Eckert v Roberts

Case [2017] SASCFC 176

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

ECKERT v ROBERTS

[2017] SASCFC 176

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Stanley and The Honourable Justice Nicholson)

22 December 2017

LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION - SURROUNDING CIRCUMSTANCES

EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - CONSTRUCTIVE TRUSTS

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - WHERE FINDINGS BASED ON CREDIBILITY OF WITNESSES - GENERALLY

The respondent is the registered proprietor in fee simple of farming land located at Langhorne Creek. The respondent became the registered proprietor in August 2010 upon purchasing the land from Rabobank in its capacity as mortgagee in possession. The appellant was at that time the mortgagor. Following the respondent’s purchase of the land, the appellant remained in possession of the land and continued to farm it. The parties executed a lease in August 2010. In March 2015, the respondent served a notice of re-entry and re-possession upon the appellant.

At trial, the respondent contended that the appellant’s occupation of the land was pursuant to a lease executed by the parties, and that the appellant had breached the lease by falling into arrears in rental payments. The appellant denied that the lease was the basis of his occupation of the land and sought a declaration that the respondent held the land on trust. He contended that there was an agreement between the parties whereby the respondent agreed to purchase the land for the appellant upon the appellant agreeing to indemnify him for all costs related to the management of the farm and servicing of the loan obtained by the respondent to purchase the land. The appellant further contended that it was part of the agreement between the parties that the appellant would have the opportunity to repurchase the land in the future at fair-market value.

The Judge held that the respondent did not hold the land on trust for the appellant and found in favour of the respondent’s claim for possession.  The Judge found that the appellant had no rights in relation to the land other than the right conferred by the lease to occupy the land for the initial 12 month term of the lease (the Arrangement Finding). The Judge further found that the parties intended the appellant’s occupation of the land to take place pursuant to the terms of the lease (the Lease Finding).

On appeal, the appellant relies on a number of grounds, primarily challenging the Judge’s Arrangement Finding and Lease Finding.  The appellant contends that the Judge erred with respect to each finding on the basis that the evidence establishes findings of fact or inferences from findings of fact that are inconsistent with the Judge’s findings or that render those findings glaringly improbable.

Held per Nicholson J, (Kourakis CJ and Stanley J agreeing), dismissing the appeal:

1.       The appellant’s challenges to the Judge’s Lease Finding…

Continue reading Eckert v Roberts

Sign in free to access the full text

Details
AGLC
Eckert v Roberts [2017] SASCFC 176
Case
[2017] SASCFC 176
Decision Date

CaseChat Overview and Summary

This case concerned an appeal from a judgment of the Supreme Court of South Australia. The appellant, Mr Eckert, was the former mortgagor of farming land at Langhorne Creek, which was purchased by the respondent, Mr Roberts, from the mortgagee in possession, Rabobank, in August 2010. Following the purchase, Mr Eckert remained in possession of the land and continued to farm it under a lease agreement executed by the parties in August 2010. In March 2015, Mr Roberts served a notice of re-entry and re-possession on Mr Eckert.

The legal issues before the Full Court of the Supreme Court of South Australia included whether the trial judge erred in finding that Mr Eckert was in trespass and had converted the wine grape crop from the land. The appeal also involved arguments concerning the nature of a constructive trust allegedly imposed on Mr Roberts by virtue of pre-purchase conversations and subsequent conduct, and whether Mr Roberts was estopped from relying on the terms of the lease agreement. The appellant sought to quash the trial judge's orders, dismiss the respondent's claims for possession, conversion, and trespass, and have it declared that Mr Roberts held the land on a constructive trust for Mr Eckert, subject to certain conditions.

The Full Court dismissed the appeal, upholding the trial judge's findings. The Court found that none of the grounds of appeal had been made out. The Court noted that the argument regarding trespass and conversion was not developed during submissions, and that if the findings relating to the lease and Mr Roberts' entitlement to possession were upheld, there could be no defence to those claims. The Court also determined that an affidavit sought to be introduced on appeal did not advance the appellant's case, as the matters it sought to confirm were already common ground at trial.

The appeal was dismissed, and the Court invited the respondent to submit minutes of order consistent with the trial judge's orders and the dismissal of the appeal, and to be heard on the question of costs. Mr Eckert had remained in possession of the farm, paying rent as requested, at the time the appeal was heard.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

For the reasons that follow, I would dismiss the appeal.Uncontested background The following lengthy extract from the Judge’s Trial Reasons[5] records matters characterised by the Judge as “not disputed” and as having been “established on the balance of probabilities”. Save for the qualification in footnote 6 below, I do not understand any of these matters to be challenged on appeal. [5] Trial Reasons at [11]-[51].Paul Roberts is 37 years old. He has been a farmer since 2003-2004. He has his own 150 acre block on Nine Mile Road, Milang (Nine Mile farm) which he bought in 1999 with the assistance of his mother. He bought the Nine Mile farm from his parents upon his parents’ marriage ending. That property is used for cropping and sheep. There is no residence on the property, but Mr Roberts has installed a shed that has power.Mr Roberts does not work the Nine Mile farm exclusively. Since 2004, with the exception of two periods where he spent time in the United Kingdom, he has also worked for Steven and Dianne Maidment. Since his return from the United Kingdom in late 2008 he has worked fulltime for Mr Maidment. Before turning to farming, Mr Roberts worked in a hardware store in Strathalbyn. It was whilst he worked in that store in 2004 that he met Mr Eckert who was a customer. He had also come across Mr Eckert as a consequence of doing some grape harvesting work for Mr Eckert with his brother, Brenton Roberts, who was a grape harvester contractor. Christopher Eckert is 56 years old and has been married for 28 years to Elizabeth. Mr and Mrs Eckert have two children, a daughter, Rebecca, and a son, Russell.Mr Roberts met Mr Eckert’s daughter, Rebecca, in 2008 when she was working at the travel agency that assisted him in arranging his travel to the United Kingdom. They soon commenced a relationship that led to them buying a house in Mount Barker together in 2009 and ultimately marrying on 18 February 2012. Unfortunately the marriage did not last and Mr Roberts and Rebecca Eckert separated in April 2014. They are not on good terms and are currently embroiled in property division proceedings in the Federal Circuit Court.As mentioned, Mr Eckert lives on Eckert farm and has done so since 1984. The residence on the farm is located on Certificate of Title Volume 6065 Folio 210. A vineyard of approximately 29.3 hectares is located on Certificate of Title Volume 6065 Folio 210 and Certificate of Title Volume 6065 Folio 207. The balance of the land, that subject of Certificate of Title Volume 6065 Folio 209, Certificate of Title Volume 6065 Folio 208, Certificate of Title Volume 6065 Folio 205 and Certificate of Title Volume 6088 Folio 676, is used for cropping and sheep. The land has a number of improvements including the residence to which I have referred, a machinery shed, barn, wool shed, irrigation shed and dam.In 2001 Mr Eckert first sought financial assistance from Rabobank. In August 2006 arrangements with Rabobank were revisited. At that time Mr Eckert was granted a loan limit/credit facility of $1,615,000. The security provided for the credit facility included all six titles comprising Eckert farm. Mr Eckert was the registered proprietor of five of six of those titles. Mr Eckert’s father, Henry John Eckert, was the registered proprietor of the sixth title. Henry John Eckert provided a guarantee to Rabobank limited to the sixth title as part of the security arrangements accepted by the bank upon granting his son the credit facility to which I have referred.Repayments on the credit facility were to be made twice yearly, on 31 December and 30 June.By 2008 Mr Eckert had fallen significantly into arrears with Rabobank. On 18 March 2008 Rabobank served a notice of breach and intention to exercise a power of sale on Mr Eckert in addition to serving a notice of demand for $424,808.96 on Henry John Eckert in his capacity as guarantor. The default was not remedied. The bank issued a further notice on 4 April 2008. Ultimately Rabobank instituted proceedings in this Court against Mr Eckert and his father, seeking orders for the delivery up of possession of the land subject of the six titles comprising Eckert farm in addition to other land that had been provided as security for the credit facility.Henry John Eckert died on 21 June 2008. An order for possession was made on 20 August 2008 against Mr Eckert in respect of the five titles of Eckert farm of which he was the registered proprietor. That order required that Mr Eckert deliver up possession of the land within 28 days of service of the order.By order dated 24 October 2008 this Court ordered the executors of Henry John Eckert’s estate, Christopher Eckert and his brother Richard Eckert, within 28 days of service of the order, to deliver up to Rabobank possession of the land subject of the one title of Eckert farm of which Henry John Eckert was the registered proprietor and which he had as guarantor provided as security for the credit facility extended to his son.Despite the orders for possession, Mr Eckert remained in occupation and continued to farm the land. He did not finally resolve all issues concerning his indebtedness to Rabobank until 2013.All attempts on the part of Rabobank to find a purchaser for Eckert farm in the period between the obtaining of orders for possession in 2008 and the purchase of Eckert farm by Mr Roberts in August 2010, proved unsuccessful. On 19 July 2010 Mr Roberts and Rabobank executed a contract for the sale and purchase of Eckert farm. The purchase price was $595,000. The purchase was conditioned upon finance being obtained. A deposit of $20,000 was paid to Elders Real Estate on 26 July 2010 by a personal cheque, drawn on Mr Roberts’ National Australia Bank Everyday Account. Finance provided to Mr Roberts by the National Australia Bank (NAB) was approved on 6 August 2010. The loan documents were executed on 18 August 2010 and the loan was drawn down on 31 August 2010, being the date upon which settlement occurred. The bank prepared three cheques for settlement – one in the sum of $574,959.98 in favour of Rabobank, a second in the sum of $31,138.00 in favour of the Chris Rodgers Trust Account and a third in favour of Finlaysons Trust Account in the sum of $2,938.19.Chris Rodgers is the registered conveyancer who acted for Mr Roberts. Finlaysons were the solicitors acting for Rabobank. The settlement statement prepared by Mr Rodgers revealed that on transfer stamp duty of $26,555.00 was payable in addition to a fee for the registration of transfer of $3,901.00. The conveyancer’s fee was $660.00 inclusive of GST. Adjustments to account for rates, the emergency services levy and the phylloxera levy paid for a period post settlement were also payable.In order to fund the purchase of Eckert farm, Mr Roberts borrowed $630,000 from NAB. The loan was an interest only loan with repayments to be made at six monthly intervals. Bank documents reveal that NAB understood[6] the purchase to be as an investment and that:[6] According to the grounds of appeal it would appear that this description of the NAB’s intention either was not or, if it was at trial, now is not, common ground.Mr Roberts will lease the property back to the vendors for $5,750 per month which will meet interest costs. Roberts intension it to realign of boundaries and sell of 5 individual, 10 to 20 acre blocks for approx $140k each (as advised by Raine & Horne) to reduce and eventually clear the debt (sic).Around the same time Mr Roberts and Mr Eckert executed a Memorandum of Lease (the lease). The lease was tendered and received as Exhibit P30. It was not registered under the RPA. The lease commenced on 31 August 2010 and expired on 30 August 2011. Mr Roberts could not recall the date upon which he signed the lease, but recalled that it was prior to the settlement of the property. He signed the lease in front of a solicitor who worked in the offices of Alan Oxenham, a solicitor in Strathalbyn. Mr Eckert signed the lease, witnessed by Mr Maidment, in Mr Roberts’ presence in Mr Roberts’ shed on Nine Mile farm.Clause 1.17 of the lease provided that the purpose for which the land may be used by the lessee, Mr Eckert, was for broadacre farming and viticulture. Under clause 4.1 the lessee was required to pay an annual rental of $63,000.00 plus GST. The rental was payable in monthly instalments of $5,250.00 plus GST, that is, $5,775.00 per month in advance. Clause 4.2 of the lease provided for the rental to be adjusted on the first day of the renewal period if the right of renewal, to which reference is made below, was exercised. Clause 4.3 of the lease provided the mechanism for the determination of the market rental of the land.Clause 10 of the lease provided for default and consequential remedies. It defined “events of default” and “default” as the failure by the lessee to pay the rental specified in the lease and the failure by the lessee to pay any other sum payable by the lessee under the lease, or to observe or perform any other covenant, condition or agreement on its part, or to be observed or performed pursuant to the lease for a period of 14 days after written notice specifying such failure and requesting that it be remedied has been given to the lessee by the lessor, unless the lessor agrees in writing to an extension of time prior to its expiration.Clause 10.2 provided that whenever any event of default referred to in clause 10.1 occurred and was subsisting the lessor could re-enter the premises or any part of it and repossess the same.Clause 11.1 of the lease provided for the giving of notices under the lease and provided that any notice or demand that is required or permitted to be given or served by either the lessor or the lessee shall be deemed properly given if served personally upon the party to whom the notice is addressed at the address given in the lease of that party. It also required that all notices shall be given in writing, and, if posted shall be deemed to have been given on the fifth day after mailing inclusive of the day of mailing. Clause 1.16 of the lease provided for its renewal for one further year in accordance with part 3 of the lease by the lessee giving written notice to the lessor not earlier than four months and not later than three months before the end of the term or the extended period of the term. The term ended on 30 August 2011.Mr Eckert has never paid rent on a monthly basis, despite the terms of the lease. Rather he would pay amounts twice yearly in time for Mr Roberts to meet his mortgage obligations with NAB. At the conclusion of the term within the meaning of the lease Mr Eckert did not seek the renewal of the lease under clause 1.16. In such circumstances clause 3.2 was enlivened. It provided:3.2 Holding OverIn the event of the Lessee continuing in occupation of the premises after the expiration of the term or any renewal thereof without any demand for possession having been made by the Lessor the premises shall be held by the Lessee under a tenancy determinable at any time upon one (1) calendar month’s notice being given by either party to the other at the same rent and subject to the same terms and conditions as are herein contained so far as they can be applied to a monthly tenancy.The table produced below contains the details of payments Mr Roberts received from Mr Eckert. [It is not necessary to reproduce the table.]As mentioned, in 2014 Mr Roberts’ marriage broke down. After the breakdown of his marriage to Rebecca Eckert, Mr Roberts, through his solicitors, engaged in settlement negotiations with Rebecca. Initially during this period his relationship with Mr and Mrs Eckert remained on good terms but it too soon broke down.On 7 November 2014 Mr Roberts issued an invoice to Mr Eckert in the sum of $11,550.00 for rent due for the months of October and November 2014 “as per agreed Lease”. Prior to this Mr Roberts had never invoiced Mr Eckert for rent. The invoice stated, “TERMS 14 DAYS FROM INVOICE DATE”. Mr Eckert did not pay this invoice.On 6 January 2015 Mr Roberts issued a second invoice to Mr Eckert. This invoice was in the sum of $23,100.00 and was for rent due for October 2014 - January 2015. Again the invoice stated, “TERMS 14 DAYS FROM INVOICE DATE”. Again Mr Eckert did not pay.On 17 January 2015 Mr Roberts issued a third invoice to Mr Eckert. This invoice was in the sum of $28,875.00 and was for rent due for the period October 2014 - February 2015. Once again the invoice stated, “TERMS 14 DAYS FROM INVOICE DATE” and once again Mr Eckert did not pay.On 28 January 2015 Mr Roberts, by his solicitor Mr Oxenham, forwarded to Mr Eckert by ordinary pre-paid post, and purportedly in accordance with clause 11.1 of the lease, a letter enclosing a written notice dated 28 January 2015 that was entitled “Notice to Remedy Breach.” It gave notice to Mr Eckert that Mr Roberts required him to pay the sum of $23,100.00, being the rent payable for the period 1 October 2014 to 31 January 2015. It made demand for the payment of the outstanding rental on or before 5.00 pm on the day that was 14 days from the date of the service of the notice. The notice also advised that if payment was not made within the time stipulated, that Mr Roberts may exercise his power of re-entry and termination of the lease and such other power or powers as may be available to him at law. The purported breach was not remedied.On 2 March 2015 Mr Roberts went to Eckert farm in possession of a Notice of Re-Entry and Re-Taking of Possession. He personally served this notice on Mr Eckert. A copy of the Notice was also sent by registered post to Mr Eckert by Mr Roberts’ solicitors undercover of a letter dated 4 March 2015.On 3 March 2015 $38,000 was deposited into Mr Roberts’ NAB everyday account by Mr Eckert.On 28 May 2015 Mr Roberts instituted these proceedings. Mr Eckert has remained and remains on Eckert farm.[footnotes omitted]

Evidence

Evidence Before The Court

However, during the appeal, it became apparent that counsel (who was not counsel at the trial below) sought to argue for a different complexion to be placed on the parties’ interactions in terms of the nature of the trust obligation said to have been assumed by Mr Roberts as a result of the conversations in or about May 2010 and the parties’ subsequent conduct, including the purchase of the Farm by Mr Roberts and the payment by Mr Eckert of all monies due under the mortgage and all farm outgoings. Counsel on appeal reformulated the orders now being sought by Mr Eckert as follows (with changes from the notice of appeal as indicated).1.that the judgment and orders made by the learned trial Judge on the 20th December 2016 be quashed.2.that the claims by the respondent for possession of the land, the conversion of the wine grape crop and trespass and an order for an account and enquiry be dismissed.3.that in lieu thereof it be declared that the respondent holds the said land on a constructive trust for the appellant:3.1 subject to the appellant continuing to keep the respondent indemnified from all expenses incurred in respect of the said land of which he has notice.3.2 to continue until such trust shall vest upon the happening of one or other of the following events:-3.2.1the appellant giving formal notice to the respondent that he requires the respondent to transfer legal and beneficial interest in the said land to him;3.2.2the respondent giving formal notice to the appellant of his intention to sell the said land;3.3 upon the vesting of the trust in the circumstances described in paragraph 3.2.1 the respondent will transfer the legal and beneficial interest in the said land to the appellant upon the appellant extinguishing the respondent’s liability to NAB in respect of the respondent’s purchase of the said land;3.4 upon the vesting of the trust in the circumstances described in paragraph 3.2.2 the respondent will give the appellant a first right of refusal to acquire the legal and beneficial interest in the said land in return to the appellant extinguishing the respondent’s liability to NAB in respect of the respondent’s purchase of the said land;4.In the alternative to paragraph 3 it be declared that the respondent holds the said land on a constructive trust for the appellant:-4.1 subject to the appellant continuing to keep the respondent indemnified from all expenses incurred in respect of the said land of which he has notice4.2 to continue until such trust shall vest upon the happening of one or other of the following events:-4.2.1the appellant giving formal notice to the respondent that he requires the respondent to transfer legal and beneficial interest in the said land to him;4.2.2the respondent giving formal notice to the appellant of his intention to sell the said land;4.3 upon the vesting of the trust in the circumstances described in paragraph 4.2.1 the respondent will transfer the legal and beneficial interest in the said land at fair market value, such value to be agreed or as may be determined by the Court on further application by the parties;4.4 upon the vesting of the trust in the circumstances described in paragraph 4.2.2 the respondent will give the appellant a first right of refusal to acquire the legal and beneficial interest in the said land at fair market value such value to be agreed or as may be determined by the Court on further application by the parties.5.Upon the constructive trust vesting and the appellant refusing or being unable to purchase the said land at fair market value extinguish the respondent’s liability to NAB in respect of the respondent’s purchase of the land or alternatively purchase the said land at fair market value the respondent shall be at liberty to sell the said land on the upon [sic] market or otherwise deal with the said land as he thinks fit;6.A declaration that the respondent is estopped from relying on the terms of the Lease as the basis upon which the appellant has occupied the said land since 30 August 2010 and continuing;7.In the alternative to paragraph (3) and (5) thereof, that the respondent is estopped from terminating the said Lease until he gives notice of his intention to do so equivalent to the period of time over which payments had historically been made, namely six months.8.That the appellant have the costs of his Appeal and the trial before the learned trial Judge.The evidence of and concerning the material conversations between Mr Roberts and Mr Eckert prior to Mr Roberts purchasing the Eckert FarmEvidence in chief of Mr Roberts

Decision

Reasons for decision

KOURAKIS CJ (dissent) NICHOLSON J (dissent)
By appeal ground 12, the appellant contends that the Judge erred in holding that from one month from the date of the service of the claim the appellant was guilty of trespass and conversion of the grapes harvested from Eckert Farm. This ground was not developed during submissions. In the event that the Judge’s Arrangement Finding, Lease Finding and findings relating to Mr Roberts’ entitlement to possession of Eckert Farm were to be upheld, there can be no defence to the claim for trespass and conversion. Conclusion At the commencement of the appeal, counsel for the appellant, by way of response to a written submission by the respondents, sought to read an affidavit sworn by Kevin Donald McKinley on 6 June 2017. The matter was left on the basis that a decision as to its admissibility on appeal would be made after hearing the parties’ submissions on the substantive issues. The burden of the affidavit was to confirm that the NAB’s initial 12 month facility was extended from time to time so that it was in place for more than the period of the lease. So much was common ground at the trial and the affidavit does not of itself advance the appellant’s case. It is unnecessary to receive the affidavit on the appeal. None of the grounds of appeal has been made out. I would not disturb the Judge’s findings and would dismiss the appeal. As I understand the position, Mr Eckert had remained in possession of the Farm paying rent as requested at least as at the time the appeal was heard. Further, various orders of an interlocutory nature were made by the Judge by agreement between the parties pending the outcome of the appeal. In these circumstances, I would invite the respondent to submit minutes of order on appeal consistent with the Judge’s orders made to this point and the dismissal of the appeal. I would also hear the parties on the question of costs.

Ratio Decidendi

Legal Principle Established

Established by:

Full text does not contain this section.