A developer purchased land using vendor finance and gave the vendor an equitable charge over the land, which he then subdivided and developed. The developer sought to refinance other loans secured by undeveloped lots which required the removal of the vendor’s caveats over the fully develop lots so they could be provided as additional security for the new lenders. The vendor resisted on the basis that he did not want to stand behind the new lenders, which would effectively render his security over the developed lots worthless.
The court found that there was a serious question to be tried that the vendor had an interest in the developed lots given the express clause in the contract creating some right in relation to the land. The court also found it was not reasonable for the caveat to be removed as the refinance would force the vendor to forego security already granted and stand behind the new lenders, owed more than $6m. The court noted that leaving the caveat in place carried less risk of injustice because removing it was potentially dire for the vendor and the evidence was that the new lenders would be willing to consider alternative terms of finance.