Bi v Touvanna
[2025] VSC 153
•28 March 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2021 04905
BETWEEN:
| RAN BI & ANOR (according to the attached Schedule) | Plaintiffs |
| v | |
| ANDROULLA TOUVANNA & ANOR (according to the attached Schedule) | Defendants |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 November 2024 |
DATE OF JUDGMENT: | 28 March 2025 |
CASE MAY BE CITED AS: | Bi v Touvanna |
MEDIUM NEUTRAL CITATION: | [2025] VSC 153 |
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PRACTICE AND PROCEDURE — Rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) — On grounds that claim does not disclose a cause of action — Rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) — Application for leave to amend statement of claim — Effect of nomination clause in contract of sale — Application to amend statement of claim allowed.
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APPEARANCES: | Counsel | Solicitors |
| The First Plaintiff in person | ||
| For the Second Plaintiff | Mr J Peters AM of counsel with Mr J Forrest of counsel | Unite Legal |
| For the Defendants | Mr N Frenkel of counsel | Consult Solicitors |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
Crefly’s statement of claim.......................................................................................................... 2
The contract of sale, Nomination Form and guarantee........................................................... 4
Rule 23.01....................................................................................................................................... 6
The authorities on nomination and novation........................................................................... 6
Crefly’s submissions on substituted purchaser...................................................................... 13
Analysis Does the SOC plead an arguable claim that Crefly was substituted as a purchaser? 15
Crefly’s proposed amended statement of claim..................................................................... 17
Rules 9.03, 9.06 and 36.01........................................................................................................... 22
Crefly’s submissions on joinder and amendment.................................................................. 24
The Touvannas submissions on joinder and amendment.................................................... 25
Joinder and amendment analysis............................................................................................. 28
Conclusion.................................................................................................................................... 32
HIS HONOUR:
Introduction
This case involves a contract of sale of land. In summary, Ran Bi (Mr Bi) entered into a contract of sale as purchaser with Androulla Touvanna and Christos Touvanna (the Touvannas) as vendors. Mr Bi subsequently entered into a deed of nomination with Crefly Pty Ltd (Crefly). Mr Bi and Crefly commenced a proceeding against the Touvannas alleging the Touvannas have refused to settle the contract and seeking an order for specific performance of the contract. However, since commencing the proceeding Mr Bi has fallen out with Mr Xiaolong Zhang, the controlling mind behind Crefly. Mr Bi has purported to cancel the nomination and to have entered into a deed with the Touvannas to set aside the contract of sale. Mr Bi seeks to discontinue his proceeding against the Touvannas.
There are two applications to be decided. The first is the Touvannas’ summons seeking summary judgment under r 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules) against Crefly on the basis that Crefly’s claim is vexatious, in that it does not disclose a cause of action. The second is an application by Crefly and Diandian Zhao[1] (Ms Zhao) seeking leave to amend Crefly’s statement of claim and an order removing Mr Bi as a plaintiff and joining him as a defendant to the proceeding. Crefly also seek an injunction to stop Mr Bi from acting in reliance on his purported cancellation of the contract of sale and nomination.
[1] Ms Zhao is the third defendant to the Touvannas’ counterclaim.
A central issue in the applications is whether Crefly has standing to seek an order for specific performance. It was common ground that if Crefly is a mere nominee under the contract of sale, it would not have standing to seek such a remedy. Crefly submits that its statement of claim (SOC) raises an arguable case that it is not a mere nominee but rather a substitute purchaser. Alternatively, Crefly says its proposed amended statement of claim (PASOC) pleads new causes of action that raise an arguable case that it is the substitute purchaser.
For the reasons that follow I have decided that while Crefly’s SOC does not raise an arguable claim, its PASOC does. Accordingly I have decided to grant leave to Crefly to file the PASOC and to join Sortop Pty Ltd as a plaintiff to the proceeding. Mr Bi will be removed as a plaintiff and joined as third defendant. I have also decided to grant the interim injunction in the form sought by Crefly.
Crefly’s statement of claim
I will first consider the Touvannas’ challenge to Crefly’s SOC in its existing form.
The SOC alleges that Mr Bi was the purchaser of the property and that Crefly was Mr Bi’s nominee under the contract of sale entered into on 19 November 2016 with the Touvannas as vendors. The SOC then sets out a number of the terms of the contract of sale, including:
(a) the purchase price of $7,500,000;
(b) the settlement date being five years after the date the contact was signed;
(c) the requirement that the purchaser pay council rates and any new or additional levies issued by any relevant authorities commencing from the exchange of the contract of sale;
(d) special condition 12, which required that in the event the purchaser elects to nominate another party as purchaser and or second purchaser, the nominee must be bound by the terms and conditions of the contract of sale;
(e) general condition 10.1 requiring the vendors to do all things necessary to enable the purchaser to become registered proprietor of the land;
(f) general condition 16.1 specifying that time is of the essence;
(g) general condition 18 specifying that the purchaser may nominate a substitute or additional transferee but the named purchaser remains personally liable for the due performance of the purchaser’s obligations under the contract of sale; and
(h) general condition 25 requiring a breaching party to pay the other party compensation for any reasonably foreseeable loss resulting from the breach and any interest due under the contract of sale.
Mr Bi and Crefly allege that Mr Bi paid the deposit of $1,440,000 and, on 16 February 2017, lodged a caveat to protect his interest as purchaser under the contract of sale.
The plaintiffs then plead that on 21 October 2021, Mr Bi, in writing, nominated Crefly as the substituted purchaser under the contract of sale (Nomination Form).
Settlement was due on 19 November 2021. The SOC pleads Crefly as nominee or alternatively, Mr Bi as named purchaser, has been ready, willing and able to settle but the Touvannas have failed or refused to settle the contract of sale. On 26 November 2021 the plaintiffs issued a notice to complete to the Touvannas’ former solicitors, notwithstanding which, the Touvannas have failed or refused to settle and are in breach of the contract of sale.
The SOC pleads that on 10 December 2021 the Touvannas’ solicitor wrote to the plaintiffs’ former solicitor claiming the Touvannas were entitled to rescind and set aside the contract.
Mr Bi and Crefly’s SOC alleges the Touvannas have evinced an intention to no longer be bound by the contract of sale and have repudiated it. Mr Bi and Crefly elect to affirm the contract of sale. Alternatively, they allege that by reason of the Touvannas’ failure to settle, they have suffered loss and damage.
Mr Bi and Crefly’s SOC then sets out the relief sought, being an injunction restraining the Touvannas from rescinding the contract and dealing further with the land, an order for specific performance, damages, and interest.
The contract of sale, Nomination Form and guarantee
It is convenient at this stage to set out in greater detail some aspects of the contract of sale and the Nomination Form and to set out the circumstances surrounding a guarantee given by Crefly to the Touvannas’ solicitor.
The contract of sale is in the standard form issued by the Real Estate Institute of Victoria Ltd. On the cover page the purchaser is ‘RAN BI’ next to which is the hand written amendment ‘AND OR NOMINEES’. There is no dispute that Mr Bi signed the contract as purchaser. Under the particulars of sale on the contract, Mr Bi is the purchaser, again with a handwritten and initialled amendment, ‘AND OR NOMINEES’.
Special condition 6 requires the purchaser to pay council rates and any levies issued by any relevant authorities commencing from the exchange of contract.
Special condition 12 states, ‘In the event that purchaser elects to nominate another party as purchaser and or second purchaser, then the nominee must be bound by the terms and conditions of this contract of sale.’
Special condition 14, which makes the contract conditional upon the purchaser obtaining Financial Investment Review Board approval of the transaction within 30 days from the date of the contract, was struck out.
General condition 18 bears the title ‘NOMINEE’ and states, ‘The purchaser may nominate a substitute or additional transferee, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.’
General condition 20 provides, ‘The vendor requires all of the directors of the purchaser to guarantee the purchaser’s performance of this contract if the purchaser is a proprietary limited company. The Directors of the Purchaser hereby consent to personally guarantee the due performance of the company.’
The Nomination Form is dated 21 October 2021. It names Crefly Pty Ltd as nominee and is signed by Xiaolong Zhang and Ms Zhao, as directors of Crefly, and Mr Bi as purchaser. The substance of the nomination is as follows:
As the property is expressed as sold to the Purchaser “and/or Nominee” (or words to that effect) then pursuant to the conditions of the contract the Purchaser nominate (sic) the Nominee as substituted purchaser to take a transfer or conveyance in lieu of the Purchaser.
The Purchaser and the Nominee acknowledge that they will henceforth be jointly and severally liable for the due performance of all the obligations of the Purchaser under the Contract and payment of any expenses resulting from this nomination (including any Stamp Duty).
On 27 October 2021 the plaintiffs’ former solicitor sent, by email, a copy of the Nomination Form to the Touvannas’ former solicitor, ‘for your records’. The email noted the contract purchaser had elected to nominate a substitute purchaser. The same email sought a response to an earlier email, the contents of which were not in evidence before this Court. On the same day the Touvannas’ former solicitor responded stating that she was still waiting for the Touvannas to provide instructions. The Touvannas’ former solicitor’s email then continued, ‘In the meantime, I attached a Guarantee & Indemnity document for the nominee directors to sign and return to me, given that the nominee is a company.’
The guarantee, prepared by the Touvannas’ solicitor, names Crefly as purchaser and its directors, Xiaolong Zhang and Zhao, as the guarantors. The guarantee is stated to be given to the Touvannas ‘[i]n consideration of your entering into the attached contract of sale (Contract) with the purchaser named in the schedule’, ie Crefly. By the guarantee the directors committed to pay the Touvannas all amounts payable under the contract of sale not paid by Crefly, the purchaser named in the guarantee, and to perform on demand all Crefly’s obligations under the contract. Xiaolong Zhang and Ms Zhao signed the guarantee on 5 November 2021.
Rule 23.01
Rule 23.01 permits the Court to give judgment where a proceeding generally or any claim in the proceeding is scandalous, frivolous or vexatious or an abuse of the Court’s process.
The Court will not make an order under r 23.01 unless it is clear on the pleadings or from extrinsic evidence that the claim is unsustainable in fact or in law and no proper amendment of the pleading can raise a good cause of action.[2] A claim will be frivolous or vexatious where a claim is groundless, or lacks a legal basis or merit.[3] As counsel for Crefly correctly submitted, an arguable claim, supported by an evidentiary basis, is not groundless or lacking in merit.
[2]Annesley v Westpac Banking Corporation [2016] VSC 323, [68]-[69].
[3]Ibid [70].
The authorities on nomination and novation
The Touvannas submit that Mr Bi’s nomination of Crefly did no more than require the Touvannas to transfer the property on settlement to Crefly. In other words, that Mr Bi’s nomination of Crefly did not amount to a novation under which Crefly became a substitute purchaser with standing to sue under the contract of sale.
Both parties referred the Court to numerous authorities which considered the effect of nomination clauses. It is convenient to set out a brief summary of some of those cases here.
Salter v Gilbertson,[4] was a case in which the Victorian Court of Appeal considered the effect of a nomination clause in a contract for the sale of shares in a company. Phillips JA, with whom Winneke P and Batt JA agreed, considered the usual effect of a nomination clause in a sale agreement:
Ordinarily, where there is an agreement of purchase and sale expressed to be between A (the seller) and B “or the nominee of” B, B is regarded as having the power simply to nominate who shall be transferee (that is, B or another at the direction of B) and a transfer to B and a transfer to B’s nominee are alike regarded as in fulfillment of the contract between A and B. Such is well established: eg Tonelli v Komirra Pty Ltd (an agreement to sell to A “and his nominees”, Jenkins v Smyth (applying Tonelli), Lambly v Silk Pemberton Ltd, Hurrell v Townsend, Harry v Fidelity Nominees Pty Ltd (where the purchaser was named in addition “and/or nominee”) and Karangahape Road International Village Life v Holloway (where the purchaser was described as one Jackson “or nominee”). See also Vickery v Woods and Power v Nathan, in both of which the contracting party purported to act for a company yet to be formed and, though the parties expected performance under the contract by the company once formed, the contract remained throughout one between the original parties. As has been pointed out often enough, although it must be so if the context so demands, it is a strong thing to regard the words “or nominee” as authorising B, unilaterally and in his or her own absolute discretion, to nominate a purchaser to stand in the place of B, with all the attendant consequences for A. For such a construction “compelling language” is required, according to Lambly. In that case the appellant had agreed to sell her house by a standard form of contract in which the description of the purchaser had been completed with these words: “Nigel Pemberton of Auckland or his nominee or nominees”; yet that was held only to entitle the purchaser to nominate another or others to be transferee, not to nominate another to stand as purchaser in his place.
Obviously every case must turn upon its own facts. It is possible, as I have said, for the language of the contract as a whole to dictate that the power to nominate must be taken to mean that a new party can be put in place of the original party who is given the power unilaterally to nominate another to stand in his or her shoes. But very clear language is required to achieve such a result.
…
[citations omitted].
[4](2003) 6 VR 466, [17]-[18].
In Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty Ltd (Avzur),[5] Finkelstein J considered the effect of a nomination clause in an agreement for the sale of a business. At the time the business was sold, the vendor knew that the purchaser intended to nominate Avzur Hotels as substitute purchaser and the nomination occurred simultaneously or almost simultaneously with the execution of the sale agreement. Avzur Hotels commenced a proceeding to sue for breach of the warranties in the sale agreement. Its standing to sue depended on whether the sale agreement authorised the named purchaser to nominate a purchaser to stand in its place or simply to nominate a person who would take the transfer of the business. Finkelstein J noted that a contract may permit a person to nominate a person to stand in his place as purchaser under a novated contract but that a nomination clause will only have that unusual effect if it clearly so provides.[6] In Avzur, the nomination clause of the sale agreement described the nominee as a ‘substitute or additional purchaser’; the sale agreement and nomination form both provided that the purchaser and nominee were to be jointly and severally liable for the performance of the purchaser’s obligations under the sale agreement; the guarantee provided that the guarantor guaranteed the nominee’s performance of all terms and conditions of the contract; and the sale agreement specified that where the purchaser nominates a substitute purchaser, for the purposes of clause 13 of the sale agreement, ‘purchaser’ means the ‘purchaser or nominee’.[7] His Honour noted the form of nomination was ambiguous as regards the position of the nominee because it failed to make clear whether the nominee was to be a substitute purchaser or simply the transferee of the business.[8] Finkelstein J found that when read in the context of the remainder of the nomination form, as well as the provisions of the sale agreement and guarantee, it was clear that Avzur Hotels was intended to be a substitute purchaser with all the rights and obligations attached to that position.[9] Finkelstein J had earlier noted that at the time of entering into the sale agreement the vendor knew the identity of the substitute purchaser and so this was not a case of a vendor binding himself to accept an unknown nominee in place of the named purchaser as the party to whom the vendor must look for the performance of the contract.[10]
[5](2009) 257 ALR 498.
[6]Ibid [9].
[7]Ibid [12].
[8]Ibid [13].
[9]Ibid.
[10]Ibid [11].
In 428 Lt Bourke Street Pty Ltd v Lonsdale St Café Pty Ltd[11] (428 Lt Bourke St Pty Ltd), Lonsdale St Café and Mr Sam Cimino entered into a contract of sale of property. Mr Cimino nominated the plaintiff as ‘substitute purchaser, to take a transfer or conveyance of the property.’ Mr Cimino was a director of the plaintiff. At the time the contract was signed, the plaintiff was not yet incorporated. The plaintiff’s proceeding alleged that misrepresentations were made about the lettable area of the property which induced Mr Cimino and the plaintiff to enter into the contract. The representations were said to have been made prior to the plaintiff’s incorporation. One issue was whether the plaintiff through Mr Cimino’s nomination was a party to the contract of sale by novation and therefore had standing to sue Lonsdale St Café. The plaintiff’s nomination was made by a written nomination form. Lonsdale St Café was notified of the nomination prior to the plaintiff becoming the registered proprietor.
[11][2009] VSC 133.
The Court found that the plaintiff was not substituted as a party to the contract of sale.[12] The nomination clause in the contact of sale authorised Mr Cimino to nominate ‘a substitute or additional purchaser’ but that was qualified by the words ‘but the named purchaser [Mr Cimino] remains personally liable for the due payment of all the purchaser’s obligations under this contract’.[13] The nomination form was executed between the plaintiff and Mr Cimino and confined the nomination to a ‘substitute purchaser who is to take a transfer or conversance in lieu of the purchaser’.[14] There was also an acknowledgement that ‘they will … be jointly and severally liable for due performance of the obligations of the purchaser under the contract…’.[15] The express words in the nomination clause and nomination form indicated no intention to amend the contract of sale to substitute the plaintiff as a party.[16] The Court also noted that Lonsdale St Café was not a party to the nomination form which expressed the intention for the plaintiff to only ‘take a transfer or conveyance in lieu of the purchaser.’[17] (Emphasis in original).
[12]Ibid [47].
[13]Ibid [31].
[14]Ibid [36].
[15]Ibid [33].
[16]Ibid [35]
[17]Ibid [37].
Rise Home Loans Pty Ltd v Dickinson[18] (Rise Home Loans) involved a contract for the sale of residential land. After the contract was signed but before settlement, the purchaser gave notice to the vendors that it had nominated Rise Home Loans as a substitute purchaser. Dickinson contended that Rise Home Loans was not a party to the contract and so did not have standing to bring the action. Mukhtar AsJ surveyed a number of authorities concerning the construction and effect of nomination clauses,[19] including 428 Lt Bourke St Pty Ltd and Avzur Hotels Pty Ltd. His Honour concluded that the nomination of Rise Home Loans did not result in it becoming substituted purchaser under the contract.[20] This case involved a similar nomination clause to the one found in 428 Lt Bourke St Pty Ltd, where the Court had decided that the clause did not cause the nominee to become a party to the contract. Mukhtar AsJ was not convinced that Rise Home Loans had ‘overcome the ordinary rule and demonstrate(d) by clear language elsewhere in the transaction documents, or objectively otherwise, that all parties intended that there be a new and different purchaser to stand legally in place of the named purchaser’.[21] The fact that Rise Home Loans paid the balance of the purchase price, arranged for the mortgage,[22] and became the registered proprietor of the land[23] did not indicate a novation.
[18][2009] VSC 555.
[19]Ibid [18]-[30].
[20]Ibid [38]-[39].
[21]Ibid.
[22]Ibid.
[23]Ibid [17].
This case was subsequently appealed,[24] but Robson J, as appeal judge, agreed with Mukhtar AsJ’s finding that the nomination of Rise Home Loans did not result in it becoming a party to the contract of sale.[25]
[24]Rise Home Loans v Dickinson (No 2) [2010] VSC 29.
[25]Ibid [21]-[23].
In Matheson Nominees Pty Ltd v Aero Developments Pty Ltd,[26] (Matheson Nominees) Vickery J considered the effect of a nomination clause in a contract of sale of land. Matheson Nominees claimed that it was entitled to an equitable charge over the land and had a caveatable interest in the land by virtue of an agreement it had with Sprint Homes, the planned purchaser of the land. Sprint Homes needed to borrow funds to finance the purchase and entered into an agreement with Matheson Nominees to obtain finance.
[26][2016] VSC 131.
Aero Developments was incorporated with Mr Evans as its sole director. Sprint Homes nominated Aero Developments as substitute purchaser under the contract. The terms of the nomination provided that “…the Purchaser nominates the Nominee as substituted purchaser to take a transfer or conveyance in lieu of the Purchaser.” Administrators were later appointed to Sprint Homes and Matheson Nominees lodged a caveat over the land. Aero Developments sought to remove the caveat. Aero Developments contended that Matheson Nominees had no rights against it because its nomination was a mere direction to the vendor to transfer the land to Aero Developments.
Vickery J stated that nomination clauses in contracts for the sale of land usually fell into two categories.[27] First, merely a direction to the vendor upon settlement to transfer the property sold to a nominated third party. In this case the rights and obligations under the original contract remain unchanged and the nominee does not become a party to that contract. Second, a clause where the purchaser can nominate who will stand in place of the purchaser under a novated contract. Vickery J agreed with Finkelstein J approach in Avzur Hotels Pty Ltd, where his Honour stated that a nomination clause in a contract would have the effect of allowing a purchaser to nominate a third party to stand in its place in a contract only where there is ‘compelling language’ that the parties intended to substitute another party to the contract.[28]
[27]Ibid [92].
[28]Ibid [93]-[94].
Vickery J noted that the nomination clause in the contract authorised the purchaser to ‘nominate a substitute or additional purchaser’ but that the purchaser, Sprint Homes, remained personally liable for the performance of its obligations under the contract despite the nomination.[29] The nomination clause in the contract was similar to the clause considered in 428 Lt Bourke St Pty Ltd.
[29]Ibid [96].
The nomination entered into between Sprint Homes and Aero Developments (but not notified to Matheson Nominees)[30] provided that ‘the Purchaser [Sprint Homes] nominates the Nominee as substituted purchaser to take a transfer or conveyance in lieu of the Purchaser’.[31] This was similar to the clause found in the nomination form in 428 Lt Bourke St Pty Ltd.[32] After considering the nomination clause in the context of the executed nomination form and contract as a whole, Vickery J was satisfied that there was no compelling language in the contract or the nomination form which demonstrated that the nomination gave rise to a substitution of the contract by a novated contract.[33] The nomination clause in the contract was merely a direction to the vendor to transfer the land to Aero Developments upon settlement.[34]
[30]Ibid.
[31]Ibid [96].
[32]Ibid [101]. See also 428 Lt Bourke St Pty Ltd (n 10), [33].
[33]Ibid [102]-[105].
[34]Ibid [105].
In ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW),[35] French CJ, Crennan, Kiefel and Bell JJ considered the nature and requirements of novation:
A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The enquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged.
[citations omitted].
[35](2012) 245 CLR 338, 346 [12].
In Fu Tian Fortune Pty Ltd v Park Cho Pty Ltd,[36] Slattery J set out the relevant principles as follows:
[36][2018] NSWSC 528, [73]-[77].
Park Cho submits that the contract for sale was novated to Fortune. A novation is a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made: Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 at 368 per Windeyer J.
The effect of a novation is to discharge the original contract between two parties (the continuing party and the outgoing party) and to substitute it with a new contract between the continuing party and a new party (the incoming party). The incoming party must perform the contractual obligations, bear the contractual liabilities and is entitled [to] the contractual benefits (under the new contract) that were formerly the province of the outgoing party under the original contract. Put simply, the rights, obligations and liabilities of the outgoing party are extinguished and the rights, obligations and liabilities of the incoming party are substituted in their place.
The authorities (see, for example, Dixon J in Vickery v Woods (1952) 85 CLR 336; [1952] HCA 7 at 345) clearly establish that the crux of novation is intention. Novation requires the consent of the parties in order for it to be valid (i.e. it is by way of tripartite agreement). Such intention may be express or, importantly for the instant case, may be implied from the circumstances: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 (“Fightvision”) at 492 per the Court (Sheller, Stein and Giles JJA).
The events in issue in Fightvision were not dissimilar to those in the present case, in the sense that the purported novation had occurred with a degree of informality through a course of dealing. The Court dealt with the question of whether there had been a novation and applied the well-known statement of Sir Garfield Barwick in Upper Hunter County Council v Australian Chilling and Freezing Co Pty (1968) 118 CLR 429; [1968] HCA 8 at 437 that in relation to contractual intention “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements”. The Court in Fightvision (at 493) concluded that there was no basis for disturbing the trial Judge’s conclusion that a novation had occurred, a conclusion which his Honour had arrived at by reference to, inter alia, the content of conversations between the parties and the “overwhelmingly consistent pattern of conduct” in which they had engaged.
In McMahon v National Foods Milk Ltd (2009) 25 VR 251; [2009] VSCA 153 Nettle JA (with whom Neave and Dodds-Streeton JJA agreed) said at [77]:
“As a matter of law, however, there is nothing to preclude a court from inferring the existence of a contract from the acts of the parties, as well as or in the absence of words, and so from the totality of the dealings between the parties. Hence, as matter of law, there is nothing to preclude inferring the existence of a contract of novation from conduct such as, for example, the conduct of a creditor in apparently accepting the liability of a new debtor in substitution for the old. And as was pointed out by the New South Wales Court of Appeal in Fightvision Pty Ltd v Onisforou; Tszyu v Fightvision Pty Ltd, the principle that no narrow or pedantic approach is warranted when searching for contractual intention in commercial arrangements applies equally when searching for an intention to novate.’”
Similar principles are restated in Orica Ltd v Commissioner of Taxation (Cth) [2010] FCA 197 at [119].
Crefly’s submissions on substituted purchaser
Crefly’s counsel submitted that the facts of this case distinguished it from those in 428 Lt Bourke St Pty Ltd, Rise Home Loans and Matheson Nominees. The point of distinction was said to be the effect of special condition 12, and general conditions 19 and 20 which counsel submitted made clear that if Mr Bi nominated another as a purchaser, not a transferee, then they would be liable under the contract. Counsel submitted that the Court should follow Avzur.
Counsel submitted that novation was not in issue in this proceeding. I understood counsel to submit that Crefly’s case, as pleaded in the SOC, was that the terms of the contract of sale authorised Mr Bi to nominate a substitute purchaser to be jointly liable to the Touvannas, such that both Mr Bi and Crefly were liable and entitled to pursue the contract.
Counsel submitted that the evidence that the Touvannas were shocked when, the day before settlement was scheduled, they learned of Mr Bi’s nomination of Crefly for the first time, is irrelevant to whether the original contract of sale permitted Mr Bi to nominate a substitute purchaser. Counsel said that it was, however, open to the Court to find that another contract had been formed when someone nominates a substitute purchaser and the vendor’s solicitor accepts the nomination and requires and is provided with a directors’ guarantee from the substituted purchaser. I interpose here to note that the taking of the guarantee is pleaded in Crefly’s PASOC but not in the SOC. In this case there was no evidence that the nomination had been rejected by the Touvannas or that fact had been communicated to Crefly and Mr Bi. In this regard counsel said that Ms Touvanna’s evidence was that she and her brother were shocked to learn of the nomination but their evidence did not state that they rejected it. Counsel submitted that the Touvannas’ solicitor had in fact, on their own ostensible authority, confirmed the nomination by taking the guarantee.
Crefly’s case was that the relevant contract occurred in two ways. The first was by special condition 12 in combination with the other terms of the contract which authorised Mr Bi to elect a substitute purchaser, which nomination was binding once made and did not require the Touvannas further agreement. This was Mr Bi and Crefly’s case pleaded on its SOC. The second was put in the alternative and was said to be a contract formed when the Touvannas’ solicitor demanded the directors’ guarantee from Crefly. Again, Crefly’s second means of pleading its case does not arise on the terms of the SOC and so is discussed below when considering the PASOC.
Analysis Does the SOC plead an arguable claim that Crefly was substituted as a purchaser?
At the outset I note that Crefly’s counsel’s submission that Crefly’s case is that Mr Bi nominated Crefly to be a joint or additional purchaser, referred to at paragraph 41 above, is at odds with the terms of the pleading, which claims Crefly became a substitute purchaser.[37] In my view it follows that the issue whether there was a novation remains an issue on the terms of the SOC.
[37]SOC [8].
As has been noted, in determining whether a person is a nominee or a substitute purchaser, every case will turn on its own facts. The question here is whether, on the terms of the SOC in this case, Crefly has an arguable case that it is a substitute purchaser under the contract of sale, and thus has standing to sue for specific performance.
Crefly’s counsel urged the Court to follow Avzur. In my view the facts of this case, as pleaded in the SOC, are distinguishable from Avzur. In Avzur the nomination clause in question permitted the purchaser to nominate a substitute or additional purchaser by delivering a nomination form to the vendors. That is very different from the terms of special condition 12 or general condition 18 in the contract under consideration in this case. In Avzur the contractual joint and several liability of the purchaser and nominee had to be considered against the terms of the nomination clause and other circumstances of that case. While Avzur also involved the substitute purchaser giving a guarantee, as Crefly’s directors did in this case, the vendors in Avzur knew the identity of the substitute purchaser at the time they entered into the contract of sale. In Avzur the nomination occurred at almost the same time the parties entered into the contract of sale. In this case there is no suggestion that the Touvannas were aware at the time of entering into the contract of sale that Mr Bi intended to nominate Crefly as either nominee or substitute purchaser. The nomination occurred almost four years after Mr Bi and the Touvannas entered into the contract of sale.
Very clear contractual language is required to dictate that the power to nominate must be taken to mean that a new party can be put in place of the original party who is given the power unilaterally to nominate another to stand in his or her shoes.
Special condition 12 of the contract of sale in this case, which provides that if the purchaser elects to nominate another party as purchaser, then the nominee must be bound by the terms and conditions of the contract, clearly contemplates the possibility that the purchaser may elect to nominate another party as purchaser or second purchaser however that clause, couched in terms of ‘In the event’, does not explicitly authorise the purchaser to nominate a substitute purchaser. Indeed, general condition 18, the nomination clause, permits the purchaser to nominate a ‘substitute or additional transferee’, not a substitute or additional purchaser, and relevantly, confirms that in the event of a nomination, the named purchaser, ie. Mr Bi, remains personally liable for the due performance of all the purchaser’s obligations under the contract.
General condition 20, which sets out the vendor’s requirement that all directors of the purchaser guarantee the purchaser’s performance of the contract is conditioned by the words, ‘if the purchaser is a proprietary limited company’. Again, this clause does not clearly authorise the purchaser to nominate a substitute purchaser.
In my view the fact that special condition 6 required the purchaser to pay council rates and other levies, combined with the fact that Crefly paid some of these, does not lend support to Crefly’s case. There could be many arrangements between Mr Bi and Crefly under which Crefly agreed to make those payments. Crefly’s payments cannot render the terms of special condition 6 to authorise Mr Bi’s authority to nominate a substitute purchaser.
The terms of the Nomination Form are somewhat ambiguous in that while they refer to Crefly as the nominated substitute purchaser, they then state ‘to take a transfer or conveyance in lieu of the Purchaser’, which is consistent with a mere nomination. Relevantly, the Nomination Form acknowledges that both Mr Bi and Crefly will be jointly and severally liable for the due performance of the purchaser’s obligations under the contract of sale.
Leaving to one side the guarantee which is not pleaded in the SOC, Crefly does not plead that the Touvannas entered into a novated contract with Crefly. The Touvannas were not a party to the Nomination Form and the Touvannas, Crefly and Mr Bi did not execute a new contract of sale, naming Crefly as purchaser and releasing Mr Bi.
I am satisfied that Crefly’s application for specific performance of the contract of sale, based upon its status as substituted purchaser as pleaded in the SOC, is not arguable. Having regard to the terms of the contract of sale and the Nomination Form, I am not convinced that Crefly can demonstrate by clear language in the transaction documents, or objectively otherwise, that all parties intended that there be a new and different purchaser to stand legally in place of Mr Bi, the named purchaser.
It follows that, subject to Crefly’s application to amend its statement of claim, Crefly’s statement of claim should be struck out.
Crefly’s proposed amended statement of claim
Crefly’s PASOC retains the existing components of the SOC: Mr Bi and the defendants executed the contract of sale; Mr Bi nominated Crefly as substituted purchaser; the defendants failed to settle; and as a result, specific performance should be ordered.
The PASOC, however, introduces a proposed new plaintiff and makes substantive additions to the pleadings.
Crefly proposes that Sortop Pty Ltd (Sortop), a corporate vehicle established by Mr Zhang, through which he and his family would invest in property in Victoria, be added to the proceeding as first plaintiff. Mr Bi is proposed to be removed as a plaintiff and added as the third defendant. Crefly remains the second plaintiff but now as the ‘nominated substitute purchaser’ under the contract of sale. Mr Zhang is pleaded to be the current shareholder and director of Crefly and at all material times in effective control of Sortop.
Crefly’s proposed substantive additions to the pleadings are as follows. First, that Mr Bi entered into the contract of sale while acting on behalf of and for the benefit of Sortop such that his rights under the contract of sale and in the property are held on trust for Sortop and subject to Sortop’s direction.
Part B paragraphs 4A to 7D of the PSOC allege, in summary, that:
(a) Mr Bi contracted at the direction of and for the benefit of Sortop and Sortop was responsible for all his financial obligations as named purchaser and would choose the ultimate purchaser and transferee of the property;
(b) the pleaded terms of the contract are as per the SOC but with the addition special condition 1, the deposit release term and general condition 20, the director guarantee term.
(c) Sortop paid the deposit of $1,440,000;
(d) Sortop and, after its nomination, Crefly, paid the property’s rates after the contract was executed;
(e) Mr Bi, at Sortop’s direction, signed a deposit statement under s 27 of the Sale of Land Act 1962 (Vic) and authorised the release of the deposit to the Touvannas;
(f) Mr Bi holds his rights under the contract of sale and any interest in the property for the benefit of Sortop, pursuant to a resulting or alternatively a constructive trust.
(g) Mr Bi owed and owes Sortop the duties:
(i) to avoid conflicts between Sortop’s interests in the contract of sale and the property and Mr Bi’s personal interests;
(ii) not to profit for himself as named purchaser under the contract of sale or his position as a resulting or constructive trustee; and
(iii) to act in the best interests of Sortop in relation to the contract of sale and the property, including by seeking that the contract be performed and the property transferred to Sortop’s nominated purchaser, Crefly;
(h) the Touvannas have been on notice since 3 June 2024 that Mr Bi holds all his rights under the contract and in the property for Sortop as trustee;
(i) in breach of his duties Mr Bi, without Sortop’s authorisation sought to:
(i) enter into a deed of cancellation with the Touvannas which purported to render the contract of sale void ab initio;
(ii) enter into the deed of revocation of nomination with the Touvannas by which he purported to revoke the nomination of Crefly as purchaser under the contract; and
(iii) withdraw his caveat.
(j) unless restrained Mr Bi will continue to act and rely, with the Touvannas, on the purported deeds of cancellation and revocation, thereby causing loss and damage to Sortop and Crefly.
Part C of the PASOC expands Crefly’s pleading that it is the substituted purchaser under the contract. In summary this section of the PASOC alleges that:
(a) the defendants knew when they executed the contract of sale that Mr Bi would ultimately name an entity related to Mr Zhang or Sortop as substitute purchaser;
(b) Mr Bi nominated Crefly as substitute purchaser in accordance with the contract of sale and at Sortop’s direction; and
(c) the defendants understood or agreed that Crefly became substitute purchaser, including because they then insisted that Crefly’s directors provide a guarantee; and Crefly’s directors, Mr Zhang and Ms Zhao, executed the guarantee and indemnity in favour of the Touvannas and Crefly ratified the contract of sale, becoming bound by it and entitled to its benefits as substituted purchaser.
Part D, paragraphs 8F to 8K, of the PASOC pleads a new estoppel claim. In summary this part pleads:
(a) by requiring and accepting the guarantee from Crefly, the Touvannas represented to Crefly, or alternatively it was a common assumption and understanding between Crefly and the Touvannas that Crefly was a purchaser under the contract of sale and therefore had or would have an interest in the property. The representations and common understanding were each conveyed in writing and by conduct. They were in writing in that they were contained in the requests for the guarantee and in conduct to the extent that the Touvannas’ solicitor accepted the guarantee and the Touvannas remained silent after receiving the guarantee;
(b) Crefly relied on the representation and common assumption to its detriment by obtaining a loan facility and paying rates, outgoings and costs associated with the development of the property;
(c) the Touvannas knew or ought to have known that Crefly relied on the representation and common assumption and have failed to act to avoid Crefly’s detriment;
(d) Crefly is entitled to equitable relief and the Touvannas are estopped from departing from the representation and common assumption.
Part E, paragraphs 9 to 15, of the PASOC pleads repudiation of the contract of sale by the Touvannas. This section is largely the same as in the SOC except that the PASOC also pleads:
(a) Crefly is no longer said to be a nominee but rather a substituted purchaser under the contract of sale and Mr Bi’s pleaded actions are now said to be on behalf of Sortop;
(b) Crefly lodged a caveat on the title to the property on 5 June 2024 to protect its interest as substituted purchaser under the contract;
(c) on 5 June 2024 Sortop lodged a caveat to protect its interest as the beneficial owner of Mr Bi’s rights and interests under the contract of sale;
(d) Crefly, or alternatively Sortop, has elected to affirm the contract and seek specific performance;
(e) by failing to settle the Touvannas have caused Crefly, or alternatively Sortop, loss and damage.
The PASOC contains a new section F, paragraphs 18 to 20, entitled, The Purported Deeds. This section, in summary, pleads:
(a) the purported deed of cancellation is invalid and ineffective because Crefly as substituted purchaser is a party to the contract of sale but not a party to the purported deed of cancellation;
(b) alternatively, the Touvannas are estopped from relying on the purported deeds;
(c) in the further alternative the purported deeds are void or voidable in that they were made in breach of Mr Bi’s fiduciary duties to Sortop and are contrary to public policy in that they have a tendency to interfere with the administration of justice.
The prayer for relief in the PASOC seeks against each of the Touvannas and Mr Bi:
(a) a declaration that the purported deeds are void or otherwise invalid and ineffective;
(b) an injunction to restrain the Touvannas and Mr Bi from relying or acting on the purported deeds or otherwise dealing with the property otherwise than for the purpose of settling the contract of sale;
(c) an order that the Touvannas and Mr Bi specifically perform the contract;
(d) damages;
(e) equitable compensation; and
(f) interest and costs
In the PASOC the prayer for relief also seeks on behalf of Sortop, a declaration that Mr Bi holds his interest in the property and his rights under the contract of sale on trust for Sortop or its nominated purchaser, Crefly.
Rules 9.03, 9.06 and 36.01
Rule 9.03(1) provides that:
Except by order of the Court or as provided by or under any Act, where the plaintiff claims any relief to which any other person is entitled jointly with the plaintiff—
(a) all persons so entitled shall be parties to the proceeding; and
(b)any person who does not consent to being joined as a plaintiff shall be made a defendant.
Rule 9.06 provides that:
At any stage of a proceeding the Court may order that—
(a)any person who is not a proper or necessary party, whether or not that person was one originally, cease to be a party;
(b) any of the following persons be added as a party—
(i)a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii)a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;
(c)a person to whom paragraph (b) applies to be substituted for one to whom paragraph (a) applies.
Rule 36.01(1) permits the Court, at any stage, order that any document in a proceeding be amended for the purpose of:
(a)determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings.
There was no real dispute between the parties as to the principles relevant to an application for leave to amend a pleading. Crefly’s written submissions summarised those principles correctly:
(a) the power to permit a pleading to be amended is to be exercised to give effect to the ‘overarching purpose’ in s 7 of the Civil Procedure Act 2010 (Vic);[38]
[38]Civil Procedure Act 2010 (Vic), ss 7 and 8; Eaton v ISS Catering Services Pty Ltd (2013) 42 VR 635, [50] (Neave JA, Hargrave and Dixon AJJA); Edwards v Hyundai Motor Company Australia Pty Ltd [2024] VSC 301, [130].
(b) this requires the Court to weigh the respective interests of the parties, as well as case management considerations and the interests of other litigants in the Court;[39]
[39]Butler v JSL Racing Pty Ltd [2016] VSC 22, [23], [31]-[36]; Keegan v Auscool Airconditioning & Mechanical Services Pty Ltd (Ruling No 1) [2020] VSC 61 at [12]–[17].
(c) the overall question in deciding whether to grant leave to amend is whether the proposed amendments would be in the interests of justice;
(d) relevant factors include:[40]
[40]Northern Health v Kuipers [2015] VSCA 172, [28] (Kyrou and McLeish JJA).
(iv) whether there will be a substantial delay caused by the amendment;
(v) the extent of any wasted costs;
(vi) whether there is an irreparable element of unfair prejudice caused by the amendment;
(vii) whether the amendment has the effect of tidying up or clarifying an existing pleading or instead introducing a new case or defence;[41]
[41]Fay v Fay [2022] VSC 103, [47]; Pascoe v Boensch [2009] FCA 1240, [79].
(viii) case management concerns arising from the stage in the proceeding when the amendments are sought;
(ix)whether a satisfactory explanation has been given for seeking the amendment at the stage it is sought;
(x) whether the proposed pleading has a real prospect of success.[42]
[42]Mandie v Memart Nominees Pty Ltd [2016] VSCA 4, [47] (Kyrou, Ferguson and McLeish JJA).
Crefly’s submissions on joinder and amendment
In relation to the joinder of Sortop, Crefly submitted that:
(a) Sortop consented to being joined;
(b) Sortop had an interest in the proceeding because it provided the funds used to pay the deposit and because Mr Bi nominated Crefly on Sortop’s instructions.
Crefly submitted that there is a question, set out in the PASOC, between Mr Bi and Sortop which is directly connected with the central claim in the proceeding, being whether Mr Bi’s rights under the contract of sale, or his interests in the property, are his own or held by him for Sortop. It is just and convenient that this question be determined in this proceeding rather than in a second proceeding.
Crefly said that it was necessary for Mr Bi to remain a party to the proceeding because he is the named purchaser under the contract of sale. It is appropriate for Mr Bi to be removed as a plaintiff and added as a defendant because, as the PASOC sets out, Mr Bi is someone against whom Sortop and Crefly seek declaratory and other relief.
Crefly submitted that their proposed amended pleading was unlikely to cause a substantial delay and the Touvannas would not be prejudiced. In part, the proposed amendments respond to the reason an earlier trial of the proceeding was adjourned, ie Mr Bi’s change of position. Further, Crefly said that to the extent the amended pleading introduces Sortop’s trust claim, it eliminates the prospect of a second proceeding in respect of the same dispute.
Crefly said that their proposed amendments were narrow and added further causes of action, meaning that they would be unlikely to cause significant wasted costs. According to Crefly, the need to amend the pleadings at this time was caused by Mr Bi’s change of position, following which it became necessary for Crefly to identify any independent claim to the relief sought and for Sortop to become involved in the proceeding.
Finally Crefly submitted that their proposed amendments were strongly arguable, regular on their face and supported by an evidentiary base in the filed affidavits.
The Touvannas submissions on joinder and amendment
At the hearing counsel for the Touvannas submitted that I should hear and determine the Touvannas’ strike out application before hearing and determining Crefly’s application to amend its pleading. Counsel reasoned that if Crefly’s SOC was struck out, then Crefly’s application to amend the pleading would effectively become an application by Sortop to join the proceeding and plead a claim against the Touvannas. While perhaps technically correct, I declined to proceed on that basis because, in my view, the overarching purpose enshrined in s 7 of the Civil Procedure Act 2010 (Vic) was best served by hearing both the strike out application and the amendment application at the same time. This is because the question whether the SOC should be struck out requires the Court to consider whether the pleading can be amended to address any deficiencies.
The Touvannas submitted that Sortop ought not be joined as a party to the proceeding because:
(a) the contract of sale is now void ab initio;
(b) Mr Bi has cancelled Crefly’s nomination;
(c) Rule 9.03(1) has no application because Crefly does not claim any relief to which Sortop is entitled jointly with Crefly;
(d) any claim by Sortop against the Touvannas would be hopeless; and
(e) the PASOC does not comply with the Rules in that the pleading is inadequately particularised.
Counsel argued that Crefly lacks standing to seek specific performance of the contract pursuant to its nomination, while Sortop was neither a party to the contract nor nominated by Mr Bi. Sortop’s proposed claim is an unclear and speculative allegation that Mr Bi entered into the contract on Sortop’s behalf pursuant to a resulting or constructive trust.
Counsel submitted that paragraphs 4 to 7D of the proposed pleading do not disclose a cause of action by Sortop against Mr Bi in circumstances where the contract of sale is now void ab initio, and so Mr Bi and Sortop can have no rights under the contract nor interest in the property.
Counsel said that it is inconceivable that Sortop could be granted specific performance of the contract of sale when Sortop was not a party to the contract; was not nominated pursuant to the contract; has not pleaded particulars of the alleged agency agreement between Sortop and Mr Bi; and the parties to the contract of sale did not intend to create a right in favour of Sortop in respect of the property.
At the time the contract of sale was executed on 19 November 2016, the only officer of Sortop was Mr Bi’s mother. Sortop’s current officer, Mr Zhang, was appointed on 30 April 2021. Ms Zhao has never been an officer of Sortop. Counsel submitted this means that Sortop’s deponents are not in a position to provide any evidence on behalf of Sortop as at 19 November 2016 because neither were officers of Sortop at that time.
Counsel argued the new claim represents a radical change from the claim made by Mr Bi and Crefly since 23 December 2021 that Mr Bi was the purchaser and is inconsistent with the existing evidence that Sortop entered into a loan agreement with Mr Bi for the deposit funds.
Paragraph 4A, which is the allegation that Mr Bi entered the contract of sale on behalf of and for the benefit of Sortop, is not adequately particularised because the details of the agency agreement between Mr Bi and Sortop have not been supplied. There is no allegation that the Touvannas were or ought to have been aware at the time of executing the contract of sale that Mr Bi was entering the contract on behalf of Sortop. The proposed amended pleading, at paragraph 7B, concedes the Touvannas were first made aware of the allegation that Mr Bi entered into the contract of sale on behalf of Sortop on about 3 June 2024.
Paragraph 6 which pleads that the deposit of $1,440,000 was paid by Sortop is fundamentally inconsistent with paragraph 6 of the affidavit of Ms Zhao affirmed 1 August 2022 which deposed that Mr Bi paid the deposit.
Paragraph 7 which pleads that Mr Bi lodged the caveat to protect the interest he held on behalf of Sortop is deficient because again, no particulars of the agency agreement between Mr Bi and Sortop have been provided.
Paragraphs 8A-8E, the claim that Crefly is a substitute purchaser, do not disclose a cause of action and have no real prospect of success.
Paragraphs 8F-8K, Crefly’s estoppel claim, do not particularise when and how the alleged representations were made.
Paragraph 8I, which pleads Crefly’s reliance on the alleged representations, does not include adequate particulars.
Paragraphs 18-20 which plead that the purported deeds (which sought to revoke Crefly’s nomination and render the contract of sale void ab initio), are void or voidable, are not reasonably arguable because Crefly is not a party to the contract of sale; even if Mr Bi owed Sortop the fiduciary duties alleged and breached those duties, that would not render the deeds executed by Mr Bi and the Touvannas void or voidable.
The proposed prayer for relief is inadequate and inconsistent with the proposed pleading. Sortop seeks various relief against the Touvannas but its claim is against Mr Bi. Sortop has not adequately pleaded the relief it seeks against Mr Bi separately from the relief sought against the Touvannas.
Counsel submitted that the deficiencies the Touvannas had identified in the PASOC illustrate that Sortop and Crefly have no viable claim against the Touvannas and accordingly, the amendment application should be refused.
Joinder and amendment analysis
I turn first to Sortop’s proposed agency claim contained in section B of the PASOC. Mr Bi and the Touvannas assert that the deed of revocation of the nomination and cancellation of the contract of sale mean that no viable claim can be made by any entity in reliance on the terms of the contract of sale. It is clear from the PASOC that Sortop seeks to plead that, by virtue of its agency agreement with Mr Bi, he did not have authority to enter into those deeds. Consequently, the validity of those deeds is a live issue in the proceeding and not, in my view, one that it would be appropriate to determine on an interlocutory application to amend the pleadings. It follows that I am not satisfied that the existence of the purported deeds of revocation and cancellation preclude Sortop’s proposed agency agreement pleading.
Next the Touvannas sought to argue that because Sortop was not a party to the contract it could not have standing to seek specific performance. Why Sortop, as an undisclosed principal, would not have standing to sue for specific performance of a contract entered into by its agent, Mr Bi, was not the subject of detailed submissions. In my view Sortop’s standing is arguable on the terms of the PASOC, subject to particularisation of its agency agreement with Mr Bi.
While I agree that the PASOC does not currently particularise the agency agreement appropriately, I am not satisfied that, in itself, is a reason not to allow the amendment. Further and better particulars may be furnished, either by the plaintiffs voluntarily or in response to a request from the defendants.
I am satisfied that Crefly has presented an evidentiary basis for the agency and breach of duties allegations. That basis is to be found in the affidavits of Ms Zhao affirmed 3 June 2024 and Ms Chong affirmed 4 March 2024 and 3 May 2024. It is unnecessary to recite that evidence here. The fact that, by this pleading, Crefly puts forward a substantially different case to that previously pleaded is not, in my view, a reason to disallow the amendment. The timing of the introduction of this pleading and any discrepancies in the evidence in support of this aspect of Crefly’s case, are matters that may be explored at trial.
Given that I have decided to allow the pleading to be amended to include Sortop’s trust claim, it follows that I am satisfied that, pursuant to r 9.06(b) Sortop should be joined as a plaintiff to the proceeding.
It is clear from the history of the proceeding to date that Mr Bi is no longer in the same camp as Crefly and Sortop. Sortop’s PASOC claims relief against Mr Bi. Mr Bi told the Court that he has resolved his claims against the Touvannas. Mr Bi, as named purchaser on the contract of sale at the centre of this proceeding, remains a necessary party to the proceeding. In these circumstances it is appropriate that Mr Bi is removed as a plaintiff and joined as the third defendant to the proceeding.
I next turn to Crefly’s proposed amendments to its case that Crefly became a substitute purchaser under the contract.
Crefly’s PASOC substantially supplements its previous pleading that it became a substitute purchaser under the contract. It does so by pleading the Touvannas’ knowledge that Mr Bi would not be the ultimate purchaser, Mr Bi’s nomination of Crefly, the request and acceptance of the guarantee by the Touvannas’ solicitor and Crefly’s ratification of the contract of sale. While I have found above that the way Crefly sought to put this case on its SOC was not arguable, my view is that its supplemented case, as pleaded in the PASOC, renders this aspect of its case at least arguable.
This form of the pleading also engages with the second way that counsel for Crefly said its case was put. That is, that it was open, on the terms of the PASOC, for the Court to find that another contract had been formed with Crefly as purchaser. Crefly’s standing to seek specific performance under the new contract alleged to have been formed does not rely solely on the terms of the contract relevant to nomination. It is distinctly separate from the case put by Crefly on the SOC. I am satisfied that this aspect of the pleading in the PASOC raises an arguable case and should be allowed. I do not agree with the Touvannas’ counsel’s submission that Crefly’s estoppel claim does not particularise when and how the alleged representations were made. Those particulars are pleaded at paragraph 8F of the PASOC. I agree with Crefly’s counsel that this aspect of Crefly’s PASOC is regular on its face and supported by an evidentiary base. It follows that I will also allow Crefly’s estoppel claim.
The interim injunction application
Crefly seeks an interim injunction to restrain Mr Bi and the Touvannas from acting further upon the deeds of cancellation and revocation. In essence Crefly and Sortop seek to restrain the Touvannas from re-selling the property before the conclusion of the trial of this proceeding or further order of the Court.
There was no dispute between the parties as to the principles relevant to the Court’s power to grant an interlocutory injunction. The Court may grant an interlocutory injunction where it is just and convenient to do so. The Court’s discretion to grant interlocutory injunctive relief is broad. It is for the party seeking the interlocutory injunction to demonstrate that they have a prima facie case for the relief they seek and that the balance of convenience favours the grant of an injunction.[43]
[43]Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318, [106] (Beach, McLeish and Hargrave JJA).
For the reasons given above I am satisfied that Crefly and Sortop have raised an arguable case with a proper evidentiary basis on affidavit.
It is thus necessary to consider the balance of convenience.
Crefly’s counsel gave his client’s usual undertaking as to damages, namely that it will submit to any order as the Court may consider to be just for the payment of compensation to any person affected by the operation of the injunction the Court may order. Counsel argued that an injunction was appropriate in circumstances where Mr Bi and the Touvannas, with knowledge of Sortop and Crefly’s claims in their PASOC, purported to enter into deeds the effect of which was intended to render the contract the very subject of the dispute void, before the dispute could be heard and determined by the Court.
Counsel for the Touvannas submitted that there was nothing improper or illegal in them entering into the deeds with Mr Bi in circumstances where they were aware of the claims made by Crefly. Crefly had commenced this proceeding in 2021 and could have sought an injunction at any time, particularly when it was aware since May 2023 that Mr Bi no longer supported its case. Counsel submitted that an injunction would be of no utility in circumstances where Crefly’s nomination had been revoked and the contract of sale had been cancelled in July 2024.
During the course of the hearing counsel for the Touvannas informed the Court, on instructions, that the Touvannas did not intend to try to sell the property or deal with it in any way until this judgment was delivered. Counsel noted that both Sortop and Crefly had lodged caveats on the title which would in any event have a practical impact on any attempt to sell the property.
I am also satisfied that the balance of convenience favours the granting of an interim injunction. I have reached this view because:
(a) Crefly has given an undertaking as to damages;
(b) while Crefly’s delay in applying for an injunction weighs against its grant, the actions of Mr Bi and the Touvannas in purporting to cancel the contract of sale the subject of the dispute, while on notice of Crefly and Sortop’s claims, weigh strongly in favour of granting an injunction;
(c) there is no evidence that a restraint on the Touvannas selling the property before the proceeding is determined would prejudice them in a way that could not be addressed by Crefly’s undertaking;
(d) conversely, if the property were sold to another buyer before the determination of this proceeding, Crefly and Sortop’s claims made in the proceeding would be significantly prejudiced;
(e) the Touvannas’ undertaking not to sell or deal with the property was temporally limited to the determination of the summonses and not the determination of the proceeding;
(f) an injunction will ensure the subject matter of the dispute is preserved pending the trial and determination of the proceeding, or further order of the Court.
Conclusion
For the reasons given above I will grant leave to Crefly to file the PASOC.
It follows that I am satisfied that Sortop should be joined as a plaintiff to the proceeding and that Mr Bi should be removed as a plaintiff and joined as third defendant. I will so order.
I will also make the injunction order in the form sought by Crefly.
Finally, I request that the parties confer on the costs of the summonses. If the parties are unable to reach agreement on costs within 7 days of the date of these reasons, the proceeding will be relisted for oral submissions on costs.
SCHEDULE OF PARTIES
| S ECI 2021 04905 | |
| BETWEEN: | |
| RAN BI | First Plaintiff |
| CREFLY PTY LTD (ACN 619 104 915) | Second Plaintiff |
| - v - | |
| ANDROULLA TOUVANNA | First Defendant |
| CHRISTOS TOUVANNA | Second Defendant |
| AND BETWEEN | |
| ANDROULLA TOUVANNA | First Plaintiff by Counterclaim |
| CHRISTOS TOUVANNA | Second Plaintiff by Counterclaim |
| - v - | |
| RAN BI | First Defendant by Counterclaim |
| CREFLY PTY LTD (ACN 619 104 915) | Second Defendant by Counterclaim |
| DIANDIAN ZHAO | Third Defendant by Counterclaim |
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