Conway v Milburn - [2014] SADC 158

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CONWAY AND ANOR v MILBURN AND ORS
[2014] SADC 158
Judgment of His Honour Judge Barrett
10 September 2014
EQUITY - EQUITABLE REMEDIES - SPECIFIC PERFORMANCE - DEFENCES - FROM NATURE OF CONTRACT - WHERE CONSENT OF THIRD PARTY NECESSARY FOR COMPLETION OF CONTRACT
EQUITY - GENERAL PRINCIPLES - EQUITABLE DEFENCES - LACHES AND DELAY
The plaintiffs and the first defendant entered into an agreement for the sale and purchase of a house property in 2002. The first defendant was registered on the title jointly with his sister, the second defendant, as trustees "without survivorship. An agreed condition of the contract was that the first defendant would obtain execution of a transfer to him solely from either his sister or the Registar of the Family Court. By reason of a property dispute between them, his sister would not execute the transfer. It is unlikley that the Registrar of the Family Court would execute the transfer as the property was no longer matrimonial property. In 2004 the first defendant told the plaintiffs he could not get title and the contract was terminated. The plaintiffs occupied the property without paying rent for 10 years before commencing their proceedings for specific performance. The value of the proptery has increased significantly in that time.
Held: Application for specific performance refused. Contract validly terminated by first defendant due to his inability to obtain title. Plaintiffs guilty of laches.
Real Property Act 1886 s 163; Limitations of Actions Act 1936 s 48, referred to.
Perri and Ano v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Cheshire and Fifoot Law of Contracts 9th Aust Ed ; Barker and Ors v Duke Group Ltd (in Liq) and Ors (2005) 91 SASR 167; [2005] SASC 81; R v McNeill (1922) 31 CLR 76; Collum v Opie (2000) 76 SASR 588, considered.

CONWAY AND ANOR v MILBURN AND ORS
[2014] SADC 158

The plaintiffs seek specific performance by the first and fourth defendants of a contract dated 18 June 2002 for the sale and purchase of a house property at 10 Capper Street, Camden Park. The contract (DJC10) has an addendum (DJC14) bearing the same date. Both documents are signed by the first defendant as vendor and both plaintiffs as purchasers. There are passages in each document which relate to a contingency. The contingency relates to the necessity for there to be an order of the Family Court transferring the ownership of the property from a trust to the first defendant. In the contract the contingency appears as a special condition thus:
SPECIAL CONDITIONS
(Clause 20)
(Identifying Letter of Applicable conditions)
THIS CONTRACT IS SUBJECT TO THE FAMILY COURT OF AUSTRALIA ORDERING THE WITHIN PROPERTY BE TRANSFERED TO THE SOLE OWNERSHIP OF WAYNE JAMES MILBURN FROM CHERYL MYRA MILBURN AND THE SAID WAYNE JAMES MILBURN TO HOLD AS TRUSTEE OF THE MILBURN FAMILY TRUST.
In the addendum the contingency appears as a vendor’s condition of sale thus:
That settlement cannot take place until the transfer under the Family Court order dated 4^th April 2000 on the property at 10 Capper Street, Camden Park has been executed and duly stamped by the State Stamp Duties Office.
The first defendant’s defence to the claim for specific performance is, in part, that he has been unable to obtain that Family Court order despite his best efforts. There are other aspects to the defence but I will deal with that aspect first.
Background
The plaintiffs occupy the Capper Street property as tenants. They have done so since 1996. The first plaintiff, Mr Conway, entered a 12 month tenancy agreement with Waymil Business Services Pty Ltd, a company of which the first defendant, Mr Milburn, was a director, on 27 July 1996 (DJC2). Thereafter, Mr Conway remained in occupation as a monthly tenant. He is a signwriter by occupation. Mr Milburn was his accountant.
The registered proprietors of the property are Mr Milburn and his sister, Ms Cheryl Milburn, the second defendant. On the Certificate of Title (DJC1) there appears after their names the notation “No survivorship”. Section 163 of the Real Property Act 1886 provides that that notation can be taken to indicate that the named persons hold the title as trustees. Mr and Ms Milburn signed a Declaration of Trust (Exhibit 1D14) on 15 April 1977. Clause 3 of that declaration indicates that the signatories hold the subject property as trustees, not beneficiaries.
The property was the subject of property settlement orders of the Family Court (Exhibit 1D15) upon the divorce of the Mr Milburn and his then wife, Ms Christine McInnes, the third defendant. (The third defendant is no longer a party to the present proceedings.)
Pursuant to Clause 2.8 of the Family Court orders made on 4 April 2000, Mr Milburn had the option to purchase the Capper Street property if he paid his wife $120,000. He exercised that option. He paid his wife $120,000. Clause 2.8.2 of the Family Court orders provides:
In the event of the husband exercising his option with respect to the property situate at 10 Capper Street, Camden Park the fourthnamed respondent CHERYL MYRA MILBURN do execute a Memorandum of Transfer in registerable form of her estate and interest therein in favour of the husband at the cost of the husband in all things provided always that in default of execution of the same by the said CHERYL MYRA MILBURN and such default continuing for the period of seven days a Registrar of this Honourable Court shall execute the said Memorandum of Transfer in her stead.
Thus it was that Mr Milburn inserted the contingency into the agreement for the sale and purchase of the Capper Street property. Between the Family Court orders made on 4 April 2000 and the agreement signed on 18 June 2002 he had tried unsuccessfully to have his sister execute a transfer of her interest to him. He had sent her the transfer to sign but she had returned it torn up. That exchange occurred in September 2000.
It is plain from the history of the matter, and the evidence of both defendants, that Ms Milburn did not then, and does not now, trust her brother. There is a degree of hostility between them. I will need to return to that topic shortly, but by the time of the Sale and Purchase Agreement in June 2002 Mr Milburn had reason to think that the only way that he could have the property transferred into his own name was to persuade the Family Court to order the Registrar of the court to execute the transfer in lieu of his sister. Clause 2.8.2 of the Family Court orders provided for that alternative mechanism if she would not do so.
The plaintiffs and Mr Milburn had been discussing the sale and purchase of the property before executing the agreement in June 2002. They had prepared a heads of agreement (DJC6) in 2001, proposing settlement by 31 December 2001.
Mr Milburn had begun his attempts to obtain the necessary Family Court order before he signed the agreement in June 2002. On 24 May 2002 he wrote to the Court Registrar (Exhibit 1D19) enclosing a transfer signed by him as transferee. In the letter he asked the Registrar to sign the transfer in lieu of his sister who had refused to sign. Unsurprisingly the Registrar would not sign the transfer unless the court specifically directed him to do so. The Registrar had apparently telephoned Mr Milburn and suggested he approach his former wife’s solicitors. Equally unsurprisingly, they could not help. They had finished acting for his former wife, and in any event the matter was by then an issue between Mr Milburn and his sister. It was no longer an issue between Mr Milburn and his former wife.
Mr Milburn applied to the court on 4 June 2003 (DJC66) to have the transfer executed. The delay between the letter to the court in May 2002 and the application in June 2003 was partly due to the correspondence with the wife’s former solicitors.
Mr Milburn appeared for himself before Judicial Registrar Forbes on the application. It is plain that the Judicial Registrar was unwilling to order, or to effect, the execution of the transfer without further enquiring into the situation of Ms Milburn. On 8 August 2003 he ordered (Exhibit 1D17) Mr Milburn to file an affidavit setting out a number of matters which were partly related to clarifying Ms Milburn’s position.
Mr Milburn did not pursue his application to the court. He gave unchallenged evidence before me that between September and November 2003 he was in hospital with a serious illness.[1] By reason of his being in hospital he did not attend court on the adjourned hearing and the application was dismissed.
[1] T139.
In the light of the evidence before me from Ms Milburn, I think it is unlikely that the Registrar would have executed the transfer if the application had been pursued.
There is a genuine dispute between Mr and Ms Milburn about whether she has a proprietary interest in the Capper Street property. That dispute is a collateral matter in this trial which I cannot determine. I will describe the dispute rather than resolve it.
Mr Milburn says that the trust deed he and his sister executed in 1977 makes it clear that their interest in the property is merely as trustees. Neither has a beneficial or proprietary interest in the property by reason of being trustees. They hold the property as trustees for a company in which Mr Milburn does have a proprietary interest. That company has received such rent as the plaintiffs have paid.
In cross-examination by his sister, Mr Milburn referred to the Certificate of Title over the property (Exhibit 1D20) to illustrate what he says has happened. The certificate shows that in March 1974 the property was transferred from a joint ownership of Mr Milburn and his parents, to him solely. He says[2] that that occurred because his parents could not, by reason of their age, secure finance to settle on the purchase of a property. It is not clear which property. Mr Milburn was in a position to secure finance so the transfer to him took place. He then obtained a mortgage which is also registered on the title.
[2] T172.
In February 1985 there is registered a transfer to Mr Milburn and his sister as trustees “with no survivorship”. Mr Milburn does not explain why that transfer occurred but he said that he and his sister held the property as trustees for Thrust Enterprises, a company in which he has a proprietary interest. It is common ground between the parties that Ms Milburn did not make any payment towards the purchase of the property. Mr Milburn maintains that his sister has no proprietary interest in the property.
Ms Milburn gave evidence[3] that she believes she does have a beneficial interest in the property. She believes that until her parents died (her father in March 1988 and her mother in 1991) she and her brother were both beneficiaries of a trust set up, with the parents’ agreement, by Mr Milburn, whose expertise as an accountant her parents relied upon. A number of properties, including the Capper Street property, were “moved into the trust”. Ms Milburn believes it was her parents wish that both she and her brother were being afforded “further protection” by that mechanism. She does not believe that her mother’s estate has been satisfactorily settled. She believes that her brother has obfuscated a full settlement.
[3] T55.
Believing she has a proprietary interest in the Capper Street property, Ms Milburn is willing to execute the transfer of the property to the plaintiffs only so long as part of the proceeds are paid to her. Mr Milburn denies his sister’s claim. That is the dispute between them.
I have not been exhaustive about all the details of Mr and Ms Milburn’s evidence on this topic. There is a dispute between them, for example, about the purpose of a payment of $80,000 by Mr Milburn to Ms Milburn in 1995. As I say, I cannot resolve this collateral issue. However, that dispute is why Ms Milburn will not sign the transfer and why, I find, the Family Court would be unwilling to execute the transfer in her stead. In my view the Family Court would decline to hear that dispute because it does not involve matrimonial property. The dispute between Mr Milburn and his wife was resolved by the orders in April 2000.
I might add that, in my view, Mr Milburn has not been very forthcoming in explaining to his sister why he believes that she has no proprietary interest in the Capper Street property. It took some time for me to elicit from him that he had not explained the situation to her[4] but I think it is clear that given the history of their relationship, no explanations by him would resolve the impasse.
[4] T201-2.
I think that by the time Mr Milburn came out of hospital in November 2003, it was reasonably clear to him that he could not get either his sister or the Family Court to execute the transfer to him of the Capper Street property. I say “reasonably clear” because I accept what he says about conversations between him and Mr Conway on that topic in January 2004. Mr Milburn says that he spoke to Mr Conway by telephone. (Mr Milburn lives in Melbourne). He says he explained to Mr Conway that he could not get the transfer executed. Mr Conway asked him if there was anything more he could do.[5] Mr Milburn said that he did not understand that there was anything more he could do, but he would speak to his solicitor. He says he did speak to his solicitor, but the advice was that there was nothing more that could be done. It is really not clear what communications there were between Mr Conway and Mr Milburn thereafter. Mr Conway has tendered an affidavit (Exhibit 1P1) filed on 25 June 2010 in which he sets out a chronology of events and discussions that occurred between the parties from January 2004 onwards. He says Mr Milburn occasionally said that steps were being taken to proceed with the contract. Mr Milburn says he told the plaintiff that there was nothing more he could do to complete the contract. Whatever was said between the parties, I think it is clear that from at least the beginning of 2004, Mr Milburn was not able to have the transfer executed. Mr Conway accepts that somewhere in 2004 or 2005 Mr Milburn did tell him that.[6] The contingency mentioned in both the contract and the addendum could not practicably be overcome. So long as Mr Milburn failed to resolve the, no doubt complicated, dispute with his sister, he had no title to transfer to the plaintiffs.
[5] T140.
[6] T61-3.
The plaintiffs have paid no rent on the property since June 2002. While it may be that Mr Milburn indicated to them in June 2002 that they need not pay rent pending settlement, he certainly sought rent from them from, at the very least, 2006 when he raised the matter with the plaintiff’s then solicitor, Mr Fisher. Getting no agreement from the plaintiffs to pay rent, he applied to the Residential Tenancy Tribunal (“RTT”) in 2007 to have them evicted. The RTT declined to make any orders in the face of a claim by the plaintiffs that they were purchasing the property.
Not only have the plaintiffs paid no rent for over 12 years, but they have not paid all the rates and taxes and insurance on the property. Those outgoings have substantially been paid by Mr Milburn. It appears that from time to time the plaintiffs have paid for repairs and maintenance on the property.
Where an agreement provides for a contingent condition, the party unable to meet the condition may terminate the agreement. That party may do so if he has done what is reasonably required in the circumstances. Once he has done what is reasonable he may indicate to the other party that he terminates the contract. It is, as I have said, clear that at some stage in 2004 or 2005 Mr Milburn did indicate to Mr Conway that the contract was at an end because he could not have the transfer executed.
In Perri and Ano v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 the High Court construed a special condition in a contract for the sale of land that the contract was conditional upon the completion of the sale of the purchasers land. The court held that the special condition required the purchasers to complete the sale of their property within a reasonable time. Once the reasonable time had elapsed, and by implication reasonable efforts had been made, either party could elect to treat the contract as at an end.[7]
[7] See Gibbs CJ at pp 541-44. See also discussion about obligations on contracting parties to cooperate to realise the performance of a contract, Cheshire and Fifoot Law of Contract, 9^th Aust Ed at pp 442-46.
The inability of a contingency to be met may also amount to frustration of the contract.[8]
[8] Cheshire and Fifoot Law of Contract, 9^th Aust Ed [19.3].
I find that after signing the agreement in June 2002, with its clearly articulated contingency, the first defendant took reasonable steps to secure the execution by both his sister and the Family Court of a transfer of the property from the trust to his own name so that the parties could then proceed to complete the sale of the property to the plaintiffs.
I find that the first defendant took those steps within a reasonable time. Ms Milburn had indicated in September 2000 that she was unwilling to sign, and that has remained the case until the present, except on terms which involve the resolution of the dispute between the siblings. The first defendant had begun the process of persuading the Family Court to execute the transfer just before signing the agreement in June 2002, and he continued those efforts until late 2003. By then I find the Family Court would not have executed the transfer. I find that sometime in 2004 the first defendant told Mr Conway that the contract could not be performed. He effectively terminated the contract.
In my view, these findings conclude the matter. I cannot order specific performance of the contract because it has been validly terminated by the first defendant.
The first defendant submits that there are other reasons why specific performance should not be ordered. I turn to those alternative submissions.
Laches
The plaintiffs seek the equitable relief of an order for specific performance. The first defendant says that the plaintiffs should not be given that equitable remedy because they are guilty of laches, that is undue delay causing him substantial detriment. The principle of laches has been explained in recent times by the Full court of South Australia in the case of Barker and Ors v Duke Group Ltd (in Liq) and Ors (2005) 91 SASR 167 and [2005] SASC 81. At [42] Perry J (with whom Duggan and White JJ agreed) said this[9]:
The relevant principles in considering the defence of laches are clearly established. There must be unreasonable delay in the institution of the proceedings and it must be established that by reason of the delay there has been such a substantial detriment to the defendant as to render it unjust to allow the claim to be prosecuted.
[9] See also Collum v Opie (2000) 76 SASR 588 and [2000] SASC 107 per Gray J at [54]-[57].
It will not be sufficient to make out the defence of laches if a plaintiff has been merely tardy in seeking his legal remedy. The delay must be unreasonable in the circumstances. Further, it must be demonstrated that the defendant has suffered a substantial detriment so that it is unjust to allow the plaintiffs’ claim.
I have found that sometime in 2004 or 2005 Mr Milburn told Mr Conway that the contract was at an end. Mr Conway admits as much.[10] The plaintiffs did not institute their proceedings until 2010. They have paid no rent for 12 years. The agreed price of the property was $155,000. The value of the property is now over $400,000.[11]
[10] T61-2.
[11] Exhibit 1D16 – Land Tax value $405,000, Emergency Services Levy assessment $460,000.

It is true that the plaintiffs did seek legal advice in 2006 to see what remedies they might have. I can accept that embarking on legal proceedings must be daunting, particularly for people who expect that they may have to represent themselves. Nevertheless the plaintiffs are seeking specific performance of a contract entered into 12 years ago, albeit that they probably were not told until 2004 that the contract could not be completed. They did commence their proceedings in 2010. That gap is 6 years.
I find that the delay is unreasonable and that Mr Milburn will suffer a substantial detriment if he is now required to perform the contract. It would be unjust to require him to do so. I find that the plea of laches has been made out. For that additional reason I would refuse the application by the plaintiffs for specific performance.
Limitations of Actions Act
Allied to the topic of delay is the application by the plaintiffs to extend the time in which to institute their proceedings.
The plaintiffs seek specific performance of the contract. They seek a remedy in equity so, as Mr Keen for the first and fourth defendants concedes, the Limitations of Actions Act does not directly apply. He goes on however to submit that the act may be applied by analogy. He cites in support of that proposition the remarks of Isaacs J in R v McNeill (1922) 31 CLR 76 at 100.
In a claim for a breach of contract the claim must be brought within six years of the breach.
I do not find it necessary to discuss this question at length. If I were to accept that it was proper to draw an analogy between the plaintiffs’ action and equity seeking specific performance and a claim for breach of contract, I would concluded that the proceedings should have been instituted within 6 years of the breach. The proceedings were commenced in June 2010. I think it is likely that the plaintiffs knew by January 2004 that Mr Milburn was asserting that he could not proceed with the contract. However, it might have been that he spoke to them later than that, possibly even after June 2004. In those circumstances it may be said that the plaintiffs learnt of facts which they concluded amounted to a breach of the contract within six years of instituting their proceedings. I would therefore grant the application of an extension of time in which to institute the proceedings.
He who seeks equity must do equity
It is a maxim of the law of equity that he who seeks equity must do equity.
Mr Keen submits that the plaintiffs claim for the equitable remedy of specific performance should be rejected because the plaintiffs have not themselves done equity. They have paid no rent for twelve years. They have gone so far as to resist paying rent when Mr Milburn sought rent, first by claiming it from them directly, and then by attempting to evict them by applications to the RTT. They have paid no interest on the purchase price. They have not even assumed the obligation to pay all the rates, taxes and insurances, although at times they have made such payments. While they have incurred some expenses in maintaining the property, Mr Milburn has been deprived of income from the property for twelve years.
I think it is likely that at some stage around the time of signing the contract in June 2002 Mr Milburn did tell Mr Conway that the plaintiffs need not pay rent until settlement. However I am satisfied that when he realised that he could not complete the contract, he sought rent from them. I cannot determine when he first asked for rent but it is clear that, whenever it was made, the request was immediately rejected.
I would refuse the application for the equitable remedy of specific performance on the ground that the plaintiffs have not themselves done equity.
Plaintiffs ready willing and able to complete the contract
The plaintiffs have given evidence that at around the time they entered into the agreement in June 2002 they obtained verbal agreement for a loan to finance the purchase. The lender was not willing to put the offer of finance in writing because there were caveats on the title. The plaintiffs called a Mr Vass at trial who testified that he had granted the plaintiffs approval for finance for the transaction. He referred to a letter in 2011 doing so, but he said the approval had been granted long before that. He said that he was still willing to grant finance to the plaintiffs.
On the basis of the plaintiffs’ evidence and that of Mr Vass, I would have found that the plaintiffs were at all times ready willing and able to complete the contract.
After the evidence had concluded, Mr Keen applied to reopen the case for the defendants saying that he wished to adduce evidence that Mr Vass was not in a position to make available to the plaintiffs the finance he said he would make available. That application was made on the adjourned date set down for addresses.
I ruled that I would defer consideration of the application until after I had delivered judgment on the other aspects raised in the trial. In the light of the findings I have made, I decline to grant the application. I have found that the plaintiffs’ application for specific performance must fail because:
1)the contract was validly terminated by Mr Milburn in about 2004,
2)the defendants’ laches defence has been made out, and
3)the plaintiffs have not themselves done equity.
In those circumstances I decline the defendants’ application to reopen his case, but I do so without considering the merits of the application.
I turn to consider the final position regarding the parties.
The plaintiffs
I grant an extension of time for the institution of the action pursuant to s 48 of the Limitations of Action Act.
I dismiss the plaintiffs’ claim for specific performance and consequently I dismiss the applications for orders that the first and second defendants execute a Memorandum of Transfer.
I dismiss the plaintiffs’ applications that the third and fourth defendants withdraw caveats.
I dismiss the plaintiffs’ claim against the first and second defendants for damages for conservation and improvement of the property.
First defendant - Mr Wayne James Milburn
I dismiss the Cross Action (Contributory Notice) against the second defendant.
Second defendant - Ms Cheryl Myra Milburn
I dismiss the Cross Action (Contributory Notice) against the first and fourth defendants.
Third defendant – Ms Christine Mary McInnes
I note the Notice of Discontinuance filed by the plaintiffs on 28 October 2013 in respect of the third defendant.
Fourth Defendant – Thrust Enterprises Pty Ltd
I dismiss the Cross Action (Contributory Notice) against the second defendant.