Vikki Louise Cummins v Ballyshannon [2004] NSWSC 889

The Defendant carried on business as a real estate developer and had done so for about 10 years.

The Defendant embarked upon the construction of 10 townhouses. The Defendant agreed to sell to the Plaintiff lot 8 for the price of $337,000.00. Under special condition 9.2 either party might rescind the contract if the strata plan was not registered within eighteen months of the contract date. Special condition 9.3 required the Defendant to use all reasonable endeavours to have, inter alia, the strata plan registered on or before the date stipulated in 9.2. By letter to the Plaintiff’s solicitors the Defendant’s solicitors purported to rescind the contract as the strata plan was not yet registered. The Plaintiff registered a caveat claiming an equitable interest under the contract in lot 8. The Plaintiff commenced proceedings by summons in which she sought orders that the caveat be extended, and for specific performance of the contract.

The principles

An application to the court for withdrawal of a caveat was made under s 74MA(1). Under ss (2)(a) the court may order the caveator to withdraw the caveat and, under sub para (b) make such other or further orders as it thinks fit.

The principle applicable to an application under s 74MA is that the court is to enquire whether the caveator would, in all the circumstances, be entitled to an interim injunction and, if not, to order the caveat be withdrawn (Martyn v Glennan (1979) 2 NSWLR 234). This, in turn, raises the questions whether the claim for an interest in property raises a serious question to be tried and whether on the balance of convenience it is preferable to maintain the status quo until the trial rather than upset it. Thus in a case such as this the question is whether the plaintiff would be entitled to an interlocutory injunction restraining the Defendant from dealing with the lot inconsistently with her right to specific performance of the contract until the final determination of the summons

In dealing with the question the court must also keep in mind the observations of Young, J in Jensen v Giugni (1994) 6 BPR 13,677 at 13,669: “Indeed, it might be said that under the Torrens System generally the court should not remove a caveat or decline to extend a caveat if there is an appearance of an arguable case … there is no doubt at all that … the policy behind Part 7A of the Real Property Act (is that) the caveat is to remain whilst the court determines the real interest between the parties, following the usual procedures in this court, and the caveat is only to go if it is one which is patently bad, or which may have no chance of success” .

With regard to the approach to be taken in deciding whether to discharge or vary an interlocutory order under Pt 40, r 9(4) Mr Harris referred to Brimaud v Honeysett Instant Print Pty Limited (unreported, 19 September 1988) in which the overriding principle was stated by McLelland, J to be whatever the interests of justice require in the particular circumstances of the case. He went on to hold that in cases where an interlocutory order is made after a contested hearing in contemplation it would operate until the final disposition of the proceedings. The ordinary rule of practice is that the applicant must demonstrate a material change of circumstances since the original application was heard.

In this case it was plain that, the Plaintiff having commenced proceedings for specific performance, the present order was made on 5 June 2003 by consent in contemplation that it would operate to restrain the Defendant from dealing with lot 8 until final disposition of her claim. It was thus accepted that extension of the caveat was the appropriate means to preserve the status quo.

The defendant submitted that since the order was made a number of things happened which combined constitute a material change of circumstances so that in the interests of justice the caveat should be lifted to enable the Defendant to be free to sell or otherwise deal with lot 8 so that, ultimately, it will be better placed to obtain finance for another development. The matters relied upon are that the Plaintiff has purchased another residence in which she lives with her family, there has been delay in the proceedings said to have been caused by the Plaintiff’s expert, the Defendant has become aware that it is unable to pay out IMB, discharge the mortgage on the home, borrow for another project and earn income for its directors unless the caveats are removed and the properties are sold, and there has been a weakening in the real estate market.

Held that the matters relied upon by the Defendant provide no basis for interfering with the caveat and depriving the Plaintiff of her claim for specific performance. The fact that she has acquired another property for residence or otherwise does not diminish her entitlement to enforce a contract to buy another. As for delay, the tardiness of the conduct of the proceedings, is not one about which the Defendant may reasonably complain as contributing to its present plight. From the commencement of these proceedings it has been open to it to seek expedition yet it has not done so although informed that an application would not be opposed. The fact that no earlier application was made suggests to me that the balance of convenience has not shifted so that continuation of the order results in injustice to the Defendant.

It must be recognised that the consequences which the caveat has upon the financial situation of the Defendant is an ordinary incident of its business which, as a property developer, it might expect to encounter in the execution of a commercial development. In any event, I attach little weight to the consequential effect of the Defendant’s difficulty in obtaining finance for another project upon persons not parties to the contract such as its directors, shareholders, and employees.

The weakening of the real estate market and its impact upon the Defendant’s fortunes is left as a matter of speculation and in my opinion would also be an ordinary risk of the Defendant’s business and so should be regarded as a factor of little weight.
 
The very circumstances which have brought about the Defendant’s anxiety to dispose of the lot against the wishes of the Plaintiff reinforce the justification of maintaining the caveat for the protection of her interest pending determination of the claim. Consistent with the policy that the caveat system is intended to preserve the status quo I find that the balance of convenience remains substantially in favour of the Plaintiff and the caveat should remain pending determination of her claim.

To do so also accords with what was said by Gleeson, CJ in Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 at p 9C: “The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just”.

The second ground of challenge to the continuation of the present order is that the Plaintiff’s claim henceforth should be confined to damages because at a final hearing an order for specific performance would not be made. For the Defendant it is submitted that on the affidavit evidence of the Plaintiff so far filed in support of the summons and on the evidence as to the Defendant’s present circumstances the court should hold that the claim for specific performance is so clearly untenable that it cannot possibly succeed (General Steel Industries Inc. v Commissioner for Railways (1964) 112 CLR 125 pp 129, 130) and summarily dismiss it.

The defendant said there was no evidence that the Plaintiff wished to live in the lot or that it was of any special value to her. It is put that from this and the evidence that she has purchased and lives in another house it may be inferred that the Plaintiff intends to profit from the resale of the lot and thus damages was the adequate remedy. It was also put that in the events which have happened, a court, in the exercise of its discretion, would refuse to order specific performance because the resultant hardship to the Defendant would amount to injustice.

Held here there were insurmountable obstacles which preclude the success of this ground. It was accepted that the summons raised serious questions to be tried. It was also common ground, as it must be, that the normal remedy for breach of a contract for the sale and purchase of land was by a decree of specific performance. At this stage of the proceedings it was simply not open to the court to decide in advance of the trial what was to be the appropriate form of final relief if the Plaintiff was successful. These factors alone were sufficient to hold that the Defendant was not entitled to the summary dismissal of a claim for specific performance.

Specific performance may be refused in exceptional circumstances of hardship to a Defendant notwithstanding absence of fault in the Plaintiff. Determination of whether such a defence is established must properly await the trial. It is not correct that a court should find damages to be the adequate remedy in cases where the purchaser intends to buy the land as an investment and/or does not demonstrate that it has some special value or feature.

Held the interests of justice required that the Plaintiff’s claim for an order for specific performance be preserved until decided on the evidence of the trial. She should not lose that opportunity at an interlocutory stage before the issues have been joined and the evidence adduced and tested. The Defendant’s claim for an order that the caveat be withdrawn on the basis that the Plaintiff should be confined to relief in damages must be rejected.

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