(2001) 10 BPR 18,615 Reported Decision : (2001) ANZ ConvR 391 (2001) NSW Conv R 55-966 New South Wales Supreme Court CITATION : Forder v Cemcorp [2001] NSWSC 281 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2034/01 HEARING DATE(S) : 11/04/01 JUDGMENT DATE : 11 April 2001 Grant Lewis Forder - First Plaintiff Gladsco Pty Ltd - Second Plaintiff PARTIES : Roanne Vere Forder - THird Plaintiff DP Consultants Pty Ltd - Fourth Plaintiff Charles Samways - Fifth Plaintiff Cemcorp Pty Limited - Defendant JUDGMENT OF : Barrett J COUNSEL : Mr R.A. Parsons - Plaintiffs Mr S. Hodges (Solicitor) - Defendant SOLICITORS : Marc Hardman & Associates - Plaintiffs Stephen Hodges - Defendant CATCHWORDS : Option to purchase lot in unregistered strata plan - whether option holder has caveatable interest in site LEGISLATION CITED : Real Property Act 1900 Commissioner of Taxes (Queensland) v Camphin (1937) 57 CLR 127 London & South Western Railway Co v Gomm (1882) 20 ChD 562 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656 Brown v Heffer (1967) 116 CLR 344 Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 Dekala Pty Ltd v Perth Land and Leisure Ltd (1989) 17 NSWLR 664 Harrison v Lidoform Pty Ltd, FCA, Hely J, unreported, 24 November 1998 CASES CITED : Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 Re Henderson's Caveat [1998] 1 QdR 632 Legione v Hately (1983) 152 CLR 406 KLDE Pty Ltd v Commissioner of Stamp Duties (Queensland) (1984) 155 CLR 288 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 Stern v McArthur (1988) 165 CLR 489 Bahr v Nicolay (No 2) (1988) 164 CLR 604 CM Group Pty Ltd's Caveat [1986] 1 QdR 381 Kuper v Keywest Constructions Pty Ltd [1993] WAR 419 DECISION : Orders extending caveats. THE SUPREME COURT REVISED OF NEW SOUTH WALES EQUITY DIVISION BARRETT J WEDNESDAY 11 APRIL 2001 2034/01 - GRANT LEWIS FORDER & ORS v CEMCORP PTY LTD JUDGMENT HIS HONOUR: 1 This matter from the Duty Judge's list requires attention today because the caveats with which it is concerned will lapse tomorrow unless extended by orders made by the Court under s.74F of the Real Property Act 1900. The question is whether the Court should order extension. The answer depends on whether the persons by whom the caveats have been lodged are properly regarded as having an estate or interest in the relevant land capable of supporting them. 2 There are five caveats, each lodged by a different person but claiming an estate or interest in the same parcel of land at Dee Why. Those persons are the plaintiffs. Each such estate or interest is said to arise by virtue of a deed made between the registered proprietor of that land, Cemcorp Pty Ltd (the defendant), and the caveator. It was agreed for the purposes of the hearing that the Court should consider only one such deed (being the deed dated 6 October 2000 and made between Cemcorp and Grant Lewis Forder, the first plaintiff) and the caveat based on that deed, these being representative of the deeds and caveats of all plaintiffs. It was also agreed that the decision in relation to Mr Forder's deed and caveat would be taken to govern the other cases as well. 3 By clause 4.1 of Mr Forder's deed, Cemcorp granted to him or his nominee an option to purchase "the Property". By clause 6.1, Mr Forder granted to Cemcorp an option to require him to purchase "the Property". Upon exercise of either the call option or the put option in accordance with the terms governing exercise, "a Contract for sale and purchase of the property in the form of the Contract will immediately be taken to be operative and effective": clauses 4.3 and 6.3. Clause 3.1 defines "Contract" and "Property" as follows: " 'Contract' means the Contract for sale which is annexure 'A' to this Deed." " 'Property' means the property described in the Contract." (For present purposes, it is the call option exercisable by Mr Forder, rather than the put option exercisable by Cemcorp, which is relevant.) 4 The annexure "A" to the deed is a standard form contract for the sale of land in accordance with the 1996 edition, with numerous attachments. The property described in this annexure "A" form of contract is: "16/14-16 Francis Street, Dee Why … Unregistered plan: Lot 16 in an unregistered plan (copy attached) (clause 15) which is part of Lot 49 & 50 Section [blank] Plan 7413 (copy attached)." 5 One of the attachments to the form of contract in annexure "A" is headed "Additional Conditions - Registration of Strata Plan". The first of the provisions in that attachment is as follows: "The Purchaser acknowledges that completion of this contract is subject to and conditional upon the registration of a strata plan by the Land Titles office relating to the property being purchased pursuant to this contract. Annexed hereto are copies of the draft strata plan and the floor plan identifying the property being purchased pursuant to this contract. If such registration is not effected within eighteen (18) months from the date of this contract, then either party shall be entitled to rescind this contract by notice in writing to the other party whereupon the provisions of clause 19 shall apply." 6 The case is thus one of "off the plan" purchase (or, more accurately, option), with the relevant commitments created at a time when a development site exists but the intended block of units has not been built or, at least, has not been completed. 7 Another special condition requires completion to take place "within" twenty-one days from receipt by the purchaser of notice from the vendor of registration of the strata plan. Completion thus cannot occur until after registration, with the result that that registration is a condition precedent to completion. 8 The caveat lodged by Mr Forder is numbered 7228749P. In it, he claims an estate or interest in land described as "Folio Identifier 49/7413 & 50/7413" (clearly enough, the land described in the form of contract which is annexure "A" to Mr Forder's deed as "Lot 49 & 50 Section [blank] Plan 7413 (copy attached)"). The estate or interest claimed is: "by virtue of the instrument referred to below/facts stated below: Nature of Instrument Date Parties Put and Call Option 6 October Registered Proprietor Agreement 2000 as vendor and caveator as purchaser in respect of proposed Lot 16 in a plan of subdivision of Lots 49 & 50 DP 7413." 9 The estate or interest asserted is thus an estate or interest in the whole of Lots 49 and 50 in Deposited Plan 7413, being the development site. It is not an estate or interest in the as yet unsubdivided portion represented by Lot 16 in the proposed strata subdivision of Lots 49 and 50. 10 Against this background Mr Hodges, for the defendant, argued, in effect, that because of what might be termed the ephemeral nature of the subject matter of the deed, Mr Forder did not have a caveatable interest in the land on which the strata title building is to be erected, although I did not understand him to argue that someone who has an enforceable option to purchase an existing parcel of land does not have a caveatable interest in that land. That much has been clear at least since Commissioner of Taxes (Queensland) v Camphin (1937) 57 CLR 127, in which reference was made to London & South Western Railway Co v Gomm (1882) 20 ChD 562; and see Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57. 11 Rather, as I understand it, it is put on behalf of the defendant that a great deal needs to be done before there will be a strata lot in relation to which a sale resulting from exercise of the option can be completed, including the obtaining of building approvals, the erection and fitting out of the building and ultimately the things which bring the strata plan into being, including a further council approval and registration at the Land Titles Office. Because of the intervention of all these conditions, it is said, no interest in the site was created when the option was granted. 12 Mr Hodges supported these arguments by reference to the decisions of the High Court in McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656 and Brown v Heffer (1967) 116 CLR 344. The approach in those cases was effectively that no equitable interest in land accrues to another party by virtue of a contract entered into by that party with the owner of the land unless circumstances are such that a court of equity will decree specific performance of the contract by ordering the owner to effect a conveyance to that other party. In the latter case, Barwick CJ and McTiernan, Kitto and Owen JJ referred with approval to the observation of Lord Parker of Waddington for the Privy Council in Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 that the interest of a purchaser under an uncompleted contract for the sale of land is "in every case commensurate only with what would be decreed to him by a court of equity in specifically performing the contract, and could only be defined by reference to the relief the court would give by way of specific performance". 13 On the approach I understood Mr Hodges to take, an option holder, under a conditional arrangement such as the present where the subject matter in the form of the envisaged strata lot does not yet exist in any tangible or documented form, occupies a position far short of that so described and thus has no interest. The point that the building is not yet in existence, let alone that the separate lot is not in existence, was a basis, I think, for a submission that support for the defendant's position could be derived from the observations of Young J in Dekala Pty Ltd v Perth Land and Leisure Ltd (1989) 17 NSWLR 664. That case concerned an option to purchase what was described as, "the completed developed property", being an option apparently granted before construction had begun. Young J held that no equitable interest would pass or accrue to the holder of the option until the option was exercised and a sale contract came into existence between the parties. But, as I read his Honour's judgment, a pertinent factor was that, unlike here, the precise terms of the ultimate sale contract did not form part of the option agreement, so that the option agreement itself or, as it was termed, Heads of Agreement, was "a provisional document which was intended to be replaced by a deed of option with a full copy of the proposed contract of sale annexed". 14 It seems to me that from the nature of the documents and the structure of the contractual and documentary arrangements in Dekala, that case is not of very much help in this present context. 15 At the same time, however, I agree that there are substantial problems with the notion that an equitable interest can subsist in an unsubdivided part of a larger parcel of land, whether the envisaged subdivision is a surface subdivision or a strata subdivision. Those problems are referred to in the judgment of Hely J in Harrison v Lidoform Pty Ltd, FCA, unreported, 24 November 1998, particularly where his Honour points out that a personal equity to be offered a lot in a proposed subdivision only becomes a proprietary interest when it attaches to an identifiable lot. 16 But that is not the case here. Mr Forder does not assert an estate or interest in a cube of air, which somehow represents Lot 16 in the as yet non-existent strata plan. The estate or interest he claims is an estate or interest in the whole of the land which is to be the site of the building to which the proposed strata plan relates and which, in physical terms, will be augmented by the erection of that building. 17 Returning to the decisions of the High Court in McWilliam v McWilliams Wines and Brown v Heffer, Mr Parsons for the plaintiffs referred me to two cases which, in effect, picked up the results in those High Court decisions and reinterpreted them in the light of subsequent observations in the High Court. The cases to which he referred are Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 and Re Henderson's Caveat [1998] 1 Qd R 632. The subsequent High Court observations are found in Legione v Hately (1983) 152 CLR 406, KLDE Pty Ltd v Commissioner of Stamp Duties (Queensland) (1984) 155 CLR 288, Chan v Cresdon Pty Ltd (1989) 168 CLR 242, Stern v McArthur (1988) 165 CLR 489 and Bahr v Nicolay (No 2) (1988) 164 CLR 604. Those cases proceed on a broader notion of "specific performance" as relevant to the question whether someone who contracts with an owner of land thereby acquires an equitable interest in the land. 18 In Stern v McArthur, Deane and Dawson JJ took a view of specific performance, for these purposes, stated in a footnote to Sir Frederick Jordan's "Chapters in Equity in New South Wales": "Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties". (This appears as footnote (f) on page 48 of the original edition of 1921 and footnote (e) on page 52 of the version reprinted in "Sir Frederick Jordan: Select Legal Papers", 1983). 19 The approaches taken by the High Court in the various cases decided in the 1980's were at the centre of reasoning applied by Brownie J in the Jessica Holdings case in declining to follow a series of Queensland first instance decisions on caveatable interests which had based themselves on the availability of what I might term full and traditional specific performance. Such a departure had been foreshadowed in C M Group Pty Ltd's Caveat [1986] 1 QdR 381, but Dowsett J had refrained from making the departure in deference to the established line of Queensland cases. In Jessica Holdings, however, Brownie J stated his conclusion thus: "It seems to me that I should do what Dowsett J had regarded himself as unable to do in C M Group , namely, hold that where a purchaser of land under a contract which contains a condition requiring some stranger to the contract to give some consent or take some other step before the contract can be regarded as unconditional, the purchaser in the appropriate circumstances should be treated as having "an interest" within the meaning of s74F of the Real Property Act or its analogues; and in the present case, since the defendant has an interest which, for the reasons already stated, ought to be protected by an injunction, it follows that the defendant has an interest which may be protected by a caveat. Of course, the injunction goes not directly to compelling the plaintiff to take the necessary steps to register the deposited plan originally contracted for, but rather to the earlier step of preventing the plaintiff from registering a different deposited plan but this distinction does not seem to me to be of any practical significance." 20 The condition to which the contract in Jessica Holdings was subject was that a plan of subdivision in the form annexed be registered within twelve months. That was a subdivision of the surface, of course, not as here, a strata subdivision. 21 A similar approach to a similar kind of contract was taken by the Court of Appeal in Queensland in Re Henderson's Caveat (decided in 1993 but not reported until 1998), thus laying to rest in Queensland the line of first instance decisions which Brownie J had declined to follow. After referring to the High Court developments already mentioned, Macrossan CJ and Demack J said: "With an expanded view of what can constitute an equitable interest in land, a correspondingly wider view of a caveatable interest under s.98 of the Real Property Act can apply." 22 A note by Associate Professor Butt at (1993) 67 ALJ 295 sees the decision in Jessica Holdings as consistent with the more recent High Court statements, although Meagher JA, in an article entitled "Sir Frederick Jordan's Footnote" (1999) 15 Journal of Contract Law 1, says of the view "that if one were, actually or potentially, entitled in equity to any form of remedy in relation to an asset, one has, by virtue of that entitlement, an equitable interest in that asset" that it simply "cannot be correct". 23 It is true, of course, that none of the cases so far mentioned concerned a lot in a proposed strata plan and, as Mr Hodges has put to me, there is much more to be done in bringing a strata plan to fruition than there usually is with a surface subdivision. For that reason, a purchaser or option holder in relation to a strata lot yet to be created stands in a more tenuous relationship to the land. 24 In that connection, however, it is necessary to refer to the decision of the Full Court of the Supreme Court of Western Australia in Kuper v Keywest Constructions Pty Ltd [1993] WAR 419. That case concerned two contracts by the same purchaser to purchase lots in a proposed strata plan relating to a building which was in the course of construction when the contracts were made. At the date of contract, local government approval of the proposed strata subdivision had not been obtained and no strata plan had been registered. The purchaser under the uncompleted contracts lodged a caveat and a question arose as to whether the purchaser had an interest sufficient to support those caveats. 25 Malcolm CJ with whom Pidgeon and Seaman JJ agreed, held that the purchasers did have a caveatable interest. The learned Chief Justice began with McWilliam v McWilliams Wines and Brown v Heffer and then proceeded via Legione v Hately, KLDE Pty Ltd, Stern v McArthur and the other more recent High Court authorities to the position that Dowsett J would have preferred to adopt in C M Group but felt constrained by comity to reject. Malcolm CJ then continued: "In my opinion, in appropriate circumstances, a court would be prepared to protect a purchaser's interest under a contract such as that in the present case, at the so-called inchoate stage, both by granting specific performance in the sense of requiring the vendor to do all things necessary to be done to procure registration of the strata plan as well as restraining the vendor by injunction from dealing with the land inconsistently with the purchaser's right to specific performance of the contract, both in the special sense and, subject to fulfilment of a condition, in the ordinary sense: cf Pakenham Upper Fruit Co Ltd v Crosby (9124) 35 CLR 386 at 396-399, per Isaacs and Rich JJ. In my opinion the estate or interest claimed by the purchasers under the contracts was sufficient to ground a caveatable equitable interest in the relevant land, notwithstanding the conditional nature of the contracts". As I said earlier, the conditional nature of the contracts there was such that not only were local government and titles office actions still to come, but indeed there was not yet any completed building to which the strata plan lots could be physically related. 26 In the present case, Mr Forder has, by virtue of the deed and, in particular, the call option provision in clause 4.1 (as supplemented by the machinery provisions which follow it), a right to bring into existence at any time a contract in the form of the annexure "A" to the deed. Although registration of the exhibited strata plan is a condition precedent to completion, neither the deed nor the form of contract appears to impose upon Cemcorp an explicit obligation to proceed to obtain that registration and, if such a term cannot be implied, it may be that there is no basis on which Mr Forder can require Cemcorp to do everything necessary to effect the registration. But Mr Forder can, in any event, and by virtue of the deed, call upon the assistance of equity in two relevant ways: first, as secondly described by Malcolm CJ in Kuper, that is to restrain Cemcorp by injunction from dealing with the site as a whole inconsistently with his rights under the deed; and, second, as described by Brownie J in Jessica Holdings, to restrain Cemcorp from registering a strata plan which does not accord with the deed. 27 To my mind, the decision of an intermediate court of appeal in Western Australia in Kuper involving a contract relating to a lot in an unapproved and unregistered strata plan, coupled with the decision of an intermediate court of appeal in Queensland in Henderson's case, albeit relating to a surface subdivision rather than a strata situation, provides a firm basis on which I may follow in this case of a proposed strata subdivision the approach which Brownie J took in the Jessica Holdings case in relation to a proposed surface subdivision. 28 I am satisfied that the effect of the deed of 6 October 2000 between Cemcorp and Mr Forder is such as to cause Mr Forder to have, in relation to Lots 49 and 50 in Deposited Plan 7413 (that is, the development site), an interest which may properly be the subject of a caveat under the Real Property Act. He is therefore entitled to maintain his existing caveat. 29 In conclusion, let me quote what I consider to be apposite and sensible words from an article by Assistant Professor K L Liew in an article entitled "Conditional Contracts and Caveatable Interests" (1995) 14 UTasLR 63: "The caveat system is supposedly designed to preserve the status quo pending resolution of the claim underlying the caveat. If this is the case, it does not seem logical to give a narrow interpretation to the word 'interest' in the provision dealing with the lodgment of caveats. If a vendor in breach of a conditional contract seeks to sell the land to another purchaser, even the availability of an injunction to the purchaser under the first contract of sale is of no assistance if he or she was not aware of the actions of the vendor (and there is a need to seek an injunction). The presence of a caveat on the register will at least give notice to a third party that there is an existence to someone who has had prior deals the property and is claiming an interest in it. At least until the contingency is determined this will give the purchaser a degree of protection prior to the fulfilment of the contingency and the opportunity of testing the claim in court. The alternative conclusion is not satisfactory because it would undermine the interest of the purchaser under the contract of sale in that a vendor is able, subject to liability for breach of contract, to walk away and enter into a more lucrative contract of sale with another purchaser. This kind of conduct is clearly not desirable, nor should it be facilitated by a narrow interpretation of what may amount to a caveatable interest." 30 I make the following orders: An order extending the operation of caveat No. 7228749 until further order of the Court. An order extending the operation of caveat No. 7228748 until further order of the Court. An order extending the operation of caveat No. 7228747 until further order of the Court. An order extending the operation of caveat No. 7228751 until further order of the Court. An order extending the operation of caveat No. 7228750 until further order of the Court. I direct that these orders may be entered forthwith. The defendant is to pay the costs of the first to fifth plaintiffs. ****** Last Modified: 04/18/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.