Bell v Knight 34 Langdon Road Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION

PROPERTY LIST

S ECI 2020 04403

BETWEEN:

JILL AVIVA BELL & ANOR (according to the attached Schedule)	Plaintiffs
v
KNIGHT 34 LANGDON ROAD PTY LTD (ACN 613 271 079) & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	19 July 2022
DATE OF JUDGMENT:	26 August 2022
CASE MAY BE CITED AS:	Bell v Knight 34 Langdon Road Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 497

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PRACTICE AND PROCEDURE – Application for summary enforcement of a settlement agreement by parties to resolve a civil proceeding regarding the purchase of an apartment “off‑the‑plan” – Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555 referred to and applied – Whether extraneous matters involved in enforcement, and whether there are substantial questions to be determined – Court must be positively satisfied that justice can be done – Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396 referred to and applied.

SETTLEMENT AGREEMENT - Whether parties mutually abandoned the settlement agreement - Whether plaintiffs elected to not enforce the settlement agreement – Whether plaintiffs should be confined to a claim in damages -– Whether defences have any real prospect of success, whether appropriate to order specific performance, whether third parties will be prejudiced or suffer undue hardship and whether damages are an adequate remedy - Settlement agreement may be enforced where another claim in the proceeding will remain – Agreement not mutually abandoned merely due to the wishes of one party and where there is evidence of multiple attempts at settlement – Damages generally not an adequate remedy where outstanding obligations under settlement agreement involves payment for and transfer of real property - Hardship to third parties not caused by the enforcement of settlement agreement or the conduct of plaintiffs - Settlement agreement enforced and ancillary orders granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M W Wise QC with Mr B Petrie	K&L Gates
For the First and Seventh Defendants	Mr D J Williams AM QC with Mr N Elias	Welner Lawyers
For the Ninth Defendant	Ms H Aprile	Corrs Chambers Westgarth

HER HONOUR:

These reasons concern an application by the plaintiffs in this proceeding, Dr Jill Bell and Dr Roger Bell (‘the Bells’) to enforce an agreement reached between them and the first to sixth defendants in this proceeding (‘original defendants’)[1] who are property developers and builders. The agreement, which was documented in a deed dated 16 April 2021 (‘settlement agreement’), compromised what were then the main issues in the proceeding (‘underlying dispute’), but the parties have not completed all of their obligations under the settlement agreement. In particular, the parties have failed to give effect to a term of the settlement agreement which requires a residential property in Caulfield North (‘apartment’) to be transferred by the first defendant (‘Knight 34’) to the Bells following the performance of the obligations of the original defendants.
[1]The director of Knight 34 was Mr Ronen Kavallero, the fifth defendant, who was, among other things, a registered builder. Knight 34 and the second, fourth and fifth defendants operated under the trading name “Knight Building Group”. The second defendant (‘Knight Homes’) was also a registered building practitioner, while the third and fourth defendants carried out what were described in the statement of claim as “treasury functions” for the Knight Building Group. The sixth defendant, STR Holdings Pty Ltd, was removed as a defendant to the proceeding for reasons irrelevant to the current application.

On 4 May 2022, the Bells filed and served a summons seeking that the terms of the settlement agreement be enforced, along with additional orders said to be necessary to give effect to the settlement agreement (‘ancillary orders’). I will grant the relief sought by the Bells, in full. My reasons follow.

Background and chronology of events

On 3 October 2018, the second plaintiff, Dr Roger Bell, entered into a contract with Knight 34 for the purchase of the apartment “off the plan” for $3.5 million (‘contract of sale’). The apartment was one of two new apartments constructed on a single block of land (‘property’). Knight 34 was the special purpose vehicle for the development of the two dwellings on the property (‘development project’). The apartment is on the ground level of the property, with a second dwelling (‘Wolman apartment’) occupying the first level of the property.

Dr Bell, along with his wife, Dr Jill Bell (who was subsequently nominated to be the purchaser of the apartment), were introduced to Knight 34 by the seventh defendant, Ms Rosie Wolman. Ms Wolman was a social acquaintance of the Bells, their daughters being friends. Ms Wolman has occupied the Wolman apartment since September 2019, although as it turns out, her involvement with the development project went beyond that of an arms length purchaser.

At around the time the Bells signed the contract of sale, which was in a largely conventional form, and paid the usual ten per cent deposit (‘deposit’), the Bells discussed a number of potential variations to the layout and finishes of the apartment with Mr Ronan Kavallero, the director of Knight 34. Mr Kavallero was also the director of Knight Homes Pty Ltd, the second defendant (‘Knight Homes’), which carried out the building works on the apartment. On the day the contract of sale was signed, the Bells agreed to variations to the value of $522,749. Mr Kavallero told them that payment for the variations would need to be made up‑front, and the Bells[2] were directed to pay those sums directly to either S.T.R. Holdings Australia Pty Ltd and/or Star (Australia) Constructions Pty Ltd, the third and fourth defendants, on behalf of Knight Homes.
[2]Dr Jill Bell was nominated as the purchaser of the apartment on 1 July 2020. For convenience, and given that both plaintiffs are known as “Dr Bell”, I will refer to the plaintiffs as “the Bells” in the remainder of these reasons, except where the context requires otherwise.

Accordingly, by the end of October 2018, the Bells had paid a total of $872,749 towards the purchase and construction of the apartment, including the deposit and upfront payments for variations. Further variations were discussed and agreed between the Bells and Knight 34 during the course of 2018 and 2019, and further payments were made by the Bells on account of variations in the sum of $49,381. The Bells also spent a further $58,852 upon whitegoods and appliances which were installed at the apartment in place of those provided for in the plans and specifications for the apartment.

Concerned at the slow progress of the construction of the apartment, the lack of documentation provided by Knight 34 to evidence the additional payments made by the Bells on account of variations, and what they later realised were the somewhat unconventional contractual arrangements they had entered into with Knight 34, by mid 2019 the Bells had engaged solicitors to act for them in relation to the transaction. At this time the Bells were largely concerned with who they were actually dealing with and where their money had gone, given that it was tolerably clear that only the deposit was held in a trust account in the usual way.

By late 2020, the apartment was close to completion. However, in October 2020, the Bells discovered that variations had been made which they said they had not agreed to, and there were allegedly some defects in the apartment. These issues, along with the ongoing lack of clarity regarding which entity was responsible for the construction of the apartment and what had happened to the money paid by the Bells on account of variations, combined with what the Bells said was undue pressure from Knight 34 to complete the purchase of the apartment, led the Bells to instruct their current solicitors, K&L Gates, to give notice on 26 November 2020 that the Bells intended to rescind the contract of sale. On the following day, the Bells commenced this proceeding and applied for a freezing order to restrain the original defendants from disposing of their assets. A freezing order was made by Moore J on 27 November 2020, which was ultimately discharged by Richards J on 4 December 2020.

The Bells filed a statement of claim on 5 March 2021, making claims against the original defendants with respect to the underlying dispute, including for, among other things, declarations that Knight 34 had breached the contract of sale, the Sale of Land Act 1962 (Vic) (in relation to the deposit and other payments made by the Bells) and the Domestic Building Contracts Act 1995 (Vic) (in relation to the unauthorised variations and alleged defects). The Bells claimed to be entitled to rescind the contract of sale, and to damages and/or compensation, including reimbursement of the deposit and all other amounts paid by them to or at the direction of the original defendants.

Shortly after the filing and service of the statement of claim, and before the original defendants had filed a defence, the Bells and the original defendants reached an in principle agreement to resolve the underlying dispute, which was ultimately documented in the settlement agreement.

The key terms of the settlement agreement included the following:

(a) Knight Homes would rectify certain defects and carry out other minor works to the apartment to the satisfaction of the Bells, and provide the Bells with the necessary certificates and certifications, including a certificate of occupancy for the apartment; and

(b) upon the Bells being satisfied that the steps referred to in (a) above had been completed, the Bells and Knight 34 would settle the contract of sale within 14 days, with the net amount payable by the Bells at settlement over and above the deposit (subject to the usual adjustments) being $3,178,300, that is, $23,300 more than the balance of the purchase price payable under the contract of sale.

On 29 April 2021, the Bells’ solicitors informed Knight 34’s conveyancing solicitors (‘Tick Box’) that, following their inspection of the apartment, they were satisfied that the original defendants had complied with their obligations under the settlement agreement, that the Bells were ready, willing and able to complete the purchase of the apartment (‘settlement’), and requested that settlement take place on 10 May 2021.

There is no dispute that the Bells were, in fact, ready, willing and able to complete the purchase of the apartment at that time, or indeed, at all relevant times. Attempts at settlement were made on 12 occasions during the course of May and June 2021. However, while this is a contentious issue in the current application, practically speaking, settlement could not proceed because of a caveat lodged over the title to the apartment by Ms Wolman on 16 December 2020 (‘first caveat’), and because the PEXA workspace[3] established by Tick Box for the settlement was linked to the PEXA workspace established for the purpose of contemporaneously finalising the transfer of the Wolman apartment from Knight 34 to Ms Wolman.
[3]“PEXA”, which is owned and operated by Property Exchange Australia Ltd, is an online conveyancing platform through which most property conveyancing transactions in Victoria are organised and processed. Each transaction carried out via PEXA has its own “workspace” to which the participants are “invited” to lodge, verify and exchange the necessary documents online.

While the issue of whether either or both of the first caveat and/or the linkage of the PEXA workspaces caused the failure of the attempts at settlement is somewhat in dispute in this proceeding, what is not in dispute is, as at the time of the proposed settlement, the balance of the purchase price payable by the Bells and the deposit was insufficient to discharge the outstanding balance of the funds loaned by National Australia Bank Ltd (‘NAB’) to Knight 34 to fund the development project (‘NAB loan facility’), which was secured by mortgages over both the apartment (‘NAB mortgage’) and the Wolman apartment (together ‘NAB mortgages’).

While NAB was prepared to discharge the NAB mortgage provided that it received the proceeds of sale of the apartment at settlement, it was not prepared to discharge its mortgage over the Wolman apartment upon the transfer of the Wolman apartment to Ms Wolman unless and until the balance of the NAB loan facility was paid in full. Ms Wolman was not prepared to remove the first caveat without being assured of receiving clear title to the Wolman apartment, and the practical effect of the linkage of the two PEXA workspaces was that settlement could not proceed without the transfer of the Wolman apartment taking place contemporaneously with the transfer of the apartment to the Bells. As NAB would not discharge its mortgage over the Wolman apartment without payment of the balance of the NAB loan facility in full, and Ms Wolman would not accept a transfer of the Wolman apartment without clear title, a stalemate was reached, and settlement did not take place, despite the terms of the settlement agreement.

Ms Wolman’s involvement in the development project

Ms Wolman and her husband, Mr Wolman, met Mr Kavallero in December 2015. Subsequently, she and her husband engaged Mr Kavallero to build a dwelling on land they owned in Caulfield South. In 2016, they agreed to be involved with Mr Kavallero in the development project, and agreed to contribute 50 per cent of the acquisition costs for the property.

On 20 September 2016, Ms Wolman, Mr Wolman, Mr Kavallero and Knight 34 (’joint venture parties’) entered into a joint venture agreement (‘JVA’). The terms of the JVA include the following:

(a) each of Ms Wolman and Mr Kavallero[4] were to hold 50 shares in Knight 34;
[4]It appears that the owner of these shares was actually the corporate trustee of Mr Kavallero’s family trust, but nothing turns on that for present purposes.

(b) Knight 34 was appointed as agent to hold the property on behalf of the joint venture parties;

(c) Mr Kavallero was appointed as project manager for the development project;

(d) at the conclusion of the development project and after the subdivision of the property,[5] Ms Wolman was to receive the Wolman apartment and Mr Kavallero the other apartment (being the apartment which was ultimately sold to the Bells);
[5]The property was subdivided on or about 23 July 2020. Some days later, the Bells lodged caveats over the title to the apartment (‘purchasers’ caveats’) to protect their interests as purchasers under the contract of sale.

(e) Knight 34 was not permitted to encumber the property for an amount in excess of $3,736,000, with such debt being “without recourse” to Ms Wolman;[6]
[6]I understand this term of the JVA to mean that Ms Wolman would not be required to act as guarantor for any loan facility taken out by Knight 34 for the purpose of the development project.

(f) Ms Wolman would make an initial capital contribution of $1,035,000, and a further payment upon the subdivision of the property, with her total contribution not to exceed $2,350,000;

(g) on or before the subdivision of the property, Mr Kavallero agreed to pay all debts owing under any encumbrance relating to the Wolman apartment; and

(h) Mr Kavallero agreed to indemnify Ms Wolman against any liability suffered or incurred by Ms Wolman by reason of any breach by Mr Kavallero of his obligations as project manager, any delays or defects in the construction of the Wolman apartment, or any breach of the term of the JVA which limited the indebtedness of Knight 34 to $3,736,000.

The JVA was varied on or about 16 August 2018. The variations were documented in writing (‘variation agreement’). The key terms of the variation agreement were as follows:

(a) Ms Wolman would bring forward the final payment of $600,000 due under the JVA, and pay Knight 34 an additional $600,000, most of which was to be applied to the development project, but with $100,000 being put towards what I assume was another residential development project being conducted by the Wolmans with Mr Kavallero. This took the total amount of Ms Wolman’s contribution to the development project to $2,870,000;

(b) certain payments were to be made by Mr Kavallero and Knight 34 to Ms Wolman at the time of the transfer of the Wolman apartment, which appear to be, in effect, delay damages (which I assume remain unpaid, but this is not of particular relevance to the current application);

(c) the minimum sale price for the apartment was set at $3,250,000, with any price below that to be agreed between Ms Wolman and Mr Kavallero; and

(d) as security for his obligations under the JVA and the variation agreement, Mr Kavallero agreed to transfer his 50 shares in Knight 34 to Ms Wolman.

Ms Wolman says that the commercial intention of the JVA and the variation agreement was that Ms Wolman would obtain clear title of the Wolman apartment in exchange for her contribution of $2,870,000, most of which was provided prior to or during the course of the construction phase of the development project. Ms Wolman says that she and her husband left the management of the development project to Mr Kavallero, and that they were not privy to the discussions and negotiations between Knight 34 and the Bells regarding the contract of sale, the variations requested by the Bells, their payments for the variations, and the alleged defects in the apartment. Ms Wolman says that she told the Bells that she and her husband were investors in the development project prior to the Bells’ entry into the contract of sale.[7]
[7]In that regard, Ms Wolman relied upon text messages exchanged between Mr Wolman and Dr Roger Bell. On 26 September 2018, Dr Bell wrote: “Hi Moish. Are you [sic] to bring the Town Planning plans and/or Endorsed Building plans?” Mr Wolman replied as follows: “Hi Roger, I do not know what it is, have never seen these plans. We just invested in the development of the first floor. I was not involved with all permits and documentation. Regards. Moish”. Further, Ms Wolman relied upon the following text message from her to Dr Jill Bell on 8 June 2021, (when the attempts to settle the purchase of the apartment were being made): “Hi Jill I have just heard that there’s a rumour going around that we are the developers with [Kavallero] for [the property]. This is far from the truth. One unit the bigger one, was for him. The other unit for us. Not sharing costs Not sharing profit. Just paid 50% each for the land. Anyway, Now just hoping to hear that this nightmare is over Regards, Rosie x”.

Ms Wolman deposed that she lodged the first caveat because of her concerns about Knight 34’s failure to transfer the title of the Wolman apartment to her, and Knight 34’s alleged breach of cl 7.1(a)(ii) of the JVA, being the clause of the JVA which provides that upon compliance with her obligations under the JVA, Ms Wolman would take the Wolman apartment “free and clear of all encumbrances”. It is not clear what alerted Ms Wolman to the possibility that she might not obtain clear title to the Wolman apartment as early as December 2020, although the first caveat, which claimed an interest as “chargee” by reason of an “implied, resulting or constructive trust”, was lodged a few weeks after the commencement of this proceeding.

It appears that by the period in which the parties were attempting to complete settlement (May and June 2021), Ms Wolman was in dispute with Mr Kavallero. The nub of the dispute between them was that the funds which were payable by the Bells at settlement would be insufficient to discharge the NAB loan facility,[8] as there would be a shortfall (approximately $200,000 as at July 2021),[9] secured against the Wolman apartment alone. Ms Wolman says this outcome was contrary to the purpose of the JVA, and the obligations of Knight 34 and Mr Kavallero under the JVA.
[8]The balance of the NAB loan facility as at 22 July 2021 was $3,719,150.85, while the amount payable to NAB at settlement from the proceeds of sale of the apartment would be approximately $3,528,000.
[9]With accumulated interest and costs, the shortfall is now approximately $650,000.

Ms Wolman also contends that Mr Kavallero caused Knight 34 to increase the NAB loan facility to an amount in excess of what she had anticipated or agreed to (by an additional $250,000), and she was also concerned that some of the disbursements which would be made at settlement (being two separate payments of $108,300 to Tick Box for “other” and $141,821.58 to Tick Box for conveyancing services) (‘unexplained disbursements’) were excessive and suspicious.

On 11 June 2021, Tick Box informed the Bells’ conveyancing solicitor, Mr Jack Bock, that they had instructions to make an urgent interlocutory application to remove the first caveat, and a proceeding was issued in this Court on 11 June 2021, returnable on 16 June 2021.

However, on 15 June 2021, Ms Wolman exercised her rights to the shares held as security pursuant to the variation agreement, and took control of Knight 34. She dismissed Mr Kavallero as the director of Knight 34, appointed herself as director in his place, and appointed her current solicitors, Welner Lawyers, as Knight 34’s solicitors in place of Tick Box. On the same day, Knight 34’s application to remove the first caveat was withdrawn by Welner Lawyers, who informed the Court that they now acted for Knight 34. Accordingly, the first caveat remained in place, and was not removed until 7 February 2022.

Events after Ms Wolman took control of Knight 34

In the interests of expedition, I do not propose to dwell at too much length upon what transpired during the latter half of 2021 after Ms Wolman took control of Knight 34. However, some key events included the following:

(a) further attempts were made at settlement on 17 and 18 June 2021, but again they came to naught;

(b) on 27 July 2021, Knight 34 issued a proceeding in which Tick Box and Mr Kavallero were defendants (‘Wolman proceeding’), and made an urgent interlocutory application seeking orders to compel Tick Box to transfer the deposit to Welner Lawyers, and a declaration that Ms Wolman had been validly appointed as the director of Knight 34;

(c) in an affidavit sworn in the Wolman proceeding, Ms Wolman expressed her concern that Mr Kavallero had mismanaged the development project and was prejudicing the solvency of Knight 34. She deposed that if the unexplained disbursements were paid at settlement, the balance of the purchase price of the apartment would be insufficient to discharge the NAB mortgages. She deposed that she had been informed by Welner Lawyers that the Bells wished to proceed to settlement without delay, and had sought an adjournment of the directions hearing in this proceeding to September 2021 to allow Knight 34 “to exhaust its best efforts to procure settlement”;

(d) on 29 July 2021, McMillan J made the orders sought by Knight 34 in the Wolman proceeding, along with the following order:

[Knight 34] will not encumber [the apartment and the Wolman apartment] as security for debt with any parties not currently registered thereupon;

(e) during August 2021, Welner Lawyers engaged in correspondence with the solicitors for NAB in an attempt to procure the discharge of the NAB mortgages at settlement, to enable the apartment to be transferred to the Bells in accordance with the settlement agreement, and to enable the Wolman apartment to be transferred to Ms Wolman unencumbered;

(f) however, no agreement was reached with NAB, and on 27 August 2021, Welner Lawyers wrote to NAB’s solicitors stating that the impasse meant that the settlement scheduled for 31 August 2021 would “fail”, and that Knight 34 would have no choice but to rescind the contract of sale. Welner Lawyers stated that Knight 34 would then re-sell the apartment, and apply the proceeds of sale to the NAB loan facility, stating further that any shortfall should be recovered by NAB under the personal guarantee provided by Mr Kavallero, and that any attempt by NAB to take possession of the Wolman apartment would be resisted by Ms Wolman;

(g) further attempts were made at settlement on 31 August 2021 and 1 September 2021. While a copy of the settlement statement was not in evidence, the correspondence between the Bells’ conveyancing solicitor and Welner Lawyers in evidence indicates that Ms Wolman believed that Knight 34 would be in a position to effect settlement because it had reduced the amount payable at settlement on account of the unexplained disbursements, had received an additional $150,000 from Ms Wolman’s personal funds, and had obtained a forbearance from NAB with respect to the sum of $639,157.37. The Bells agreed to pay a further $29,507 at settlement said to be on account of unpaid variations (‘additional sum’), under protest. Welner Lawyers told Mr Bock that if settlement did not proceed because of the failure of the Bells to pay the additional sum, Knight 34 would rescind the contract of sale and claim damages from the Bells for $639,157.37. Accordingly, Mr Bock confirmed the Bells’ readiness for settlement on 1 September 2021, but settlement did not proceed, as the PEXA workspace for the settlement remained linked to the PEXA workspace for the transfer of the Wolman apartment, and NAB refused to discharge the NAB mortgages; and

(h) on 4 October 2021, the Bells rejected an offer made by Knight 34 that they take a licence of the apartment for $1,000 per month pending settlement. Dr Roger Bell deposed that by this time, the Bells had concluded that there was little point in trying to progress settlement while the dispute between Knight 34 and NAB remained unresolved, and they had decided to explore other avenues to enforce their rights under the contract of sale and the settlement agreement.

Events in 2022

Nothing further of any note occurred until 23 December 2021, when K&L Gates wrote to Welner Lawyers and the solicitors who lodged the first caveat, RKL Lawyers, providing a detailed history of the relevant events, asking them to explain the basis upon which Ms Wolman claimed to have a caveatable interest in the apartment, demanding that the first caveat be removed, and demanding that Knight 34 take steps to complete settlement by 15 January 2022, failing which the Bells would amend their statement of claim to seek specific performance of the settlement agreement, and apply to remove the first caveat. In this letter (’23 December letter’), K&L Gates noted that the balance of the NAB loan facility was now $4.3 million, and stated as follows (footnote omitted):

It is evident that in lodging:
(a) the Caveat and seeking to frustrate the settlement of the Property to the Bells unless the Bells accede to her demands to pay extra for the Property; and
(b) an AFCA complaint against NAB,

Ms Wolman, as a joint venture participant, is taking a strategic position to attempt to:
(c) avoid the financial responsibility for any shortfall in the joint venture funding;
(d) pass that burden onto innocent parties (being the Bells and NAB); and
(e) obtain Lot 2 for $2.9m, in circumstances where the Bells have agreed to pay approximately $4.1m for an almost identical property.

No response was received to the 23 December letter.

On 25 January 2022, Welner Lawyers served a Notice of Default and Rescission of the Contract of Sale (‘default notice’) upon K&L Gates. In the default notice, Knight 34 relied upon the Bells’ failure to serve a default notice before commencing this proceeding against the original defendants, which was said to be contrary to the requirements of general condition 27.1 of the contract of sale. In the letter accompanying the default notice, Welner Lawyers stated that unless the Bells discontinued this proceeding and paid Knight 34’s costs of preparing the default notice, Knight 34 would treat the deposit as having been forfeited.

Later that day, K&L Gates sent Welner Lawyers a letter disputing the entitlement of Knight 34 to rescind the contract of sale, and sought an undertaking from Welner Lawyers that they would not dissipate the deposit save for at the direction of or with the consent of the Bells. No such undertaking was proffered.

On 3 February 2022 the Bells issued a summons in this proceeding seeking an injunction restraining Knight 34 and Welner Lawyers from dissipating the deposit and otherwise dealing with the apartment, and for leave to join Ms Wolman, the Registrar of Titles and Welner Lawyers as defendants to the proceeding.

The Bells’ solicitor, Mr Stephen Hume of K&L Gates deposed that the application to join Ms Wolman as a defendant to the proceeding was made in order to apply to file and serve an amended statement of claim and to seek orders for the removal of the first caveat. At a hearing before John Dixon J on 7 February 2022, his Honour made the orders sought by the Bells, and directed that the deposit be paid into Court. During the course of the hearing, his Honour also expressed some negative views regarding the validity of the first caveat.

On the evening of 7 February 2022, Welner Lawyers informed K&L Gates that they had withdrawn the first caveat and provided evidence of same, and contended that it was no longer necessary for Ms Wolman or the Registrar of Titles to be joined as defendants to this proceeding, as the Bells had no cause of action against either of them.

However, later that evening, K&L Gates undertook a title search for the apartment, which showed that, shortly before sending the email referred to above, Welner Lawyers had lodged a further caveat on behalf of Ms Wolman (‘second caveat’) which claimed an interest in the apartment as mortgagee, pursuant to a mortgage granted to her by Knight 34 that day (‘Wolman mortgage’).

On 14 February 2022, Welner Lawyers advised K&L Gates that they no longer acted for Ms Wolman, but continued to act for Knight 34, and provided contact details for Ms Wolman’s new solicitors, Pearce Webster Dugdales.

On 23 February 2022, Pearce Webster Dugdales informed K&L Gates that they had withdrawn the second caveat, but failed to disclose that they had also lodged the Wolman mortgage for registration with the Registrar of Titles.

On 26 February 2022, the Registrar of Titles notified K&L Gates that unless the Bells obtained an order from the Court restraining the registration of the Wolman mortgage within 30 days, the caveats lodged by the Bells to protect their interests as purchasers under the contract of sale would lapse.

On 14 March 2022, the Bells filed a summons in this proceeding seeking to restrain the Registrar of Titles from registering the Wolman mortgage, and restraining Knight 34 from otherwise dealing with the apartment. The orders sought by the Bells were made by Moore J by consent on 16 March 2022, with the Bells providing an undertaking as to damages, and with the parties’ costs being reserved.

The pleadings

On 11 February 2022, the Bells filed an amended writ and statement of claim in this proceeding pursuant to the orders made by John Dixon J on 7 February 2022, adding Ms Wolman and the Registrar of Titles as defendants to the proceeding. On 6 May 2022, the Bells filed a further amended writ and statement of claim adding NAB as a defendant to the proceeding. The additional matters pleaded in the amended statement of claim and the further amended statement of claim relied upon the settlement agreement rather than the Bells’ claims in the underlying dispute, although the paragraphs of the pleading concerning the underlying dispute were not struck out. However, the Bells do not rely upon these claims for the purpose of the current application.

In the further amended statement of claim the Bells seek:

(a) specific performance of the settlement agreement;

(b) the removal of the (unregistered) Wolman mortgage; and

(c) damages and/or compensation against Ms Wolman pursuant to s 118 of the Transfer of Land Act 1958 (Vic).

In their defence filed on 23 March 2022, the original defendants (save for Knight 34 and Mr Kavallero):[10]
[10]Knight 34 is now controlled by Ms Wolman. Mr Kavallero went bankrupt on 13 May 2022.

(a) admitted that they entered into the settlement agreement;

(b) admitted that by their respective acts of part‑performance, “the parties unequivocally confirmed the existence, validity and effectiveness of the [settlement agreement], including each of its terms”;

(c) said that they have complied with all of their obligations under the settlement agreement, in that Knight Homes completed all of the necessary remediation works at the apartment by May 2021;

(d) said that they are entitled to rely upon the releases in the settlement agreement; and

(e) did not oppose the relief sought by the Bells in the further amended statement of claim.[11]

[11]Given the position outlined in their defence, the remaining original defendants did not appear at the hearing of the current application.

In their defence filed on 6 April 2022, Knight 34 and Ms Wolman:

(a) admitted the existence of the contract of sale and the settlement agreement;

(b) said that Ms Wolman had told Dr Roger Bell that she and her husband had invested in the development project;

(c) denied or did not admit the allegations made by the Bells in relation to the underlying dispute;

(d) said that settlement could not occur because Knight 34 could not obtain a discharge of the NAB mortgages;

(e) said that no further attempt was made by either party at settlement after 1 September 2021, and that from that time the settlement agreement had been mutually abandoned by the parties;

(f) denied that the reason that settlement did not occur was that Ms Wolman failed to remove the first caveat, but said that the contract of sale was terminated by the Bells’ failure to comply with the default notice issued by Welner Lawyers on 25 January 2022;

(g) admitted that the NAB mortgage has priority over any interest that Ms Wolman has pursuant to the Wolman mortgage, and that NAB is entitled to the whole of the proceeds of sale of the apartment, but denied that any equitable interest the Bells have in the apartment has priority over Ms Wolman’s equitable interest in the apartment;

(h) said that it was not the first and second caveats (or either of them) or the Wolman mortgage which prevented settlement, but rather, the inability of Knight 34 to obtain a discharge of the NAB mortgages, and the abandonment of the settlement agreement by the Bells;

(i) denied that the Bells are entitled to specific performance of the settlement agreement, because the Bells have elected against seeking to enforce the contract of sale and/or the settlement agreement, and are confined to a claim in damages against Knight 34; and

(j) said further that specific performance of the settlement agreement is no longer possible because Knight 34 does not have sufficient funds to obtain a discharge of the NAB mortgages.

In their reply filed on 26 April 2022, the Bells, in addition to joining issue with the allegations in the defence of Knight 34 and Ms Wolman, stated, in summary, as follows:

(a) prior to 30 November 2020, the Bells were unaware of the existence or terms of the JVA, or that Knight 34 held the property as a bare trustee for the joint venture parties;

(b) the joint venture parties enabled Knight 34 to represent itself as the legal and beneficial owner of the apartment, and Knight 34 entered into the contract of sale with the actual or ostensible authority of the joint venture parties, the undisclosed principals of Knight 34. Accordingly, the joint venture parties are bound by the contract of sale and the settlement agreement;

(c) in breach of Knight 34’s obligations under the contract of sale and the settlement agreement, settlement has failed to occur because, and only because:

(i) Ms Wolman failed to withdraw the first caveat until 7 February 2022;

(ii) at the instigation of Ms Wolman, Knight 34 caused the PEXA workspace established for the settlement to be linked to the PEXA workspace established for the transfer of the Wolman apartment to Ms Wolman, which precluded the two transactions being settled separately;

(iii) NAB was prepared to discharge the NAB mortgage for the payment of the deposit and the balance of the purchase price for the apartment to it, but was not prepared to discharge its mortgage over the Wolman apartment without payment of the balance of the NAB loan facility by Knight 34; and

(iv) the linkage of the two transactions was not requested or consented to by the Bells, and was not necessary to give effect to the terms of the contract of sale and/or the settlement agreement;

(d) while they admit that they have not attempted to effect settlement since 1 September 2021, the Bells said that:

(i)settlement has not occurred because of Knight 34’s breaches of the settlement agreement;
(ii)they have been at all material times ready, willing and able to complete settlement;
(iii)Knight 34 has failed to enable the settlement to occur independently of the settlement of the transfer of the Wolman apartment;
(iv)on 4 October 2021 Mr Bock told Welner Lawyers that the Bells were keen to complete the settlement;
(v)on 23 December 2021, K&L Gates demanded that Ms Wolman remove the first caveat, and that Knight 34 perform its obligations under the settlement agreement and the contract of sale;
(vi)since 7 February 2022, settlement has been prevented by the lodgment of the Wolman mortgage for registration; and
(vii)Knight 34 cannot avoid the consequences of its own breaches of the settlement agreement by characterising those breaches as “mutual abandonment” of the settlement agreement, and the Bells have otherwise acted promptly to enforce their rights under the settlement agreement;

(e) the granting by Knight 34 of the Wolman mortgage on 7 February 2022 constitutes a breach of the orders made in the Wolman proceeding on 29 July 2021; and

(f) in the settlement agreement, Knight 34 and the Bells agreed to resolve the underlying dispute in accordance with the terms of the contract of sale, as varied by the settlement agreement.

The Bells issued the current application on 4 May 2022. In their summons, they sought the following orders:

1. Summary enforcement of the terms of a deed of settlement entered into between the First and Second Plaintiffs and the First to Fifth Defendants on 16 April 2021 in settlement of the issues raised in this proceeding (Settlement Agreement), in particular, for the following orders:
(a)As against the First Defendant, that the Contract of Sale dated 3 October 2018 between the First and Second Plaintiffs and the First Defendant (Contract of Sale), and the Settlement Agreement, for the sale and purchase of land at unit 1, 34 Langdon Road, Caulfield North 3161 (certificate of title volume 12234 Folio 282) (Property) be specifically performed and carried into execution at the purchase price of $3,178,000 plus the deposit of $350,000 (Deposit) (subject to adjustments).
(b) That the Plaintiffs pay to the First Defendant the total sum of $3,528,000, by way of the following payments being made to the proposed Ninth Defendant, National Australia Bank (NAB), directly as the mortgagee of the Property:
(i)the Court is to release to NAB directly the funds presently held in Court in the sum of $350,000, in satisfaction of the Plaintiffs’ obligation to pay the Deposit; plus
(ii) the sum of $3,178,000, being the balance of the purchase price due, together with any other payments or deductions that are required to be made under the Contract of Sale including, inter alia, allowances for the adjustment of rates and taxes or other outgoings in respect of the land and unremedied defects in the Property.

(c) Upon the Plaintiffs paying to the First Defendant the sum provided for in paragraph 1(b) above, together with any other payments or deductions that are required to be made under the Contract of Sale including, inter alia, allowances for the adjustment of rates and taxes or other outgoings in respect of the land and unremedied defects in the Property[12], the Defendants must do all things necessary to enable the First Plaintiff to become the registered proprietor of the Property, including:

(i) the First Defendant must execute and deliver to the Plaintiffs a transfer of land in respect to the Property; and
(ii) NAB must discharge its mortgage over the land at unit 1, 34 Langdon Road, Caulfield North 3161, being the land described in Certificate of Title Volume 12234 Folio 282 (bearing dealing number AN279007S) in exchange for receipt of the amounts payable by the Plaintiffs under paragraph 1(b) above.

(d) The Eighth Defendant, the Registrar of Titles, is to remove unregistered dealing number AV3602910X (ie the Purported Second Wolman Mortgage) Caveat from the title of the Property.

[12]The Bells do not press any claim for an allowance for unremedied defects, as they say there are no such defects.

The Bells relied upon an affidavit affirmed by Dr Roger Bell on 22 April 2022, which in turn referred to affidavits previously affirmed by him on 27 November 2020, 3 February 2022, and 5 February 2022, and an affidavit affirmed by Mr Stephen Hume of K&L Gates on 10 March 2022.

Ms Wolman relied upon an affidavit sworn by her on 8 July 2022.

Also in evidence was an affidavit sworn by Mr Matthew Critchley of Corrs Chambers Westgarth, the solicitors for NAB, stating that NAB was unlikely to oppose the orders sought by the Bells.[13]
[13]This was confirmed by NAB’s written submissions filed on 14 July 2022, in which NAB stated that it was prepared to discharge the NAB mortgage on the basis that the net proceeds of sale of the apartment were paid to it at settlement.

Relevant legal principles regarding the enforcement of settlement agreements

The primary authority governing applications of the current kind in this jurisdiction is the decision of the Full Court in Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd,[14] where the Court considered:

(a) whether it was permissible for the Court to make an order for the enforcement of a settlement agreement in the existing proceeding, or whether it was necessary for the party seeking to enforce a settlement agreement to commence a separate proceeding to obtain the remedy of specific performance of that settlement agreement; and

(b) if the Court had the jurisdiction to enforce a settlement agreement, the applicable principles governing the exercise of that jurisdiction.

[14][1956] VLR 555 (‘Roberts’).

In Roberts,[15] Smith J undertook an extensive review of the relevant authorities and observed that, following the enactment of the Judicature Act, the Court should be able to exercise its summary jurisdiction more freely. His Honour observed that, given the power to order specific performance is founded in the Court’s equitable jurisdiction, equitable principles should govern the exercise of the jurisdiction to enforce settlement agreements, even where the underlying dispute compromised by the settlement agreement originated in the Court’s common law jurisdiction.[16]
[15]Ibid.
[16]Ibid, 565.

Smith J stated that the critical question facing the Court in applications of the current kind is whether the Court can be satisfied that justice can be done by summary enforcement of a settlement agreement.[17] Matters relevant to the determination of whether justice could be done include:

the extent to which extraneous matters are involved, how substantial are the questions to be determined, to what extent questions of credibility are likely to arise, and whether pleadings and discovery are desirable.[18]

[17]Ibid, 562.

[18]Ibid, 564.

Smith J identified the following factors relevant to whether the Court should grant or even entertain an application for the enforcement of a settlement agreement:

(a) if the settlement agreement for which enforcement was sought involved matters extraneous to the proceeding in which the application for summary enforcement was made, it would generally be necessary for the applicant to issue a separate proceeding; and

(b) matters “extraneous to the suit” might include:

(v) where the settlement agreement concerned property which was not referred to in the proceeding;

(vi) enforcement of the settlement agreement would involve granting remedies beyond which a court would ordinarily order;

(vii) enforcement of the settlement agreement involved giving effect to different equities with which the original proceeding was concerned; and

(viii) if there were parties to the settlement agreement which were not parties to the original proceeding.[19]

[19]Ibid, 562.

Smith J observed that if a settlement agreement did not involve matters extraneous to the original proceeding, the Court would generally enforce the settlement agreement, especially if the settlement agreement related solely to the conduct, the stay or the dismissal of the proceeding, and/or involved the grant of the whole or part of the relief claimed in the original proceeding. Further, even if these criteria were not met, a court might be disposed to enforce a settlement agreement if the agreement concerned contained an express provision to the effect that such an order could be made in the proceeding, or urgent action was required.[20]
[20]Ibid, 563.

His Honour stated that, when determining whether or not a settlement agreement involved matters extraneous to the original proceeding, the Court should look at the nature of the obligations sought to be enforced, and any outstanding obligations of the applicant, but may disregard those obligations which had already been performed. That the only outstanding obligation was the payment of money did not preclude enforcement.[21]
[21]Ibid.

Smith J observed that the Court may also refrain from summarily enforcing a settlement agreement if there was a substantial question to be determined as to what were the terms of the agreement, or whether it was valid or specifically enforceable, such that a full trial was warranted.[22]
[22]Ibid.

The principles in Roberts[23] have been referred to and applied on numerous occasions in this Court. In O’Brien and Fourth Taljan Pty Ltd v O’Brien & Nicholls Pty Ltd and Ors,[24] Warren J observed that an application for specific performance is “akin to” summary judgment.[25] In Seachange Management Pty Ltd v Pital Business Pty Ltd[26] cautioned that:

although the power summarily to enforce a compromise is discretionary and is wider now than once was the case, it is not to be invoked unless the court is ‘clearly satisfied that justice can be done’; and whether justice can be done is a question of degree. Consistently with the equitable origins of the power, one must weigh among other competing considerations the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and procedural considerations like the desirability of pleadings and discovery and substantial cross-examination.[27]

[23]Ibid.

[24][2001] VSC 411.

[25]Ibid [25].

[26](2009) 23 VR 396 (‘Seachange’).

[27]Ibid [40].

In Seachange,[28] the Court of Appeal declined to enforce a settlement agreement where there was evidence that the respondent to the application for summary enforcement might have a viable defence, such that a full hearing was necessary.[29]
[28]Ibid.
[29]Ibid. See also Gondarra v Minister for Families, Housing, Community Services and Indigenous Affairs (2014) 311 ALR 21 [59], where Kenny J held that the presence of “significant questions of fact which needed to be determined” rendered the summary enforcement procedure unsuitable.

In Barratt v Rees,[30] the Court of Appeal dismissed an appeal against a decision to summarily enforce a settlement agreement, observing that:

There is a strong public interest in enforcing agreements made at mediation in the absence of circumstances suggesting the occurrence of events that vitiated the mediation or the terms that resulted.[31]

[30][2014] VSCA 327.

[31]Ibid [54].

In the case before the Court of Appeal, while there was some evidence that the settlement agreement might have been procured by fraud, misrepresentation, and/or unilateral mistake, that evidence was insubstantial, and the party seeking to avoid the settlement agreement sought to do so only insofar as the terms of the settlement agreement did not benefit her.[32]
[32]Notably, in Barrett v Rees, the settlement agreement with which the Court of Appeal was concerned did not include a clause permitting the parties to return to the Court and apply for judgment upon any breach of its terms.

My review of the authorities indicates that other matters relevant to the question of whether a court can be satisfied that justice can be done by the enforcement of a settlement agreement include:

(a) whether the settlement agreement concerned included a term allowing the reinstatement of the proceeding and the entry of judgment upon default;[33]
[33]Australian Xinyangfeng Fertilizer Pty Ltd v Andrew Freshwater [2020] VSC 450.

(b) whether all interested parties were before the court;

(c) whether the facts were uncontested and/or whether there was any dispute about quantum, and, to the extent there were such disputes, whether the resolution of those disputes turned upon the credibility of witnesses;[34]

(d) whether requiring the issue of a new proceeding would cause further delay and expense;[35] and

(e) whether there has been any unexplained delay on the part of the applicant for summary enforcement in seeking relief.[36]

[34]Ugrinovski v Naumovski [2018] VSC 437 [46].

[35]Ibid.

[36]Ibid.

The parties’ submissions

The Bells submitted that the only thing standing in the way of settlement is that Ms Wolman has prevented, and continues to prevent settlement, for no reason other than her own financial benefit.

In their written submissions, the Bells observed that the settlement agreement, if enforced, will substantially dispose of the issues in this proceeding, given that the settlement agreement compromises all claims made by the Bells against the original defendants concerning the underlying dispute. If the settlement agreement is enforced, the only outstanding claim in this proceeding will be the Bells’ claim against Ms Wolman for damages and compensation said to have been suffered by them by reason of the lodgment and maintenance of the first caveat.[37]
[37]In the particulars to paragraph 117 of the further amended statement of claim, the Bells say that the lodgment and maintenance of the first caveat has caused them loss and damage, as follows: (a) additional interest costs of $132,600; (b) additional accommodation costs of $42,800; (c) storage, removal and pet accommodation costs of $25,817; and (d) conveyancing costs of $7,448.

Under the heading “Steps taken by Ms Wolman and her lawyer to scupper settlement”, the Bells’ submissions observed that Ms Wolman’s efforts to frustrate the settlement were made in order to avoid the Bells obtaining clear title to the apartment and leaving the Wolman apartment encumbered with the unpaid balance of the NAB loan facility. In particular, the Bells said that:

(a) Ms Wolman lodged the first caveat, when she had no proper basis for doing so, and leveraged the first caveat to prevent settlement;

(b) settlement did not take place on 28 May and 31 May 2021 by reason of Welner Lawyers’ conduct in causing the PEXA workspace for settlement to be linked to the PEXA workspace for the transfer of the Wolman apartment; and

(c) on 31 May 2021, Welner Lawyers wrote to NAB stating that if the mortgage held by NAB over the Wolman apartment was not discharged, the Bells’ lender, Westpac Bank, would withdraw from the transaction, which was misleading.

The Bells’ submissions referred to the takeover of Knight 34 by Ms Wolman and the affidavits filed on behalf of Ms Wolman in the Wolman proceeding, stating that:

at least part of the motivation for Ms Wolman commencing the [Wolman proceeding] was her concern that [Tick Box] intended to complete settlement … but with the result that the [NAB loan facility] would not be discharged (thereby affecting [Ms Wolman’s] interest in the [Wolman apartment]).

Under the heading “Wolman’s further attempts to scupper settlement”, the Bells referred to the further attempts at settlement between June and September 2021, the correspondence between Welner Lawyers and NAB in that period, what they said were misleading statements made by Welner Lawyers to Mr Bock to the effect that all parties had agreed to the linkage of the PEXA workspaces, and noted that NAB had refused to permit the transfer of both apartments without payment of the NAB loan facility in full.

The Bells then went on to refer to the creation of the Wolman mortgage, stating that “Wolman was clearly on notice of the [Bells’] interest in the [apartment] at the time that the [Wolman mortgage] was created”.

The Bells’ submissions observed that the only substantive defence identified by Ms Wolman and Knight 34 to the Bells’ claim to be entitled to enforce the settlement agreement is the allegation that the settlement agreement was mutually abandoned, because:

(a) Knight 34 was unable to obtain a discharge of the NAB mortgages because Knight 34 lacked the funds to pay out the NAB loan facility in full;

(b) settlement did not occur within the time specified by the contract of sale; and

(c) the Bells failed to write to Knight 34 to request or demand that settlement occur, and have requested adjournments of this proceeding on multiple occasions.

The Bells submitted as follows (omitting citations):

These allegations fail to acknowledge:
(a)that the Plaintiffs have attempted settlement of the Contract of Sale numerous times;
(b)that NAB is prepared to discharge the NAB Mortgage over [the apartment] upon the Plaintiffs making payment of all outstanding sums owing under the Settlement Agreement (cf., the NAB Debt);
(c)that the linked financial settlement was orchestrated by Wolman and Mr Welner, and is not a necessary condition for the performance of the Settlement Agreement;
(d)that settlement has been prevented by Wolman and Mr Welner on multiple occasions by reason of their own conduct;
(e)that each adjournment has been by consent, and in any event does not constitute an abandonment by the Plaintiffs of their claims. To the contrary, the Plaintiffs used the adjournment to prepare the Further Amended Statement of Claim which now contains multiple new allegations against Wolman herself by reason of her (and her lawyers’) conduct.

The balance of the Wolman Affidavit is either plainly contrary to the objective evidence summarised above, is irrelevant, is in the nature of hearsay and is speculative, is argumentative, and contains serious allegations without a proper basis. Nothing in the Wolman Affidavit changes the above analysis.

The Bells referred to the following matters and events which contradicted the allegation that the settlement agreement has been mutually abandoned, which senior counsel for the Bells described as “an opportunistic attempt to craft a defence that really does not pass muster”:

(a) the demands made in the 23 December letter;

(b) the Bells’ response to the default notice, which relied upon the terms of the settlement agreement in response to Knight 34’s contention that the Bells had failed to comply with the terms of the contract of sale;

(c) the summons filed on 3 February 2022 seeking to restrain Knight 34 from forfeiting the deposit and otherwise dealing with the apartment;

(d) the filing and service of an amended statement of claim on 11 February 2022 relying upon the settlement agreement, and claiming an entitlement to enforce the settlement agreement; and

(e) the application in March 2022 to restrain the Registrar of Titles from registering the Wolman mortgage.

The Bells also relied upon these matters to refute the allegation that the Bells had elected not to exercise their rights to seek specific performance of the settlement agreement.

The Bells’ submissions then went on to refer to the relevant test governing when a court will enforce an agreement entered into for the purpose of compromising a proceeding, and, referring to s 63 of the Civil Procedure Act 2010 (Vic), stated that “there is no reason in principle why terms of settlement cannot be summarily enforced where the result is that another claim in the proceeding remains”.

The Bells submitted that the settlement agreement should be summarily enforced, as:

(a) the settlement agreement concerns only the underlying dispute between the Bells and the original defendants, and no extraneous matters. Only the claim against Ms Wolman for loss and damage suffered by them as a consequence of her lodgment of the first caveat will remain on foot once the settlement agreement is enforced;

(b) the only substantive argument put forward by Knight 34 and Ms Wolman in their defence, being that the settlement agreement was mutually abandoned, is inconsistent with the objective evidence regarding the Bells’ attempts to perform their obligations under the settlement agreement and enforce the terms of the settlement agreement;

(c) the original defendants admit that the settlement agreement is valid and effective. While this is not accepted by Ms Wolman, she was not a party to the settlement agreement, and accordingly, her position, and the position now adopted by Knight 34 should be given little weight, noting that Knight 34 is still bound by all of its contractual obligations, including the settlement agreement;

(d) NAB is prepared to discharge the NAB mortgage upon payment of the deposit and the balance of the purchase price at settlement;

(e) the parties, including Knight 34, have taken “significant and unequivocal” steps in substantial part‑performance of the settlement agreement; and

(f) what equitable interest (if any) Ms Wolman claims to have in the apartment cannot take priority over the Bells’ equitable interest in the apartment as the purchasers of the apartment.

The Bells submitted that Ms Wolman had prior to 7 February 2022, no equitable interest in the apartment whatsoever, and she has admitted as much when conceding that she had no proper basis to lodge the first caveat. The Bells do not simply have a contractual right to the transfer of the property: they have an equitable interest in the apartment, which they are entitled to enforce. Ms Wolman’s only equitable interest in the apartment arises from the Wolman mortgage. Given that Ms Wolman has had notice of the Bells’ equitable interest as purchasers for some time (noting that the purchasers’ caveats were lodged on 27 July 2020), her equitable interest as mortgagee cannot take priority over the Bells’ equitable interest in the apartment.

In response, Knight 34 and Ms Wolman submitted that I cannot be satisfied that enforcement of the settlement agreement would be in the interests of justice. The Bells’ application to enforce the settlement agreement would require the Court to determine contested issues of fact in order to resolve the question of whether the settlement agreement can and should be enforced, and as such, the Bells’ claims to be entitled to enforce the settlement agreement should proceed to a full trial. Further, Knight 34 and Ms Wolman submitted as follows (omitting footnotes):

Importantly, the Seventh Defendant (Wolman), was not a party to the Settlement Agreement. She was not appointed a director of the first defendant until well after that agreement had been entered into and had no knowledge whatsoever of that agreement’s terms until recently. Were the Settlement Agreement to be specifically enforced, she is likely to be left with a mortgage in the order of $650,000 secured against her home (being unit 2 of the Property) notwithstanding that her and her husband expected and were entitled to receive unencumbered title to unit 2 from the First Defendant after having made payments totalling approximately $2,870,000 in accordance to the JV Agreement in around August 2018 and having lived there since September 2019. Indeed, enforcing the performance of the First Defendant’s obligations under the Settlement Agreement will mean that the First Defendant cannot perform its obligations under clause 7.1(a)(ii) of the Joint Venture Agreement (which agreement pre-dates the First Defendant’s dealings with the plaintiffs) to transfer unencumbered title to unit 2 to Wolman. In circumstances where the First Defendant lacks the funds necessary to meet its obligations under both agreements, enforcing the Settlement Agreement would be inequitable as it would unfairly preference the plaintiffs’ interests over Wolman’s.

Knight 34 and Ms Wolman relied upon a number of terms of the settlement agreement, including:

(a) clause 3.1, which sets out what is to occur upon any failure by the original defendants to comply with their obligations under the settlement agreement;

(b) clause 4.1, being the releases, which Knight 34 and Ms Wolman say do not take effect unless and until all parties have complied with their obligations under the settlement agreement;

(c) clause 5(e), which provides that the settlement agreement may be pleaded as an absolute defence to any claims with respect to the subject matter of the releases; and

(d) clause 7.17, which provides that time is of the essence.

Knight 34 and Ms Wolman submitted as follows:

As is apparent from the provisions set out above, the terms of the Settlement Agreement do not contemplate summary enforcement. On the contrary, clause 3 expressly provides for the rights available to the plaintiffs in the event that the defendants do not strictly perform their obligations under the Settlement Agreement. These rights include the right not to settle the Property; and the right to require the defendants to file defences in the proceeding, which if they do not, may entitle the plaintiffs to obtain summary judgment. This, together with the lack of any term entitling the parties to move for judgment upon default by a party of the performance of their obligations under the Settlement Agreement was not performed, provides a clear indication that the parties intended that in the event that the settlement agreement was not performed, they would be left to prosecute their rights at the trial of the proceeding.

Knight 34 and Ms Wolman submitted that “various substantive questions and disputed matters of fact ... must be determined prior to any enforcement of [the settlement agreement]”, in particular:

(a) whether the settlement agreement continues to bind the parties, or whether the settlement agreement has been mutually abandoned;

(b) whether the Bells elected against pursuing specific performance of the settlement agreement;

(c) the reasons why settlement did not take place; and

(d) whether Ms Wolman has an equitable interest in the apartment arising from the JVA and the full payment of her contributions to the development project, and whether her interest takes priority over the Bells’ equitable interest as purchasers under the contract of sale.

Knight 34 and Ms Wolman submitted further that enforcement of the settlement agreement would cause undue harshness and unfairness to Ms Wolman and her husband, which is relevant to the question of whether the Court should grant specific performance of the settlement agreement.

The particular prejudice to Ms Wolman of enforcing the settlement agreement includes:

(a) being left with an encumbrance of approximately $650,000 over the Wolman apartment (‘shortfall’), despite having paid $2,870,000 to Knight 34 in order to obtain clear title to the Wolman apartment, where Ms Wolman and her husband have been living for more than two years; and

(b) Ms Wolman may not be in a position to pay the shortfall, and thus may lose her home. Further, even if she was able to pay, the burden of the shortfall should not be imposed upon her for the benefit of the Bells in circumstances where she was not a party to the settlement agreement, and was not responsible for the performance of Knight 34’s obligations under the contract of sale or the settlement agreement, or for Knight 34’s conduct in increasing the limit of the NAB loan facility.

Further, enforcement of the settlement agreement would have adverse consequences for Knight 34, in that compelling Knight 34 to perform its obligations under the settlement agreement would cause it to breach its obligations under the JVA, given that Knight 34 does not have the funds to pay out the NAB loan facility.

Knight 34 and Ms Wolman submitted that the prejudice caused to Ms Wolman and Knight 34 by the enforcement of the settlement agreement tells against ordering specific performance of the settlement agreement, as the precise extent of that prejudice should be a matter for evidence at trial. In that regard, Knight 34 and Ms Wolman submitted as follows (omitting footnotes):

This is especially so given that the First Defendant lacks the funds necessary to discharge its obligations to the NAB and Wolman, and those the plaintiffs allege it owes to them. The NAB as a secured creditor is in a position to have its debt discharged in full. The Wolmans and (allegedly) the plaintiffs each have a contractual right against the First Defendant to the transfer of a unit, or alternatively a claim for damages, which if proved will render the First Defendant insolvent (if it is not already so). In that event, the claims of Wolman and the plaintiff would be paid proportionately. It follows that enforcing the Settlement Agreement is inequitable as the effect of doing so would be to satisfy the plaintiffs’ claim against the First Defendant in full, while leaving Wolman to pursue a damages claim against an insolvent company.

Senior counsel for Knight 34 and Ms Wolman referred to the decision of Isaacs J in Gall v Mitchell,[38] which concerned an application for specific performance of a contract for the purchase of land, where the application was resisted on the grounds that ordering specific performance would cause undue hardship to impecunious family members of the vendor. His Honour stated as follows:

Hardships of third persons entirely unconnected with the property are immaterial. But I do not think that rule excludes the case of third persons so connected with the [vendor] that, by reason of some legal or moral duty which he owes them, it would be “highly unreasonable” for the Court actively to prevent the defendant from discharging his duty.[39]

[38](1924) 35 CLR 222: This decision is an example of a rare instance where the purchaser under a contract of sale for land has been denied specific performance.

[39]Ibid, 230–1.

Senior counsel submitted that the statement above applies to Ms Wolman’s circumstances as a consequence of the legal and moral duty owed by Knight 34 to transfer the Wolman apartment to her unencumbered, given that she has paid for the Wolman apartment in full. If the Court were to enforce the settlement agreement, it would denude Knight 34 of the capacity to fulfil its obligations to Ms Wolman. The Court should not, in effect, resolve the conflict between the rights and the entitlements of the Bells and the rights and the entitlements of Ms Wolman without further evidence and argument.

Finally, Knight 34 and Ms Wolman submitted that the procedural advantages of enforcing the settlement agreement have been overstated, in that there are still outstanding matters yet to be determined in the proceeding, including the Bells’ claim for compensation against Ms Wolman with respect to the lodgment and maintenance of the first caveat, potential claims by Knight 34 and Ms Wolman against NAB, a potential cross‑claim by NAB, and the possibility that Ms Wolman may ultimately have a claim against the Bells relying upon their undertaking as to damages with respect to the Wolman mortgage.

In reply, senior counsel for the Bells rejected the proposition that Ms Wolman and the Bells were in a materially equivalent position, stating as follows:

[Ms Wolman] entered into a joint venture with Mr Kavallero, which has not realised its expected fruits. Knight 34 entered into enforceable [arrangements] with an arm’s‑length purchaser … with a contract of sale and a settlement agreement.
Knight 34, no matter who controls it, is obliged to meet those obligations. The NAB as a secured creditor is entitled to realise its securities as it sees fit. It has agreed to discharge the [NAB mortgage] for the balance of the sale proceeds.

And further, in response to the submission that the enforcement of the settlement agreement would impose a burden upon Ms Wolman for the benefit of the Bells:

[the Bells] have an enforceable right to take the conveyance of the property. [The] Wolmans entered into a commercial venture.

Senior counsel for the Bells referred to the variation agreement, noting that Ms Wolman agreed to put more funds into the development project in exchange for Mr Kavallero’s shares in Knight 34. She knew that the apartment was going to be sold, and she concurred in its sale to the Bells for the price set in the contract of sale (which exceeded the minimum price established by the variation agreement).

In relation to the other matters raised by Knight 34 and Ms Wolman in opposition to the Bells’ application to enforce the settlement agreement, the Bells submitted:

(a) the Bells have not sought to enliven the issues in the underlying dispute, because the obligations of Knight Homes to rectify the defects in the apartment have been complied with;

(b) any delays by the Bells in taking action to enforce the settlement agreement have been caused by Ms Wolman’s “manoeuvres”; and

(c) any disputes between Ms Wolman and NAB and/or Mr Kavallero have no connection with the Bells or their entitlement to have the apartment transferred to them.

The ninth defendant, NAB, submitted as follows:

NAB does not oppose the plaintiffs’ application for summary judgment.
NAB’s position is, and always has been, that it is willing to discharge its mortgage over the Property on the basis that the net proceeds of the Contract of Sale are tendered to it.
NAB has been joined to this proceeding on application made by the plaintiffs. No allegations are made against it on the pleadings by the plaintiffs.
The only allegation made that appears to relate to NAB is that set out in paragraph 114(c) of the Defence filed by the First to Seventh Defendants, that it is not possible for the First Defendant to discharge the NAB Mortgage over the Property and the Adjoining Property as it does not have sufficient funds to do so.
That allegation appears to evolve into the assertions made in the Woman [sic] Affidavit at [90] that NAB somehow ‘agreed’ on 31 August 2021 to discharge the NAB Mortgage over the Adjoining Property for $1.00. That allegation is, respectfully, fanciful and should not be accepted (or, indeed, tolerated).
To the extent that the Court considers it appropriate to consider the matters raised in that paragraph, NAB observes that:
a. There is no pleading to the effect that any such agreement existed.
b.There is no attempt made in the Wolman Affidavit to identify or explain how any such agreement was entered into, or even could be said to have been represented by NAB to have existed.
c.The contemporaneous evidence before the Court plainly, and unequivocally, establishes that NAB’s position has always been that as set out in paragraph 2 above. That position is demonstrated by the letters from NAB’s solicitors to Welner Lawyers, solicitors for the First Defendant, dated 13 August 2021, 27 August 2021, 31 August 2021 and 2 September 2021 respectively. There is, respectfully, no room for any doubt.

Analysis and conclusions

When determining the question of whether I should exercise my discretion to enforce the settlement agreement, it seems to me that a suitable framework within which to consider the issues posed by the current application consistent with the approach in the authorities is to:

(a) consider whether any of the defences identified by Knight 34 and Ms Wolman in their defence and affidavit evidence in response to the Bells’ contention that the settlement agreement is valid, binding and enforceable have, in the language of ss 62 and 63 of the Civil Procedure Act 2010 (Vic), any real prospects of success;

(b) if the settlement agreement is valid and enforceable, consider, having regard to the usual equitable principles governing the availability of the remedy of specific performance, whether it is possible to conclude, on a summary basis, that it is appropriate to order specific performance of the settlement agreement; and

(c) if the questions in (a) and (b) above are answered favourably to the Bells, consider whether I can otherwise be positively satisfied that justice can be done by enforcing the settlement agreement, or whether there are matters which would detract from the requisite state of satisfaction.

In my view, the analysis required by the framework set out above, while not expressed in quite the same language as used in Roberts[40] and Seachange,[41] is consistent with the formulation of the relevant test in the authorities, in that my proposed approach merely disaggregates the issue of whether enforcement of the settlement agreement is in the interests of justice into its component parts. To elaborate:
[40][1956] VLR 555.
[41](2009) 23 VR 396.

(a) when considering whether to summarily enforce a settlement agreement, it would usually be necessary to evaluate whether, having regard to ordinary contractual principles, whether there is any real prospect that the settlement agreement would be found to be invalid and/or unenforceable, such that a full trial would be necessary to determine any factual and legal issues in dispute. For example, if there was evidence to suggest that there was a serious question to be tried that a settlement agreement had been procured by duress or fraud, or had been tainted by unconscionable conduct, one would expect a court, all other things being equal, to exercise its discretion not to enforce the settlement agreement concerned. It is in this context that it is necessary to examine whether Ms Wolman’s defences based upon abandonment, election and the proper construction of the terms of the settlement agreement have any real prospects of success;

(b) even if it were found that the settlement agreement was valid and enforceable, it would be necessary for me to be satisfied, again, on a summary basis, that specific performance was an appropriate remedy, having regard to the usual principles governing the availability of the remedy of specific performance, including, among other things, whether granting the remedy of specific performance would prejudice relevant third parties, and whether damages would be an adequate remedy for any breach or repudiation of the settlement agreement; and

(c) to the extent that the matters relevant to the Court’s discretion to enforce a settlement agreement are not addressed when considering (a) and (b) above, it is then appropriate to consider whether there are any other matters relevant to the question of whether the Court should or should not enforce the settlement agreement, including, but not limited to, any procedural advantages or complications arising out of summary enforcement of the settlement agreement.

For completeness, I should say that in adopting this analytical framework, I accept that ultimately, the question of whether to summarily enforce a settlement agreement involves the exercise of a discretion, which is not to be unduly fettered, or be subject to inflexible rules. However, it seems to me that it would generally be inappropriate to summarily enforce a settlement agreement if there was a real prospect that the other party or parties to a settlement agreement seeking to rescind or terminate that agreement could mount a viable defence based upon ordinary contractual or equitable principles. In such cases, generally only a full trial would be appropriate. Similarly, if a party seeking specific performance of a settlement agreement has been able to satisfy the Court, on a summary basis, that the settlement agreement was valid and enforceable, that damages would be an inadequate remedy, that the applicant was ready, willing and able to perform their obligations under the settlement agreement and had come to the Court with clean hands, and that third parties would not be unduly and unfairly prejudiced by the enforcement of the settlement agreement, then there would have to be a good reason not to enforce the settlement agreement.

Further, I note that it may be that, given the public policy considerations which would encourage the Court to uphold settlement agreements, including the public interest in promoting the early and cost effective resolution of civil disputes, the relevant test may be able to be applied a little less rigorously than would ordinarily be the case where a party was seeking specific performance of an agreement other than a settlement agreement. A good reason may be, for example, if the subject matter of the settlement agreement traversed matters well beyond the scope of the subject matter of the proceeding concerned.

Turning first to the question of whether the settlement agreement is valid and enforceable, Knight 34 and Ms Wolman have raised the following issues in opposition to the current application:

(a) whether the settlement agreement has been abandoned;

(b) whether the terms of the settlement agreement permit the Bells to apply for summary enforcement of the settlement agreement; and

(c) whether the Bells, by their conduct, have elected to take a different course other than summary enforcement of the settlement agreement.

The question of whether the parties to an agreement have abandoned the agreement was considered in Fitzgerald v Masters,[42] where Dixon CJ and Fullagar J stated as follows:

There can be no doubt that, where what has been called an ‘inordinate’ length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them, it may be inferred that the contract has been abandoned. ... What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … ‘the matter is off altogether’. (citations omitted).[43]

[42](1956) 95 CLR 420.

[43]Ibid 432.

Given that the requisite conduct is said to amount to an inferred agreement:

[whether] there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties.[44]

[44]Ryder v Frohlich [2004] NSWCA 472 [136].

In my view, the allegation that the Bells and Knight 34 have mutually abandoned the settlement agreement lacks merit. While Knight 34 has dragged its feet since Ms Wolman took control in June 2021, it is the conduct of both parties, objectively assessed, which is relevant to the question of abandonment, not the fervent wishes of one party to the agreement.

Knight 34 and Ms Wolman relied upon the following conduct of the Bells to support their contention that the settlement agreement has been abandoned by the parties:

(a) the failure of the Bells to make any attempts at settlement after 1 September 2021;

(b) the failure of the Bells to demand that settlement take place, and their delay in making the current application; and

(c) the repeated adjournments of this proceeding.

I agree with the submissions of the Bells to the effect that the cessation of the Bells’ attempts to effect settlement through conventional means (that is, via PEXA) should not be held against them. More than a dozen attempts were made to complete settlement this way between May 2021 and September 2021. The Bells say that settlement was stymied (or “scuppered”) by the presence of the first caveat and what they say was the unnecessary linkage of the PEXA workspaces for the transfer of the apartment and the transfer of the Wolman apartment. On the other hand, Knight 34 and Ms Wolman say that settlement was prevented by the refusal of NAB to discharge the NAB mortgages.

Strictly speaking, it is not necessary for present purposes to determine conclusively where the fault lies. However, the practical reality of the situation was that settlement could not occur unless Ms Wolman (and later, Knight 34 and Ms Wolman) allowed settlement to occur, either because they had reached an accommodation with NAB, or because they accepted that the NAB mortgage over the Wolman apartment would have to remain in place to secure the outstanding balance of the NAB loan facility. Knight 34 and Ms Wolman did not contend, and nor could they, that the Bells acted other than in good faith in attempting to complete settlement.

It seems to me to have been entirely reasonable for the Bells, after the attempt at settlement on 1 September 2021 failed, to conclude that, unless and until there was an accommodation between NAB and Ms Wolman, or a material change in attitude by Ms Wolman, then continuing to attempt to effect settlement through the PEXA process would be a waste of time and money.

While there was a gap of nearly three months between the letter from Mr Bock to Welner Lawyers stating that the Bells were keen to complete settlement and the 23 December letter, I do not consider that this was such an inordinate delay as to constitute evidence of abandonment, noting that, in some of the relevant authorities, periods of many years over which the parties to an agreement have failed to take any meaningful steps have found to have not amounted to conduct constituting abandonment.[45]
[45]In Fitzgerald v Masters (1956) 95 CLR 420, the High Court held that a contract for the sale of land had not been abandoned notwithstanding that a period of 26 years had elapsed between the execution of the contract and the commencement of proceedings for specific performance. In a case more closely analogous to the current application, in Wang v Malop Street Pty Ltd [2019] VSC 193, a delay of 18 months between the respondent’s default and the commencement of an application to enforce a settlement agreement did not preclude enforcement of the settlement agreement.

As for the submission that the Bells failed to demand that Knight 34 comply with the terms of the settlement agreement, that is simply not correct. A number of attempts at settlement were made between May and September 2021, such that no “demand” was necessary, and a formal demand was made in the 23 December letter.

As for the submission that the numerous adjournments of this proceeding supports a conclusion that, objectively speaking, the parties had abandoned the settlement agreement, I accept that orders were made in case management hearings listed before judicial registrars or associates judges on nine occasions since the execution of the settlement agreement on 16 April 2021: on 11 May 2021, 1 June 2021, 12 July 2021, 3 September 2021, 19 November 2021, 8 February 2022, 25 March 2022, 26 April 2022 and 2 May 2022. A number of these hearings were adjourned by consent without appearances by the parties.

However, to suggest that the parties had been inactive for a twelve month period is inconsistent with the evidence. First, numerous attempts at settlement via PEXA were made between late May and early September 2021, so it could not be said that the Bells had abandoned the settlement agreement during the period covered by four of the hearings enumerated above. Two directions hearings were adjourned by consent on 3 September 2021 and 19 November 2021, which did coincide with a period where little else occurred. However, by the time the proceeding returned before Keith JR on 8 February 2022, the Bells had given notice that they intended to apply for specific performance of the settlement agreement, and had made an urgent application to restrain Welner Lawyers from dealing with the deposit and to join Ms Wolman as a defendant to this proceeding for the purpose of applying to remove the first caveat.

At the directions hearing on 8 February 2022, Keith JR made orders setting a timetable for the filing and service of further pleadings. After that hearing, the Bells made an urgent application to restrain the Registrar of Titles from registering the Wolman mortgage. On 25 March 2022 orders were made granting the Bells leave to file and serve a further amended statement of claim, and on 4 May 2022 the Bells filed the summons which is the subject of the current application.

Accordingly, while it is correct to say that there have been numerous hearings and adjournments in this proceeding, the only period in which the parties and this proceeding can be described as being “dormant” is the period between 3 September 2021 and 23 December 2021. Both of the directions hearings scheduled during this period were adjourned by consent, and this period also overlaps with the period where there was no correspondence between the parties of any note, that is, between 4 October 2021 and 23 December 2021. Put another way, in the twelve month period between the execution of the settlement agreement and the issue of the current application, the period of real inactivity spanned less than three months in the latter part of 2021.

Given the numerous attempts at settlement which had been made in the four month period leading up to early October 2021, and the stalemate which had been reached by reason of Ms Wolman’s inability to reach an agreement with NAB regarding the discharge of the NAB mortgages, it seems to me that it was not unreasonable for the Bells to have taken a step back to obtain further advice and regroup before taking any further steps. Taking that time does not, in my view, necessarily lead to a conclusion that the Bells had abandoned the settlement agreement. That they had not done so was evident from the flurry of activity which took place after the dispatch of the 23 December letter and the service of the default notice in January 2022, and all of that correspondence and activity was consistent with there having been no abandonment of the settlement agreement by the Bells. Significantly, there was no suggestion on the part of Knight 34 and Ms Wolman to the effect that the settlement agreement had been abandoned until they filed their defence on 6 April 2022.

Knight 34 and Ms Wolman also rely upon the terms of the settlement agreement as precluding any entitlement on the part of the Bells to enforce the settlement agreement. In particular, they rely upon cl 3.1 of the settlement agreement, which under the heading “Breach”, provides as follows:

(a) If the Defendants or any of them fail to strictly comply with their obligations in this Deed then the Bells are not required to settle the Property and the Bells may require the Defendants to file and serve a Defence in the Proceedings within 21 days of the Bells notifying them of a breach of their obligations.
(b) If the Defendants fail to file and serve their Defence in accordance with paragraph 3.1(a) above, then the Bells may apply for judgment in default of defence in the Proceedings.

I would make the following observations regarding cl 3.1 of the settlement agreement:

(a) first, when read in the context of the settlement agreement as a whole, it is tolerably clear that it is directed at circumstances where Knight Homes has failed to carry out the agreed remediation works to the satisfaction of the Bells and/or has failed to obtain the necessary approvals and certificates to enable the Bells to occupy the apartment, leaving it open to the Bells to re-agitate their claims in the underlying dispute; and

(b) secondly, the language of cl 3.1 is permissive, not mandatory.

Accordingly, I accept the Bells’ submissions to the effect that cl 3.1 does not limit the remedies available to the Bells under the settlement agreement. Further, while the existence of a term expressly conferring upon the parties to come to court to enforce a settlement agreement may be a relevant factor in favour of enforcing a settlement agreement, the absence of such a term is not fatal to any application for enforcement.

Finally, Knight 34 and Ms Wolman’s submission to the effect that the Bells have elected to pursue a remedy under cl 3.1 rather than seek specific enforcement of the settlement agreement appears to be based upon a misapprehension that, in filing and serving an amended statement of claim, the Bells were relying upon their rights under cl 3.1 of the settlement agreement to call upon the original defendants to file a defence, such that they were only entitled to enter judgment in the event that the original defendants failed to file a defence.

However, there is no evidence that the Bells were in fact relying upon cl 3.1 of the settlement agreement in response to the failure of Knight 34 to transfer the apartment to them. Rather, their filing of an amended writ and statement of claim was a necessary consequence of their successful applications to join Ms Wolman and the Registrar of Titles, and then NAB, as defendants to the proceeding. Strictly speaking, it was not necessary for the Bells to amend their statement of claim to plead the matters they rely upon in order to support their application to enforce the settlement agreement, although it is helpful that they did so. However, while arguably it would have been desirable for the Bells to better clarify their position by deleting the paragraphs of the statement of claim concerning the underlying dispute, I simply cannot see how the filing of an amended statement of claim (which I accept by implication calls for the filing of a defence) seeking the remedy of specific performance of the settlement agreement can amount to conduct on the part of the Bells which was inconsistent with them pursuing their rights to enforce the settlement agreement.

Accordingly, any claim by Knight 34 and Ms Wolman (to the extent that the latter has standing in relation to this issue, which is doubtful) to the effect that the settlement agreement is not valid and enforceable has no real prospects of success.

Having found that the settlement agreement is valid and enforceable and has not been abandoned, the question remains whether it is possible to conclude, on a summary basis, that the remedy of specific performance is available to the Bells. Again, the starting point in this analysis are the relevant equitable principles governing the grant of the remedy of specific performance.

In the current application, the following issues arise as to whether specific performance ought to be granted on a summary basis:

(a) whether the grant of specific performance would be inconsistent with the terms of the settlement agreement;

(b) whether the Bells are ready, willing and able to complete their obligations under the settlement agreement and have come to the Court with clean hands;

(c) whether damages would be an adequate remedy for Knight 34’s failure to fulfil its obligation to transfer the apartment to the Bells upon tender of the balance of the purchase price; and

(d) whether granting specific performance would unduly prejudice third parties, in particular, Ms Wolman.

As for the question of whether ordering specific performance of the settlement agreement would be inconsistent with the terms of the settlement agreement, I refer to my observations at paragraph 107 of these reasons.

Further, while no suggestion was made to the contrary, I should add that I am satisfied that the Bells are, and were at all relevant times, ready, willing and able to complete their obligations under the settlement agreement, and have come to Court with clean hands.

When considering whether the remedy of specific performance is available to enforce the terms of the settlement agreement for any contract involving the disposition of an interest in land, the presumption is, given the unique quality of land, that damages would not be an adequate remedy for breach of any such agreement. While the settlement agreement is not of itself a contract for the sale of land, the subject matter of the settlement agreement and the underlying dispute concerns the construction and sale of the apartment.

Significantly for present purposes, the only executory obligations of the parties under the settlement agreement involve the transfer of the apartment by Knight 34 to the Bells in exchange for the balance of the purchase price. It may be that if the Bells had sought summary enforcement of the settlement agreement prior to Knight Homes undertaking the works required by the settlement agreement, the application would have been rejected, on the basis that the enforcement of the executory obligations of the parties under the settlement agreement would have required an undue amount of supervision by the Court. No such concerns arose with respect to the obligations currently outstanding under the settlement agreement.

Accordingly, the starting point is that, absent any countervailing considerations, the outstanding obligations under the settlement agreement are amenable to specific performance, given that the subject matter is real property. Further, given that it is apparent from the evidence that the Bells intend that the apartment be their family home, and that considerable time, money and effort has been expended by the Bells to customise the apartment to suit their needs, such that I can safely infer that the apartment has some special value to them.

The most contentious issue between the parties concerning the availability and appropriateness of the remedy of specific performance in the current application is the submission of Knight 34 and Ms Wolman to the effect that ordering specific performance of the settlement agreement would cause undue hardship to Ms Wolman, and, to a lesser extent, Knight 34. They submitted that, if the settlement agreement was enforced, the Wolman apartment would remain encumbered by the balance of the NAB loan facility, securing the sum of approximately $650,000, which may result in Ms Wolman and her family losing their home. Knight 34 and Ms Wolman submitted that this outcome would be harsh and unfair in circumstances where Ms Wolman has paid for the Wolman apartment in full, and has otherwise complied with her obligations under the JVA and the variation agreement. Accordingly, they submitted that the Bells’ claims in the proceeding should proceed to trial, where the question of the hardship to Ms Wolman if specific performance was granted could be the subject of further evidence and submissions, in the event that their contentions regarding the validity and enforceability of the settlement agreement are not ultimately successful at trial.

The considerations to be taken into account when assessing whether an application for specific performance of a contract for the disposition of an interest in land were referred to in the following extract of the decision of Macaulay J in Mould v Canale (omitting footnotes):[46]
[46][2017] VSC 793.
The equitable relief of specific performance of contracts is a discretionary remedy; but, in the ordinary case of a sale of land, the court normally grants it as of course and withholds it only on proof of special facts. Hardship is a ground on which, in a proper case, a purchaser or vendor may be refused specific performance and be left to its right to damages for breach of contract at law. The hardship which moves the court to refuse specific performance is either a hardship existing at the date of the contract or a hardship due in some way to the plaintiff.
Dr I C F Spry in The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages, (9th ed 2014, Lawbook Co.) at p 63:
‘But land is property that has a fixed location and a special value, and ordinarily at least damages are not to be regarded as an adequate substitute for the right either to acquire or dispose of an interest in it. Even indeed if the purchaser intends to purchase the land in question merely in order to be able to sell it later at a profit, damages are not regarded as an adequate remedy for him. [Citing, relevantly, Adderley v Dixon [1824] EngR 376; (1824) 1 Sim & St 607; 57 ER 239 and Pianta v National Finance & Trustees Limited [1964] HCA 61; 180 CLR 146 at 151 per Barwick CJ].’
The general rule is that the substitution of damages for specific relief ordinar[il]y occurs only when the hardship caused to the defendant through specific enforcement would so far outweigh the hardship caused the plaintiff if specific enforcement were denied that it would be unjust in all circumstances to do more than to award damages.
Specific performance will not lightly be refused when a purchaser has established the existence of a contract capable of specific performance. For a court to refuse the remedy, it would generally be necessary for the vendor to prove hardship to the vendor amounting to an injustice. Examples of cases where a Court has refused to order specific performance on the grounds of hardship illustrate the proposition that the hardship must amount to ‘oppression far outweighing the inconvenience’ to a purchaser if left to their remedy in damages.[47]
…
The Court may consider hardship to be caused to third parties who are so connected with the vendor that, because of some moral duty, it would be highly unreasonable to prevent the vendor from discharging that duty.[48]
[47]Ibid [139]–[140]
[48]Ibid [142].

In the last paragraph extracted above, the reference to the moral duty of the vendor refers to the statement of Isaacs J in Gall v Mitchell[49] extracted at paragraph 79 of these reasons, and relied upon by Ms Wolman.
[49](1924) 35 CLR 222, 230–1.

Senior counsel for Knight 34 and Ms Wolman submitted that considerations of hardship may lead to the Court determining that both the Bells and Ms Wolman should be left to their remedies in damages against Knight 34, which, given the possible pending insolvency of Knight 34, may ultimately result in the Bells and Ms Wolman sharing the burden of the shortfall.

I am prepared to accept, at least for the purposes of the current application, that Ms Wolman, by reason of her involvement in the development project, has a sufficient connection with the apartment such that any hardship to her of ordering specific performance of the settlement agreement is a matter which ought to be taken into account in the exercise of the Court’s discretion. I am also prepared to accept for present purposes that taking the title of the Wolman apartment encumbered by a mortgage securing the sum of $650,000 would cause Ms Wolman significant hardship.

Where I part company with Knight 34 and Ms Wolman is whether the source of the hardship likely to be caused to Ms Wolman is the Bells exercising their rights under the contact of sale and the settlement agreement, or whether that hardship arises from matters unconnected with the contract of sale and the settlement agreement. Contrary to the submissions made by senior counsel for Knight 34 and Ms Wolman, Ms Wolman is not in the same position as the Bells. The Bells are purchasers under a contract of sale, with all of the statutory protections and equities that accrue to parties in their position. Ms Wolman was a participant in a joint venture, with no protections other than those conferred by the JVA. Those protections include the covenant in the JVA to the effect that she would not be required to guarantee any debt incurred by Knight 34 for the purpose of the development project, and Mr Kavallero’s promise to pay out all encumbrances over the Wolman apartment prior to transferring the Wolman apartment to her. She also had the benefit of an indemnity from Mr Kavallero for any loss suffered by her in the event that the NAB loan facility exceeded $3,736,000.

However, as it turns out, Ms Wolman, for whatever reason, has failed to receive the benefit of the covenants and indemnities conferred upon her by the terms of the JVA once it became apparent that the purchase price of the apartment was going to be insufficient to pay out the NAB loan facility. Once Mr Kavallero became bankrupt, any indemnities provided by Mr Kavallero under the JVA lost all of their value. In other words, what Ms Wolman may have considered to be a lucrative, risk‑free investment did not pan out that way. However, the inability of Ms Wolman to realise the full benefit that she anticipated she would receive from the bargain she entered into with Mr Kavallero is not something which could be sheeted home to the Bells, or, indeed, the terms of the settlement agreement. Rather, the relevant hardship arises out of her unwillingness and/or her inability to enforce the contractual promises and indemnities in her favour under the JVA, and the dispute between her and Mr Kavallero regarding the unexplained disbursements, noting that Mr Kavallero did not go bankrupt until May 2022.

Indeed, it is difficult not to reach a conclusion that Ms Wolman is, at least to some extent, the author of her own misfortune. When the Bells first attempted settlement in late May 2021, the shortfall was approximately $200,000 (that is, less than the amount of the unexplained disbursements). At this time, the balance of the NAB loan facility was a little under the cap provided for by cl 8.3(a)(ii) of the JVA, such that Ms Wolman would have been unable to call upon the indemnity conferred by cl 8.4 of the JVA. She did, however, have the benefit of the covenant of Mr Kavallero in cl 7.3 of the JVA to pay out any loan encumbering the Wolman apartment.

Accordingly, if Ms Wolman had allowed settlement to proceed in May or June of 2021 while reserving the right to pursue Mr Kavallero for the shortfall, she would probably now be in a significantly superior financial position than the position she now complains of, noting that the shortfall is now in the order of $650,000, and any promises made and indemnities given to her by Mr Kavallero are now worthless. Again, I cannot see how the deterioration of Ms Wolman’s financial position over the past 12 months or so can be sheeted home to the Bells.

Accordingly, the hardship to Ms Wolman, while real, is not of an origin or nature to detract from the Bells’ entitlement to specific performance of the settlement agreement. The inability of Ms Wolman to obtain what she bargained for under the JVA arises from her failure to protect herself from the consequences of the insolvency of Mr Kavallero. There is no basis for shifting the burden of the now realised risk of Mr Kavallero’s insolvency from Ms Wolman to the Bells, either in whole or in part.

I accept that, when determining whether to grant specific performance of a contract for the disposition of land on the basis of hardship to third parties, it is not determinative that the conduct of the applicant, or the terms of the relevant agreement be the cause of the relevant hardship. After all, specific performance may be declined where the granting of specific performance may impede the ability of a party to comply with their legal or moral duty to a third party, such that the conduct of the party seeking to enforce the agreement may be quite irrelevant. However, while the fact that the source of Ms Wolman’s difficulties lays elsewhere (being her inability to recover the shortfall from Mr Kavallero) may not be determinative of the matter, it is surely a relevant consideration in the exercise of the discretion.

In the extract from Mould v Canale[50] referred to at paragraph 120 above, it was stated that “[t]he hardship which moves the court to refuse specific performance is either a hardship existing at the date of the contract or a hardship due in some way to the plaintiff”.[51]
[50][2017] VSC 793.
[51]Ibid [139].

There was no suggestion, nor could there be, that the Bells’ conduct has caused, or will cause Ms Wolman hardship. Indeed, at one stage the Bells agreed to pay an amount greater than they were required to pay under the settlement agreement for the purpose of facilitating settlement. However, it seems to me to be highly unlikely that the hardship now faced by Ms Wolman existed at the time the settlement agreement was executed in April 2021. While Ms Wolman may have had some suspicions at that time that Knight 34 did not have sufficient funds to pay out the NAB loan facility, she did not give any evidence as to why she thought that might be the case. Rather, her evidence was to the effect that it was only when the parties first attempted settlement that she became aware of the unexplained disbursements, plus an attempt by Mr Kavallero to “divert” the sum of $351,935.47 to his own bank account. While the evidence is unclear as to how it was said Mr Kavallero planned to “divert” the sum of $351,935.47 from the proceeds of sale of the apartment for his own use, the total of the amounts complained of by Ms Wolman are in excess of $600,000, that is, well in excess of the shortfall at the time the parties first attempted settlement. Accordingly, it was not the terms of the settlement agreement, or the pending settlement which caused Ms Wolman hardship, but rather the dispute between Ms Wolman and Mr Kavallero regarding the destination of the funds payable by the Bells at settlement.

Accordingly, having taken into account all of the relevant facts and circumstances, and taking at face value Ms Wolman’s assertion that the enforcement of the settlement agreement will cause her hardship, I do not consider that the hardship to Ms Wolman warrants declining to enforce the settlement agreement.

Further, the possible insolvency of Knight 34 is another reason why damages would be an inadequate remedy for any refusal by Knight 34 to transfer the apartment to the Bells. Even if the Bells could make good their claim to an equitable interest in the apartment in the face of a claim by a liquidator, which I accept is more likely than not, no doubt that would involve further cost, delay and inconvenience.

Finally, while I accept that delay is a relevant factor which might tell against granting specific performance, I do not consider that there has been any material delay which would deny the Bells relief in that regard. While it is not necessary for present purposes for me to make any detailed findings regarding the cause of the failed settlement attempts between May and September 2021, I cannot see how the responsibility for that period of delay can be sheeted home to the Bells. As for the period after September 2021, I refer to the observations I made earlier in these reasons regarding the question of whether the parties have abandoned the settlement agreement.

Having found that the settlement agreement is valid and enforceable, and that the remedy of specific performance is available to enforce the terms of the settlement agreement, the question remains whether there are any other residual discretionary matters which affect the question of whether I can be satisfied that it is in the interests of justice to enforce the settlement agreement. While the determination of this question requires, practically speaking, a balancing of the relevant matters, I am conscious that the authorities provide that I need to be positively satisfied that the interests of justice require the enforcement of the settlement agreement.

In the current application, matters relevant to the residual discretion, in addition to the matters already addressed earlier in these reasons, include the following:

(a) whether enforcement of the settlement agreement would disturb the current “equities” of the Bells and Ms Wolman in the apartment;

(b) whether the settlement agreement deals with matters extraneous to the proceeding already on foot;

(c) whether enforcement of the settlement agreement would resolve many, if not all of the outstanding issues in the proceeding;

(d) whether the settlement agreement “involves” parties who are not parties to the settlement agreement, or this proceeding;

(e) what might be described as “public policy” considerations; and

(f) to the extent that the issue has not been dealt with earlier in these reasons, whether further investigation and evidence is required to determine the issues in this application.

Turning first to the issue identified in (a) above, the question of whether Ms Wolman had an equitable interest in the apartment, and whether any such interest had priority over the Bells’ equitable interest as purchasers assumed somewhat greater significance in the application than was probably necessary. The issue will no doubt assume greater importance in the determination of the Bells’ claim for compensation against Ms Wolman. That said, I accept that the Court would not ordinarily order specific performance of a contract to enforce an equitable interest which ranks behind another equitable interest unless there was good reason to do so.[52]
[52]Mould v Canale [2017] VSC 793 [136].

In the first caveat, Ms Wolman claimed an interest as chargee pursuant to an implied, resulting or constructive trust. Setting aside the defects in the form of the first caveat, I presume she claims to be the beneficiary of a trust to be implied from the terms of the JVA.

I am prepared to accept, at least for present purposes, that the JVA conferred a beneficial interest in the property upon Ms Wolman commensurate to her financial contributions. What I do have some difficulty in understanding is how that interest transferred itself to the apartment upon the subdivision of the property in July 2020, given that Ms Wolman’s contributions to the development were clearly referable to her obtaining an equitable interest, and ultimately legal title to the Wolman apartment. However, this issue was not the subject of detailed argument, and I do not propose to resolve that question here.

It is not necessary for me to do so, because I am satisfied that, prior to executing the contract of sale, or, if this is a relevant event, the lodgment of the purchasers’ caveats, the Bells had no notice, actual or constructive, of Ms Wolman’s role in the development project, and her possible entitlement to an equitable interest in the property, let alone the apartment. The text message exchange relied upon by Ms Wolman as disclosing her interest in the property (see footnote 7) in my view falls well short of what would be required to give effective notice of a claim to an equitable interest in the property. In particular, Mr Wolman’s use of the term “investing” is so vague as to be practically meaningless. Indeed, the text message from Ms Wolman to Dr Jill Bell sent in June 2021, while seeking to downplay her involvement in the development project, conveys far more information than Mr Wolman’s text message in 2018, and supports a conclusion that the Bells knew little about the true nature of Ms Wolman’s involvement in the development project prior to that time.

Accordingly, ordering specific performance of the settlement agreement will not disturb any “equities” of the parties with respect to the apartment. If Ms Wolman had an equitable interest in the apartment, which is doubtful, her conduct in failing to take steps to protect that equitable interest prior to lodging the first caveat in December 2020 means that any equitable interest must be postponed to the Bells’ equitable interest, which was notified by the lodgment of the purchasers’ caveats in July 2020.

In relation to (b) above, there are no matters dealt with in the settlement agreement which concern anything other than the underlying dispute, and enforcement of the settlement agreement would not involve giving effect to remedies which would not ordinarily be available from a court.

In relation to (c) above, the enforcement of the settlement agreement would deal with the underlying dispute in its entirety, given that once the apartment is transferred to the Bells, the releases in the settlement agreement would be given their full effect. The only outstanding claim is the Bells’ claim for compensation against Ms Wolman with respect to the first caveat.

In relation to (d) above, the parties to the settlement agreement are the Bells and the original defendants. To the extent that the enforcement of the settlement agreement “affects” other parties, those other parties are NAB and Ms Wolman, both of whom are now parties to this proceeding, and both have had the opportunity to file evidence and make submissions with respect to the current application.

In relation to (e) above, while this is by no means determinative of the matter, there are sound public policy reasons for not imposing too high a bar in applications of the current kind. However, the public interest in promoting the early and consensual resolution of civil disputes cannot detract from the need for the Court to be positively satisfied that it would be just to enforce the settlement agreement. There is no conflict between these principles in the current application.

Finally, in relation to (f) above, the necessary implications of my findings in relation to the validity and enforceability of the settlement agreement and the availability of the remedy of specific performance is that no further evidence is required to draw the conclusions which support the enforcement of the settlement agreement. In the current application, I have had the benefit of fully developed pleadings, voluminous evidence, and comprehensive and considered submissions. To the extent that the evidence regarding the hardship to Ms Wolman which will be caused by the enforcement of the settlement agreement is a little imprecise, I have given Ms Wolman the benefit of the doubt for the purposes of considering whether that hardship should cause me to reject the Bells’ application. Otherwise, the remote possibility that some evidence may emerge which would alter my views on any of the issues in the current application does not, in my view, justify the cost, expense and inconvenience of forcing the parties to proceed to trial. Such an approach would be, in my view, contrary to the objectives and requirements of the Civil Procedure Act 2010 (Vic).

Accordingly, I will make orders to enforce the settlement agreement, and I agree that it is appropriate to make the ancillary orders in order to facilitate the transfer of the apartment. I will hear further from the parties regarding the form of order and the question of costs.

SCHEDULE OF PARTIES

S ECI 2020 04403
BETWEEN:
JILL AVIVA BELL	First Plaintiff
ROGER BELL	Second Plaintiff
- v -
KNIGHT 34 LANGDON ROAD PTY LTD (ACN 613 271 079)	First Defendant
KNIGHT HOMES PTY LTD (ACN 121 402 480)	Second Defendant
STAR (AUSTRALIA) CONSTRUCTIONS PTY LTD (ACN 123 010 846)	Third Defendant
S.T.R HOLDINGS AUSTRALIA PTY LTD (ACN 111 816 070)	Fourth Defendant
RONEN KAVALLERO	Fifth Defendant
~~STR HOLDINGS PTY LTD (ACN 626 841 567)~~	~~Sixth Defendant~~
ROSIE WOLMAN	Seventh Defendant
REGISTRAR OF TITLES FOR THE STATE OF VICTORIA	Eighth Defendant
NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937)	Ninth Defendant

[2022] VSC 497

26 August 2022