Blog 64. Agreement concerning land insufficient to give rise to caveatable interest.

A. P. Welco Holdings Pty Ltd & Anor v Canterbury Hills Pty Ltd & Anor [2022] VSC 490, Button J., (24 August 2022) concerns an unsuccessful attempt to eke a caveatable interest out of a Memorandum of Agreement (MOA) concerning land.  It also confronts the problem of the PEXA drop down menu having limited options for description of the caveatable interest.

The facts were –

  • The defendants were registered proprietors of five parcels of land.  It was not proposed that the first plaintiff purchase the land.  The plaintiffs alleged the existence of a contract in substance to develop the land (the Agreement) between the first plaintiff and the defendants, being, insofar as in writing, constituted by a ‘Memorandum of Agreement’ (MOA).  The plaintiffs alleged that the terms included: access to the defendants’ project consultants, internal staff, and documents to enable a feasibility assessment by the first plaintiff of a project; access to the land; the defendants not advertising or negotiating with any other party to market the land; the defendants permitting the first plaintiff or its nominee to, without purchasing it, subdivide the land and then develop and sell the lots; payment to the defendants of $40 m.; the first plaintiff having carriage of the development, providing development and marketing expertise and funding for development; the parties preparing and entering a “Final Agreement” (known as the  “Staged Asset Sale Agreement”) after which the first plaintiff would pay land outgoings and for insurance; and an obligation to act in good faith.
  • The plaintiffs alleged that, pursuant to the Agreement, the first plaintiff and the defendants worked towards concluding the Staged Asset Sale Agreement, drafts being exchanged, but that on 21 December 2021 the defendants wrongfully repudiated the Agreement, which repudiation was not accepted.
  • The relief sought by the plaintiffs included an order for, or in the nature of, specific performance of the Agreement requiring the defendants to provide a signed form of the Final Agreement contemplated by the Agreement, substantially the same as the form of a particular document sent to the defendants with any agreed additions or variations.
  • The defendants, in substance, denied the existence of large components of the Agreement.
  • The first plaintiff caveated over the land on the ground of an agreement with the registered proprietor(s) dated 20 May 2021.  The defendants applied under the Transfer of Land Act s. 90(3) for removal of the caveat.

The estate or interest claimed in the caveat was described as ‘Interest as Covenantee of a Restrictive Covenant’.  The plaintiffs accepted that this description was inapt but, referring to a Land Use Victoria document stating the options in the drop-down form on PEXA, submitted that the PEXA lodgment portal lacked any option corresponding to the particular equitable interest allegedly held by the first plaintiff.

The plaintiffs argued that although the MOA did not itself confer any proprietary interest the first plaintiff had an equitable interest in the land because: it was a binding agreement for the development and subsequent sale of the land (and not merely an agreement to negotiate accompanied by limited rights); and, because the MOA was a contract whose subject matter was land, which contained obligations with a substantial connection with the land, and which provided for its ultimate sale after subdivision with sharing of proceeds, the potential availability of an order for specific performance of the MOA gave the first plaintiff an equitable interest.

Button J. removed the caveats, holding –

  1. The arguments that the MOA was an immediately binding agreement for the development and sale of the land, that the first plaintiff was a party to it, and that it had not already been terminated by the time the caveat was lodged, were insufficiently strong to establish a prima facie case of an equitable interest. Approaching the matter on a summary basis it appeared that the plaintiffs only a very weak case that the MOA was an agreement for development of land and of no fixed duration. [64], [65], [80], [87], [90], [101]
  2. Further, any potential the first plaintiff had of obtaining specific performance of the MOA did not suffice to establish a prima facie case of an equitable interest. The mere availability of an equitable remedy such as specific performance in relation to a contract concerning land did not give rise to a proprietary interest in land. [59], [63], [75], [77]
  3. The deeming provisions of the Duties Act 2000 did not give rise to an equitable interest. [102]-[105].
  4. Even if the plaintiffs had established a prima facie case the balance of convenience was against them. [110]
  5. The PEXA system did not contain an available option directly corresponding with the nature of the equitable interest claimed by the first plaintiff, and so this case was distinguishable from other caveat interest misdescription cases.  However by reason of the holdings referred to above it was unnecessary to consider whether an order could have been obtained for amendment of the caveat. [106]

       Philip H. Barton

          Owen Dixon Chambers West

        Thursday, February 16, 2023