicitor Mr Bridge to “hurry up” with the contracts and send them to him.
On 24 June the vendor emailed Stathopoulos that she had forgot to mention that she wanted the contract to include terms permitting her to continue living in the house for a year after settlement rent free and requiring him to pay rates until settlement. Stathopoulos deposed that later that day he told Bridge that he agreed to these requests and that the vendor wanted Bridge to “hurry up” with issuing the contracts (Bridge replying that he knew what she wanted), and that in answer to Bridge’s question he confirmed that his details were the same as in the First Contract.
On 30 June 2020 the vendor’s solicitors emailed Stathopoulos stating –

“The Vendor Statement and Contract of Sale are ready to be finalised.
In order to proceed, can you please provide me with your full name and/or entity purchasing the property and your lawyer details.”

Stathopoulos replied “I am waiting on a GST ruling from the ATO”.

In April 2021 a dispute erupted between Stathopoulos and the vendor’s solicitors as to whether any contract existed. Stathopoulos had not by this time paid the $20,000 for preparation of the contract.
In May 2021 the vendor entered a contract to sell Lot 2 to another purchaser due for settlement in May 2023. In March 2022 Stathopoulos caveated over the land described in the Second Contract claiming an equitable estate in the land as purchaser. The vendor applied under s. 89A(1) for removal of the caveats and in due course Stathopoulos gave notice to the Registrar of commencing this proceeding for specific performance of the alleged Second Contract. The vendor counterclaimed seeking removal of the caveats. She also issued a Summons seeking summary dismissal of the proceeding.

Barrett AsJ dismissed the application for summary dismissal, holding –

There was a real question to be tried whether the Second Contract was a binding agreement, and the plaintiff had a real not merely fanciful prospect of success. While there was force in the argument that the facts fell within the third category of Masters v Cameron it was open to the plaintiff to argue that the words “subject to contract” were not decisive and that circumstances both before and after the alleged contract supported its existence. Consideration of those matters would probably involve consideration of the parties’ relationship through negotiations and at least one signed contract and of discussions post-dating the alleged Second Contract. Further what occurred in the lead up to the signing of the Second Contract, including the dealings of the parties with Schnall, was somewhat obscure and could be relevant to questions of agency and attribution of knowledge. Finally, immediately before Schnall took the four offers to the vendor he stated that he looked forward “executing this deal for you … next week” and shortly after this the vendor signed a document in which she agreed “to the abovementioned purchase details, key terms and conditions”. The terms of the alleged Second Contract headed “Exclusivity” and “Contract Preparation Payment” did not detract from the conclusion that there was a real question to be tried whether the Second Contract was a binding agreement. [37], [50], [51]
Section 126 of the Instruments Act required that the agreement on which the action was brought, or a memorandum or note of the agreement, was in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note. The vendor carried the onus of establishing non-compliance with s. 126. If Schnall was acting as her agent then it was arguable that, on 9 April 2020, she by her agent received the four offers under cover of an email that specifically identified the plaintiff as the purchaser. There were significant questions whether the Second Contract contained a sufficient description of the purchaser, either directly by reason of Stathopoulos’ signature, or by the description as purchaser, or having regard to extrinsic evidence that accompanied the four offers, or other evidence. On this the plaintiff had a real as opposed to fanciful prospect of success and that there was a real question to be tried. [54], [59], [65]
As the question involved an interest in land the balance of convenience favoured the status quo. [52]
Accordingly the caveats would remain. [67]

Barrett AsJ set out at length the law related to: contractual construction including the admissibility of post-contractual conduct ([35], [45]); the Masters v Cameron categories ([36]); and the Instruments Act s. 126 ([55], [58], [60]-[63]).

Philip H. Barton

Owen Dixon Chambers West

Tuesday, August 8, 2023

Blog 68. Court of Appeal allows appeal by caveator on ground of arguable contract of sale.

Ek v Red Eagle International Pty Ltd (atf Chunan Bai Hybrid Unit Trust) [2022] VSCA 254, Niall and Kennedy JJA., (18 November 2022)

The facts were –

The respondent (Red Eagle) was registered proprietor of three adjoining buildings at 7 – 13 Carrington Road, Box Hill (the Properties). Ms Cherry Pai was a director of Red Eagle. In 2021 and early 2022 she negotiated with the applicant (Jade) concerning their sale. Jade received a draft contract of sale and s. 32 Statement. She later paid $3,000 to Red Eagle.
At a meeting between Cherry and Jade on 14 June 2022 a price of $12.15 m. was proposed and a ‘particulars of sale’ page was used to write down the discussion. Jade subsequently texted Cherry a photo of the completed particulars which included that price and a handwritten amendment by Jade of the address, from ‘7 – 13 Carrington Road Box Hill’ to ‘7 – 15 Carrington Road, Box Hill’ (the ‘first particulars’). However, Cherry subsequently explained that shop 15 was not on the title and so not for sale.
On 9 July 2022 Jade and Cherry met at Jade’s dental clinic. Notwithstanding conflicting evidence of what occurred at this meeting it was undisputed that a revised ‘particulars of sale’ dated 9 July 2022 (the ‘9 July Particulars’) came into existence. This recorded the following, with two handwritten notes (denoted NB)–
Vendor: Red Eagle International Pty Ltd
Purchaser: Jade Ek & or Nominee
Street Address: 7 – 13 15 Carrington Road Box Hill 3128
Purchase price: $11,850,000.00
Deposit: $355,500.00 3 – 5% or ($592,500 @ 5%)
Balance: $11,494,500.00 (9 – 12 months)
N/B 3 – 5% Due 10/10/2022
N/B On Market Value 2 yrs after settlement if Property appreciate (Jade) will give 300k

The amounts recorded for price, deposit and the balance were in Jade’s handwriting over whiteout. Jade’s initials also appeared proximate to the entries of purchaser, street address, ‘3 – 5%’, and the notes. At its bottom Jade’s signature appeared next to the Chinese characters for ‘purchaser’ (next to a date of 9 July 2022) and Cherry’s signature appeared next to the Chinese characters for ‘vendor’.

On 9 July Jade made a further payment of $12,500 to Cherry, and ultimately paid a total of $45,500 between June and 1 August (which she asserted was part payment of the deposit).
On 24 July 2022 Red Eagle entered into a contract of sale of the Properties with a new purchaser, Jun Chen, with settlement on 24 October 2022. Cherry gave evidence that a 10% deposit was paid. That contract was not in evidence, nor did Jun Chen give evidence.
On 2 August 2022 Jade caveated relying on an agreement with the registered proprietor dated 9 July 2022.
In September the net deposit paid by Jun Chen was released to Red Eagle and it used $62,750 of it to pay consulting fees related to the sale to Jun Chen.
Red Eagle applied to the County Court under the Transfer of Land Act s. 90(3) for removal of the caveat. Cherry deposed that: at the 9 July meeting she and her husband insisted on a price of $12.15 m.; ‘we signed’ at the bottom of the first particulars of sale next to the Chinese character meaning vendor (which showed her intention to sell at $12.15 m.) and Jade signed the bottom of the page next to the Chinese character for purchaser; Jade then took the signed document back to her office and amended it in handwriting including the price and the deposit, then initialled the changes, and added the handwritten notes; after this Jade presented the amended page to Cherry who refused the amendments.
Jade deposed that while she was initially prepared to pay $12.15 m., this altered on realizing that Red Eagle could not sell 15 Carrington Road. She deposed that: on 9 July she met with Cherry and Cherry’s husband; Jade said to Cherry that she was initially prepared to offer $12.15 m. for “the Carrington Properties” but that after discussions with her son, who was investing with her, we would only pay $11.85 m.; Cherry asked if she would consider paying her $300,000 if the Carrington Properties increased in value of at least that amount, to which Jade agreed; Cherry wanted Jade to sign that day; she told Cherry they could meet again later to sign a clean copy as the copy Jade had contained her previous offer; Jade then remembered she had electronic access to the one page she had sent to Cherry previously by sms, and so they went to her office and arranged for her staff to print it out; Cherry whited out the details and asked Jade to complete the price and other details, which she did except for the Chinese writing appearing at the bottom, which was done by Cherry; she asked Cherry what that writing was and she said it was “buyer” and “seller”; Jade signed where the buyer appeared and wrote the date “9/7/2022”; Cherry signed where the seller appeared; Jade believed that they had reached a concluded agreement.
Jade undertook to the court to pay 5% of $11.85 m. (in addition to amounts already paid).
On 21 October a County Court judge ordered Jade to remove the caveat by 4 November. The judge reasoned inter alia: she reached her conclusion on a consideration of the particulars of sale, and so was not required to resolve disputed facts or matters of credit; the indicia of objective intention available from a consideration of the face of the particulars of sale did not support the argument that the parties intended the document to be a binding contract; these indicia included the absence of Cherry’s initials, including against changes to the price and deposit; at trial the caveator would have to establish that the amendments were agreed to by Red Eagle and in view of this lack of initialling Jade’s prima facie case in this regard was weak; the submission that it was left to the purchaser to decide whether to pay a deposit of 3%, 4%, 5% or something in between was not supported on the face of the document – there was nothing to indicate at whose election the amount of the deposit within that range can be decided – so the prima facie case on certainty in this regard was weak; as to the time for payment of the balance of price, a range was provided but without indication of who decided when; she rejected the contention that the terms were agreed but it was simply that the mechanism was not; it was objectively apparent from the existence of unresolved matters on the face of the document that the argument that the document was a final enforceable agreement was weak.
Jade filed an application for leave to appeal. Her proposed grounds included first that the judge erred in finding that her prima facie case of an interest in land arising from an enforceable contract of sale was weak. The particulars of this ground included that the judge erred by considering that the strength of the prima facie case was diminished by: (a) the term specifying the deposit as 3–5% of the price; (b) the term fixing settlement as 9 – 12 months after entry into the contract; (e) the fact that handwritten notations on the agreement had only been initialled by the purchaser and not on behalf of the vendor.
The Court of Appeal stayed the County Court order.

The Court of Appeal gave leave to appeal, allowed the appeal and dismissed the application under s. 90(3), holding –

Because the court’s power under s. 90(3) was discretionary an applicant for leave to appeal against an exercise of that discretion must establish an error of the kind identified in House v The King (1936) 55 CLR 499. [22]
The critical issue was whether the parties signed the 9 July Particulars (which include a revised price of $11.85 m.) or the (earlier) first particulars. This could only be resolved at trial. [16]
The judge hearing the caveat removal application was not required to consider that a trial judge might consider the absence of Cherry’s initials in determining whether Cherry had really executed the 9 July Particulars. Not only was this not required, it was ordinarily inappropriate for a judge to enter into resolution of the underlying factual dispute on this sort of application, particularly where this turned on findings on credit of witnesses. Accordingly, the judge was not in a position to assess the key issue of whether the parties signed the 9 July Particulars or the first particulars. The judge had endeavoured to reach a finding about the strength of the key issue in the case and in so doing had considered the absence of Cherry’s initials without regard to the other evidence. [25]-[26]
Even if the judge was in a position to assess the merits of the key issue, there could be no assessment on a prima facie basis, or otherwise, by only having regard to one isolated piece of evidence. The judge thereby erred in her treatment of the evidence that the 9 July Particulars had only been initialled by the purchaser. [27]
The judge’s reasoning that the ranges for the deposit (3% – 5%) and settlement date (9 – 12 months) meant that the prima facie case on certainty was ‘weak’, because there were ‘unresolved matters’, was also flawed. A contract was only uncertain if the court could not put any definite meaning on it. The objection that one party was left to choose whether to perform a contract was distinguishable from the situation where the contract gave one party choice of or discretion in the manner of performance. The identification of the person given the choice to determine the figure within the range specified for the deposit or time of settlement was capable of resolution, consistent with the general approach of upholding contracts: there was authority, for example, that it is the promisor who usually had the right to elect which of the methods of performance to choose (although this may need modification as regards time for settlement, given this depended on mutual obligations). Issues of contractual construction of the 9 July Particulars were ultimately to be determined by the trial judge, but this said nothing about whether the 9 July Particulars gave rise to a binding contract in the first place. [28], [29], [33], [34]
Each of the absence of Cherry’s initials and the specification of the deposit and time of settlement ranges played a significant, if not determinative, role in the judge’s assessment of the prima facie case. They also affected the judge’s assessment of the balance of convenience. Accordingly grounds 1(a), (b) and (e) were sustained. [36]-[37]
Given the urgency of the case and the Court of Appeal having before it the evidence and submissions that were before the judge, it was appropriate for the Court to exercise afresh the discretion under s. 90(3). [39]
For the reasons given in holding number 5 Red Eagle’s submissions concerning failure to agree on the deposit and settlement date were unmeritorious. Also unmeritorious was its submission that there was a failure to agree on the mechanism for determining market value to ascertain whether the additional $300,000 was payable. Courts were routinely called upon to determine the market value of properties and would readily supply machinery when parties failed to state the basis for determining value. [40]-[41]
As to any argument about reliance on material which post-dated the contract, post-contractual conduct could in limited circumstances be admissible on whether the parties intended a contract to be binding. There was conflicting material which could only be tested at trial. [42]
In summation, the 9 July Particulars raised a serious question to be tried of whether Jade had the interest claimed. [43]
The balance of convenience favoured maintenance of the caveat having regard to: evidence that available properties of this nature in this location were very rare; evidence of Jade’s business needs; an assessment of the interests of the other purchaser; the vendor dissipating part of the released deposit to third parties (to which Jade’s undertaking as to damages was relevant); Jade’s undertaking to pay an amount equal to 5% of $11.85 m. and to prosecute a proceeding for specific performance. [44], [45], [47], [48]
Accordingly, although the matter was finely balanced, the lower risk of injustice was to maintain the caveat. [49]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, March 14, 2023

Blog 58. Online Auction – No contract, no caveatable interest.

Maverick Signs Pty Ltd v Cetinkaya & Anor [2022] VSC 27, Ierodiaconou AsJ (4 February 2022) is a standard offer and acceptance case, interesting because arising from an online auction. The facts were –

The plaintiff appointed an agent, whose employee was Falconer, to sell its land. The first defendant (the caveator) deposed that on 14 August 2021 he asked Falconer if he could purchase the land for $1.25m. with a 6 month settlement.
On 9 September an auction using the online platform AuctionNow occurred. The Terms and Conditions of the platform included:

In Schedule 1:

“11. The User may upload approved amendments to the contract through the Site and such amendments must include written evidence from the vendor of their legal representative accepting such alterations to the contract…”

In Schedule 3, that the following procedure applied to a User who placed a Successful Bid:

“1. The contract for purchase and sale of the Property will be sent to you electronically by the Vendor as soon as practicable after the close of the Auction.
2. The User must sign the contract for sale and purchase of the Property via the electronic software, docusign or in any other manner agreed to between the User and Agreement immediately after the Auction.
…
4. The deposit being 10% of the purchase price or such other amount agreed to in writing by the Vendor prior to the close of the auction, will need to be paid as directed by the Vendor or Vendors [sic] Agent as soon as practicable after the close of the Auction.
…”

In a subsequent County Court proceeding the caveator pleaded that Falconer stated: at the commencement of the auction, in effect, that unless the vendor or bidder refused to sign the contract following the auction, the auctioneer must not accept any bid or offer made after the property had been knocked down to the successful bidder; during the auction, that the land was “on the market”; at the end of the auction, that the land had been sold to bidder number 6.
The caveator made the winning bid of $1.25m. At 1.16pm he received an automated email from AuctionNow stating that the property had sold for $1.25m.
The caveator deposed that at 1.20pm Falconer congratulated him on the purchase and said that the contract would be sent shortly. The caveator deposed, and the vendor disputed, that: he reminded Falconer of a previous discussion concerning changing the settlement date; Falconer said he would get the vendor to agree to the settlement terms and that part-payment of the deposit would not be an issue provided the balance was paid shortly thereafter.
At 1.31pm the caveator received an email from the agent with a link to an unsigned copy of the contract and a section 32 Statement.
The caveator deposed, and the vendor disputed, that at 1.41pm Falconer said that the vendor had accepted the amendments to the contract and to make the amendments on the contract and get it back to him as soon as possible.
The caveator deposed that at 2.21pm Falconer said to him that he needed the contract returned to which the caveator replied that he needed access to his computer and printer to make the agreed amendments and would be at his office shortly upon which he would provide the amended contract.
At 2.55pm the caveator received an email with a link to the contract.
At 3.00pm the caveator texted Falconer that he was restarting his computer.
The caveator deposed that at 3.17pm he rang Falconer saying that he was having issues with his printer and would provide a signed copy shortly, with Falconer replying that he had no issue with this.
The caveator deposed that he orally requested Falconer and then Falconer’s employer to provide trust account details to enable part-payment of the deposit, without response.
At 3.38pm the caveator paid $12,500, being part-payment of the deposit, by EFT.
At 3.40pm the caveator received an email which said that the contract was void.
Meanwhile the vendor had entered a contract of sale with a third party, the deposit being paid at 3:49pm.
At 3.58pm the caveator emailed the agent’s office, attaching a contract with a price of $1.25m., stating that the attachment was as discussed with Falconer and requesting an executed copy. The attachment contained handwritten amendments, which the vendor deposed were unauthorized: making the deposit not payable “on acceptance of this offer” but “payable by bank cheque of which $12,500 has been paid by EFT. Fee (sic) attached receipt”; and altering settlement from 11 October 2021 to 8 March 2022.
The caveator caveated alleging the existence of a contract of sale and issued a County Court proceeding for specific performance. The vendor applied under the Transfer of Land Act s. 90(3) for removal of the caveat.

Ierodiaconou AsJ held –

There was no serious question to be tried. There was no written evidence that vendor accepted alterations to the contract of sale. The caveator was not assisted by the provision in the AuctionNow terms that payment of the deposit was required ‘as soon as practicable’ after the auction – this was subject to the subsequent written contract of sale. And even if the change in settlement date had been accepted by Falconer’s earlier alleged representation, this representation was overtaken by the written contract of sale and the caveator’s agreement to the AuctionNow terms including Schedule 1 Item 11. [40], [43], [44], [46]-[49].
Even if the caveator had established a serious question to be tried, the balance of convenience was against him, there being an executed contract of sale between the vendor and the third party with which the caveat interfered. [53]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, June 21, 2022

Blog 56. No contract of sale, no caveatable interest – Undertaking as to damages?

Wright & Ors v Insert Pty Ltd & Ors [2022] VSC 1, M. Osborne J (11 January 2022)

In this case M. Osborne J. comprehensively dispatched a caveat based on an alleged contract of sale. His Honour’s thorough reasoning was: no arguable case of a contract (Holdings 1 – 3); non – compliance with s. 126 of the Instruments Act (Holding 4); no part performance (Holding 5); no estoppel (Holding 6); even if there was a prima facie case of an enforceable contract, there was not a prima facie case that a court would grant specific performance of that contract, because the vendors had, after the alleged contract with the caveator, entered a contract with an innocent purchaser, and the caveator arguably would have lost priority to that innocent purchaser (Holdings 7, 8, 10); the caveator would not have been defeated by the doctrine of laches (Holding 9); if the caveator had established a sufficient prima facie case the court would, in assessing the balance of convenience, have required an undertaking as to damages of substance (Holding 11); in any event the caveator failed on the balance of convenience (Holding 12).

This case is interesting for two reasons. First, where there is no prima facie case of a contract of sale, a court will normally cease its analysis at this point. M. Osborne J. went further, stating ([87])–

“It is also something of an oversimplification to characterise the critical question as whether the Purchaser has a prima facie case that it has an enforceable contract of sale; in fact, the Purchaser must establish that it has a prima facie case that it has an enforceable contract of sale in respect of which the Court will order specific performance.”

The second interesting point is that, if the balance of convenience had been decisive, his Honour would have required, as part of the caveator attaining a credit balance, an undertaking as to damages. As part of the exercise of judicial discretion the court can require such an undertaking from a caveator – his Honour notes this in footnote 22 of his judgment. However, whereas undertakings as to damages are universally required from applicants for interlocutory injunctions, they are uncommon in caveat cases. In Boensch v Pascoe [2019] HCA 49, the subject of Blog 29, the plurality of the High Court noted that, although a caveat was conceived as “a statutory injunction to keep the property in statu quo until [the caveator’s] title shall have been fully investigated”, unlike an application for interlocutory injunction it did not at least in the first place have to be supported by an undertaking as to damages.

Footnote 22 to M. Osborne J.’s judgment continues that “invariably such an undertaking is required” citing a 1995 text and Harvey v Emery [2021] VSC 153. That this statement is limited to where there are third party rights is elucidated by the following passage in Harvey v Emery (the subject of Blog 36) at [48] –

“Thirdly, neither by their affidavit, nor their submissions, did the defendants offer any undertaking as to damages, notwithstanding that such an undertaking is invariably required when a caveator is permitted to maintain a caveat in circumstances where third party rights will be detrimentally affected.”

In the instant case the facts were –

The four plaintiffs were the registered proprietors of a residential property. The sole director of the first defendant (Insert) was Shaw. In 2020 the plaintiffs entered into a contract of sale with Shaw. He did not pay the balance of purchase monies, the vendors rescinded in July/August 2021 and the deposit was forfeited.
Although the vendors had an estate agent, one vendor, Nicholas Wright (Wright), continued with their authority to negotiate directly with Shaw, generating a proposed sale with settlement on 4 October 2021. However, between 1 and 4 October Wright requested Shaw to do various things, with little response.
On 7 October Wright texted Shaw asking whether he was in or out and that a sale could occur possibly that day. Shaw replied within 30 minutes ‘In’. Some hours later Wright texted that he was taking it that Shaw was out “unless I get a commitment today”. A conversation then occurred in which Shaw assured Wright that he was serious about purchasing and had finance, to which Wright responded that there was no contract until a deposit was paid and a contract signed.
At 3:50pm on 7 October a conveyancing clerk (the conveyancer), associated with the solicitors acting for Insert and Shaw, emailed the vendors’ solicitor stating her understanding that the clients had been communicating, that the purchase by Shaw was to proceed, and requesting that the vendors’ solicitor advise his clients’ instructions.
On 8 October at 6.51pm the vendors’ solicitor emailed in substance that: no contract existed but his client would enter a new contract if put in the same position as if the previous contract had been substantially performed; a draft contract and vendor statement prepared by him could be downloaded from the internet; ‘Our client is prepared to consider entering into a contract with your client on the following terms’ then setting out a price of $4,838,500 and how it was calculated, the deposit and when payable, settlement date, and that a director’s guarantee was required; and ‘this email is not an offer capable of acceptance’.
Between 11 and 22 October the parties communicated, including as to clarification of the email of 8 October and communication between Shaw and his financier (the financier). On 19 October the financier offered a 6 month loan of $3,881,250 subject to verification by it and due diligence.
Shaw deposed that on 25 October he stated to Wright that Insert accepted the terms contained in the 8 October email, that the purchase would proceed on that basis, and that Wright agreed that if the financier accepted those terms the financier would issue a PEXA invitation for settlement on 28 October.
Shaw also deposed that later on 25 October the financier informed him that it would fund the purchase on the terms of the 8 October email. He also deposed that later that day he informed Wright that the financier had confirmed finance, and Wright replied that if a PEXA settlement appointment was not set up that day he would sell to someone else next day, and in consequence he (Shaw) requested the financier to open a PEXA transaction that day for settlement on 28 October. (In fact a PEXA workspace was established on 26 October by Insert’s lawyers). Wright deposed that he had one telephone discussion with Shaw that day in which Shaw promised that a PEXA transaction would be set up, but he denied that he agreed to sell the property to Shaw in the event that the financier accepted the terms and he denied that Shaw said that a PEXA workspace would be set up for settlement on 28 October.
On 25 October, after emails about the terms of any contract, the conveyancer at 3:33pm advised that Shaw was agreeable to proceed on the terms set out in the 8 October email, and she sought a written contract and vendor statement. At 4:21pm the vendors’ solicitor replied asking when Shaw proposed to settle, noting that the proposed settlement date in the 8 October email was that very day. The email also stated the solicitor’s statement of the process to be followed, including that he would provide a contract of sale once the details of Shaw’s proposal were confirmed, and that on receipt of the signed contract and a 5% deposit he would submit the ‘offer’ to his client, and that a contract would be formed when he returned the fully signed contract to the conveyancer by way of exchange.
On 27 October Insert executed a mortgage to the financier and a PEXA invitation was given for a settlement proposed for 28 October. The vendors’ solicitor did not accept the invitation and on 27 October advised that the vendors had signed a contract of sale with a third party. This contract was due for settlement on 17 January 2022.
On 28 October Insert caveated on the ground that it had an interest as purchaser pursuant to a contract dated 25 October.
Following an application by the vendors under Transfer of Land Act s. 89A(1) Insert commenced, but did not serve, a County Court proceeding seeking a declaration that it had an equitable interest in the property under a contract of sale. The vendors commenced a proceeding under s. 90(3).

Although the caveat stated that the contract was made on 25 October counsel for the caveator argued that it was made on 7 October 2021.

The vendors deposed that the extent of authority given by them to Wright was to negotiate on their behalf, not to bind them to sell. The caveator argued that any non-compliance with the Instruments Act s. 126 was overcome by part performance, namely: it executing the mortgage to the financier; it incurring liability to pay the financier $330,878 for fees and prepaid interest; and the opening of the PEXA transaction workspace.

Shaw deposed that if he did not obtain specific performance he would lose the ability to make a profit of $4.2m. in developing the land.

M. Osborne AsJ held –

No contract was made on 7 October 2021. At its highest, Shaw’s evidence that he was ‘in’ evidenced that he wanted to purchase. To determine whether an agreement had been reached it was permissible to have regard to subsequent communications: those post 7 October were all inconsistent with such an agreement – in particular the conveyancer’s emails of 11 and 25 October and the caveat itself. [73]
The email chain did not evidence a contract made on 25 October, and in fact contradicted it, particularly the emails of 8 October at 6:51pm and 25 October at 3:33pm and 4:21pm. [70]
As to Shaw’s evidence that, notwithstanding these emails, by their conversations on 25 October he and Wright agreed on a sale for $4,838,500, with no deposit, and with settlement on 28 October subject to the financier agreeing to finance the purchase on the terms of the 8 October 2021 email:
1. although on an interlocutory application the court would not definitively reject this evidence yet an assessment of it was relevant to whether there was a prima facie case;
2. in this regard Shaw’s evidence was: disputed by Wright’s evidence; in disconformity or inconsistent with emails that day; uncorroborated in any significant way by contemporaneous documentary evidence; not adverted to by Insert’s solicitors in their email of 29 October; and entailed (notwithstanding Shaw having defaulted under the 2020 contract) Wright agreeing to sell subject to a condition wholly for Shaw’s benefit, which was then satisfied by establishment of a PEXA settlement appointment three days later with no deposit or signed contract, with the consequence that the property was taken off the market despite negotiations with other purchasers. [71]
Even if there was an agreement, s. 126 of the Instruments Act was not complied with. Even if (which the court did not decide) the co-vendors had cloaked Wright with ostensible authority to bind them to sell on terms negotiated by him, this was not in writing and so did not comply with s. 126. [75]-[77]
Non – compliance with s. 126 was not in this case overcome by part performance. The doctrine of part performance permitted enforcement of an oral contract where there were acts undertaken which of their own nature were unequivocally referable to a contract of the kind alleged. Such acts must be such as to change the relative positions of the parties in relation to the subject matter of the contract. Each act relied on here, particularly the mortgage and opening of the workspace, was a unilateral act of the supposed purchaser, readily explicable as preparatory to the making of an agreement and not changing the purchaser’s relative position to the property. It was also difficult, the loan not having been drawn down, to accept that Insert had incurred a liability of $330,878. The evidence at most suggested possible payment of a non-refundable application fee of $5,000. [78], [79], [81]-[83]
For related reasons the purchaser’s argument that the vendors were estopped from denying the enforceability of the alleged contract was rejected. Even on the most favourable view of the evidence for the purchaser, there was no clear and unequivocal representation that a legally binding contract of sale existed, no detrimental reliance (unless, of which the court was not satisfied, substantial fees had been incurred to the financier), and no evidence of the vendors knowing that such fees were being incurred on the faith of a representation by them. Moreover, the period of any detrimental reliance was two days at most, such that the equity said to arise was wholly disproportionate to the minimum equity necessary to ameliorate the detrimental reliance. [84]-[86]
It was an oversimplification to characterise the critical question as whether the purchaser had a prima facie case of an enforceable contract of sale of land: it must establish such a case in respect of which the court would order specific performance. Ordinarily such a prima facie case sufficed to establish a prima facie case for specific performance, land being of a sufficiently unique character as to make damages an inadequate remedy, even land purchased as part of the business of a property developer. [87], [89]
However, here the basic position (set out in the holding 7) was complicated by the third party contract, rendering this in essence a priority dispute between Insert and that purchaser (there being no evidence of that purchaser having notice of any interest of Insert’s in the land). As to this –
1. priority was accorded to the competing equitable interest created first in time, save where conduct by the holder of the prior interest rendered this inequitable;
2. the failure to lodge a caveat may in certain circumstances constitute postponing conduct;
3. although Insert alleged that the contract was made on 7 or 25 October, the caveat was not lodged until 28 October, being the day after the third party contract, and from 7 October onwards not only, while knowing that vendor’s agent was negotiating with other parties from at least 4 October, did Insert fail to assert that it had an enforceable agreement, the solicitors’ communications were to the contrary effect. If Insert had made this assertion there was every reason to believe that the vendors would not have entered into the third party contract. There might therefore have been considerable force in the proposition that any interest of Insert was postponed to that of the third party, in which case, specific performance would not have been ordered. [90]-[93]
Further, the doctrine of laches required that those seeking equitable remedies, such as specific performance, use due diligence, where on notice or otherwise knowing that prejudice could arise to a defendant or third party if the claim was not pursued. However, mere delay not occasioning prejudice was insufficient. Any prejudice here was most likely to have occurred in the periods from 7 October onwards and from 25 October onwards. Accordingly, the delay in initiating legal proceedings and prosecuting the claim for specific performance was insufficient to establish laches (but was relevant to the balance of convenience). [94]-[96]
For the foregoing reasons, the caveator had not established a prima facie case of the existence of a legally enforceable agreement for sale with sufficient likelihood of specific performance to justify the maintenance of the caveat and the preservation of the status quo pending trial. [97], [105]
In assessing the balance of convenience, had the court been minded to maintain the caveat this would have only been on the basis of an undertaking as to damages of substance, ie by Shaw not Insert. [99]
Even if the caveator had established a prima facie case it would have failed on the balance of convenience because: Shaw was open to a monetary solution; Insert’s pursuit of the claim for specific performance was marked by lack of urgency; Insert could sue for damages. This was particularly so when assessed in light of the weakness of Insert’s claim and (as the effect of not removing the caveat would be to equivalent to enjoining the vendors from settling the third party contract) interference with the third party’s rights. [96], [100]-[105]

Philip H. Barton

Owen Dixon Chambers West

Wednesday, May 25, 2022

Blog 47. No contract of sale – No caveatable interest

In Hazelwood v Mercurio & Ors [2021] VSC 362 (22 June 2021) Daly AsJ –

primarily deals with an agent lacking authority to conclude a binding contract on behalf of a vendor (similar to the lack of authority of a solicitor: Leahy v Javni [2020] VSC 680 at [122]);
notes that, if a document existed whereby the vendor expressly authorised the agent to execute the contract on her behalf, it would be a breach of the Civil Procedure Act not to disclose it;
distinguishes English authority on whether an exchange of emails can comply with the Statute of Frauds;
held that if the caveators had established a binding contract the balance of convenience would have favoured them;
stayed the removal of caveat for 7 days to enable the caveators to apply for an injunction restraining completion of a further sale based on an alleged estoppel.

The facts were –

The plaintiff vendor gave an Exclusive Sale Authority to an agent (whose employee was Campbell) to market an apartment and two separately titled car parking spaces in the Melbourne CBD. The Authority provided that the agent would advertise, market and sell the property and that “sold” meant (in normal circumstances) “the result of obtaining a binding offer”. Clause 13 also authorised the agent to –
- instruct a legal practitioner or conveyancer to prepare a section 32 statement, contract of sale, agree the content of either document and advise and agree on other amendments or additions to either document;
- fill-up a standard form contract or contract to record the sale as permitted by statute;
- negotiate and, with the vendor’s approval, agree and record, or have the legal practitioner or conveyancer record, the final terms of, and obtain signatures to, the contract;
- attend to contract exchange; receive the price and certain advice or notices; and make public certain information.
The caveators deposed that on about 11 February they made an unconditional offer to purchase the apartment and one car space for $750,000, with settlement within seven days. Campbell deposed that caveators imposed a very short deadline on the offer and that he conveyed it to the vendor.

The caveators deposed that on 16 February Campbell said that he had found a purchaser for the other space and that the vendor had accepted their offer. Campbell disputed this, deposing that although he could not remember his exact words he had no intention of conveying that a sale had been completed until signing of a written agreement.

The vendor deposed that Campbell told her that he had located a potential purchaser of the apartment and one car space and another purchaser of the second space, and that she instructed him to amend the documents accordingly.

On 18 February Campbell emailed the caveators: stating that if they could “confirm the below points for me” he would start the paperwork. The points were: whether they had a conveyancer; their full names and address; price $750,000 with a 10% deposit; as to time for settlement; solicitors’ details. The email concluded: “New paperwork is getting drawn up at our end so nothing for you to do at this stage”.

The caveators provided full names, address, lawyer’s details, and stated that settlement would be on 12 March.
On 24 February Campbell emailed an unsigned section 32 statement and contract. His email stated that he had just received these documents and not yet reviewed them “so let me know any questions you have and I’ll work through them”. The unsigned contract named the vendor, referred to the apartment and to particulars of title of one space, but omitted purchasers’ names, price and settlement date. When a caveator queried this Campbell replied that he had “just hit send as soon as I received and so you could have your people quickly review it before signing”.

On being informed by Campbell that someone else had purchased the apartment and both spaces the defendants on 2 March caveated on the grounds of a “part performed oral agreement” with the plaintiff. On 4 March this contract was executed. The vendor issued a notice under s. 89A of the Transfer of Land Act (TLA), leading to the caveators issuing a Proceeding with a Statement of Claim. The vendor issued this proceeding under s. 90(3). Campbell deposed that on average more than ten apartments in the building would be marketed and sold in any year.

The Victorian Statute of Frauds provision, contained in the Instruments Act s. 126, provides that –

“An action must not be brought to charge a person … upon a contract for the sale … of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note”.

In their Statement of Claim the caveators alleged, in the alternative to breach of contract, that the vendor represented that she would sell the apartment to them, such that she was estopped from resiling from that representation.

Daly AsJ held –

Accepting, for present purposes at least, that –

- to comply with s. 126 a contract of sale need not be contained in a single, self-contained document; [33]
- a sender of an email, by identifying themselves as the sender, can be considered to have “signed” the email; [33]
- section 126 should be construed as to accommodate “accepted contemporary business practices”; [34]

nonetheless, the vendor had not signed anything. The only signatory was Campbell, who was authorised to market the apartment but not to enter a contract on behalf of the vendor. In the Authority there was a material difference between the definition of “sell” and the phrase “endeavour to sell”. More importantly, cl. 13 did not authorise the agent to sign any contract on behalf of the vendor, but contemplated personal execution by the vendor and purchaser. [35]-[39]

What was stated in the foregoing holding was based on the non-existence of a document in which the vendor not only confirmed her acceptance of the caveators’ offer but also expressly authorised the agent to execute the contract on her behalf. If such a document existed, it should have been disclosed by the vendor in accordance with s. 26 of the Civil Procedure Act headed “Overarching obligation to disclose existence of documents”. [46]
The English decision in Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltdas to whether an exchange of emails between parties to a negotiation can constitute an agreement in writing for the purpose of the Statute of Frauds, was distinguishable. There was a material difference between English and Victorian legislation. [40]-[44]
If it had been necessary to consider the balance of convenience, this would have favoured the caveators because:

- notwithstanding Campbell’s evidence that the sale of properties equivalent to the apartment was not rare, this apartment was particularly suitable to the caveators’ needs;
- while the vendor not unreasonably considered that, absent an executed contract, she was free to deal with the apartment, and was now exposed to claims by the new purchaser, she entered this contract knowing that the caveators asserted that they had a contract with her and so she assumed the risk of this being established. [47]

The caveators had not argued that their estoppel claim created an immediate equitable interest supporting a caveat. However this estoppel claim might found injunctive relief. Accordingly the order for removal of the caveat would be stayed for 7 days to enable the caveators to apply for an injunction as they may be advised. [24], [48] – [50]

Philip H. Barton

Owen Dixon Chambers West

Friday, September 17, 2021

30. Vendors agreeing to extend settlement date through act of agent with actual or ostensible authority – Not a formal variation of contract of sale required to comply with Instruments Act s. 126 but a waiver or estoppel – However caveator by withdrawing previous caveat had elected not to sue for specific performance but only to claim damages or was estopped from asserting the contrary – Caveat removed.

Chan & Anor v Liu & Anor [2020] VSCA 28 (25 February 2020) was a successful appeal from a decision of Forbes J [2019] VSC 650 upholding a caveat. The facts were –

By a contract dated 21 July 2018 the first respondent Zhenzhu Liu agreed to purchase a property in Burwood Highway, Burwood, from the applicants for $2,450,000 with settlement due on 22 July 2019.
Most of the discussions concerning the sale were between Mr Liu’s wife Yumei Feng and Xuehang Cheng who was a sales consultant employed by the selling agents. Soon after the contract was entered into she asked through him whether the vendors would agree to extend settlement to 15 September 2019 without penalty. After speaking to the second vendor he conveyed that the vendors would only agree to an extension to 22 August 2019. Ms Feng again sought an extension to 15 September, Mr Cheng again sought the vendors’ consent and again confirmed that the vendors would extend settlement to 22 August 2019. Further interaction to similar effect then occurred between the purchaser’s solicitors and the agents, and on 10 August 2018 the agents again stated that the vendors had agreed to extend the settlement date to 22 August 2019.
Mr Liu deposed that he and Ms Feng believed that the extension to 22 August 2019 was confirmed and that only the further request to extend settlement to 15 September 2019 was not, and that they were preparing their finances for settlement on 22 August 2019 in reliance on the agent’s representation.
On 10 August 2018 Mr Liu caveated claiming an interest in the property pursuant to the contract of sale.
In late 2018 the vendors requested the purchaser to temporarily ‘lift’ the caveat so that they could refinance. The caveat was accordingly withdrawn and on 21 December 2018 a second caveat was lodged.
Between 12 June and 22 July 2019 the solicitors for both parties engaged in manoeuvres and negotiations including: the purchaser’s solicitor asserting that the vendors had previously agreed to a penalty free extension to 22 August 2019 and the vendors’ solicitor disagreeing; the vendors’ solicitors seeking more money; the purchaser’s solicitor stating his client had difficulty obtaining finance and asking that the vendors consider an extension of the settlement date and a deferred payment of part of the price.
On 22 July, following no settlement by 4.00 pm, the vendors’ solicitor at 5.19 pm served a 14 day notice of default and rescission.
On 9 August the vendors’ solicitor wrote to the purchaser’s solicitor confirming termination of the contract and forfeiture of the deposit. No response was received.
On 20 August the vendors’ solicitor wrote again noting that as a result of the purchaser’s default his clients needed to re-sell and demanding withdrawal of the second caveat. In response, on 22 August the purchaser withdrew the second caveat and his solicitor advised the vendors’ solicitor of this. However, next day the purchaser’s solicitor wrote again stating that the withdrawal of the caveat was ‘without prejudice to any of the [respondent’s] rights under the contract or at all, which rights are fully reserved’. The vendors’ solicitor responded that day stating that his clients were attempting to re-sell quickly and requesting that the purchaser not jeopardise or delay this re-sale.
On 27 August the vendors entered into a contract of re-sale to a third party.
On 3 September 2019 the purchaser lodged a third caveat claiming an interest in the property pursuant to the (original) contract of sale and next day his solicitor sent a notice to complete by 19 September 2019. The vendors subsequently disputed the validity of these actions. They subsequently applied under the Transfer of Land Act s. 90(3) to remove the caveat.

The court (Beach, Kyrou and Kaye JJA) gave leave to appeal and allowed the appeal, holding –

The power of the court under s. 90(3) was discretionary and so to obtain leave to appeal the applicants must establish material error by the judge in the exercise of that discretion of the kind described by the High Court in House v The King (1936) 35 CLR 499. [41]
The principles applicable under s. 90(3) were as stated by Warren CJ in Piroshenko v Grojsman [2010] VSC 240, (2010) 27 VR 489, ie that the caveator must persuade the court that:

(1) there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and

(2) that probability is sufficient to justify the caveat’s practical effect on the ability of the registered proprietor to deal with the property in accordance with normal proprietary rights.

But that these propositions were qualified by the fact that the discretion conferred by s. 90(3) was expressed broadly and enjoined the court to make such order as it thinks fit, and so the test adopted by the court ought not to restrict the statutory power. Further, (1) and (2) are not mutually discrete: the exercise of the court’s discretion ultimately involved a synthesis of the Court’s conclusions on each. [42], [43], [75], [76]

Where a purchaser had a right, in equity, to specifically enforce a contract of sale the purchaser thereby had an interest in the land, akin to an equitable interest, which may be protected by a caveat. [53]
The parties had agreed that the specified settlement date be extended to 22 August 2019. Even if the vendors had insisted that the agent Mr Chan impose a condition on the extension of time, which he failed to do, for the purpose of the summary application under s. 90(3) it was appropriate to proceed on the basis that he had, at least, ostensible if not actual authority to enter into such an extension arrangement on behalf of the applicants. Accordingly there was a serious issue to be tried that that ‘arrangement’ did not constitute a formal variation of the contract of sale (which would have been required to comply with s. 126 of the Instruments Act) but, rather, was a waiver of the stipulated settlement date of 22 July 2019 or founded an estoppel precluding the vendors relying on that date (instead of 22 August 2019). [55], [56]
However, as to whether there was a serious issue to be tried that the purchaser, when he lodged the third caveat, had and continued to have the right to specifically enforce the contract, notwithstanding failure to pay the balance of purchase monies on 22 July 2019, as a consequence of which the vendors purported to rescind the contract –

(a) Under the doctrine of election, a party confronted by two truly alternative or inconsistent rights or sets of rights (such as the right to avoid or terminate a contract and the right to affirm it and insist on performance of it) may lose one of those rights by election by acting in a manner which is consistent only with that party having chosen to rely on the other alternative or inconsistent right; [60]

(b) Ordinarily, a caveat removal application, being in the nature of an application for an interlocutory injunction, was not an occasion for the final determination of disputed factual issues, or of the substantive claims which the caveat sought to protect, and so it was not appropriate or necessary for the court to determine conclusively whether there was a binding election. In the circumstances of the case, it was sufficient that there were strong grounds for concluding that the purchaser had made an unequivocal election not to retain his right to specific performance but, rather, to treat the contract of sale at an end, and pursue a claim for damages ([57], [59], [63], [67], [71]) for the following reasons –

(i) the purpose of the lodgement of the second caveat was to protect the right of the purchaser to specific performance; [64]

(ii) on 9 August the purchaser was placed on clear notice that the vendors took the position that the contract had been terminated. Then, in the context of neither seeking to rebut nor respond to that position, he on 22 August withdrew the second caveat in response to the demand that he do so that the vendors could re-sell. At this point it was strongly arguable that, in those circumstances, the purchaser’s conduct in withdrawing the caveat was an election no longer to claim a right to specific performance, which was an essential pre-condition to maintaining the second caveat. That proposition was reinforced by the email of 23 August reiterating that the vendors were attempting to re-sell the property. There was no assertion by the purchaser at any time before the re-sale on 27 August that the vendors were precluded from doing so because the purchaser had a right to specific performance; [65]

(iii) the context in which the purchaser’s solicitor emailed on 23 August stating that the withdrawal of the caveat was done ‘without prejudice’ etc militated strongly against the proposition that the purchaser thus preserved his right to specific performance. The only purpose served by the removal of the second caveat was to enable the applicants to re-sell the property, which re-sale would be directly inconsistent with any potential right of the purchaser to specific performance, and the email of 23 August did not suggest that the rights sought to be preserved included a right to specific performance or that the vendors could or should not re-sell. [66]

(c) For the same reasons there was a strong basis for concluding that the purchaser, by his conduct between 9 August and 27 August 2019, was estopped from contending that he continued to have a right to seek specific performance of the contract of sale. He represented that he did not seek to maintain a caveatable interest in the property, so implying that he no longer sought to pursue a right to specific performance; by his withdrawal of caveat on 22 August, and his conduct at that time, he enabled the vendors to re-sell; if he was now permitted to depart from this representation the vendors would suffer detriment, namely, the loss of the contract of re-sale and exposure of them to a claim in damages (or other relief) by the new purchaser. [69], [71]

6. The degree of likelihood of success in the proceeding was relevant to evaluation of the balance of convenience. The above conclusions on election and estoppel were of critical significance in an assessment of the balance of convenience against the fact that retention of the caveat would prevent completion of the contract of re-sale. The balance of convenience accordingly favoured removal of the caveat. [73], [74], [77]

7. The vendors’ further argument that, insofar as the parties had arranged, in August 2018, for the settlement date to be extended to 22 August 2019, nevertheless the conduct of the respondent between June 2019 and 22 August 2019 in some way rendered the extension of time nugatory, raised a question of fact which the court could not determine. [79]-[82]

Comment:

This case is interesting for the following reasons –

1. In cases of contracts of sale the caveator/purchaser will often win or lose depending on whether there was a contract at all or if there had been whether it had been repudiated. In this case the caveator lost because by the withdrawal of the second caveat he had given up the right to specific performance by affirmation or by estoppel.

2. The court (paragraph 3 above) states that the right to specific performance is an “interest in land, akin to an equitable interest”. The words “akin to” are interesting and are based mainly on Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 332–3. Older cases simply said that a specifically enforceable contract of sale confers an equitable interest on the purchaser (eg Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd. R. 712, based on earlier authorities).

3. The principle that on a caveat removal application it is not appropriate or necessary for the court to determine conclusively whether a particular legal event would happen (see paragraph 5(b) above) is normally applied in favour of caveators, ie that the caveator has only to show a serious question to be tried. In this case the Court of Appeal turned this principle on its head by applying it in favour of the registered proprietor, ie it was sufficient that the registered proprietor showed only “strong grounds” for there being a binding election.

Philip H. Barton
Owen Dixon Chambers West
7 April 2020

28. Contracts of sale – No caveatable interest.

Gold Road No. 3 Pty Ltd v Platt [2019] VSC 714 concerned a completed contract of sale as to which the erstwhile vendor caveated on the ground of no consideration, repudiation, and misleading or deceptive conduct. Jovanovski & Anor v T Square Investments Pty Ltd & Anor [2019] VSC 641 concerned a caveat lodged by a purchaser who had nominated a substitute purchaser. The caveats were removed.

Gold Road No. 3 Pty Ltd v Platt [2019] VSC 714, Ginnane J (17 October 2019)

The facts were:

· In March 2017 Mr and Mrs Platt entered a contract of sale of their bayside property to Evergrande Properties Pty Ltd, controlled by Michael Elliott. The contract did not proceed, Evergrande sued for specific performance and the Platts counterclaimed.

· The proceeding was settled. The settlement documents included a deed which inter alia: substituted the plaintiff, being another company controlled by Elliott, as purchaser, and affirmed the 2017 contract; and contained mutual releases. The Platts had legal advice. The proceeding was subsequently dismissed without any right of reinstatement.

· On 27 September 2018 the sale settled including by Gold Road paying approximately $2 m. to a bank to discharge its mortgage, Gold Road having borrowed this from AusFinance Group Pty Ltd, who it must now repay. Evergrande also advanced the Platts approximately $100,000 to repay money owing to another company. Gold Road became registered proprietor.

· The parties also entered into a Development Rights Agreement (‘DRA’). Its recitals included that the Development Manager (Gold Road) and the Platts had agreed that the Development Manager would develop the land and that the Platts would have the right to purchase a lot in the development.

· On the ground, disputed by the Platts, that the development was commercially unviable and that a condition precedent was not met, Gold Road terminated the DRA and asserted the right to deal with the land at its discretion.

· The Platts caveated claiming a freehold estate and an absolute prohibition on Gold Road dealing with the land. The Platts contended that the consideration for the transfer had been illusory, that Gold Road had repudiated the DRA, and that Elliott and his company may have engaged in misleading or deceptive conduct. As to the consideration argument the Platts argued inter alia that: the DRA effectively enabled the Development Manager to acquire land for an undervalue; the DRA did not require the Development Manager to attempt to develop the land; that the settlement was a ‘hoodwink’ of Mrs Platt’s rights;

· Gold Road applied under s. 90(3) for removal of the caveat.

Ginnane J. held –

1. The settlement deed was supported by consideration in the form of mutual releases and the payment by Gold Road on behalf of the Platts. [14], [31]

2. The Platts’ case, if proved, would probably provide a remedy in damages for breach of the DRA or other agreements based on their repudiation by Gold Road or for damages caused by misleading or deceptive conduct. This did not create a prima facie case of a caveatable interest: the possibility of a remedy under the Australian Consumer Law, particularly under s 243, did not create an estate or interest in land. [28], [29], [32]

3. The balance of convenience also favoured removal of the caveat, in particular Gold Road needed to repay the loan to AusFinance and the fact that it was registered proprietor normally carried the right to sell the property. [34]-[35]

Jovanovski & Anor v T Square Investments Pty Ltd & Anor [2019] VSC 641,
Cameron J (20 September 2019).

The plaintiffs and first defendant entered into a contract of sale under which the price was payable in four instalments. The first defendant caveated. It failed to pay the third instalment and did not comply with a rescission notice. About a year before the third instalment was due it nominated a nominee purchaser and her Honour stated that from that date the nominee “became exclusively liable for the due performance of all the obligations of the First Defendant pursuant to the Contract”. Her Honour held that as the first defendant had nominated another purchaser there was no serious issue to be tried that the first defendant had a caveatable interest.

Comment: The fact that the first defendant no longer had a caveatable interest appears to hinge on the form of the nomination, ie that the nominee became “exclusively liable”. By contrast in Six Bruce Pty Ltd v Milatos and Ors [2017] VSC 784 (Blog 8) the plaintiff contracted to sell a property to the first defendant Milatos. He nominated a substitute purchaser AM Land. The first defendant eventually rescinded the contract and caveated on the ground of a lien to secure repayment of money paid under the contract. The caveat did not name the substitute purchaser. An argument that the caveat was defective, at least as to part of the monies paid because the nominee was not named was rejected by Keogh J: after nomination A M land did not acquire rights as purchaser against Six Bruce. The rights and obligations as purchaser remained with Mr Milatos. Keogh J. referred to: Tonelli v Komirra Pty Ltd [1972] VR 737 at 739; Commissioner of State Revenue v Politis [2004] VSC 126, [11]; 428 Lt Bourke St Pty Ltd v Lonsdale St Cafe Pty Ltd & Ors [2009] VSC 133, [24]-[25].

Further, General Condition 18 in the REIV/LIV contract of sale provides that despite nomination the name purchaser remains personally liable for the due performance of all the purchaser’s obligations under the contract.

Category: Contract of sale

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28. Contracts of sale – No caveatable interest.

Gold Road No. 3 Pty Ltd v Platt [2019] VSC 714, Ginnane J (17 October 2019)

The facts were:

· In March 2017 Mr and Mrs Platt entered a contract of sale of their bayside property to Evergrande Properties Pty Ltd, controlled by Michael Elliott. The contract did not proceed, Evergrande sued for specific performance and the Platts counterclaimed.

· The parties also entered into a Development Rights Agreement (‘DRA’). Its recitals included that the Development Manager (Gold Road) and the Platts had agreed that the Development Manager would develop the land and that the Platts would have the right to purchase a lot in the development.

· On the ground, disputed by the Platts, that the development was commercially unviable and that a condition precedent was not met, Gold Road terminated the DRA and asserted the right to deal with the land at its discretion.

· Gold Road applied under s. 90(3) for removal of the caveat.

Ginnane J. held –

1. The settlement deed was supported by consideration in the form of mutual releases and the payment by Gold Road on behalf of the Platts. [14], [31]

3. The balance of convenience also favoured removal of the caveat, in particular Gold Road needed to repay the loan to AusFinance and the fact that it was registered proprietor normally carried the right to sell the property. [34]-[35]

Further, General Condition 18 in the REIV/LIV contract of sale provides that despite nomination the name purchaser remains personally liable for the due performance of all the purchaser’s obligations under the contract.

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Gold Road No. 3 Pty Ltd v Platt [2019] VSC 714, Ginnane J (17 October 2019)

The facts were:

· In March 2017 Mr and Mrs Platt entered a contract of sale of their bayside property to Evergrande Properties Pty Ltd, controlled by Michael Elliott. The contract did not proceed, Evergrande sued for specific performance and the Platts counterclaimed.

· The parties also entered into a Development Rights Agreement (‘DRA’). Its recitals included that the Development Manager (Gold Road) and the Platts had agreed that the Development Manager would develop the land and that the Platts would have the right to purchase a lot in the development.

· On the ground, disputed by the Platts, that the development was commercially unviable and that a condition precedent was not met, Gold Road terminated the DRA and asserted the right to deal with the land at its discretion.

· Gold Road applied under s. 90(3) for removal of the caveat.

Ginnane J. held –

1. The settlement deed was supported by consideration in the form of mutual releases and the payment by Gold Road on behalf of the Platts. [14], [31]

3. The balance of convenience also favoured removal of the caveat, in particular Gold Road needed to repay the loan to AusFinance and the fact that it was registered proprietor normally carried the right to sell the property. [34]-[35]

Further, General Condition 18 in the REIV/LIV contract of sale provides that despite nomination the name purchaser remains personally liable for the due performance of all the purchaser’s obligations under the contract.

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