How does a party to a contract of sale of real estate in Victoria prove that they are ready, willing and able to perform the contract, in order to obtain an order for specific performance?

On 15 March 2023, in Knight 34 Langdon Rd P/L and anor v Bell and others [2023] VSCA 54, the Court of Appeal of the Supreme Court of Victoria (Emerton P, WalkerJA and J Forrest AJA) considered an application by an unsuccessful defendant for leave to adduce further evidence. 

The case concerned a dispute about a Contract for the Sale of a unit 'off the plan' in Toorak. The purchase price was $3,528,000 and a deposit of $350,000 had been paid. The purchasers had obtained an order from the Trial Judge that the vendor specifically perform the contract by settling the sale.

The further evidence was said to go to whether the purchasers were actually in a position to settle, the argument being that they were not, as they did not have the loan funds available on the day that they had applied for specific performance. 

The Court of Appeal rejected the application to rely on further evidence and dismissed the application for leave to appeal. 

For our purposes, the Court of Appeal made the following observations (at paragraphs 69 to 70): 

... we accept the Bells’ submission that it is not necessary, in order for a party to be properly characterised as ‘ready, willing and able’ to perform a contract of sale by payment of the purchase price, to have in hand — or in their bank account — the full amount of the purchase price at the time they claim to be ready, willing and able. As Menzies J observed in Bishop v Taylor:

The requirement of readiness and willingness does not demand that a purchaser should always have the purchase price in his pocket; all that is necessary is readiness and willingness to perform the contract according to its terms ((1968) 118 CLR 518, 525; [1968] HCA 68).

70                  That is, it is only necessary for a person to have the full amount of the purchase price immediately available as at the date on which the obligation to pay falls due (see Bisognin v Hera Projects Pty Ltd [2018] VSCA 93, [171]–[173] (Tate JA, Kyrou JA agreeing at [216], Coghlan JA agreeing at [217])). Thus, even if we had accepted that, on 19 July 2022, the Bells did not have immediate access to funds sufficient to pay the full purchase price for the Bell apartment, we would not have concluded that they had misled the Court by submitting that they were ready, willing and able to perform the contract of sale. In that regard, we accept the Bells’ submission that ‘[f]ar from demonstrating that they were not able to have the funds ready for settlement when the time for performance came, the so-called “fresh evidence” demonstrates exactly the opposite’

The Court of Appeal has therefore confirmed that to obtain an order for specific performance of a contract of sale of real estate in Victoria, all that a party to the contract needs to do is demonstrate that they will meet their obligations at the date that they fall due. In this case, the Trial Judge and the Court of Appeal found that the purchasers had met that requirement. 

WG Stark

Hayden Starke Chambers

When is it appropriate to seek summary possession under order 53 of the Victorian Supreme or County Court Rules?

Summary procedure for possession under order 53

1.     In March 2020, the Court of Appeal (Maxwell P, Tate and Forrest JJA), looked at whether the summary procedure for possession of land under order 53 was appropriate in the case of a dispute between a brother and sister (see Chan and Lin v Chan [2020] VSCA 40).

 

2.     Maxwell P and Forrest JA agreed with the detailed reasons for decision written by Tate JA.

 

Background

3.     The dispute was between a brother and sister over the ownership of land in Victoria. Ching Ha Chan (‘Carol’) was the registered proprietor of 2 units in Plenty Road, Bundoora. Carol paid the deposit on each unit using money given to her from her parents. Carol and her brother, Ching Lung Chan (‘Michael’), lived in Unit 2 while Carol rented out a number of other bedrooms in Unit 2 and all of the bedrooms in Unit 1. Carol used the rental income to service the mortgage repayments. When Michael married Ying Lin (‘Lisa’) he moved to Unit 1 with his wife and eventually collected the rent from the other tenants in Unit 1 for himself. Michael claims that the money their parents gave to Carol was to purchase Unit 2 for herself and to hold Unit 1 on trust for him. Since late 2017, Michael had been in dispute with Carol about the ownership of unit 1. However, it was not in dispute that Michael and Lisa moved into Unit 1 with Carol’s consent.

 

4.     Carol brought summary possession proceedings for possession under order 53 in the County Court on 30 July 2018 to evict Michael and Lisa. She denied that she held Unit 1 on trust for Michael.

 

5.     A County Court judge made orders under Order 53 of the County Court Civil Procedure Rules 2018 in favour of Carol for the summary recovery of land.

 

6.     In the County Court, Michael and Lisa had claimed that they had an interest in unit one, ostensibly on the basis of a resulting, constructive or implied trust (although not in those terms, as they were not represented by counsel at the hearing).

 

7.     Counsel for Carol had submitted that nothing that Michael and Lisa raised had displaced the presumption of indefeasibility of title under the Transfer of Land Act, 1958. Justice of Appeal Tate found (at paragraph 38) that:

… counsel was wrong to submit that nothing had emerged either from Michael’s and Lisa’s affidavit, or Lisa’s oral submissions, to support an arguable case for the recognition of an equitable interest that might

attract an exception to indefeasibility (See, for example, Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131, [128] – [130]).

 

8.     Michael and Lisa applied for leave to appeal from the orders of the County Court. The primary basis for the appeal was that the dispute was not an appropriate case for the summary procedure under order 53, and

in the circumstances there were disputed facts and legal

contentions in respect of their equitable interest in Unit 1 that warrant a trial.

 

9.     The Honourable Justice of Appeal Tate granted leave to appeal and allowed the appeal.

 

10.  As a part of her reasoning, Tate JA examined the history, purpose, and scope of Order 53 (commencing at paragraph 46 of her reasons).

 

11.  Among other points of interest, Tate JA concluded that the summary procedure does not apply to a tenant, including a tenant holding over after the determination of the tenancy (in paragraph 8).

 

12.  Tate JA quoted from a decision by Derham As J (In Framlingham Aboriginal

Trust v McGuiness [2014] VSC 241, which was upheld on appeal in Framlingham Aboriginal Trust v McGuiness [2014] VSC 354 (Ginnane J). Associate Justice Derham summarised the principles that govern the application of Order 53 as follows:

(a)   It is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby trespassers are keeping the proprietor out;

(b)  It is intended to apply only in clear cases where there is no question to try;

(c)   The existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly;

(d)  While an order for possession may be made notwithstanding that there is a factual dispute between the parties, such an order will only be appropriate if the Court is able to satisfy itself as to the material facts that bring the case within Order 53;

(e)   The jurisdiction should be exercised with great care;

(f)    Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to Rule 4.07 of the Rules; and

(g)   Where the Court gives judgment for possession under Order 53, it may grant a stay of execution.

 

13.  Derham As J concluded with the following summary:

The power to give summary judgment for possession is similar in nature to the power to give summary final judgment under Rule 22.02 of the Rules. That power should be exercised with great care and should never be exercised unless it is clear that there is no question to be tried. The need for exceptional caution in exercising the power is the subject of numerous observations of courts in this country.

 

14.  Justice of Appeal Tate then analysed a number of other cases which held that the procedure under order 53 was not appropriate to deal with a factual dispute.

 

15.  In summary, she noted as follows:

The purpose of proceedings for the summary recovery of land is to protect against trespassers, that is, those who enter land without lawful authority or those who remain in occupation when the licence or consent to that occupation has been withdrawn. The procedure is only appropriate in a clear case, although it may be available where there is a minor factual dispute providing the dispute can be readily and fairly resolved by the judge.

 

The dispute between Carol, and Michael and Lisa, as to whether Unit 1 was held on trust by Carol for Michael, is not minor. The issue was not resolved by the judge, nor could it be without a trial. The judge, quite properly, determined not to hear the application until the parties had been given an opportunity to adduce evidence by affidavit. The evidence filed established a relevant contest of fact between the parties that could not be fairly and readily resolved summarily.

 

16.  After her analysis of the history, purpose, and scope of Order 53, Tate JA then noted that the two issues raised by the grounds of appeal relate to the status of Michael and Lisa as tenants at will or licensees and whether Carol holds Unit 1 on trust for Michael.

 

17.  The Honourable Justice of Appeal Tate then noted “When a person is given an uncertain interest in premises, the law may presume a tenancy at will” (paragraph73).

 

18.  At paragraph 76, Tate JA noted:

Michael and Lisa entered into occupation of Unit 1 lawfully. They

were permitted to occupy Unit 1 rent-free. There is no evidence to suggest that the occupation was for any defined term. There was no relevant lease. Their interest in Unit 1 is uncertain. If they had exclusive possession of Unit 1 by reason of an express or implied agreement with Carol, the law would likely presume a tenancy at will. While the position of a tenant at will has been described as somewhere between a lessee and a licensee, it is accepted that tenants at will are not licensees, licensees not being entitled to exclusive possession.

 

19.  As a result, Tate JA concluded that having never been nor become licensees, Michael and Lisa would fall outside the scope of Order 53.

 

20.  On the hearing of the appeal, both parties attempted to rely on new evidence. This evidence tended to establish that there may have been a constructive trust arrangement in place. The Court of Appeal rejected the attempt to introduce new evidence.

 

21.  Tate JA also outlined some of the (disputed) evidence from the hearing in the County Court and concluded (at paragraph 87):

While the evidence may seem somewhat scant to found a constructive trust based on principles of proprietary estoppel, in my view it is sufficient to indicate that the matter ought to have been directed to proceed by way of trial. … This was especially so given that Michael and Lisa were self-represented below and the identification of a relevant equitable interest is a complex matter.

 

22.  Finally at paragraph 91, the Honourable Justice Tate concluded:

I cannot confidently conclude that a constructive trust could not be found against Carol at a trial hearing of this proceeding. In those circumstances, the summary procedure under Order 53 is neither available nor appropriate.

 

Conclusion

23.  This case provides a useful summary of the law as it relates to the summary procedure for possession of land, as provided by order 53, as well as a thorough analysis of the circumstances in which the procedure will and will not be available.

WG Stark

Hayden Starke Chambers

What happens if I lodge a caveat over the title to real estate in Victoria when I do not have a caveatable interest?

A caveat is an instrument that protects an unregistrable legal or equitable interest in real property. 

The caveat is a notice to the public that the person lodging the caveat (the caveator) holds an unregistered interest in the property, and provides details of the interest claimed. 

The caveat prevents the registration of any dealings a person has with the property until the caveat is removed or the caveator consents.

Lodging a caveat is a very serious matter, and as a result a caveat should not be lodged ‘without reasonable cause’. 

Section 118 of the Transfer of Land Act 1958 (Vic) provides: 

Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as a court deems just and orders.

What does ‘without reasonable cause’ mean?

In 2019, the High Court of Australia explained what it means to lodge a caveat ‘without reasonable cause’ for the purposes of claiming compensation under the NSW provision that is equivalent to section 118. 

The case dealt with the question of what property vests in a trustee in bankruptcy. However, in determining that issue, the High Court has provided some useful insight into the issue of whether a person has lodged a caveat without reasonable cause.

In Boensch v Pascoe [2019] HCA 49; 94 ALJR 112; 375 ALR 15, the High Court (Kiefel CJ, Gageler and Keane JJ and separately Bell, Nettle, Gordon and Edelman JJ) endorsed the two-step ‘reasonable cause’ test that had been applied in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) and other cases.

Background

Mr Boensch was a trustee holding real property on trust for the benefit of his children (Trust Property). Mr Pascoe was appointed as Mr Boensch's trustee in bankruptcy upon Mr Boensch being declared bankrupt. Whilst acting as Mr Boensch’s trustee in bankruptcy, Mr Pascoe lodged a caveat over the Trust Property.

Ultimately, the caveat was removed by a lapsing notice issued by the NSW Registrar General. Mr Pascoe chose not to issue litigation to establish that he had a caveatable interest in the real property (mainly due to the limited equity that appeared to be available in the property). 

Mr Boensch then commenced proceedings against Mr Pascoe seeking compensation under the Act on the grounds that Mr Pascoe had lodged and maintained a caveat over the Trust Property ‘without reasonable cause’.

In determining whether Mr Pascoe had lodged and maintained the caveat over the Trust Property ‘without reasonable cause’, the trial judge applied a two-step test, namely that a caveat is lodged ‘without reasonable cause’ if the lodging party:

1. does not have a caveatable interest; and
2. does not have an honest belief based on reasonable grounds that they have a caveatable interest.

As a result, in order to claim compensation under the equivalent of section 118 successfully, Mr Boensch was required not only to establish that Mr Pascoe did not have a caveatable interest in the Trust Property but also that Mr Pascoe did not have an honest belief on reasonable grounds that he had a caveatable interest over the Trust Property.

The High Court concluded that Mr Pascoe had a caveatable interest in the Trust Property for the purposes of lodging and maintaining the caveat. This was on the basis that the caveatable interest arose from Mr Boensch’s entitlement to be indemnified out of the Trust Property for liabilities he incurred while he was trustee. This entitlement to be indemnified created an equitable interest which vested in Mr Pascoe upon his appointment as Mr Boensch’s trustee in bankruptcy.

The majority (Bell, Nettle, Gordon and Edelman JJ) noted (at ALR page 46, paragraph 116):

For the reasons earlier stated, there is no reason to doubt that, upon the making of the sequestration order, the ... property vested in equity in Mr Pascoe by reason of Mr Boensch’s right of indemnity and, therefore, that Mr Pascoe had a caveatable interest in the property. Nor is there any reason to doubt that Mr Pascoe honestly believed on reasonable grounds that the property so vested, either on the basis that the trust was void or on the basis of Mr Boensch’s right of indemnity. On the facts as found, Mr Pascoe did not lodge or refuse to withdraw the caveat without reasonable cause.

The minority (Keifel CJ, Gageler and Keane JJ) noted (at ALR page 20, paragraph 12) that:

The existence of a caveatable interest, without more, supplies “reasonable cause” for lodging and maintaining the caveat.

In the circumstances, the High Court concluded that Mr Pascoe did not lodge the caveat ‘without reasonable cause’ and therefore Mr Boensch was not entitled to compensation under the New South Wales provision equivalent to section 118 of the Transfer of Land Act 1958.

Conclusion 

This High Court decision highlights the importance of ensuring that caveats are lodged and maintained with ‘reasonable cause’. 

It also provides guidance on how a Court will approach the issue of whether a caveat has been lodged ‘without reasonable cause’ under the Act, and thus whether an applicant is entitled to compensation under section 118 of the Transfer of Land Act 1958.

Legal practitioners will be aware that if they lodge a caveat without reasonable cause, they may be engaging in unsatisfactory professional conduct, or even professional misconduct. If that happened, the legal practitioner is likely to find themselves the subject of a disciplinary matter initiated by the Legal Services Commissioner, and having their right to engage in legal practice put at risk. 

WG Stark

Hayden Starke Chambers