Weekly property law round-up, 4 - 10 March 2024
- Hamish Williamson
- Mar 15, 2024
- 7 min read
Overview
The latest instalment in a weekly summary of cases involving property law in the State and Territory Supreme Courts, the County Court of Victoria, and the Land and Environment Court of NSW.
Selected judgments from last week:
If a vendor and purchaser have agreed to an extended settlement date, as part of a deed to settle a related dispute, do the terms of this deed supersede the original contract of sale? Further, is there a difference between ‘default’ and ‘fault’ in the context of an alleged breach of contract? (VS Property and Holding Pty Ltd v Zurzolo [2024] VSC 89).
Does a unitholder of a trust which holds land have a caveatable interest in that land? (LPY Investments Pty Ltd v JY Property Pty Ltd & Anor [2024] VSC 94).
Aside from the two cases summarised in this article, I’ve also listed some other cases that may be of interest for further reading. Catchwords and links are included.
Supreme Court of Victoria (Quigley J)
REAL PROPERTY — Sale of Land — Claim for specific performance — Failure to settle on due date — Settlement Deed — Construction of the contract — Conflicting terms — Commercial purpose — Purchaser’s obligations at settlement — Failure to settle ‘through default on its part’ — Whether contract void or voidable — Whether default notice required to be served — Effect of electronic settlement clause — Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418, Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 — Adaz Nominees Pty Ltd [2020] VSCA 201 — Australian Broadcasting Commission v Australian Performing Rights Association [1973] HCA 36; (1973) 129 CLR 99 considered — Declarations made — Specific performance refused — Caveat removal ordered.
Background
This decision concerned a large block of land in Rockbank, a semi-rural suburb 28km west of Melbourne. The defendants (the ‘vendors’) had bought the land as a hobby farm some years ago, but as the suburbs expanded westwards, decided to sell it. In 2017, they entered into a contract with the first plaintiff (‘the purchaser’). Settlement was due on 5 November 2020, with the balance of the $4m purchase price being payable on that date.
After the contract was signed, a three-way dispute arose between the vendors, the purchaser, and a local water authority, about the grant of an easement by the vendors to the authority. The dispute was eventually settled in July 2022. However, while the dispute was on foot, the settlement date of 5 November 2020 came and went, and the purchaser did not pay the balance of the sale price.
As part of the agreement that settled the water authority dispute, the vendors and purchaser struck a deal under which they extended the deadline for settlement of the sale contract, to 15 September 2022. However, the purchaser was unable to secure finance in time, despite the vendors being ready and able to perform the contract, and this date also passed without payment.
Key issues in dispute
After the extended settlement date passed, the vendors treated the sale contract as being at an end, and retained the deposit paid by the purchaser. The vendors had grown frustrated with the delay in receiving the settlement sum. Moreover, in the years since 2017, the land had increased in value considerably, and the vendors were unable to sell it to an alternative buyer until the sale contract was terminated and the purchaser’s caveat removed.
In response, the purchaser denied that the contract had been effectively terminated, and applied to the Court for specific performance. The main argument that it relied on was that its failure to pay the settlement sum arose due to a delay by its lender in releasing funds, rather than any fault of the purchaser itself.
Central to the dispute was the construction of the settlement agreement, and particularly clause 5, which entitled the vendors to terminate the sale contract and retain deposit money if the purchaser “failed to settle, through default on its part…on the Extended Settlement Date”. The clause gave rise to two key issues:
Whether clause 5 of the settlement agreement superseded the default provisions in the original sale contract, particularly general condition 27, which precluded termination by the vendors unless they provided a default notice to the purchaser; and
Whether the term “default on its part” in clause 5 of the settlement agreement applied when the purchaser’s failure to settle on time was said to arise due to a delay by its lender to release funds.
Decision and reasoning
Her Honour Justice Quigley relevantly held that:
The settlement agreement and sale contract were to be read harmoniously and consistently. However, some of the clauses in the respective documents were clearly inconsistent, and it needed to be determined which applied.
Clause 5 of the settlement agreement was in direct conflict with general condition 27 of the sale contract. It would not make commercial sense for clause 5 to set out the consequences of default, if the consequences of default were to be as set out in general condition 27.
As such, clause 5 superseded general condition 27. The purpose of the former clause was to address the initial default of the purchaser, and this formed part of the objective background circumstances known by both parties on entering into the deed of settlement.
As to whether the purchaser had breached clause 5, it was relevant that the clause referred to ‘default’ and not ‘fault’. Her Honour observed that ‘those words have a different meaning’. A default, in a legal context, means a failure to fulfil an obligation. It does not carry with it a connotation of blame or responsibility. The word ‘fault’ carries with it such connotations.
The purchaser defaulted by its failure to pay the settlement sum on time, whether or not there was any fault on its part. As such, it breached clause 5.
In any event, her Honour further found that the breach was indeed the purchaser’s ‘fault’ as well—the breach arose not only due to the slowness of the purchaser’s lender, but the purchaser’s own slowness in seeking to secure finance in the first place.
The Court refused to grant specific performance, and ordered that the purchaser’s caveat over the property be removed.
Supreme Court of Victoria (Cosgrave J)
REAL PROPERTY – Caveat – Application to remove caveat – Whether unitholder has sufficient interest in land to justify caveat – Terms of trust deed important – Trust deed does not assign beneficial interest in land to unitholders – Unitholders’ interest does not compel trustee to act in a particular manner – Insufficient interest in land to sustain caveat – Caveat ought be withdrawn.
Background
In simple terms, the key question in the proceedings was whether unitholders in a discretionary unit trust, where the trustee is the registered proprietor of land, have a sufficient interest in that land to lodge a caveat over it.
The directors of the respective companies are, or were, a married couple, who were separately involved in contested litigation in the Federal Circuit and Family Court of Australia.
The plaintiff company, directed by Ms Yang, was the trustee of a unit trust, which was the registered proprietor of the properties. The defendant company was, according to its director Mr Yun, a unitholder in that trust. On the basis of this alleged beneficial interest in the properties, the defendant company had lodged caveats over them, preventing their sale by the plaintiff company.
The plaintiff company applied under s 90(3) of the Transfer of Land Act 1958 (Vic) for removal of these caveats. As usual in such applications, the second defendant was the Registrar of Titles, although it did not take any active part in the proceedings.
Decision and reasoning
His Honour Justice Cosgrave relevantly held that:
The case law emphasised that the label ‘unit trust’ and ‘discretionary trust’ should not be simply relied on. The terms do not have a ‘constant, fixed or normative meaning’. Courts must consider the terms of the actual trust deed to establish the rights and entitlements it grants.
As such, whether a deed that establishes a discretionary unit trust confers a beneficial interest in land sufficient to form the basis for a caveat, is a question that needs to be answered with reference to the deed itself.
The mere fact that land was held on trust did not necessarily mean that the beneficiaries had some beneficial interest in it that might found a caveat. There is longstanding authority that, where a legal estate in land is vested in a trustee, this does not necessarily mean that some other person must hold an equitable estate in the land. It is, in fact, possible for the trustee to be entitled to the whole of the estate in possession, both legal and equitable (citing Griffith CJ in Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490, 497).
On the facts before the Court, the unitholders lacked a sufficient interest in the land to support a caveat: on the terms of the deed, unitholders did not have a beneficial interest in the whole of the assets comprising the trust fund, nor any particular interest in the land it held. Further, the unitholders had no capacity to compel the trustee to act in any way in relation to the income generated by the trust—any distributions etc. were to be made by the trustee at its discretion.
His Honour further expressed some concern that the caveat may have been lodged for a collateral purpose, although he made no such finding. The Court held that the caveat ought be withdrawn.
Other property law decisions last week
Supreme Court of New South Wales (Peden J)
EQUITY —Equitable charges and liens — Enforceability — Whether court should make an order for judicial sale out of court — Whether court should make ancillary order for possession
Supreme Court of New South Wales (Hmelnitsky J)
PARTNERSHIPS AND JOINT VENTURES — Family farming partnership carried on since 1989 – Whether farmland formed part of partnership assets – Winding up of partnership – Rights of outgoing partner – Alleged conversation at family meeting said to give rise to binding contract – Specific performance sought re land – Proprietary estoppel relied on re alleged payment into partnership in return for inheriting land
The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq) (No 2) [2024] NSWCA 45 (4 March 2024)
New South Wales Court of Appeal (White and Kirk JJA, Griffiths AJA)
REAL PROPERTY – Caveats – Caveatable interests – Where caveatable interest in the nature of equitable charge secured payment of commission owing in respect of sales of property – Whether charge extended to all unsold units – Effect of supplementary agreements is that the properties listed therein are to be treated as included in the primary agreement – Declaration that equitable charge extends to all unsold units to secure debt owed for commission and interest