Foxman v Mitzev

[2006] NSWSC 1404

CITATION:	Foxman v Mitzev [2006] NSWSC 1404 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	8 December 2006
JUDGMENT DATE :	8 December 2006
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Vendor’s lien declared.
CATCHWORDS:	CONVEYANCING [114] – Relationship of vendor and purchaser – Position of parties after completion – Vendor’s lien – Generally.
CASES CITED:	Aronis v Hallett Brick Industries Ltd [1999] SASC 92 Davies v Littlejohn (1923) 34 CLR 174 Hewett v Court (1983) 149 CLR 639 Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466
PARTIES:	Marsha Foxman (P) Assen Atanasov Mitzev (D)
FILE NUMBER(S):	SC 2280/06
COUNSEL:	L S Einstein (P) R J Colquohon (D)
SOLICITORS:	Coustas & Co (P) Lynden E Hopper & Co (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

FRIDAY, 8 DECEMBER 2006

2280/06 MARSHA FOXMAN v ASSEN ATANASOV MITZEV

JUDGMENT

1 HIS HONOUR: These are proceedings for the enforcement of a vendor’s lien for unpaid purchase moneys under a contract for the sale of land.

2 In early 2002, Elimajo Pty Ltd (“Elimajo”) was the trustee of the Wajnstajn Family Trust and was as such the registered proprietor of a substantial property at 47 Ridge Avenue Jindabyne (“the property.”)

3 Subsequently, Elimajo ceased to be the trustee of the Wajnsztajn family trust and on 20 March 2006, by deed of appointment subsequently registered, the plaintiff was appointed as the new trustee of the trust. No point has been taken in these proceedings about the entitlement of the plaintiff to pursue the proceedings on behalf of the trust.

4 On an unspecified date before May 2002, Elimajo advertised the property for sale. The advertisement stated, “Total Price $900,000 Accepting $450,000 Credex Deposit.” On 1 May 2002, Elimajo entered into a contract for the sale of the property to the defendant (“the contract”). The price was stated on the front page of the contract to be $900,000, payable as to $90,000 by way of a deposit, with the balance on completion. Special condition 8 of the contract provided that the purchase price might be paid as follows.

“ Deposit:
Credex dollars to the value of $90,000.00
Balance payable on completion:
(i) Cash or bank cheque in the sum of $380,000.00
(ii) Credex dollars to the value of $430,000.00.”

5 Completion took place on 22 May 2002. There is no doubt that the total amount to be paid by Credex dollars was reduced by agreement from $520,000 to $510,000. This was the obligation that was met on completion. On completion, at Elimajo’s direction, the portion of the purchase price payable in Credex dollars was paid to Foxel Pty Limited (“Foxel”), of which Mr Wajnsztajn was the sole director.

6 Foxel was a member of the Credex scheme. Neither Elimajo nor the defendant was at the time of contract or at the time of settlement a member of that scheme, which was a scheme permitting members to deal by barter through the medium of “Credex dollars”.

7 Credex National Australian Trade Exchange Limited (“CNATE”) was a company limited by guarantee. Its memorandum and articles provided that the central right of “B” class shareholders was to engage in the trading scheme by trading with other members and with the manager. The Credex rules of trading contained the following provisions:

“1.1 The purpose of these Rules is to regulate, facilitate and administer the trading by Members between themselves and with the Manager of the Exchange and to govern the proce-dures [sic] to be adopted by the Manager to manage the Exchange and the accounts of Members.

1.2 These Rules are binding on all Members of the Exchange Company, Credex National Australian Trade Exchange Ltd ACN 079 710 713, and Credex Australia National Management Company Pty Ltd ABN 49 089 244 182 (hereinafter called the ‘Manager’) and constitute all of the Rules governing the Exchange and transactions between the Members and the Manager and the Trustee as well as the administration and operation of accounts associated therewith.”

8 “Member” is defined as a “B” class member of CNATE and “Membership” as the entitlement of a Member to participate in the trading scheme. “Trade dollars” is defined as an accounting unit to facilitate the recording of the debits and credits entered in respect of transactions between buying members and selling members or members and the manager. It is stated that it should be of the same value as $1 in Australian legal tender.

9 There are in evidence an application form for membership and the Credex Rules of Trading. The evidence is that these documents are in the form which they were in when Foxel became a member of CNATE in December 2001. The application form is headed “Membership Agreement and Acknowledgement Statement.” It provides that the applicant applies for “B” class membership in CNATE carrying with it the right to participate in the trading Program operated by CNATE under the management of Credex Australia National Management Company Pty Ltd (“CANMC”) under a deed of management with CNATE.

10 The problem to be dealt with in this case arises from the fact that at the time of the exchange and the settlement of the contract, CNATE no longer existed. It had been deregistered as a company on 18 February 2002 and remained deregistered at all times material to the determination of these proceedings.

11 The plaintiff’s submission is that the deregistration of CNATE meant that at the time of exchange and completion of the contract there was effectively no trading scheme and that Credex dollars were, in effect, of no value. Whilst most of the operations in relation to transactions were carried out by the manager, the manager was appointed to perform and performed this function by delegation from CNATE under the deed with that company. What is more, it is dubious whether persons who were previously “B” class members of CNATE could any longer realistically be regarded as members of the company or entitled to deal with other members under that rubric.

12 Mr Les Einstein, of counsel for the plaintiff, has in relation to the principles relating to vendors’ liens referred me to what was said by Gibbs J in Hewett v Court (1983) 149 CLR 639 at 645.

“A vendor’s lien for unpaid purchase money has been said to be founded on the principle that ‘a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration’: Mackreth v Symmons (1808) 15 Ves 329, at 340; 33 ER 778, at 782. The lien of a purchaser for the purchase money that he has paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a purchase price will not be allowed to keep the price if he fails to make the conveyance. At all events, the rule has been said to be founded on ‘solid and substantial justice’. Rose v Watson (1864) 10 HLC 672, at 684; 11 ER 1187, at 1192. In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor (cf Combe v Lord Swaythling [1947] Ch 625, 628) -- the lien is the security for the money which is justly due.”

It had been said by Knox CJ in Davies v Littlejohn (1923) 34 CLR 174 at 181:

“The rule to be applied seems to be that, where a vendor delivers possession of land to a purchaser without receiving the purchase-money, equity gives the vendor a lien on the land for the money unless there is something in the transaction itself, or in the circumstances, leading to a clear and manifest inference that the intention of the parties is otherwise …”

See also per Hope JA in Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 478.

13 The plaintiff submits that the parties evinced their intention in relation to payment of the purchase price on the cover page of the contract and in Special Condition 8, by which there was provision for the payment of parts of the purchase price by way of Credex dollars “to the value of” stated Australian dollar figures. That was a clear intention to attain two objectives. The first was that part payment might be made in Credex dollars. The second was that such Credex dollars were to have a value equivalent to the Australian dollar figures provided for in the contract. There is no doubt that Credex dollars were delivered and accepted at completion of the contract. The question arises as to whether that was a satisfaction of the contract, if it be established that those Credex dollars were worthless at the time.

14 In relation to this, Mr Einstein has referred me to the decision of Debelle J in Aronis v Hallett Brick Industries Ltd [1999] SASC 92. I cite the following passage from his Honour’s judgment:

“[13] The magistrate came to the conclusion that payment by Bartercard trade dollars was intended to be a primary but not the exclusive source of payment applying the reasoning of the High Court in Saffron v Societe Miniere Cafrika (1954) 100 CLR 231, at 243 to 245 where it was held that, in the circumstances of that case, the stipulation for payment by letter of credit did not go beyond requiring the establishment of such a letter as the primary but not the exclusive source of payment with the consequence that the seller could sue for and recover the price.

[14] As the reasons in Saffron indicate, the question is to determine the intention of the parties. In that case, the court decided that it was not reasonable to suppose that the parties intended that, in the unlikely circumstance that the buyer got the goods but payment therefor against the letter of credit was refused, the seller should not be paid. For that reason, the letter of credit was held to be the primary but not the exclusive source of payment. Thus, when considering whether a seller who had received a letter of credit in payment is barred from suing to recover the price of the goods, it is necessary to examine whether the letter of credit is to be regarded as an absolute or as a conditional method of payment: W J Alan & Co Ltd v El Nasr Export & Import Co [1972] 2 QB 189 at 210; E D & F Man Ltd v Nigerian Sweets & Confectionary Co Ltd [1977] 2 Lloyd’s Rep 50 at 55 to 56. See also Northwest Shipping and Towage Co Pty Ltd v Commonwealth Bank of Australia (1993) 118 CLR 453 at 463 and the discussion in Gutteridge and Megrah, The Law of Bankers’ Commercial Credits (7th Ed) at 35 to 42.

[15] I think that, in the particular circumstances of this case, a more helpful analogy is payment for goods by a bill of exchange or cheque. If a bill of exchange or a cheque given in payment for the sale of goods is dishonoured, the seller may sue to recover payment unless the parties have agreed that the receipt of the negotiable instrument is in full satisfaction of the debt. As Lord Esher MR said in Re Romer and Haslam [1893] 2 QB 286 at 296

‘It is perfectly well-known law, which is acted upon in every form of mercantile business, that the giving of a negotiable security by a debtor to his creditor operates as a conditional payment only, and not as a satisfaction of the debt, unless the parties agree so to treat it. Such a conditional payment is liable to be defeated on non-payment of the negotiable instrument at maturity, and it is surprising that there can be at the present day any doubt as to the business result of such a transaction.’

The other members of his Court of Appeal concurred with that view. See also Saffron (supra) at 244. In Tilley v Official Receiver (1960) 103 CLR 529 at 532 Dixon CJ expressed the principle in these terms:

‘Prima facie when a cheque is taken for the price of goods, or for that matter in respect of any other debt contracted, it operates as conditional payment. The condition is that the cheque be paid on presentation: if it is dishonoured the debt upon the original consideration revives. The rule is, of course, an old one and the presumption applies to other negotiable instruments as well as to cheques, although perhaps not necessarily with the same strength.’

See also Kitto J at 535 - 536 and Menzies J at 537. It is a question of fact in each case whether the negotiable instrument is taken in complete satisfaction of the original debt or merely as a conditional payment, the onus lying on the party alleging that the negotiable instrument operates as a complete satisfaction of the original debt: Armco (Australia) Pty Ltd v Federal Commissioner of Taxation (1948) 76 CLR 589, 595.”

15 Mr Einstein submits that if the Credex dollars be valueless, the vendor is entitled to look to the defendant for payment in Australian dollars and, what is more, the purchase price, not having been satisfied pro tanto by the delivery of Credex dollars, a vendor’s lien arises in favour of the vendor for the unpaid portion of the purchase price. He submits that the transaction does not evince an intention by the parties that the receipt of the Credex dollars should satisfy the defendant’s obligation to pay, whatever the worth or lack of worth of the Credex dollars.

16 The submissions put by Mr R J Colquhoun, of counsel for the defendant, were as follows: (1) There was no evidence that the trading scheme was not operating in May 2002 despite the deregistration of the exchange company. (2) Neither the vendor nor the defendant was a member of the Exchange. They were both people operating outside the Exchange. Therefore the non existence of the Exchange was irrelevant. (3) Payment of the Credex dollars was made in accordance with the contract and discharged the defendant’s obligation, so that no vendor’s lien arose. (4) There was no evidence that the Credex dollars were valueless, or of less value than one Credex dollar equals one Australian dollar, or that the Credex dollars delivered were not to the value of $510,000 Australian. (5) There was no evidence that the rules which were in evidence were the rules governing the exchange scheme at the time of the exchange or settlement of the contract and that there should be evidence of the rules at the relevant time.

17 To deal first with this submission (5), I should say that the rules when tendered in evidence were not objected to as irrelevant. Furthermore, the evidence shows that the membership application and the rules were current as at December 2001. There is, of course, a presumption of continuance. The contract was only some six months later in May 2002. More importantly, CNATE was deregistered in February 2002, only some two months after it is plain that the rules in evidence were current. They are hardly likely to have been changed after the company was deregistered. I find on the evidence before me that the membership application in evidence and the rules of trading were current at the time of the contract.

18 As to submission (1), Mr Colquhoun said there was no evidence that the scheme was not operating in May 2002. However, more importantly, there is no evidence that it was operating in May 2002 or has indeed operated at any time after deregistration of CNATE in February 2002. In my view, it could not have had any valid operation once the exchange company, which was contractually provided to be the operator, was non-existent and among people of whom the vital description was that they were members of that company, which was no longer in existence.

19 Submission (2) was that neither party to the contract was a member of CNATE at the time of the contract, so that the non existence of CNATE was irrelevant. That neither was a member is quite correct, but is hardly to the point. There was nothing in the scheme, so far as it was in evidence, that prevented people holding entitlement to Credex dollars who were not members of CNATE. What membership of CNATE provided for was the ability to carry out trading deals with other members of CNATE. The defendant was obviously able to obtain Credex dollars, although not a member of the exchange company, and to deliver them in purported performance of its obligations under the contract. The vendor could presumably make use of them by way of trading, either by itself subsequently becoming a member of CNATE or, as it did, by procuring their transfer to a person, in this instance Foxel, who was a member of CNATE. However, none of that is to the point, in my view, if the Credex dollars were themselves valueless, ie, Foxel could make no use of them because it was no longer able to enter into exchange transactions with other members of the exchange company.

20 As to submission (3), I accept Mr Einstein’s submissions about the status of, and the parties’ intention in relation to, the obligation of payment. This is not a case in which the parties’ intention as evinced was that the Credex dollars, whatever their value, were, if delivered, to be taken as due performance of the contract by the defendant without reference to the question of whether or not they were of the equivalent value in Australian dollars. It was not the intention of this contract, in my view, that the delivery of the Credex dollars, whatever their value, was a due fulfilment of the terms of the contract, nor was delivery of Credex dollars the exclusive means by which the obligation could be fulfilled. It could also be fulfilled, as appropriate, by the payment of ordinary currency in the stipulated amount.

21 Submission (4) was that there was no evidence that the Credex dollars were valueless or of less value than one to one with the Australian dollar. However, it flows from what I have said in [18] above as to submission (1) that there was no longer any scheme or any use to which Credex dollars might be put. I am of the view that they were in effect valueless at all material times.

22 The result of the reasons that I have given is, in my view, that the vendor was unpaid to the extent of $510,000 and that the plaintiff is entitled to enforce a vendor’s lien for that amount. Submissions have been put to me by Mr Einstein as to the manner in which that lien may be enforced. I shall say no more of those submissions at the moment, but simply direct that short minutes of order be brought in on Monday 11 December 2006 at 10 am. Any argument as to the appropriateness or form of those orders may take place at that time.

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19/12/2006 - Corrected the date of judgment - Paragraph(s) NA