Fong v Shi

[2007] SASC 72

SUPREME COURT OF SOUTH AUSTRALIA

(Appeal from a Master: Civil)

FONG v SHI

[2007] SASC 72

Judgment of The Honourable Justice Anderson

8 March 2007

CONVEYANCING - LAND TITLES UNDER THE TORRENS SYSTEM - CAVEATS AGAINST DEALINGS - LAPSE, REMOVAL AND WITHDRAWAL

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PAYMENT INTO COURT, AND OFFERS TO SETTLE OR CONSENT TO JUDGMENT

APPEAL AND NEW TRIAL - APPEAL GENERAL PRINCIPLES - ADMISSION OF FRESH EVIDENCE

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT

TRANSFER OF ACTION TO DISTRICT COURT

Appeal against decision of a Master to remove action to District Court - original action before Supreme Court was application to extend caveat until conclusion of proceedings in a related matter in the District Court - parties came to agreement that plaintiff remove caveat and that the defendant sell property and pay proceeds into court - defendant applied to transfer matter to District Court - whether Master erred in transferring matter to District Court - exact terms of the agreement unclear -whether the terms of the agreement are recorded in the records of the Supreme Court - whether there were any issues left to transfer - whether money had been paid into court to abide result of District Court action.

Held: appeal dismissed - the Master did not err in transferring matter to District Court - the terms of agreement cannot be decided on records of Supreme Court - application to call fresh evidence refused - remaining issues to be decided in District Court if necessary

Real Property Act 1886 (SA), s191, referred to.

FONG v SHI
[2007] SASC 72

Introduction

1. This matter has a long and complex history.  It has been frustrated by some fundamental errors of process, with the result that there are now two concurrent matters being run in the Supreme Court and in the District Court.  All issues should have been pursued in one court.

2. This is an appeal from a decision of a Master of this Court.  The Master ordered that the Supreme Court action be transferred to the District Court.

   Background

3. The background to this matter is as follows. In July 2001, Jian Shi, the father of the respondent, entered into a loan agreement with the appellant whereby the appellant loaned Jian Shi a sum of Renimbi Yuan 650 000 (Renimbi is the currency of the People’s Republic of China and Yuan is a denomination of this currency).  This loan agreement was written in Chinese.

4. Pursuant to the loan agreement, the respondent’s father agreed to repay this money to the appellant before October 2003.  The respondent’s father used the loan monies to purchase a property at 42 Henry Street Ottoway SA on 7 December 2001.

5. In October 2003, the respondent’s father failed to repay the loan. This resulted in the appellant registering a caveat over the land on 4 May 2004.  This was followed on 16 June 2004 by the appellant issuing the respondent’s father with a letter of demand for payment of the loan in Australian dollars for an amount of $110 000 principle plus $22 804.65 interest.

6. On 20 July 2004 the appellant and the respondent entered into a deed of undertaking whereby the respondent voluntarily undertook liability for repaying the amount of RMB 800 000 (consisting RMB 650 000 principle, plus interest) in two instalments of RMB 400 000 by no later than 30 December 2004.  Upon the signing of the deed, the appellant withdrew the caveat on 5 October 2004 in order to enable the respondent to mortgage the property

7. Whilst on 5 October 2004 the respondent paid the appellant the first instalment of $69 019, the respondent failed to pay the second instalment by 30 December 2004.  The respondent told the appellant that further time was required to subdivide and develop the land in order to obtain the funds required to pay the second instalment.  The parties then agreed that the period for the payment of the second instalment would be extended.

8. On 9 March 2006 the appellant discovered that, contrary to the assertion made by the respondent, namely that the property was being subdivided and developed, the property was in fact advertised for sale.  On 5 April 2006 the appellant lodged a caveat over the land and then on 6 April 2006 sent a letter to the respondent demanding payment of the second instalment plus interest and advised that the caveat would not be removed until the respondent paid the second instalment.

9. On 11 May 2006 the respondent lodged an application to remove the caveat. On 17 May 2006 the appellant commenced action 772 of 2006 in the District Court of South Australia to recover the second instalment and interest on the second instalment.

   The Supreme Court Action

10. On 19 May 2006 the appellant commenced this action in the Supreme Court. It was an application pursuant to section 191 of the Real Property Act 1886 (SA) to have the caveat extended until the finalisation of the District Court matter. The apparent reason for this matter being lodged in the Supreme Court, rather than in the District Court, was because of an administrative error by the District Court Registry, which, according to the parties, incorrectly informed the appellant that the District Court did not have jurisdiction to hear the matter. On 24 May 2006, 7 June 2006 and 7 August 2006 the Master made interlocutory orders to extend the time for removal of the caveat. It is worth noting that the District Court did in fact have jurisdiction to hear the matter.

11. Following the orders of the Master, the respondent applied to the Supreme Court to remove the caveat.  However, prior to this application being heard, the parties entered into negotiations in relation to the possibility of the caveat being lifted so that the respondent could sell the land with the proceeds to be paid into Court.  The specific terms of the agreement reached are in dispute.

12. On 15 August 2006, the Master in the remarks on the Court file noted that the respondent had indicated that it would be willing to pay the net proceeds of the sale of the property into Court ‘to abide the outcome of the District Court action between the parties’.

13. On 18 August 2006 another Master in his remarks on the court file acknowledged that the parties had ‘reached an agreement about the caveat and payment of moneys into Court’ in that ‘the caveat is not to be further extended’ and that ‘instead the [respondent] without admitting liability has agreed to pay the net proceeds of the sale…into the [Supreme Court] of South Australia Suitor’s Fund’. On 21 August 2006 that Master made an order removing this caveat.

    Payment into court

14. Unfortunately the money was incorrectly paid by the respondent into the District Court Suitors Fund. This error was acknowledged by the Master on 24 August 2006, who noted on the court file that it was now ‘the expectation of this Court that those monies will not be removed from the suitors fund of the District Court until further order of [the Supreme Court]’.   This payment into the District Court was another unfortunate mistake.

15. On 1 December 2006 the respondent applied to the Master for an order that the Supreme Court Action be transferred to the District Court.  The respondent argued that while the Supreme Court’s orders had so far extended to finding that there was an arguable case that the appellant had a caveatable interest, there had not actually been a determination of whether a caveatable interest existed.  The Master indicated in his remarks that he felt that the respondent had an arguable point.  His Honour then ordered that the action be transferred to the District Court, and that the money that was ‘paid into Court pursuant to an order of this Court be subject to an order of the District Court.’

    Issue on appeal

16. The actual orders made by the Master on 1 December 2006 are as follows:

    1.     That this action be transferred to the District Court.

    2.The defendant lodge with the Registrar of the District Court an office copy of this order and the file maintained by the Registrar in respect of this action.

    3.     Costs of this application reserved pending the outcome of the District Court action.

    4.That the monies presently held in the Suitors Fund in the District Court action between these parties paid into Court pursuant to an order of this Court be subject to an order of the District Court.

17. Pursuant to the notice of appeal, the appellant only seeks that orders 1, 2 and 3 be set aside.

18. I am therefore to decide whether the Master was correct in transferring the action to the District Court.  The appellant has also asked me to determine the matter of whether the agreement between the parties is clearly set out in the records of the Supreme Court and if so to determine the terms of the agreement.

19. Mr Lazarevich, counsel for the appellant, submitted that while the appellant did not challenge the actual order that the monies held in the District Court Suitor’s Fund be subject to an order of the District Court, the appellant’s main issue was with the remarks accompanying this order made by the Master, in particular that:

    The defendant argues that while this Court’s findings so far extend to a prima facie arguable case that the plaintiff had a caveatable interest, there has been no determination of whether in fact the plaintiff did have a caveatable interest…[i]n my view the defendant has an arguable point…

20. Mr Lazarevich contended that the caveat proceedings were resolved by agreement between the parties.  He argued that, upon this matter being transferred to the District Court, a judge would feel bound by the remarks which would require a determination on the merits, which is contrary to the agreement reached between the parties.  The remarks at face value would tend to indicate no agreement as contended for by the appellant.

21. It is quite clear that there was at some stage an agreement between the parties.  The main issue in this appeal is to determine, if possible, what the terms of that agreement were.  The appellant asserts that the terms of this agreement are made clear by the orders of the Supreme Court and that no further evidence is required to interpret the agreement.  The appellant also argued that the respondent’s claim that extrinsic evidence needs to be used in order to interpret the terms of the agreement is contrary to the established principles relating to the interpretation of contracts.

22. According to the appellant, the terms of the agreement were that the appellant agreed to remove the caveat in return for the respondent paying the proceeds of the sale of the property into Court to abide the outcome of the monetary claim in the District Court. The appellant argued that this agreement finalised the caveat issue and, as this was the only issue before the Supreme Court, finalised the matter before this Court. As a result the appellant argues that the learned Judge erred in transferring the matter to the District Court as there were no issues left to transfer.

23. Mr Stevens, counsel for the respondent, in his submissions argued that the agreement between the parties was not to settle the caveat issue before the Supreme Court, but rather to effect payment into Court of the proceeds of the sale of the property and adjourn the caveat issue to await the outcome of the District Court matter.  Mr Stevens submitted that the reason for this was that the question of the final resolution of the caveat issue would not have been required to be determined in the Supreme Court if the appellant failed in the District Court.

24. As a matter of history, the issue in the District Court as to whether there is an enforceable contract has now been determined in the appellant's favour – see Fong v Shi [2007] SADC 7, a decision of Judge Soulio given on 14 February 2007. Judge Soulio has adjourned making final orders until the outcome of this matter is known.

25. The respondent challenged the proposition that the terms of the agreement were clear from the Supreme Court records.  Mr Stevens highlighted several inconsistencies in the court record and said that as a result further evidence was required to establish the terms of the agreement.  He sought to introduce new evidence consisting of affidavits and transcript from the District Court proceedings.  This course was opposed by the appellant and I did not allow this evidence to be admitted.  The appellant conceded that I should read a small portion of the transcript of the District Court proceedings to see if that assisted me, however, it only tended to further confuse the true position reached between the parties.

26. Therefore, the issue between the parties is whether I should determine if the money was paid into Court to abide the outcome of the District Court.  If it was, then with the result of the District Court action now known, the appellant would succeed in having the monies paid to him.

    Are the terms of the agreement clear from the Supreme Court records?

27. In his submissions, Mr Lazarevich referred to the actual order made by the Master.  On 15 August 2006, in his remarks on the court file, his Honour noted that the respondent did not object to paying the net proceeds into Court to abide the outcome of the District Court action.  Mr Lazarevich highlighted the fact that the District Court matter concerns a monetary claim and is not a claim based on any equitable interest in the property.  He submitted that it was the respondent who, with full knowledge of the nature of the District Court action, first proposed that the payment should abide the outcome of that action.

28. Mr Lazarevich then referred to the remarks accompanying the orders made by the Master on 18 August 2006, where his Honour stated that the parties had ‘reached agreement about the caveat and payment of monies into Court’ in that the caveat would not be ‘further extended’ and that ‘without admitting liability’ the respondent had agreed to pay the net proceeds of the sale of the property into Court.  Mr Lazarevich argued that the term ‘without admitting liability’ referred to liability in the District Court matter, not the Supreme Court matter, and argued that the fiat of 15 August 2006 proved this as it made it clear that the monies were being paid in to abide the District Court matter.

29. Mr Stevens argued that the term ‘without admitting liability’ referred to the caveat issue before the Supreme Court and that the respondent had paid the money into Court on the basis that it ‘explicitly reserved’ the issue of whether the appellant had a legal or equitable interest in the monies.

30. Mr Lazarevich also referred to the remark made by his Honour that the appellant’s solicitor accepted an undertaking by the respondent that upon settlement of the sale of the property, the respondent would pay the net proceeds of the sale into Court, and that the appellant accepted that undertaking ‘in lieu of other relief’.  Mr Lazarevich argued that this established that there was to be no further argument regarding the caveat issue.

31. Mr Lazarevich referred to the order for costs made by the Master on 18 October 2006, as further proof that the agreement between the parties had brought to an end all issues before the Supreme Court.  His Honour concluded his orders by stating that the matter was ‘finalised’.  Mr Lazarevich argued that this order indicated the finalisation of the Supreme Court proceedings.

32. Mr Stevens' response to this argument was that the hearing on 18 October 2006 was solely related to the issue of deciding costs and that the words ‘matter finalised’ referred to the finalising of only the costs issue.

33. Mr Stevens, submitted that the order made by the Master on 18 August 2006 required the proceeds of the sale to be paid into the Supreme Court Suitors Fund and that on 24 August 2006 the Master acknowledged that the monies had been erroneously paid into the District Court Suitors Fund and noted that it was the expectation of the Supreme Court that those monies would not be removed from the District Court Suitors Fund until further order of the Supreme Court.  Mr Stevens argued that the reason that the monies were in the District Court was not because the Supreme Court ever intended to relinquish control with respect to the caveat issue, but because of a mistake which occurred when the Registry of the Supreme Court declined to accept the money.

34. As I have already indicated, Mr Stevens argued that further evidence was required to establish the precise terms of the agreement.  Mr Stevens used the portion of the transcript of the District Court proceedings to argue that the comments by Mr Slattery QC, for the appellant, on that occasion contradicted the appellant’s argument before this Court.   It seems to me that both sides have chopped and changed their respective positions at different stages of argument.

35. Mr Lazarevich submitted that the transcript was of limited value as Mr Slattery had no involvement in, and only a peripheral understanding of, the Supreme Court matter. Mr Lazarevich also pointed out that the comments of Mr Slattery, were in response to an application by the respondent to adjourn the matter, which was made without notice and occurred during the course of the hearing.  I have not derived any assistance from what was said on a previous occasion in the District Court on the discrete matter relating to an adjournment.

    Conclusion

36. Having regard to the arguments presented by both parties I find myself in a position where I cannot make any conclusion from the court records as to what the terms of agreement between the parties were.  There are indications which in different ways support the arguments put forward by both sides.  It is not possible from a combination of orders and remarks made by Masters to interpret the intention of the parties.  It is my view that it would be inappropriate for me to do so unless it was clear cut.  It is not clear cut in this case.

37. Mr Stevens may well be right in his submission that the only way to determine what the agreement was is to hear evidence about it from both sides.  There are affidavits which have been filed in the District Court.  It was in respect of those affidavits that I declined Mr Stevens' application to tender them as evidence before me relating to the terms of the agreement.  The deponents of those affidavits would need to be cross-examined.  There may be other evidence that would assist but as at present advised the matter is, in my view, incapable of resolution on the mere orders of the Court together with the accompanying remarks.  In any event the matter should be resolved in the District Court, if indeed the Judge  considers it necessary to do so.

38. Having rejected Mr Stevens' application to present this further evidence I am of the view that there would be a prejudice in my interpreting the matter in the way suggested by Mr Lazarevich.   I will illustrate the difficulty I face.

39. On 15 August 2006 the Master noted that the defendant would ‘not object to paying the…proceeds of the sale into court to abide the outcome of the District Court action’.  This remark was made before the parties entered into the final agreement. The orders of the Master on this occasion required that the respondent draft and file a copy of the anticipated settlement statement and draft minutes of order. If these documents were still in draft form then the agreement had not been finalised and accordingly I cannot find that the term ‘abide the outcome of the District Court action’ was a term of, or is evidence of a term of, the final agreement between the parties.

40. In comparison, the fiat from the hearing before another Master on 18 August 2006 can be seen as a contemporaneous record of the agreement between the parties as it was at this hearing that the minutes of order requested by the Master was presented to the Court and accepted.  The relevant order was not actually made until 21 August 2006 due to an administrative delay but it seems that the terms of the agreement were not materially altered over the course of this delay. Judge Burley in his remarks made it clear that the money was to be paid into the Supreme Court Suitors Fund.  I think that this shows that it was at least possible that at the time of the agreement it was the understanding of the parties and the Court that the monies were being paid into the Supreme Court to abide the outcome of the Supreme Court matter.

1. This stance is further supported by the Master's remarks on 24 August 2006 where his Honour highlighted that the monies were wrongly paid into the District Court and that it was the expectation of this Court that those monies were not to be paid out until further order of the Supreme Court.

2. I have come to the conclusion that there is some merit in Mr Stevens’ argument that the orders of both Masters are inconsistent with, or at least cast some doubt over, the appellant’s assertion that the terms of the agreement are clearly recorded in the court record.     

3. I feel that it is appropriate that the two actions be consolidated into one and finalised in the District Court. It would then be open to the District Court to decide whether the question of the agreement and the caveat issue would be relevant to the orders already made there. In the event that the District Court finds it relevant and necessary to resolve these issues, at least all of the evidence required to interpret the agreement, including the District Court affidavits which the respondent sought to rely upon in this matter, will be before the Court and the deponents will be able to be cross-examined.

4. It is my view that the Master was correct in transferring the Supreme Court action to the District Court.  It is not possible to say that there was nothing left to transfer for the reasons I have given.

5. The appeal is therefore dismissed.