Reported Decision : (2002) NSW ConvR 55-993 New South Wales Supreme Court CITATION : Lawrence v. Appleby [2001] NSWSC 649 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3678/01 HEARING DATE(S) : 24 July, 2001 - Ex tempore JUDGMENT DATE : 24 July 2001 Wayne James Lawrence (Plaintiff) PARTIES : George Henry Paul Appleby (First Defendant) Steven John Appleby (Second Defendant) JUDGMENT OF : Palmer J COUNSEL : M.A. Bradford (Plaintiff) R. Lovas (Defendants) SOLICITORS : Elliot Tuthill (Plaintiff) Dibbs Barker Gosling (Defendants) CATCHWORDS : CAVEAT - EXTENSION - DISCRETION - DAMAGES - Purchaser contends contract for sale of land not validly terminated by vendors - purchaser lodges caveat and commences suit for specific performance - purchaser applies to extend caveat until suit determined - claim is arguable and may have substance - Court still has discretion under s.74K(2) Real Property Act whether to extend caveat - discretion similar to that exercised on application for interlocutory injunction - balance of convenience and whether damages are adequate remedy are relevant considerations - after purported termination of contract purchaser clandestinely advertises land for sale at profit and offers to compromise with vendors for money sum - caveator should not be permitted to use caveat to coerce compromise of genuine dispute - purchaser's interest in suit for specific performance apparently only for purpose of re-sale at a profit - damages an adequate remedy - vendors should not be restrained from dealing with property pending determination of suit. LEGISLATION CITED : Real Property Act (NSW), s.74K CASES CITED : Kingstone Constructions Pty Ltd v. Crispel Pty Ltd (unrep. NSWSC, 12 March 1991) Young J. DECISION : Application to extend caveat dismissed; plaintiff to pay defendants' costs. 1 By a summons filed on 20 July 2001 the plaintiff claims a declaration that he is entitled to have a contract for the sale of land at 87 Cambourne Avenue, St Ives specifically performed by the defendants. The plaintiff is the purchaser under a contract for the sale of that land and the defendants are the vendors. 2 The contract for sale is dated 12 September 2000, the price of the land is $300,000 and the contract provided for a deposit of $15,000, i.e. 5% of the purchase price. Clause 8 of the special conditions of the contract provided that the vendor would, prior to completion of the contract, construct a driveway including a retention tank on the property in accordance with plans which were identified in clause 8.2 of the special conditions. Clause 8.5.1 of the special conditions provided that written confirmation from an engineer stating that the driveway had been constructed in accordance with the plans would be conclusive evidence that the vendor had complied with special condition 8.2. By clause 8.5.1 it was provided that the vendors would furnish to the purchaser the written confirmation of the engineer prior to completion. 3 In October 2000 the plaintiff did some work on the construction of the driveway which made it apparent to him that the driveway was not being constructed in accordance with the plans of the engineers which had been annexed to the contract. Indeed, if one looks at the plans annexed to the contract it is evident that the plan for the driveway shown on what is page 32 of the plaintiff's affidavit, being part of the contract, differs somewhat from the plan that is shown on page 33. The plaintiff was not satisfied with the way in which the driveway had been constructed. 4 The contract was due for completion on 30 November 2000. On 1 December 2000 the defendants served a notice to complete on the purchaser requiring completion by 18 December 2000. On 18 December 2000, prior to the expiry of that notice to complete, the plaintiff caused to be delivered to the vendors a notice in the form of a letter from his conveyancer, dated 18 December 2000. By that letter the plaintiff claimed: "Pursuant to clause 7 of the contract, the sum of $2,000 being the amount required to pay (the engineer) to attend at the above property and make all other investigations to obtain information as to whether the concrete used on the driveway and the retention pit is in accordance with their plan. A further sum of $12,500 is claimed being the estimated cost of rectification in the event that the driveway and the retention pit are not constructed in accordance with their plans." 5 It is agreed by both sides that that notice was a notice pursuant to clause 7 of the contract for sale. Clause 7 provides as follows: " Claims by purchaser The purchaser can make a claim (including a claim under clause 6) before completion only by serving it with a statement of the amount claimed, and if the purchaser makes one or more claims before completion – 7.1 the vendor can rescind if in the case of claims that are not claims for delay – 7.1.1 the total amount claimed exceeds 5% of the price; 7.1.2 the vendor serves notice of intention to rescind ; and 7.1.3 the purchaser does not serve notice waiving the claims within 14 days after that service ; and 7.2 if the vendor does not rescind , the parties must complete and if this contract is completed – " 6 It will be observed that the plaintiff's letter of 18 December 2000 made a claim which did not exceed 5% of the purchase price of the contract. Accordingly, the defendants were not entitled to rescind the contract upon receipt of that claim and clause 7.2 of the contract provided that the parties "must complete" the contract. 7 On 18 December 2000 the plaintiff registered a caveat against the title to the property. A second notice to complete was served by the defendants on 29 December 2000. It appears that there was argument backwards and forwards between the solicitors for the parties as to whether or not the plaintiff was required to complete the contract when his claim for rectification or compensation pursuant to clause 7 had not been resolved. 8 On 12 January 2001, the plaintiff's solicitor wrote to the defendants' solicitors enclosing a report by a building consultant as to the amount required to rectify what was said to be the defective work in the construction of the driveway. It was proposed that the matter be resolved temporarily by the parties settling the contract on the basis that there would be retained out of the settlement funds 10% of the purchase price to cover the alleged defective work. 9 There was further correspondence from the plaintiff's solicitors to the defendants' solicitors, culminating in a letter on 15 January 2001 to the vendor's solicitors. In that letter the plaintiff's solicitors stated that "the purchaser does not agree to settle this matter without the retention sums being withheld as previously discussed" . The retention sums, it will be noted, exceed the amount claimed in the plaintiff's letter of 18 December 2000, being the notice pursuant to clause 7 of the contract. 10 On 15 January 2001 the defendants delivered to the plaintiff a notice terminating the contract. It appears that between January and June 2001 the parties attempted by various means to resolve their differences. However, on 23 June 2001 the plaintiff placed an advertisement in the Sydney Morning Herald advertising the land for sale at a price of $369,000. The plaintiff does not dispute that he placed that advertisement and it appears that he did so without first informing the defendants. It will be noted that the price advertised for the land is $69,000 in excess of the purchase price in the contract between the plaintiff and the defendants. 11 The defendants discovered almost by chance that the plaintiff had advertised the property and the first defendant spoke to the plaintiff on 23 June 2001 protesting at the plaintiff's conduct. On 26 June 2001 the plaintiff wrote a letter to the first defendant in which he said: "1. I have made every attempt to settle the matter including agreeing to paying you all the money except for $30,000 to be held in trust until we have disputed the obligations of the parties. 2. The only reason I am attempting to find a buyer for the property is to pay you your money and leave the balance in trust until the matter is disputed. Most people would consider this a reasonable issue. I fail to understand why you are so adamant about forcing an issue that could be resolved between the parties without spending thousands of dollars in legal costs. I have attempted to walk away without claiming damages, however because of your actions I am now going to seek damages. It is you who is unable to complete the contract, and to blame the problem on the purchaser, only cements the fact you are being given the wrong information. I want the matter settled with as little fuss as possible. If I were you, I would be offering to compensate me for the ads to sell your property. Do you fail to realize that the property cannot be sold unless to [sic] agree to it. Do you fail to realize that any moneys from the sale will be going into your solicitors' trust account. I suggest that you re-think your attitude and let me settle this matter as quickly as possible. 12 The plaintiff had filed a caveat against the land on 18 December 2000. The caveat claimed an interest in the land pursuant to the subject contract for sale. In early July 2001 the defendants filed an application for the removal of the caveat and on 3 July, a notice under s.74J of the Real Property Act was served on the plaintiff. 13 By letter dated 19 July 2001 the plaintiff's solicitors wrote to the defendants' solicitors advising that they had been instructed to commence proceedings seeking orders that the caveat be extended until further order of the Court. The plaintiff's solicitors offered on behalf of the plaintiff to settle the matter on condition that the defendants paid the plaintiff the sum of $38,000 from the proceeds of sale of the subject property. 14 This morning application was made by the plaintiff to extend the caveat against the land until the final determination of the proceedings. Mr Bradford, who appears for the plaintiff, submits that what he must show in order to invoke the jurisdiction of the Court under s.74K(2) of the Real Property Act is that the plaintiff's claim that the contract has not been validly rescinded and that he is entitled to specific performance "has or may have substance" . Mr Bradford says that the plaintiff has amply satisfied that requirement. He says that there is a real dispute involving issues both of fact and law as to whether the contract has been validly terminated by the defendants by their notice of 15 January 2001. 15 Mr Bradford says that the defendants were in breach of clause 8.2 of the contract in that they did not, prior to serving a notice to complete, construct upon the land a driveway in accordance with either of the plans which are attached to the contract. He says that the defendants, being in breach of clause 8.2 of the contract, were not at any time entitled to serve a notice to complete. 16 Mr Lovas, who appears for the defendants, says that any claim which the plaintiff might have had under clause 8.2 of the contract has been subsumed in the plaintiff's claim for compensation under clause 7 of the contract. He submits that, in effect, the plaintiff elected his remedy for breach of special condition 8, namely, compensation pursuant to clause 7. Having so elected, the plaintiff was confined to the rights afforded by clause 7.2 of the contract and was not entitled thereafter to resist completion of the contract. 17 Mr Lovas further submits that the conduct of the plaintiff from 18 December 2000 to the present time indicates that the purchaser is not in any sense ready, willing and able to perform the contract. He submits that the purchaser's insistence upon resolution of a dispute as to the costs of rectification of the driveway prior to completion is an insistence on performance of the contract which is not in accordance with its terms. Therefore, says Mr Lovas, it is demonstrable that the plaintiff is not ready, willing and able to perform the contract and would, upon a final hearing, be denied the equitable remedy of specific performance. 18 In my opinion, it is not appropriate on this application to resolve these disputed questions of fact and law. There is clearly a real issue as to whether the delivery by the plaintiff of his claim for compensation under clause 7 has resulted in an election for a remedy under that clause and a relinquishment of a remedy which he might otherwise have had under special condition 8. There is much to be said for the defendants' submissions in this regard, but it is clear that there may be a great deal of further evidence which may be relevant to the determination of that issue on the final hearing. 19 I am satisfied that there is an arguable case that the defendants' notice of termination of 15 January 2001 was not validly given. It follows that I am satisfied that the plaintiff's claim for specific performance of the contract may have substance. However, that does not determine the matter as far as s.74K(2) of the Act is concerned. 20 The sub-section certainly requires, before the exercise of jurisdiction, that the Court be satisfied of the adequacy of the caveator's claim. But if the Court is so satisfied the Court is still to exercise a discretion as to whether or not the caveat should be extended. The discretion is clearly a wide one. The Court may simply extend the caveat or, in a suitable case, may make such other orders as it thinks fit. 21 It is often said that the discretion to be exercised under s.74K of the Act is akin to the discretion to be exercised upon an application for an interlocutory injunction. That is clearly so, as a caveat is in some respects nothing more than a statutory injunction restraining dealings with the subject matter of the dispute until the dispute is resolved. 22 However, it has been observed, and with respect rightly so, that it is not appropriate to regard the exercise of discretion under s.74K in exactly the same way as the exercise of a discretion to grant an interlocutory injunction in the Court's inherent jurisdiction. In Kingstone Constructions Pty Ltd v. Crispel Pty Ltd (unrep. NSWSC, 12 March 1991) Young J. said: "Normally, when a caveat is proper in form and substance it will be retained even though this will cause harm to the registered proprietor. After all, the whole purpose of a caveat is to enable a brake to be put on the registered proprietor's dealings with his property whilst the claim of the caveator is resolved. Mr Hodgekiss points to the fact that Judges have said that the Court approaches questions as to whether a caveat should be extended in much the same way as it considers whether to grant interlocutory relief by way of injunction: see e.g. Ralph Symonds Australia Pty Ltd v Pacific Property Investments Pty Ltd – Bryson, J – 29 October, 1988, extracted in Leslie's Equity and Commercial Practice Volume 1 para C10:60. Such statements must, however, be read sub modo. It must be remembered that when dealing with extensions of caveats the Court is not exercising its equitable jurisdiction but a statutory jurisdiction. As Powell J. said in Bethian Pty Ltd v Green (supra) at p 11,582, discretionary bars to relief in equity are not necessarily relevant to the statutory discretion contained in what is now s74K of the Real Property Act : see also World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181, 185 and Town and Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 97 ALR 315, 319. Thus, I have little sympathy with Mr Hodgekiss's submission that clean hands are a relevant matter in this case and I rejected evidence going towards this so-called defence accordingly. So far as balance of convenience generally is concerned, it is certainly the case that this Court has ensured that caveats are not used as a blackmailing device so that a caveat can legitimately be lodged in respect of a relatively small claim and force the registered proprietor to pay out such a claim even though it is bitterly contested. The Court has consistently taken the attitude that if the registered proprietor is prepared to put up an alternative security, then it will remove the caveat, even though, as I have said, the caveat may be completely valid. A recent example is Gibson v Co-ordinated Building Services Pty Ltd (1989) NSW Conv R 55-481." 23 As that passage from his Honour's judgment indicates, grounds relevant to the exercise of the discretion to grant relief in equity are not necessarily relevant to the exercise of the statutory discretion under s.74K. As his Honour pointed out, a clean hands submission is probably very inapt in a case in which the statutory remedy afforded by s.74K is invoked. 24 However, in an application for an extension of a caveat, it is still appropriate, in my view, to consider the balance of convenience in very much the same way as the Court does when considering the grant of an interlocutory injunction. For example, as Young J. observed, it is certainly the case that the Court will ensure that a caveat is not used to bring unwarranted pressure upon a registered proprietor of land to force abandonment or compromise of a claim in a real and genuine dispute between the parties. 25 In the present case I am much influenced by the fact that, as seems clear from the evidence, the plaintiff does not intend to use the subject land for his own home. He has already sought to sell the property at substantial profit. It seems that the only interest of the plaintiff in insisting upon specific performance of the contract with the defendants is as a source of profit from an on-sale. No other hardship to the plaintiff has been advanced which might otherwise influence the Court's discretion as to the extension of the caveat. 26 In my opinion, the plaintiff's actions in attempting to procure a re-sale of the land militate very much in favour of the view that damages would be an adequate remedy if he ultimately succeeds at the trial in establishing that the contract with the defendants has not been validly terminated. I bear in mind also as relevant to the exercise of discretion that, in my view, on the evidence presently before the Court the plaintiff's case is weak on the question as to whether he has elected the remedy under clause 7 of the contract in substitution for such rights as he might have had under special condition 8. 27 I bear in mind also that whereas the plaintiff's initial claim for compensation was some $14,000, he has escalated his claim throughout the conduct of negotiations from December 2000 to June this year so that his total claim is now well in excess of $38,000. It seems to me that this points to a strong inference that the plaintiff's interest in the land is purely financial. 28 In those circumstances I do not think that it is appropriate to restrict the defendants by caveat from dealing with their property pending the determination of this suit. In my view, the plaintiff should be left to his remedy in damages. 29 Accordingly, I decline to extend the caveat as requested. 30 Notwithstanding Mr Bradford's submissions, I think the proper order for costs is that costs of today follow the event. Accordingly, the order of the Court will be: (1) the application is dismissed; (2) The plaintiff will pay the defendants' costs of today. 31 Stood over for further directions before the Registrar on Friday, 3 August 2001, at 9.30am. – o0o – Last Modified: 08/02/2001 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.