Dreamfields Pty Ltd ATF the Culkin Lawrence Family Trust v Zacutti as Executrix of the Will of John Luxmoore
[2018] VCC 2073
•13 December 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-17-06121
| Dreamfields Pty Ltd ATF the Culkin Lawrence Family Trust & Anor | Plaintiffs |
| V | |
| Zacutti as Executrix of the Will of John Luxmoore | Defendant |
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JUDGE: | Judicial Registrar Tran | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19, 20 and 23 November 2018 | |
DATE OF JUDGMENT: | 13 December 2018 | |
CASE MAY BE CITED AS: | Dreamfields Pty Ltd ATF the Culkin Lawrence Family Trust & Anor v Zacutti as Executrix of the Will of John Luxmoore | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 2073 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT; EQUITY
Catchwords: Heads of Agreement for sale of land - subject to preparation of formal contract by solicitor and provision of Section 32 - whether intention to create legal relations - Amadio unconscionability - whether special disadvantage - extent of knowledge - whether land sold at undervalue.
Legislation Cited: Sale of Land Act 1962 (Vic), ss32, 32K, 32L
Cases Cited:Masters v Cameron (1954) 91 CLR 353; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; Molongolo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326; Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155; Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd (2013) 46 VR 447; Perri v Collangatta Investments Pty Ltd (1982) 149 CLR 537; Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; Etna v Arif [1999] 2 VR 353; Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd (2015) VSCA 128; Thorne v Kennedy (2017) 350 ALR 1; Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; Jenyns v Public Curator (Qld) (1953) 90 CLR 113
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W. Gillies | SLM Law |
| For the Defendant | Mr J. Rizzi | Savage & Co Pty Ltd |
JUDICIAL REGISTRAR TRAN:
1 On the afternoon of 1 July 2017, Betty[1] took a bottle of wine[2] from the fridge and invited Robin[3] and his partner Marie to share a glass with Betty and her close friend, Grazyna. They were seated around the kitchen table in the former home of Betty’s deceased brother Jack, on the outskirts of the Birregurra township.
[1] The Defendant.
[2] There was some dispute in the evidence at trial as to whether the wine was champagne or chardonnay, presumably on the basis that champagne was a more ‘celebratory’ drink. I do not think the difference is significant.
[3] The Second Plaintiff.
2 Betty and Robin had just signed a document entitled “Heads of Agreement” that recorded details of an agreement that Betty would sell some of Jack’s land to Robin, for a total price of $93,000. Robin and Marie lived on a property just a little further down Kettle Lane. The land to be sold adjoined Robin’s farm and would provide him extra land to extend his nursery and olive grove.
3 Betty, Grazyna, Robin and Marie chatted for another hour and a half or so before Robin and Marie headed home for dinner. Everyone appeared to be happy and friendly and pleased with the agreement which had been made that day. Indeed, arrangements were made to meet up again in the future for purely social reasons. Not only had a mutually satisfactory agreement been made, but it seemed that new friends had been made.
4 Later, perhaps as early as a few days later, Betty got cold feet. An unnamed person or people in town suggested to her that she had been “conned”. She became concerned that she had been misled as to the extent of the friendship between Robin and her deceased brother and had sold the land at an undervalue. She felt like “someone had done a damn good job on me”. She determined, with the benefit of advice from her lawyers, that she did not wish to proceed with the sale.
5 The fundamental issue in this proceeding is whether Betty is free do so, or whether the Heads of Agreement constitutes a legally enforceable contract of sale.
Background
Contacts prior to the Birregurra meeting
6 Betty’s brother Jack died on 19 April 2017, at the age of 90. At the time of his death, he owned a large portfolio of properties in Melbourne and in and around Birregurra, with a value in the vicinity of $11 million. His will[4] appointed Betty as his sole executor and, effectively, the ultimate beneficiary of the majority of his estate.
[4]As amended by a codicil dated 29 September 2016.
7 At the time of Jack’s death, Robin was on holiday in Port Douglas. He spoke to someone from Birregurra on the phone who let him know that his former neighbour Jack had died.
8 According to Robin, there was then a series of telephone conversations between him and Betty. Robin said he rang Betty and offered his condolences, and then asked if the property abutting his land was for sale. He said that Betty said that she was on holidays and that the property hadn’t been sold and that they should discuss matters further in about three weeks’ time. He said that he spoke to her again about three weeks later and asked her if she was still interested in selling the property and told her that he was interested in buying it. She said that she needed to speak to an agent to establish what price she wanted for it. He said he had a further telephone conversation with Betty after this, in which Betty said she was still interested in selling the property and that she wanted $70,000 for the property. He said that she also said she wanted $160,000 for the block with Jack’s house on it and $80,000 each for two smaller blocks adjoining the house block. During the course of this conversation, Robin said he told Betty about a “man in a blue car” who he had seen at the property, who had said that he was Robin’s new neighbour. Robin said that he formed the view that the man in the blue car had been “aggressive”, but he denied telling this to Betty or describing the man as suspicious.
9 Betty and Robin then made an arrangement to meet at Betty’s home in Brighton. However, on the day of the arranged meeting, Robin called Betty to confirm the meeting and she asked him not to come that day as she was tired. They arranged to meet in about a fortnight in Birregurra.
10 Betty’s account of her contacts with Robin prior to the meeting in Birregurra was considerably shorter. She described receiving one voice message just as she was arriving home carrying shopping and with the dogs barking, in which a voice said something about a blue car going onto land. She said she ignored this message and assumed if it was important they would call back. She said about two weeks later she received a phone call from Robin in which he introduced himself as Robin from the Olive Grove and said: “I thought I should let you know that there’s been someone suspicious hanging around the land in Kettle Lane, and I was at the front of my place and a man drove up in a blue sedan and he got out and opened the gate and I said what are you doing, and he said, this is my land, I’ve bought this land now. And he said it in an aggressive manner and there was a woman and a small child in the car and he drove onto the land and closed the gate”. She said that Robin also asked if she had sold the land. She described the conversation which followed with some precision:
…I said “no, I haven’t got probate yet, I haven’t done anything” and he said “well, because I’m the next door neighbour to this block I should have the first right to buy it” and I said “well, fair enough, you know I can understand that if you’ve got a neighbour you’d ask them if they were interested in that land”, and he said, “When are you coming down again?” And I said “well, as a matter of fact I am coming down in three or four days”. So he said, “Can I come over and see you?” And I said “yes, okay”.
11 She said that she must have got Robin’s phone number in this conversation because she later rang him and said she wouldn’t be down for another week.
12 It is not easy to resolve the conflict in the evidence about the number of contacts between Robin and Betty, and the content of those contacts, prior to the meeting at Birregurra. There was an element of reconstruction in the evidence each of the witnesses gave at trial. All of the factual witnesses called clearly had strongly held views about the justice of the case. Betty, Grazyna and Marie were particularly eager to volunteer information or conclusions which they felt was supportive of those views. There was also a striking contrast between the detail in which some conversations were recalled (such as the conversation recalled by Betty set out above) and the complete lack of recollection about other details. Whilst it may not have been deliberate, at times it seemed to me that there was a tendency by Betty and Grazyna, particularly, to be unable to recollect aspects of events which were not favourable and to exaggerate the certainty with which recollections of favourable aspects were held.
13 Overall, I prefer Robin’s recollection of the conversations between Robin and Betty. Betty may well have genuinely believed by the time of trial that Robin had left an answering machine message in which he referred to the man in the blue car. However, on her own evidence, she couldn’t properly hear the message because she was distracted by shopping and dogs barking, and ignored it. It was only two weeks later when Robin called her again that she made the connection between the barely heard message left two weeks earlier and what Robin was then telling her over the telephone.
14 Betty also accepted in cross-examination that Robin had made an arrangement to visit her house in Brighton which she cancelled because she was tired. No mention was made of this additional phone call in Betty’s evidence-in-chief.
15 Overall, I think it more likely that there was a series of phone calls, as described by Robin in his evidence, culminating in an arrangement for Robin and Betty to meet. That meeting was originally to be at Betty’s Brighton home, but at Betty’s request it was moved to Jack’s former home in Birregurra.
16 Although there was some inconsistency in Robin’s evidence,[5] Robin was quite specific that Betty said she would accept $70,000 for the property and proposed prices for other adjacent properties during the course of one of these phone calls. I accept that a figure of $70,000 was at least discussed during the course of one of the phone calls and that Betty gave Robin the impression that she would be prepared to sell the property for $70,000. It would be a very bold negotiating move if Robin turned up to the meeting in Birregurra with a cheque for $70,000, and a Heads of Agreement with $70,000 typed in, without that figure even having been mentioned previously. Robin did not strike me as the sort of person who would do this. I also accept that Betty told Jack the price she wanted for the other nearby properties.
[5] In evidence-in-chief he placed the conversation in which he said Betty suggested a price of $70,000 after he spoke to a valuer, in cross-examination and re-examination he said that this conversation occurred before he spoke to a valuer.
17 Shortly prior to the meeting at Birregurra, Robin’s partner Marie consulted SLM Lawyers. On her instructions, SLM Lawyers drew up a draft document which was emailed to Marie as a pdf document later that day. The draft document prepared by SLM Lawyers was headed “Heads of Agreement”. It contained sections for “VENDOR” name and address, “Vendors solicitor/conveyancer” name and address, “PURCHASER” name and address and “Purchasers solicitor/conveyancer” name and address. The box directly to the right of “Name” under the heading “PURCHASER” was pre-filled with “Dream Fields Pty Ltd (ACN: 086 299 541) ATF the Culkin-Lawrence Family Trust”. Otherwise the purchaser and vendor sections were left blank. Under a heading of “SUBJECT MATTER” there were sections for “Property”, “Purchase Price”, “Initial Deposit” and “Settlement Date”. A figure of “$70,000” was inserted next to purchase price. Next to “Property” were the words “Lots” and “Kettle Lane, Birregurra, VIC 3242”.
18 Directly underneath these sections, were the following words:
“The Vendor agrees to sell and the Purchaser agrees to buy on the terms and conditions set out above.
Special Conditions
This Agreement is subject to and conditional upon the following:
1. The sale is subject to and conditional upon the Vendor providing the Purchaser with a Contract of Sale and Section 32 Vendors Statement. The sale is further subject to and conditional upon the Purchaser’s solicitor or conveyancer approving the contents of the Contract of Sale.
2. The Purchaser agrees to pay an initial deposit of $ upon signing of this Agreement to the Vendor. In the event of this sale not proceeding prior to the signing of an unconditional Contract of Sale, any deposit monies paid will be refunded to the Purchaser in full.”
The Birregurra meeting
19 The meeting, as I have said, took place in the kitchen of Jack’s former home in Birregurra, on a Saturday, most likely on 1 July 2017.[6] Robin, Marie, Betty and Grazyna were seated around the kitchen table. At first there was some small talk. During the course of this conversation, it is likely that Robin spoke of his friendship and respect for Jack. According to Grazyna, the conversation travelled more broadly to topics such as children and divorces. The man in the blue car may or may not have been mentioned. Grazyna and Robin said he had been mentioned. Betty said he had not. Marie was not asked and did not say.
[6] The Heads of Agreement was dated 2 July 2017 and the evidence given at trial was to the effect that the meeting occurred on Saturday 2 July 2017. It was only after the Plaintiff’s evidence had closed that the parties realised that 2 July 2017 was in fact a Sunday. It was agreed by Counsel that the weight of the evidence was that the meeting took place on a Saturday.
20 At some point in time, the conversation turned to the sale of the property. Robin and Marie both gave evidence that there was a map showing the property on the table when they arrived. Neither Betty nor Grazyna denied that the map was at the meeting, but they denied it was there at the start of the meeting. Betty thought perhaps she might have brought it out during the course of the meeting, but could not remember. I accept that the map was provided by Betty and that it was certainly present on the kitchen table by the time the Heads of Agreement was filled in and signed.
21 Robin’s evidence was that at the meeting he went to hand over the cheque for $70,000 and Betty said she had spoken to the agent and the agent said she couldn’t sell it for less than $96,000. He said that he was “shocked”, but offered her $90,000. Betty said she would meet him half way at $93,000 and they reached agreement.
22 Both Betty and Grazyne denied any substantial recollection of this crucial part of the Birregurra meeting. In particular, they had great difficulty in explaining the increase in the proposed purchase price from $70,000 to $93,000 during the course of that meeting. I was left with the distinct impression that their lack of recollection of what took place was in part explained by the fact that a negotiated increase to the price was not consistent with the picture of the exploited and anxious elderly lady that they sought to portray.
23 It is clear that at some stage during the meeting, Robin was persuaded to increase his offer to purchase the land from $70,000 to $93,000. I find that the most plausible explanation is the one given by Robin, that Betty negotiated the price up to $93,000 by first saying that she would not accept less than $96,000, to which Robin responded by offering $90,000, with the two “meeting in the middle” at $93,000. I note that Grazyna accepted under cross-examination that there was negotiation between Robin and Betty, which included discussion of a price per acre.
24 Robin’s evidence was that Betty said that she had spoken to an agent. Whilst I do not make any finding that Betty had in fact consulted an agent before the Birregurra meeting, I find that it is more likely than not that Betty said something during the Birregurra meeting that gave Robin the impression that she had consulted an agent. When cross-examined about what was said at the Birregurra meeting she conceded that she “might have said if I spoke to someone [ie: an agent] I’m sure they’d say that [I couldn’t sell it for anything less than $96,000]”.
25 I also accept Robin’s evidence that the meeting ended happily. Once agreement was reached on price, Grazyna, Robin and Marie participated in handwriting the details of the agreement onto two copies of the Heads of Agreement which had been prepared by the Plaintiffs’ lawyers. These two copies were then signed by Robin and Betty and witnessed by Marie and Grazyna. They all shook hands and Robin and Betty embraced. Betty and Marie shared a hug.
26 I do not accept that there was anything to indicate to Robin that Betty was feeling at all anxious or pressured by what took place at the Birregurra meeting. To the contrary, Betty then brought out a bottle of wine. Marie and Betty had a glass and the four chatted for another hour and a half or so. They made arrangements to meet up again socially at a later date. As Robin put it: “Everything was lovely and friendly”.
27 At the conclusion of the meeting, Betty requested a copy of the draft Heads of Agreement for use in a meeting with a prospective purchaser of another property later that week. Grazyna subsequently followed up the request for the Heads of Agreement by telephone and Marie dropped off copies the following day. A few days later, Betty used this Heads of Agreement to record her agreement to sell one of Jack’s other properties to another purchaser for $580,000.
Defences
28 On behalf of the Plaintiffs, it is said that the Heads of Agreement was a legally enforceable contract of sale. On behalf of Betty it was said:
a) there was no intention to create legal relations;
b) for various other reasons, the Heads of Agreement was unenforceable: special conditions were not fulfilled, the parties to the Heads of Agreement were uncertain, the three lots comprised in the property were mis-described and Betty was not authorised to enter into the Heads of Agreement as agent for Jack; and
c) the conduct of Robin in procuring the execution of the Heads of Agreement was unconscionable and any binding contract of sale should be set aside on that basis.
Intention to create legal relations
29 The starting point on whether Heads of Agreement constitute a binding and enforceable contract is Masters v Cameron.[7] In that case the High Court described three classes of cases:[8]
[7] (1954) 91 CLR 353.
[8]Masters v Cameron (1954) 91 CLR 353, 360.
a) cases where “the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect”;
b) cases where “the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document” and
c) cases where “the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract”.
30 The first two classes of case create a binding contract, the third does not.
31 A fourth class of case was identified in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd,[9] as being cases where “the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”.
[9](1986) 40 NSWLR 622 at 628.
32 It was submitted by the Plaintiff that the Heads of Agreement was either in class one, two or four (all binding). It was submitted by Betty that it was in class three (non-binding).
33 There is a striking similarity between the facts of Masters v Cameron and the facts in the present case. The agreement in Masters v Cameron was an agreement for the sale of farming land signed by a widow. All the essentials of a contract of sale of land had been agreed, including the parties, the property, the price and the date for possession.[10] However, the agreement provided “This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions…” The High Court treated these words as words of similar import to “subject to contract” and noted that, although not intractable, “prima facie [such words] create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract”.[11] It was held that there was no binding contract for the sale and purchase of the land.
[10]Masters v Cameron (1954) 91 CLR 353, 360.
[11]Masters v Cameron (1954) 91 CLR 353, 362-364.
34 There are numerous authorities in which Masters v Cameron is applied and the three, or perhaps four, classes of case are considered. It is not necessary for me to exhaustively review these cases. Each case turns on the particular words used and the intentions of the parties, determined objectively from the text of the document and the circumstances in which it was executed.[12] As noted by the Court of Appeal in Molongolo[13] “It is important to bear in mind that the four Masters v Cameron categories are not intended to be exhaustive or strict and that the issue of classification ought not be allowed to obscure the real task of ascertaining the intentions of the parties”.
[12]Molongolo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147, [130]-132], see also [125] and [148].
[13]Molongolo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147, [148].
35 In the present case, the objective circumstances which may indicate an intention that the Heads of Agreement was not to be binding are as follows:
a) The use of the words “Heads of Agreement” as the title of the document.
b) The lack of the use of easily included and clear words such as “legally binding”,[14] despite the fact that the Heads of Agreement was drawn up by the Plaintiffs’ lawyer.
[14] Compare GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631.
c) The use of the words “The sale is subject to and conditional upon the Vendor providing the Purchaser with a Contract of Sale and Section 32 Vendors Statement. The sale is further subject to and conditional upon the Purchaser’s solicitor or conveyancer approving the contents of the Contract of Sale”. Whilst these words are more specific as to process than the words used in Masters v Cameron, they are words of similar import. As in Masters v Cameron, whilst not intractable, they suggest that the Heads of Agreement was subject to contract and not intended to be binding.
d) The use of the words “subject to and conditional upon” twice in Special Condition 1. Counsel for the Plaintiffs submitted that the first use of the words “subject to and conditional upon” carried with it an obligation upon Betty to provide the Plaintiffs with a Contract of Sale and Section 32 Vendors Statement. However, he asserted that the second use of “subject to and conditional upon” carried with it no obligation upon the Plaintiffs to approve the contents of the Contract of Sale. It is more likely that a consistent use was intended (ie: that neither step in Special Condition 1 was mandated or both were). If the Plaintiffs’ argument were accepted, the result would be that Betty bound herself absolutely to sell the property, whilst leaving the Plaintiffs free to disclaim it by not approving the Contract of Sale.
e) The reference in the Heads of Agreement to a future “Contract of Sale” and an “unconditional Contract of Sale”, suggesting that the Heads of Agreement was not a contract of sale.
f) The contemplation in the Heads of Agreement of the “sale not proceeding” in which case “any deposit monies paid will be refunded to the Purchaser in full”.
g) The contemplation by the parties (as evidenced by the objective circumstances) that further action would be required by the parties’ lawyers to finalise the sale.[15] Robin’s partner Marie gave evidence that the words “We’ll finalise the rest through the lawyers” were said at the Birregurra meeting.[16] In view of Marie’s evidence, I find that there was discussion at the meeting of the need for further work by lawyers to “finalise” the sale. This is part of the objective circumstances which favours the view that the Heads of Agreement were not binding. On the other hand, Marie’s subjective view that the Heads of Agreement was “the contract” is not.
[15]The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326, [45(g)].
[16] I note that Betty and Grazyna both gave evidence that Robin said his lawyer would take care of things. Robin denied that he said this. As the Heads of Agreement in fact contemplated that Betty’s lawyer would draw up the contract of sale, I prefer Robin’s evidence on this point.
h) The fact that the Heads of Agreement concerned real estate.[17]
[17] The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326, [45(f)]; Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155, [28]-[29]; Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd (2013) 46 VR 447[40] .
i) The fact that the Heads of Agreement was provided to Betty for the first time at the Birregurra meeting, rather than being the result of a process of negotiation and considered decision-making.
j) The fact that Betty had not had an opportunity to obtain legal advice on the Heads of Agreement.[18]
[18]The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326, [45(g)].
k) The fact that a section 32 statement had not been provided by Betty at the time of signing the Heads of Agreement. Section 32K(3) of the Sale of Land Act 1962 (Vic) provides that a purchaser may rescind any contract for sale of land where the vendor fails to give the purchaser a section 32 statement before the purchaser signs the contract at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits. Section 32L makes it a criminal offence to knowingly or recklessly “fail to give a purchaser a section 32 statement signed by the vendor before the purchaser signs the contract for the sale of land”. If the Heads of Agreement was a contract for the sale of land, Betty was thus both binding herself unconditionally to a contract which the Plaintiffs could rescind at any time before acceptance of title and exposing herself to potential criminal liability.
l) The uncertainty and informality surrounding the description of the Purchaser:
i. In the Heads of Agreement, under the heading “PURCHASER” next to the word “NAME” were the handwritten words “Robin Culkin”. Next to that were the typed words “Dream Fields Pty Ltd (ACN: 086 299 541) ATF the Culkin-Lawrence Family Trust”. The address 35 Kettle Lane was handwritten twice, under both “Robin Culkin” and “Dream Fields Pty Ltd…”. The Heads of Agreement was signed by Robin as Purchaser and the words “Robin Culkin” are handwritten above his signature. Robin provided no explanation for the use of “Robin Culkin” rather than Robin Culkin-Lawrence under cross-examination. The Heads of Agreement is not expressly signed on behalf of Dream Fields Pty Ltd.
ii. In this proceeding the First Plaintiff is described in the writ and statement of claim as “Dreamfields Pty Ltd ATF the Culkin Lawrence Family Trust (ACN 089 003 252)”. The Second Plaintiff is described as “Robin John Culkin-Lawrence”. It was common ground in closing submissions that the ACN listed for the First Plaintiff in the writ and statement of claim was the ACN of a company known as Noble Olive Groves Pty Ltd rather than a company known as Dreamfields Pty Ltd. The ACN used in the Heads of Agreement (ACN 086 299 541) was the ACN of a company called Dream Fields Pty Ltd.[19]
[19] Had I formed the view that the Heads of Agreement weas otherwise binding I would have required an amendment to the Writ and Statement of Claim prior to granting the relief sought. However, I would not have refused relief solely on the basis of the mis-description of the First Plaintiff in the Writ and Statement of Claim given the Defendant’s failure to raise this as an issue until trial.
iii. Nowhere in the Heads of Agreement does it expressly specify whether Robin and Dream Fields Pty Ltd were purchasing the property jointly, or whether they were each to have the option to purchase the property or whether Robin was signing solely on behalf of Dream Fields Pty Ltd. Indeed, Counsel for the Plaintiff submitted in closing that Betty could select from either Robin or Dream Fields Pty Ltd or both.
Whilst not determinative, I accept that the lack of clarity and formality concerning the identity of the purchaser(s) weighs against an objective intention that the Heads of Agreement be binding.
m) The other informal aspects of the agreement, including:
i. its brevity;
ii. the description of the Vendor as “Betty Zacutti (Acting Agent for Jack Luxmoore)”. All witnesses denied being the original source of these words. Regardless, the informality of the words used does provide some support for the Betty’s contention that the Heads of Agreement was not binding;
iii. the description of the property. The property is described in the Heads of Agreement as “‘Lots 1. AP101447, 2. AP101448, 3. AP101449”. This is not a description utilised on a plan or title held by the Registrar of Titles. The failure to use a method of describing the property which accords with documents held by the Registrar of Titles is somewhat informal. On the other hand, these descriptions were used on a map which was on the kitchen table at the Birregurra meeting during the course of negotiations. In the objective circumstances, I find that they were sufficient to identify the lots which comprised the property and which were the subject of the Heads of Agreement. I have not given this aspect of informality significant weight;
iv. the use of an incorrect date. The weight of the evidence was that the Birregurra meeting took place on a Saturday. The Heads of Agreement was dated 2 July 2017, which it was accepted was a Sunday; and
v. the lack of any clauses concerning GST and other clauses normally found within contracts of sale of real estate.[20] In relation to this, I note that the relief sought in the Statement of Claim is that the Defendant “specifically perform the Heads of Agreement by producing a Contract of Sale to the plaintiffs”. Nothing is said as to the contents of that Contract of Sale; nor as to what should occur if that Contract of Sale contains terms and conditions unacceptable to the Plaintiffs.
n) The fact that Betty did not yet have probate. I mention this factor for completeness, but it is not a particularly compelling factor against the Heads of Agreement being binding. Betty and Marie’s evidence was that Betty was assured by Robin that the Heads of Agreement could be signed even if Betty did not have probate. Betty’s Counsel ultimately accepted at trial that as a matter of law this was correct. It was therefore part of the objective circumstances that Betty chose to sign the Heads of Agreement having been told she could do so without having probate.
[20]The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326, [45(d)].
36 Counsel for the Plaintiffs submitted that the objective intention of the parties was to be bound immediately and that the provision of a section 32 statement and a contract of sale was a condition precedent to performance by the Plaintiffs rather than a condition precedent to contract.[21] The objective circumstances which may support that view are as follows:
[21]Perri v Collangatta Investments Pty Ltd (1982) 149 CLR 537, [15]-[17].
a) The existence of all essential terms of the agreement. However, the question of intention to create legal relations is separate from the question of whether sufficient terms have been agreed to constitute a contract.[22] For example, all essential terms of the agreement were agreed in Masters v Cameron but the agreement was nevertheless held to be non-binding.
[22]Nurisvan Investment Limited v Fibo Australia Pty Ltd [2017] VSCA 141, [108].
b) The fact that agreement was reached after some negotiation of price. However, some negotiation of price would be normal and expected before the signing of a Heads of Agreement, whether binding or not.
c) The payment of a very significant proportion of the sale price as a deposit. I find that the reason such a large deposit was paid was convenience, given that this was the amount of the cheque brought by Robin to the meeting. I also note that the deposit must be considered in the context of the express term in the Heads of Agreement that the deposit was to be returned in full if the sale did not proceed.[23]
[23] See discussion of payment of deposit in Masters v Cameron (1954) 91 CLR 353, 364-5.
d) The fact that the document was signed by Betty and Robin and witnessed by Marie and Grazyna, which is suggestive of a level of formality.
e) The subsequent statement by Betty over the telephone to the effect that Robin should treat the land as his home.[24] Although post-contractual conduct can be relevant and admissible on the issue of whether a contract was in existence, it is not always relevant. In Nurisvan,[25] the Court of Appeal stated: “The issue in the present case concerns whether it was the intention of the parties, on execution of that document, to conclude a binding agreement between themselves. That question was to be determined, objectively, from the text of the document, construed in the context of the circumstances in which it came into being. In such a case, and subject to one qualification, it is difficult to understand how subsequent negotiations between the parties, and, in particular, their subsequent attitude to the Heads of Agreement, could be determinative of the question whether, at the time the document was executed, it was intended to be a binding contract between the parties.” The reasoning of the Court of Appeal in Nurisvan applies equally to the present case.
[24] Betty denied making this statement. I prefer Robin’s evidence.
[25]Nurisvan Investment Limited v Fibo Australia Pty Ltd [2017] VSCA 141, [110].
37 Had I considered the text of the Heads of Agreement in the absence of any evidence as to the objective circumstances, I would have found that it did not, on its face, amount to a binding contract. Taken as a whole, the evidence led at trial as to the surrounding circumstances in which the Heads of Agreement was signed serves to reinforce that conclusion. I find that the objective intention of the parties was that the Heads of Agreement be non-binding.
38 Accordingly, the Plaintiffs’ claim should be dismissed.
Heads of Agreement otherwise unenforceable
39 It was contended on behalf of Betty that, even if the parties intended to be bound, the Heads of Agreement was otherwise “unenforceable”.
40 First, it was said that as the first Special Condition (provision of a contract of sale and section 32 statement) had not been fulfilled, the Heads of Agreement was not enforceable.
41 I have effectively found that the provision of a contract of sale and section 32 statement was a condition precedent to any contract. If I am wrong about this and a contract was in existence, then I would find that the provision of a contract of sale and section 32 statement was a condition precedent to its further performance by either party.[26] The alternative, as noted above, would be that Betty was bound by the Heads of Agreement to sell the property to the Plaintiffs but the Plaintiffs were free to rescind at any time and obtain a refund of the deposit. The contra proferentum rule applies given the Heads of Agreement was drafted by the Plaintiffs’ lawyer. An interpretation which makes provision of a contract of sale and section 32 statement a condition precedent to further performance by either party should be preferred.
[26] As to which see Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; Etna v Arif [1999] 2 VR 353 at [45]; Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd (2015) VSCA 128 at [58].
42 As this condition precedent was not fulfilled, Betty was not bound to sell the property to the Plaintiffs.
43 Secondly, it was contended that the parties to the Heads of Agreement were uncertain. The named First Plaintiff in this proceeding (Dreamfields Pty Ltd (ACN 089 003 252)) does not appear to be the same entity as the company named on the Heads of Agreement, Dream Fields Pty Ltd (ACN 086 299 541).
44 As the mis-description of the First Plaintiff was not pleaded in the Defence, I would not find in Betty’s favour on this issue as a stand-alone defence without first giving the Plaintiffs an opportunity to amend their Writ and Statement of Claim.
45 Thirdly, it was contended that the three blocks were mis-described. I have addressed this above as a factor indicating that the Heads of Agreement was not binding, albeit not a particularly compelling one. There was some evidence at trial by Betty and Grazyna that they understood the Heads of Agreement referred to a single block rather than the three lots comprised by the property. This was not anticipated in the Defence or Further and Better Particulars and was not put to Robin or Marie. It contradicts the clear labels on the map which I have found was present at the Birregurra meeting; and the specification of three lots in the Heads of Agreement. Betty and Grazyna’s subjective understanding is not part of the objective circumstances to which I may have regard.
46 In my view, the property was sufficiently identified in the objective circumstances, particularly given the presence of the map at the Birregurra meeting. Any technical mis-description of the lots would not suffice as a stand-alone defence.
47 Finally, it was contended that Betty was not authorised to enter into the Heads of Agreement as “agent” for Jack Luxmoore. Again I have addressed this above as an element of informality. In the objective circumstances, Betty’s identity and capacity was clear. This would not suffice as a stand-alone defence.
Unconscionability
48 All of the expert evidence, and a great deal of the factual evidence and submissions, concerned the question of whether the Heads of Agreement (if they were otherwise legally binding) were procured by Robin’s unconscionable conduct.
49 As I have found that the Heads of Agreement were not binding, it is not necessary for me to determine this issue, however in deference to the extensive evidence and submissions on this issue I record my reasons below.
Applicable principles
50 The principles applicable to an “Amadio” unconscionability claim are well settled. They were succinctly summarised by the majority of the High Court in Thorne v Kennedy:[27]
A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.
[27] (2017) 350 ALR 1, 13 [38].
51 The knowledge of the special disadvantage required is one of actual knowledge or wilful blindness. Thus in Kakavas, the Full High Court stated:[28]
[156] It is apparent from what Mason J said in relation to the transaction under consideration in Amadio that his Honour was speaking of wilful ignorance, which, for the purposes of relieving against equitable fraud, is not different from actual knowledge…
[161] Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm’s length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned.
[28]Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 438-440.
52 A transaction may only be impugned on the basis of Amadio unconscionabliity after “a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [other party]”.[29]
[29] Jenyns v Public Curator (Qld) (1953) 90 CLR 113, applied in Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 426 [122].
53 For Betty to succeed in establishing that the Heads of Agreement ought to be impugned on the basis of Amadio unconscionability, she must therefore show:
a) that she was subject to a special disadvantage that seriously affected her ability to make a judgment as to her own best interests;
b) that Robin knew or was wilfully ignorant to the existence of that special disadvantage; and
c) that Robin exploited or victimised Betty by unconscientiously taking advantage of her special disadvantage.
Special disadvantage
54 Betty, in giving oral evidence, impressed me as being assertive, articulate, strong-minded and forthright. She was unafraid to speak her mind and determined not to let Robin take advantage of her.
55 Certainly she was a woman of mature years. Age is an accepted category of special disadvantage. However, I do not accept that age alone inevitably suggests an incapacity to make a judgment about one’s own best interests.
56 It is true that Betty did not have legal advice on the Heads of Agreement prior to signing it. However, she had both a lawyer and an accountant acting for her in her capacity as executor from whom she could have sought advice if concerned about any aspect of her dealings with Robin. The contact details of her lawyer were handwritten on the Heads of Agreement at the Birregurra meeting.
57 Whilst I do not wish to discount Betty’s own subjective experience of suffering from depression and anxiety over many years, nor her sadness at the death of her brother, there was very little evidence before me as to the nature and extent of these feelings, and in particular, the extent to which they impacted upon her decision-making capacities at the Birregurra meeting. There was no expert evidence of the nature and extent of her depression and anxiety nor of the extent to which this may have impaired her capacity to look after her own interests.
58 Betty gave evidence of the anxiety and distress she experienced upon hearing about the man in the blue car in a phone call from Robin. However, this was not entirely consistent with the fact that she neither reported it to the police nor to her lawyer and subsequently chose to travel to Birregurra and stay at Jack’s former home accompanied only by her friend Grazyna, a primary school teacher.
59 It also does not establish that at the time of the Birregurra meeting, well over a week later, her anxiety and distress about the man in the blue car was at such a level that it seriously impacted her capacity to make judgments about her own interests. My findings about the happy and social tone of the Birregurra meeting suggest otherwise. She also had present with her the support of her trusted friend, Grazyna.
60 Robin certainly had more experience in buying and selling property than Betty, and had run a longstanding and presumably successful nursery and olive grove business. However, he was not someone I would describe as highly experienced in contractual negotiations or the buying and selling of property (other than residential property).
61 Having considered all of the evidence, I am not satisfied that Betty was operating under a special disadvantage of the kind required at the time she signed the Heads of Agreement.
Knowledge of the special disadvantage
62 Even if special disadvantage were established, the most that was known to Robin was that Betty was an elderly lady who had recently lost her older brother. He did not know of her prior diagnosis of depression and anxiety or that she was taking medication. He did not know of Betty’s asserted extreme anxiety about the man in the blue car. I accept that Robin genuinely believed that Betty had consulted an agent prior to the Birregurra meeting. I do not accept, therefore, that he was aware that Betty was unaware of the true value of the property. I also accept that he genuinely believed that Betty had consulted or had access to a lawyer. I do not accept that he was aware that Betty was feeling pressured, anxious or confused at the Birregurra meeting. To the contrary, I have found that the atmosphere was happy and friendly and that Betty was able to negotiate the price that Robin paid up from $70,000 to $93,000.
63 This does not amount to either actual knowledge of special disadvantage or wilful blindness to special disadvantage.
Unconscientious taking advantage
64 Finally, I am not satisfied that there was any unconscientious taking advantage of special disadvantage by Robin.
65 Certainly, Robin was very keen to buy the property and no doubt wanted to do so at the best price possible. However, I am not satisfied that he believed that he had purchased the property at an undervalue.
66 Counsel for Betty submitted that I should infer that Robin knew that he purchased the property at an undervalue from the amount he was prepared to spend on this litigation. People commence and prosecute proceedings for many reasons, which are not always economically rational. I am not prepared to draw that inference.
67 A significant amount of time was taken up at trial by expert evidence in relation to the value of the property. I am not satisfied on the basis of that evidence that the property was sold at an undervalue.
68 As is usual practice, both of the expert valuers arrived at their estimation of value by considering comparable past sales. However, there was a quite extraordinary difference in the estimations of value which were arrived at by that method.
69 The valuer called by the Plaintiffs arrived at his estimation of value by comparing past sales of land which required a permit to build a residence; but which did not have a permit. He excluded past sales of land which were in the Rural Living Zone (and so did not require a permit) or which were sold with a permit to build. He arrived at a value for the property as a whole of $90,000.
70 The valuer called by Betty, on the other hand, included as comparable sales properties which had permits to build, or were in the Rural Living Zone. Only one of the comparable properties that he referred to in his report required a permit to build. That property had a much lower price per acre. He valued each of the three lots comprised in the property individually, arriving at a cumulative value of $540,000. Effectively, this amounted to an assumption that a permit to build could be obtained for each of the three lots comprised in the property.
71 The expert planners called at trial both prepared detailed and careful reports. They both gave evidence that the property was governed by the Birregurra Structure Plan 2013 and in the Farming Zone. They both gave evidence that a permit was required to build a residence on the property. They agreed that a permit would not be granted unless a Whole Farm Plan was prepared showing that the residence was required for agricultural use; or a Business Plan was prepared showing that the residence was required for non-agricultural use.
72 The difference between the planning experts was more one of emphasis – the expert planner called on behalf of the Plaintiffs emphasised the underlying policy of the Birregurra Structure Plan 2013 to actively discourage dwellings which would further divide and fragment otherwise productive agricultural land. The expert planner called on behalf of Betty emphasised the possibility that a Whole Farm Plan might be able to be prepared for an innovative use of the property which would justify a planning permit. She also raised the likelihood that the property would be re-zoned at some (uncertain) time in the future.
73 Neither of the expert planners had expertise in agribusiness or the preparation of Whole Farm Plans. Taking the evidence of the expert planner called by Betty at its highest, it would not justify a finding that it was more likely than not that a permit would actually be granted. Nor would it justify a finding that the property should be treated as comparable to a property that had a permit to build or did not require such a permit. On my reading of her report she did not purport to say any more than that a permit was possible, if an appropriate Whole Farm Plan or Business Plan establishing the necessity of a residence was prepared. However preparation of such a document was not within her expertise, nor was any assessment of the actual likelihood of an acceptable Whole Farm Plan or Business Plan being produced. In my view, her report is insufficient to justify the inclusion of properties with a permit or in the Rural Living Zone as comparable sales for the purposes of valuation.
74 An expert in agribusiness was called by the Plaintiffs. He gave evidence that the property (even if consolidated) would fail to meet the conditions and intent of Whole Farm Planning in the Farming Zone. Betty did not call any expert in agribusiness. I accept the evidence of Robin’s expert in agribusiness on this issue.
75 In light of the above, it was not appropriate for the expert valuer called by Betty to include as comparable sales land which had a permit or were in the Rural Living Zone. Accordingly, I do not accept the evidence of the expert called by Betty as to value.
76 It follows from what I have said that the local sales of land of which evidence was given at trial which either had been built on, or did not require a permit to build, are not comparable sales for the purposes of valuation.
77 I am required to make findings on evidence. The best evidence before me as to the value of the property is the valuation provided by the expert called by the Plaintiffs. He was not challenged in cross-examination on the comparable sales he relied upon nor on his method of calculation.[30] His valuation put the property at $90,000. Accordingly, I do not accept that the property was sold at an undervalue.
[30] Aside from the challenge to the exclusion of properties which had a permit or were in the Rural Living Zone which I have already addressed.
Conclusion
78 The proceeding should be dismissed. I will hear from the parties on the question of costs.
Certificate
I certify that these 26 pages are a true copy of the reasons for judgment of Judicial Registrar Tran, delivered on 13 December 2018.
Dated: 13 December 2018
Shannon Finegan
Associate to Judicial Registrar Tran
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