Shaw v Yarranova [2005] VSC 94
In the Supreme Court of Victoria, Hollingworth J held that an order removing a caveat under the Transfer of Land Act is a final order that cannot be sought by summons alone in an existing proceeding and, treating the vendor's summons as a summary judgment application, proposed to dismiss it because there was a serious question under the Domestic Building Contracts Act and the balance of convenience did not clearly favour removal [32], [33], [38], [65], [72], [73].
What the court decided
The purchaser bought an apartment "off the plan" and said he need not complete because it had not been properly constructed [1]. He also claimed that the contract was a major domestic building contract under the Domestic Building Contracts Act 1995, so that section 42 prevented a demand for final payment until the works were satisfactorily completed and the vendor could not rescind [21]. On 10 October 2003 the purchaser lodged a caveat claiming an interest under the contract [19]. On 15 October 2003 the vendor's solicitors said that the contract was rescinded and the deposit forfeited [18]. He sued for specific performance and other relief [22]. The vendor counterclaimed for removal of the caveat under section 90(3) of the Transfer of Land Act 1958 [25].
Her Honour agreed with the purchaser that the vendor was not entitled to seek removal by summons in the current proceeding [31], [32]. An order removing a caveat is a final order, and such proceedings are commonly brought by originating motion and summons [33]. Counsel did not refer her Honour to any case, and she could find none, in which a caveat was removed on a summons alone in an existing proceeding [36]. In Martyn v Glennan, relied on by the vendor, a separate proceeding seeking removal had been commenced [37]. Her Honour instead treated the summons as an application for summary judgment on that part of the counterclaim [38]. She noted in passing that such an application ought ordinarily to be made before a Master and, if brought before a Judge, ought simply to be dismissed, but dealt with it because the point was not raised [39].
The supporting affidavit had to state the deponent's belief that there was no defence, and courts require strict compliance [40]. The vendor's initial affidavit contained no such statement, an omission ordinarily fatal but an irregularity curable by a further complying affidavit [40]. After her Honour provided draft reasons saying the application was doomed to fail for that reason, the vendor sought leave to re-open [41], [42]. On 4 November 2004, over opposition, her Honour granted leave and the vendor relied on a further complying affidavit [42].
The vendor had to establish that there was no real question to be tried as to both the purchaser's caveatable interest and the balance of convenience [48]. Without a concluded view, her Honour saw much force in the vendor's submission that the defects went to quality rather than title [56]. The vendor's counsel conceded that the defects had to be assumed [54].
The Domestic Building Contracts (Amendment) Act 2004 removed off the plan contracts of sale from the definition of domestic building contract but did not affect this contract, the subject of a proceeding commenced before 16 March 2004 [61]. A special condition admitting that the contract was not such a contract was not decisive, as another acknowledged that a court might find otherwise [62], [63]. Section 132 also raised a real question whether the contract could limit the rights under section 42 [64]. Applying the reasoning of Byrne J in Mirvac (Docklands) Pty Ltd v Philp, the contract appeared to be a major domestic building contract and the vendor the builder for section 42 [65]. Assuming the alleged defects existed, as her Honour had to, there was a serious question as to the vendor's compliance with section 42 [65].
Nor had the vendor shown that the balance of convenience so clearly favoured removal that the issue should be resolved summarily [66], [72]. The vendor bore the onus of showing that damages would be adequate, yet there was evidence that the purchaser intended to live in the property [69]. Her Honour proposed to order that the summons be dismissed with costs [73].
Why it matters
Removal of a caveat is final relief that cannot be sought by summons alone in an existing proceeding. The applicant should bring a separate proceeding (as in Martyn v Glennan) or, where removal is sought by counterclaim, apply for summary judgment, ordinarily before a Master, with a complying affidavit. On such an application the applicant must show no real question to be tried, bearing the onus on the adequacy of damages. Bell J later held that the contract was not a major domestic building contract, declining to follow Mirvac, so that whether section 42 applied did not need answering (Shaw v Yarranova Pty Ltd (2006) VSC 45 at paragraphs 78, 97 and 98). The Court of Appeal, by Neave JA (Eames JA agreeing), dismissed the purchaser's appeal, Warren CJ dissenting in preference for Mirvac (Shaw v Yarranova Pty Ltd (2006) VSCA 291).
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.