Fuller v Albert (No 3)

[2021] NSWCA 226

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Fuller v Albert (No 3) [2021] NSWCA 226

Hearing dates:

On the papers (submissions of 25, 27, 31 August 2021)

Date of orders:

23 September 2021

Decision date:

23 September 2021

Before:

Macfarlan JA; Brereton JA; Emmett AJA

Decision:

(1) Vary Order (2) made by this Court on 18 May 2021 to read “Orders 1, 2, and 4 made on 14 July 2020 be set aside”.

(2) Set aside Order (5) made by this Court on 18 May 2021 and in lieu thereof grant leave, to the extent that it be required, to Mr Albert to rely on his affidavit sworn on 11 November 2020, and to Mr Fuller to rely on the affidavit of Jason Wasiak affirmed 20 November 2020, with costs of the motion filed on 11 November 2020 to be costs in the appeal.

(3) Set aside Order (3) made by this Court on 18 May 2021 and in lieu thereof:

(a) Give judgment that the third respondent Matcove Pty Ltd pay the appellant the sum of $393,750. This judgment takes effect on 23 September 2021.

(b) Declare that the sum referred to in Order (3)(a) is a charge on the third respondent’s land comprised in Folio Identifier 1/1097743 at Moonee Beach.

(c) Order that the proceedings be remitted to the Equity Division to take accounts as between Mr Fuller as mortgagor and Mrs Albert as mortgagee of the Mortgaged Share, to order that, upon payment by Mr Fuller within 21 days of the amount certified to be owing, Mrs Albert re-transfer the Mortgaged Share to Mr Fuller, and to determine the costs of the proceedings at first instance on the redemption claim.

(d) Order that Mr Albert pay Mr Fuller’s costs of the proceedings after 26 April 2019 at first instance on the contract claim.

Catchwords:

APPEALS – Orders on appeal – Remittal – Whether more appropriate for Court to finally resolve part of the dispute – Where neither party sought remitter – Where Court has all the evidence and submissions – Where Court in best position to understand own judgment – Order for remittal set aside

CONTRACTS – Remedies – Specific performance – Whether to exercise discretion to decline specific performance – Imbalance of rights and entitlements of parties – Impairment of development application – Lapse of time – Difficulty of framing orders for specific performance – Likelihood that ongoing supervision necessary – Land of no greater importance to appellant than its value – Availability of alternative remedies – Specific performance declined – Lord Cairns’ Act damages awarded in substitution for specific performance – Resolution of competing valuations

COSTS – Party/Party – Exceptions to general rule that costs follow the event – Offer of compromise made during hearing – Where appellant only liable for costs if successful solely on basis of offer – Offer not the basis of appellant’s success – No reason for costs not to follow event

COSTS – Party/Party – Exceptions to general rule that costs follow the event – Whether error found by Court of Appeal was attributable to successful appellant not raising point at trial – Where appellant has always advanced case in appropriate terms – No reason for costs not to follow event

Legislation Cited:

Chancery Amendment Act 1858, 21 & 22 Vict, c 27

Supreme Court Act 1970 (NSW), s 68

Uniform Civil Procedure Rules 2005 (NSW), r 36.16

Cases Cited:

ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512

Bosaid v Andry [1963] VR 465

Crabb v Arun District Council (No 2) (1976) 121 SJ 86

Dell v Beasley [1959] NZLR 89

Edward Street Properties Pty Ltd v Collins [1977] Qd R 399

Ferguson v Wilson (1866) LR 2 Ch App 77

Fuller v Albert (2021) 152 ACSR 80; [2021] NSWCA 88

Fuller v Albert (No 2) [2021] NSWCA 183

Madden v Kevereski [1983] 1 NSWLR 305

Matcove Pty Ltd, In the matter of [2020] NSWSC 625

Matcove Pty Ltd, In the matter of [2020] NSWSC 897

McKenna v Richey [1950] VLR 360; ALR 778

Sayers v Collyer (1884) 28 Ch D 103

Tamplin v James (1880) 15 Ch D 215

Weily v Williams (1895) 16 LR (NSW) Eq 190

Wentworth v Attorney-General (NSW) (1982) 154 CLR 518; [1982] HCA 70

Wroth v Tyler [1974] Ch 30; 1 All ER 897

Texts Cited:

P M McDermott, Equitable Damages (Butterworths, 1994)

R N Barber, “The Operation of the Doctrine of Part Performance, in Particular to Action for Damages” (1973) 8 University of Queensland Law Journal 79

Category:

Consequential orders

Parties:

Eric Andrew Fuller (Appellant)
Kerry Albert (First Respondent)
Sandra May Albert (Second Respondent)
Matcove Pty Ltd (Third Respondent)

Representation:

Counsel:
D L Cook SC (Appellant)
C R Newlinds SC with M E Hall (First and Second Respondents)
No appearance (Third Respondent)

Solicitors:
Crowther Sim Lawyers (Appellant)
Pure Legal (First and Second Respondents)

File Number(s):

2020/182084

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Corporations List

Citation:

[2020] NSWSC 625

[2020] NSWSC 897 (Costs)

Date of Decision:

25 May 2020
14 July 2020

Before:

Black J

File Number(s):

2017/213055

Judgment

1. THE COURT: On 14 July 2020, for reasons contained in a judgment which had been delivered on 25 May 2020,[1] a judge of the Equity Division made the following orders:[2]

“1. The Sixth Defendant [the second respondent Mrs Sandra Albert] be released from her obligations with respect to the undertaking provided to the First Plaintiff on 30 May 2019.

2. The proceedings otherwise be dismissed.

3. The First Plaintiff [the appellant Mr Fuller] pay the First [the first respondent Mr Kerry Albert], Fourth, Fifth and Sixth Defendants’ costs of the proceedings on an indemnity basis up to and inclusive of 26 April 2019.

4. The First Plaintiff pay the First, Fourth, Fifth and Sixth Defendants’ costs of the proceedings on an ordinary basis after 26 April 2019, as agreed or as assessed.

5. No order as to costs as against the Second, Third or Fourth Plaintiffs.”

1. In the matter of Matcove Pty Ltd [2020] NSWSC 625 (Black J) (“Primary judgment”).

2. In the matter of Matcove Pty Ltd [2020] NSWSC 897 at [14] (Black J).

2. Mr Fuller appealed from those orders, and on 18 May 2021, for reasons published on that day, with which these reasons should be read, this Court made the following orders: [3]

“1. The appeal be allowed.

2. The orders made by the primary judge on 14 July 2020 be set aside.

3. The Proceedings be remitted to the Equity Division for further determination in accordance with these reasons.

4. The first and second respondents should pay the appellant’s costs of the appeal.

5. The notice of motion filed on 11 November 2020 [Mr Albert’s application for leave to adduce further evidence on the appeal] be dismissed, with costs to be the costs of the parties at first instance.”

3. Fuller v Albert (2021) 152 ACSR 80 at 104 [92] (Emmett AJA; Macfarlan JA and Brereton JA agreeing); [2021] NSWCA 88 (“No 1 Judgment”).

3. The remitter under order 3 “for further determination in accordance with these reasons” involved two matters, as summarised in the conclusion of the judgment of Emmett AJA, with whom the other members of the Court agreed: in relation to the claim for specific performance of the Agreement (contract claim), it was “remitted to the primary judge for consideration of the practicability of specific performance or, alternatively, for assessment of damages”,[4] and in relation to the claim for redemption of the share mortgage (redemption claim), it was remitted for an inquiry to determine “the just amount that should be paid by Mr Fuller” in order to redeem the Mortgaged Share. [5]

   4. No 1 Judgment at 104 [88].

   5. No 1 Judgment at 104 [91].

4. By Notice of Motion filed on 31 May 2021, Mr and Mrs Albert applied to have the orders of 18 May 2021 recalled or set aside and the hearing of the appeal re-opened, under Uniform Civil Procedure Rules 2005 (NSW), r 36.16, and/or the inherent power of the Court. On 23 August 2021, for reasons published on that day,[6] the Court granted leave to the Alberts to file an Amended Notice of Motion, directed the parties to file and serve written submissions as to the appropriate order concerning costs of the appeal and as to whether the proceedings should be remitted to the Equity Division (being two of the issues in respect of which the Alberts had sought to re-open the No 1 Judgment), and otherwise dismissed the Amended Notice of Motion, with costs. Pursuant to those directions, the parties have made submissions, from which three issues requiring resolution arise: first, whether the proceedings should be remitted to the Equity Division as proposed in the No 1 Judgment; secondly, the costs of the appeal, in so far as it involved the redemption claim; and thirdly, the costs of the appeal in relation to the contract claim.

   6. Fuller v Albert (No 2) [2021] NSWCA 183 (Macfarlan and Brereton JJA and Emmett AJA) (“No 2 Judgment”).

Should the proceedings be remitted?

5. In the No 2 Judgment, the Court observed that although remitter was a not unconventional course, which the parties ought to have anticipated the Court might adopt rather than itself re-exercising the relevant discretion, it was prepared to afford the Alberts a further opportunity to make submissions as to why there should not be a remitter. [7] The Alberts submitted that the contract claim should not be remitted, and that this Court should proceed itself to determine the remaining questions concerning relief on that claim. They did not submit that the redemption claim should not be remitted, although the scope of that remitter in respect of costs was questioned, and is addressed later.

   7. No 2 Judgment at [24]-[25]

6. One basis of the Alberts’ opposition to remitter of the contract claim, which is conveniently dealt with first, is a contention that there is an unresolved question raised in their Notice of Contention as to whether there is any unperformed term in the Agreement, which does not go to the exercise of discretion as to what remedy may be appropriate, but is a question of law that must be determined before any question of remedy, and which, if resolved in their favour, will finally determine the proceedings because the orders of the primary judge will have been correct. They submit that, contrary to the statement in the No 2 Judgment[8] that the Court did not need to find a breach in the sense of non-performance of a term:

“that was something that the Court was statutorily required to do to finally dispose of the appeal. Without determining that point of the Notice of Contention it is simply not possible to conclude that the Primary Judge's orders were wrong. Contrary to what the Court might think, at trial Mr Albert did anticipate this "obvious" point and ran the case and made submissions as to why no breach of such a term could be found. It is most definitely covered by the Notice of Contention.”

8. No 2 Judgment at [12].

7. The Alberts’ repeated and increasingly strident complaint that this Court has not dealt with their Notice of Contention in this respect is misconceived. At the outset, it needs to be understood that a Notice of Contention – unlike a Notice of Appeal, or a Notice of Motion – is not a process which seeks relief, and does not require disposition in the sense of orders being made pursuant to it, or dismissing it. A Notice of Contention merely serves to give notice, to avoid surprise, that the respondent to an appeal will rely on arguments not accepted or relied upon by the primary judge, to uphold the decision. If, as in this case, notwithstanding a Notice of Contention, an appeal is allowed and the orders of the primary judge are set aside, the Court has necessarily decided that the judgment should not be upheld on the grounds advanced in the Notice of Contention.

8. However, this was not merely implicit. The Notice of Contention (which was filed belatedly on 17 November 2020, some thirteen days before the hearing of the appeal on 30 November 2020), raised, in respect of “the refusal to order specific performance”, eight grounds (numbered 3 to 10 inclusive) on which it was said that the judgment should be affirmed which were not relied on by the primary judge. In the No 1 Judgment, this Court rejected grounds 3 (variation), 4 (waiver or abandonment), and 5 (release), [9] as further explained in the No 2 Judgment. [10] Ground 8 (limitation or laches) was also dealt with and rejected. [11] The complaint that the Court has failed to determine whether there is any unperformed term in the Agreement, and that the Court was wrong in stating that it did not need to find a breach in the sense of non-performance of a term, appears to relate to grounds 6, 7, and 9, which were as follows:

“6    The Alleged Agreement did not impose any obligation on Kerry Albert;

7    There was no breach of the Alleged Agreement by Kerry Albert and/or Matcove and the Appellant never demanded Kerry Albert perform any obligation pleaded;

…

9    The pleaded Alleged Agreement cannot be specifically performed as time for performance has not arisen and there has been no breach by Kerry Albert; and”

9. No 1 Judgment at 94-96 [47]-[58].

10. No 2 Judgment at [18]-[22].

11. No 1 Judgment at 96-97 [59]-[60].

9. It is self-evident from the No 1 Judgment and the No 2 Judgment that the Court has necessarily rejected ground 6, in holding that the agreement indeed imposed an obligation on Mr Albert, to the effect of pleaded term (d) of the Agreement. [12] It is also self-evident that it has rejected grounds 7 and 9: by holding (a) that Mr Fuller had repudiated the Agreement,[13] and (b) that such repudiation provided a sufficient basis for an order for specific performance, and that it was not necessary to establish a subsisting breach of a specific contractual obligation,[14] the Court rejected the proposition that the judgment below should be upheld on the basis that there was no breach and no demand and that time for performance may not yet have arisen; it was not necessary to go any further, as neither breach in the strict sense (as distinct from repudiation), nor demand, was a necessary precondition for a decree of specific performance, repudiation being a sufficient trigger. Just because the Notice of Contention asserts that there is no demand, no breach, and that the time for performance has not yet arrived, does not mean that the Court has to determine those assertions, if they are not relevant to the result. Here, they are not relevant to the result because the Court has held that regardless of whether there has been a demand or a breach, and regardless of whether the time for performance has arrived, Mr Fuller is, subject to the question of the practicability of relief, entitled to specific performance.

   12. No 1 Judgment at 91 [37].

   13. No 1 Judgment at 97-98 [65].

   14. No 1 Judgment at 97-98 [65]; No 2 Judgment at [10].

10. Thus the issue which the Court contemplated remitting was whether, it having been held that there was a binding and enforceable agreement, susceptible to specific performance, that remedy should be granted as a matter of discretion, and if not what if any damages or other relief should be awarded instead. In connection with whether, as a matter of discretion, specific performance should now be decreed, there were particular issues as to whether:

1. specific performance is impracticable;

2. the adverse effect of specific performance on the development approval in respect of Matcove’s Property is such that it should be declined; and

3. if specific performance is held to be inappropriate, whether damages should be awarded in substitution, and if so how much, and/or whether Mr Fuller should have an equitable charge as contemplated in the No 1 Judgment. [15]

   15. No 1 Judgment at 98 [66].

11. Although, as will appear, the Court received some submissions on these issues, they were not elaborate, and in circumstances where the discretionary considerations had not been addressed, at least in any conclusive way, by the primary judge – understandably so, because it was unnecessary for his Honour to do so given the basis on which he disposed of the matter – it appeared preferable to afford both parties the opportunity to address them more fully on remitter. Such a course would also ensure that both parties had a right of appeal to this Court from what would be the first full consideration of the discretionary issues, whereas if this Court itself undertook the exercise, the only remedy would be an appeal by special leave to the High Court.

12. However, the Alberts press this Court to determine the outstanding issues, without remitter. In particular, they submit that:

1. neither party sought remitter;

2. all the evidence and submissions required to resolve the outstanding questions are before this Court; and

3. this Court is better placed than the primary judge to consider the remaining issues, since it is in the best position to understand what it has determined, whereas if the matter is remitted, there will be lengthy and complex debate as to what has been remitted and what is yet to be determined.

13. There is force in these submissions, especially when they are advanced by the unsuccessful party in the appeal. It is correct that neither party sought remitter, and that in opposing the present application Mr Fuller has changed his position. At the hearing of the appeal, each party envisaged that this Court would, if the appeal succeeded, embark on the exercise of the discretion to grant or withhold specific performance. While the fact that neither party sought remitter by no means binds the Court, it is relevant, as neither party can complain if this Court proceeds, as it indicated was at least a possibility, to re-exercise the discretion itself on the material before it. And it is particularly relevant to the associated submission that the Court has all the evidence and submissions on which the parties wished to rely in respect of the re-exercise of the relevant discretion. Against the eventuality that this Court might itself exercise the discretion to grant specific performance, both parties sought and were permitted to adduce further evidence relevant to that question, and it was made clear that that might well be the only opportunity to do so, as illustrated by the following exchange with counsel for Mr Fuller (emphasis added): [16]

“COOK: Effectively I think that's what has to happen, your Honour, because if the appeal is successful and specific performance is ordered, your Honour would have noted from my submissions that we seek that this Court determine and supervise the specific performance, and the matters that are raised in that evidence about the SSD application on matters that would be relevant to the Court at this stage, to read the evidence today and the appeal probably doesn't---

MACFARLAN JA: Well, this is likely your only chance so I think you probably should attempt to read it on a conditional basis, that it's only relevant in the event of the Court re exercising a discretion and we will see what Mr Newlinds' response is.”

16. Tcpt, 30 November 2020, p 1(30)-(42).

14. As already observed, the submissions of each of the parties referred to the discretionary considerations, though not in any elaborate way, and (in the case of the Alberts) chiefly by reference to and incorporation of the submissions they had made at first instance. The significance of the circumstance that it is the unsuccessful party in the appeal, the Alberts, who press for this Court itself to re-exercise the discretion, having proposed remitter in circumstances where, at the hearing, the successful appellant did not seek a remitter, is that the Court need not be concerned that they will be deprived of an opportunity they might have desired to present further evidence or arguments which might have been advanced on remitter.

15. Accordingly, while there is much to be said for the view that, the discretion not having been exercised at first instance, there would be benefits for both parties in remitting the question, neither can object if this Court does not do so, and in circumstances where the unsuccessful party presses the Court not to do so but to exercise the discretion itself – presumably in order to avoid the time, costs, and uncertainty of a further hearing – there is good reason to do so.

14. Ground 10 of the Alberts’ Notice of Contention was that as a matter of discretion, specific performance should not be ordered. In respect of it, the Albert’s written submissions simply relied on their submissions at first instance and on “the findings of his Honour consistent with these submissions”. In essence, their relevant submissions at first instance were to the effect that the Court should refuse to exercise its discretion to grant specific performance, because (1) there had been no breach by Kerry Albert; (2) Mr Fuller had not been ready and willing to perform his obligations under the agreement, because he acted in a manner inconsistent with any entitlement to land on the Property, in that by disavowing Mr Albert’s entitlement to the Albert Lot for no monetary payment, he equally disavowed any entitlement he may have been said to have to his Lot; (3) the delay in seeking specific performance would result in the effective derailing of the development application; (4) Mr Fuller’s dishonest conduct in bringing the proceedings meant that he lacked clean hands; and (5) Mr Fuller’s inconsistent conduct in respect of any entitlement to his own block of land was also relevant. It was also submitted that the deterioration in Mr Albert’s health, his exposure to abusive conduct by Mr Fuller, and his change of position in making the payment of $175,000 on 21 December 2016, were relevant considerations. Finally, it was submitted that significant weight should be given to the “immense financial damage” any order for specific performance would cause to Matcove (and its shareholders), by reason of its impact on the pending “State-significant” development application, including that it would require a redesign of the entire lot layout, cause the application to be no longer above the 100-lot threshold to invoke the jurisdiction of the Minister as the relevant planning and authority, and consequently have the result of derailing the entire present development application and requiring it to be recommenced, effectively from scratch and likely before a new planning authority.

15. To the extent that those submissions do not overlap submissions which have been rejected under other grounds, they relate chiefly to the impact that an order for specific performance would have on the development application. Save for that aspect, the primary judge merely noted the Alberts’ submission that several discretionary factors warranted the refusal of relief, and stated that it was not necessary to address those matters given the findings on other grounds. ^[17] In respect of the impact specific performance would have on the development application, his Honour said:[18]

“The Defendants relied on the expert report of a planning consultant, Mr Lawer, dated 7 February 2020 (Ex D2). It seems to me that Mr Lawer’s evidence was cogent, although that evidence depended upon making an assumption as to where a subdivided block allotted to Mr Fuller would be placed based on Mr Lawer’s reading of the Page 552 Document diagram at the time of preparing his report. That evidence was qualified in cross-examination when Mr Cook identified an alternative positioning where that block could be placed. I accept Mr Lawer’s evidence that, even if that block was repositioned, it would likely require changes to the current development application that is current in respect of the land as a State Significant Development. I also accept that, as Mr Lawer’s report indicated and Mr Newlinds submitted, an allotment of a lot of substantial size to Mr Fuller, or several lots of smaller size to Mr Fuller, would potentially reduce the number of lots that are subject to the development application below the 100 lot threshold for a State Significant Development application, and potentially require the development application to be resubmitted as a new application on a different basis. It is not, however, necessary to express final views as to those matters, given the conclusions that I reach on other grounds.”

17. Primary Judgment at [156].

18. Primary Judgment at [17].

18. In this Court, Mr Albert sought leave to adduce evidence, which was received by the Court conditionally, that the development application was granted on 8 October 2020, that he had received an offer for the land the subject of the approval in the sum of $8 million, and that he wishes to accept the best offer and proceed to cause Matcove and Moonee Developments to sell the land with the benefit of the development approval. On the same conditional basis, Mr Fuller adduced evidence of a town planner, Mr Wasiak, to the effect that in his opinion, a block of 10,785sqm – some 945sqm less than the 11,730sqm to which Mr Fuller would be entitled under the Agreement – could be created in the approximate location of Lot 1 (the Fuller Lot) described in the Agreement, and that once the lots in that area were created under the development approval, they would have separate titles which could be transferred to Mr Fuller. Alternatively, if it were desired to perform the Agreement immediately, application could be made for a modification of the development approval to allow for a change in the staging sequence, which would not in his opinion be controversial and would likely be granted as a matter of course, “subject to supporting engineering design to demonstrate the sequencing does not prejudice the overall approach”. This, he explained, would involve (1) revision of the approved plans by engineers to reconfigure the staging and works to allow for the Fuller Lot to be in a stand-alone stage with a view to being a separate lot, without affecting the developability of the remainder of the land, at a cost of perhaps $10,000; (2) an application to modify the existing approval, at a cost of a further $5,000, which the Department might take about four months to consider; (3) upon approval, creation of a subdivision plan to enable a subdivision certificate to create the Fuller Lot; (4) registration of the plan; and (5) either selling, or developing in accordance with the approval, the balance of the land. There was no application to cross-examination Mr Wasiak.

19. The Alberts submitted that if the Court were to embark on considering discretionary factors relevant to specific performance, they relied on Part IV of their written submissions, and the additional evidence of Mr Albert summarised above. Part IV of their submissions was simply:

“107. If contrary to the above submissions the Court wishes to consider whether specific performance ought to be ordered the Alberts wish to adduce evidence relevant to the exercise of the Court's discretion. Such evidence is strictly speaking not fresh evidence. However, out of an abundance of caution, the Alberts have filed an application to rely on the evidence pursuant to UCPR r 51.51; s 75A(8)-(9) Supreme Court Act 1970 (NSW).

108. The evidence is contained within the Affidavit of Kerry Albert and pertains to the outcome of SSD 7198 that occurred after the Reasons.

109. The relevance of the evidence was foreshadowed by his Honour at J [148]; Red pg 65 and appears to be accepted by Mr Fuller given AS [47] and [49].”

20. In addition, reference was made in oral submissions to the adverse impact that specific performance would have on the development, and on the value that Matcove would derive from it.

21. Mr Fuller’s written submissions stated that he had no desire to cause the impairment of the development application, and accepted that if when the question came to be considered the development application had been granted (as Mr Albert’s evidence established it was), the question of hardship must be considered in that context – in which case the question of compensation in lieu of specific performance would arise.

22. Mr Wasiak’s unchallenged evidence shows that, in principle, specific performance is not impossible. The No 1 Judgment makes clear that a powerful discretionary consideration weighing in Mr Fuller’s favour is the imbalance in the respective rights and entitlements of the parties in circumstances where Mr Albert has, but Mr Fuller has not, received their respective lots. [19] However, the combination of the passage of time, the intervening prosecution of the development application over the whole of the land and the expenditure incurred on it, its culmination in the grant of development approval, the impact that an order will have on the development approval and the realisation of benefits for the parties, the considerable complexity that would be involved in working out any order for specific performance, the likelihood of the requirement for ongoing supervision, the availability of alternative remedies, and the absence of evidence that shows any particular reason why the land is of greater importance to Mr Fuller than its value, combine to produce the result that, as a matter of discretion, specific performance should be declined.

    19. No 1 Judgment at 97 [61].

23. Where specific performance is declined as a matter of discretion having regard to factors such as those, the Court may award damages in substitution for specific performance, under Lord Cairns’ Act, [20] as reflected in Supreme Court Act 1970 (NSW), s 68. The prevailing view is that where a contract is susceptible to specific performance (as this Court has held is the case here), but for a discretionary consideration the Court declines to order it, the statutory power to award damages in substitution for specific performance is engaged. [21] In this context, the court is not awarding damages for breach of contract, but equitable compensation in lieu of specific performance: the power is one to give compensation in respect of an equitable interest. [22] Such damages are intended to put the plaintiff into a position equivalent to that in which it would have been had the contract been specifically performed. [23] In those circumstances, the correct approach is to compare the plaintiff’s position with that which would have obtained had specific performance been decreed and the contract performed. In that event, Mr Fuller would have his lot, 50% larger than Mr Albert’s lot, though he would have incurred the costs of subdivision to create it.

    20. Chancery Amendment Act 1858, 21 & 22 Vict, c 27.

    21. Wentworth v Attorney-General (NSW) (1982) 154 CLR 518 at 525 (Gibbs CJ, Mason, Brennan, Deane and Dawson JJ); [1982] HCA 70; Edward Street Properties Pty Ltd v Collins [1977] Qd R 399 at 400-401 (Douglas J; Wanstall CJ and Sheahan J agreeing); ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512 at 516-518 (Needham J); Bosaid v Andry [1963] VR 465 at 487-489 (Sholl J); Dell v Beasley [1959] NZLR 89 at 97 (McCarthy J); McKenna v Richey [1950] VLR 360 at 375 (O’Bryan J); ALR 778; Weily v Williams (1895) 16 LR (NSW) Eq 190 at 195 (Owen CJ in Eq); Sayers v Collyer (1884) 28 Ch D 103 at 108 (Baggallay LJ), 110 (Fry LJ); Tamplin v James (1880) 15 Ch D 215 at 221 (Brett LJ), 222 (Cotton LJ), 223 (James LJ); Ferguson v Wilson (1866) LR 2 Ch App 77 at 88-89 (Turner LJ), 91-92 (Cairns LJ).

    22. Madden v Kevereski [1983] 1 NSWLR 305 at 307 (Hisham CJ in Eq); Crabb v Arun District Council (No 2) (1976) 121 SJ 86 at 86 (Lord Denning MR; Lawton LJ and Scarman LJ agreeing).

    23. Wroth v Tyler [1974] Ch 30 at 58, 60 (Megarry J); 1 All ER 897; P M McDermott, Equitable Damages (Butterworths, 1994) at 103; R N Barber, “The Operation of the Doctrine of Part Performance, in Particular to Action for Damages” (1973) 8 University of Queensland Law Journal 79, 83-84.

24. Ground 11 of the Notice of Contention was that there was a lack of evidence as to quantum, and as to who between Mr Albert and Matcove would be liable. However, the second aspect of that contention is not a matter of evidence. While it is Mr Albert’s repudiation that has enlivened the jurisdiction, the Court is not awarding damages for breach of contract, but equitable compensation in lieu of specific performance. If specific performance were decreed, it would have resulted in the Fuller Lot being subtracted from the remaining property of Matcove, rather than from that of Mr Albert. The pleaded agreement was one to which the parties were Mr Albert, Mr Fuller, and Matcove. This Court accepted that Matcove was a party to the Agreement. [24] Ground 11 of the Notice of Contention specifically adverts to the possibility that damages might be awarded against Matcove. The proper remedy is that in lieu of specific performance, Matcove should pay Mr Fuller the value of the lot which he ought to have received, and that obligation should be charged on Matcove’s land. This reflects the underlying reality that the agreement was one between Mr Fuller, Mr Albert, and Matcove, to create two interests out of Matcove’s land, namely the Fuller Lot and the Albert Lot.

    24. No 1 Judgment at 90-91 [35].

25. As to the contention that there was a lack of evidence as to quantum, it is well-established that the assessment of damages is not a precise exercise and a court must do the best it can with the material available. Ideally, the Court would have a valuation of the Fuller Lot, as at today, allowing for the costs of subdividing it. But not having that evidence does not render the exercise impossible. Evidence of value at an earlier date can be used, subject to allowing for the time difference by way of interest or appreciation to derive a proxy for present value.

26. Before the primary judge there was a valuation of Mr Loader, who was qualified on behalf of Mr Fuller, that assuming that the Agreement had been performed and that the Fuller Lot had been subdivided and transferred to Mr Fuller, it would have been worth $550,000 at the date of valuation (being 31 July 2019), and $375,000 in December 2005. There was also a valuation of Ms Parkes, who was retained on behalf of the Alberts, that the Fuller Lot was worth $260,000 as at November 2005, and $280,000 at April 2007 (the time when Mr Albert took a transfer of his block); although she offered criticisms of Mr Loader’s current market valuation, she was not instructed to offer an opinion as to current value.

27. The primary judge referred to “difficulties” with Mr Loader’s evidence. These included that he miscalculated the land area, by attributing to the Albert Lot an area required to be dedicated to the Council, and thus erroneously inflating the area of the Fuller Lot; assumed that the Fuller Lot was already subdivided, when it was not; and used several sales of properties which already had development approval as comparables. [25] While conscious that Ms Parkes had also incorrectly assumed that the Fuller Lot had been subdivided,[26] his Honour appears to have been disposed to prefer her opinion, albeit noting that it was as at 2007, and not current. [27] Somewhat remarkably, it was submitted to the primary judge on behalf of the Alberts, who had tendered her report, that her evidence could be given no weight because she too assumed that the Fuller Lot had been subdivided. In making that assumption, Ms Parkes was acting in accordance with her instructions. It ill behoves the Alberts, who tendered and relied on her evidence, but failed to give her the correct instructions as to assumptions, to impugn it. Ms Parkes’ valuation of $280,000 (after subdivision) as at 1 April 2007 bears a close relationship to the sum of $262,500, which is the proportionate equivalent for the Fuller Lot of the value of $175,000 attributed to the Albert Lot at that time (before subdivision). ^[28] Ms Parkes’ 2007 valuation, and the value of $262,500 derived from the value attributed to the Albert Lot (which was then unsubdivided), supports a valuation of at least $262,500 for the Fuller Lot as at 1 April 2007, after providing for the costs of subdivision.

    25. Primary Judgment at [16].

    26. Primary Judgment at [18].

    27. Primary Judgment at [157].

    28. No 1 Judgment at 98 [66].

28. Interest on $262,500 at the Court rates from 1 April 2007 to 23 September 2021 amounts to $250,257, producing a total of $512,757. That represents appreciation in the land value over that fourteen year and five month period of 95%. However, the Court rates of interest are set at 4% above the cash rate, to recognise the relatively high risk associated with judgment debts, and to incentivise payment. Those considerations do not inform the appreciation of land. Although Mr Loader’s valuation cannot be accepted because of the miscalculation of the land area, it provides some integers which enable appreciation to be tested. Mr Loader’s valuations of $375,000 in December 2005 and $550,000 in July 2019 imply appreciation of 47% for that period of thirteen years and seven months commencing from 2005. Those analyses demonstrate that application of the Court rates is likely to produce a result that exceeds the true appreciation of the land. For the period of fourteen years and five months from 1 April 2007 to 23 September 2021, appreciation of 50% should be allowed on the value before subdivision of $262,500. The proxy for present value before subdivision is therefore $393,750, which is the measure of Mr Fuller’s damages.

Costs of the redemption claim

29. The primary judge held that Mr Fuller was not entitled to redeem the share mortgage, chiefly on account of the long period of time since the loan was not repaid. In the No 1 Judgment, this Court held that that was erroneous: [29]

    29. No 1 Judgment at 103 [84]-[85].

“[84] The primary judge refused an order for redemption, principally, on the basis of the delay on Mr Fuller’s part in repayment of the amount secured by the mortgage of the Mortgaged Share. However, that delay is compensated for by the offer to pay interest at UCPR rates. Delay alone would not be sufficient to extinguish the equity of redemption prior to the valid exercise of a power of sale of the mortgaged property or an order for foreclosure by the Court. It follows that his Honour erred in refusing an order of redemption on the basis of delay. The other matters upon which his Honour relied in refusing relief were dealt with in the offers made in the course of the hearing before the primary judge.

[85] In addition, in the course of the hearing before this Court, Mr Fuller proffered an offer in the following terms:

1.   Eric Fuller offers to redeem the share in Matcove Pty Ltd transferred to Sandra Albert pursuant to the General Security Deed 2013 (mortgage) on the basis that:

a.   He will repay the amount advanced under the loan of $170,000;

b.   He will pay interest on the amount of $170,000 from the date that the funds were advanced at the Court rate or the rate incurred by Sandra Albert on funds that she borrowed to make the advance, whichever is the greater;

c.   He will pay Sandra Albert’s costs of the redemption suit, in the proceedings below and on appeal, as assessed or agreed, on an indemnity scale;

d.   He will pay any and all costs arising out of Sandra Albert’s holding of his share from the date of transfer to date of transfer to him;

e.   He will pay whatever other amounts are found to be due on the taking of an account under the mortgage.

2.   Eric Fuller further offers, as the price of the equity, to:

a.   Pay into Court the sum of $170,000 together with a provision for interest of $72,313, being interest at the Court rate from 1 June 2013 to 1 December 2020 within 14 days;

b.   Pay into Court such further amounts as the Court determines to provide for the obligations in [1] above within 14 days of such determination;

c.   Submit to an order for the taking of an account of all the amounts due the mortgage and to pay the amount so determined;

d.   Submit to any further condition as the Court might impose upon him as the price of the equity of redemption.”

Upon that offer being proffered, a member of the Court observed that that would have costs consequences “if this were the only basis on which” the Court made an order. Counsel for Mr Fuller accepted that proposition and observed that Mr Fuller was “tendering costs on indemnity scale, whatever it takes”. [30]

30. Tcpt, 30 November 2020, p 46(16)-(20).

30. Mr Albert and Mrs Albert contend that the appropriate order for costs in relation to the issue of redemption is that Mr Fuller pay all the costs, including of the appeal, on the basis that he undertook to do so. However, the offer was not, as the Alberts assert, an unconditional undertaking proffered to the Court and therefore to the parties to the proceedings as well, but, as its terms indicate, an offer, which was not accepted. The transcript references provided in the Alberts’ submissions do not support their assertion that “[d]uring the hearing the Court made it entirely clear that the undertaking was essential and that Mr Fuller would be paying costs if successful”. [31] Contrary to their submissions, but as the passage emphasised above shows, this Court did not state that the “undertaking” was essential, nor that Mr Fuller would be paying the costs if he was successful, but only that there would be costs consequences if he succeeded only because of it. In fact, the Court held that he was entitled to succeed on the basis of what was before the primary judge, the primary judge having erred in holding that the right to redeem had been lost. Thus, Mr Fuller’s success on this issue did not depend on the offer set out above. The basis on which he succeeded was set out in the No 1 Judgment at [84], reproduced above. [32] The observation of a member of the Court, referred to above, that the offer would have costs consequences “if this were the only basis” is not engaged, because, for the reasons explained in the previous paragraph, it was not the only basis on which the Court made an order.

    31. Citing Tcpt, 30 November 2020, pp 46(16)-(17), 77(33), 80(19-(20) and 83(29)-(42).

    32. Above at [29].

31. The Alberts also say that, being a redemption suit, this is not a case where the usual order that costs follow the event applies, and that in a redemption suit the mortgagor is required to pay the mortgagee’s reasonable costs. That is so, to a point, but it does not extend to the costs of wrongfully opposing redemption. In this case, before the primary judge, Mrs Albert wrongly (and unsuccessfully) disputed that the transaction was in the nature of a mortgage; and she wrongly (but, at first instance successfully) contended that any right to redeem had been lost by delay. In this Court, the real issue was whether his Honour erred in holding that the right to redeem had been lost. Mrs Albert failed on that issue. Her incorrect assertion, accepted by the primary judge, that any right to redeem had been lost by delay, put Mr Fuller to the costs of his successful appeal. There is no reason why he should not recover those costs.

32. The Alberts also complain that the observation, in the No 2 Judgment, that “[i]t is possible that if an order for redemption is ultimately made at first instance, a condition might be that Mr Fuller bear the costs of the appeal, to the extent that they are attributable to the redemption suit, but that would be a matter for the Equity Division judge”,[33] appears to suggest that it would be open to the judge on remitter to order redemption with a condition that effectively reversed and would be inconsistent with this Court’s order, and that, apart from the question as to whether as a matter of law a first instance judge on remitter could do that, “there is simply no reason to place that hurdle, obstacle and debate upon a trial judge and the parties”. Those submissions have force. There is no reason why Mr Fuller should bear the costs of his successful appeal. Mrs Albert should bear the costs of the appeal on the redemption issue, without it being open to the primary judge on remitter to revisit that question.

    33. No 2 Judgment at [30].

33. It may well be the case that, in accordance with the general principle, Mr Fuller should be required to pay Mrs Albert’s costs at first instance of the redemption suit, although due allowance will need to be made for the costs arising from Mr Albert’s denial that the arrangement constituted a security. [34] That will be a matter for the primary judge when accounts are taken and an order for redemption is made.

    34. See No 1 Judgment at 103 [87].

Costs of the contract claim

34. In relation to the costs of the contract claim, the Alberts submit that the error attributed by this Court to the primary judge was entirely attributable to the position taken by the successful appellant in not running the point, and in no way contributed to by the position of the respondents. Accordingly, they submit that the usual order for costs in that situation would be that the successful appellant pay the costs of the appeal and the proceedings to date before the primary judge, probably on an indemnity basis.

35. The Alberts assert that, if the effect of this Court’s judgments is no more than that there is a contract with a term of good faith and that there has been repudiation of that contract, but no finding of non-performance or breach, that result arises because Mr Fuller did not make a submission in support of such a term either before the primary judge or in the appeal and despite the fact that at no time did Mr Albert deny the existence of such a term. Essentially, this is another attempt to contend, despite the No 2 Judgment, that the case on which Mr Fuller succeeded was not that which he ran at first instance.

36. At first instance, Mr Fuller contended that terms (a) and (d) were implied terms of the Agreement. The primary judge held that they were not. This Court held that they were.

37. Insofar as the Alberts submit that this was found on a basis not advanced before the primary judge, they are wrong. The “Plaintiff’s Further Submissions on Implied Term” of 5 May 2020 included submissions which are closely analogous to this Court’s reasoning in the No 1 Judgment (at [37]), as explained in the No 2 Judgment (at [4]-[6]). Because of the strident complaints of the Alberts that this case was not that “run” at first instance, it is worth setting out in full the following extract from those submissions:

“8. However, the term at ASOC [44](d) also falls within category (ii).

9. The relevant test for this category has been put that the term must be “a basis without which the whole transaction would be futile” (Miller v Hancock [1893] 2 QB 177 at 181 per Bowne LJ) or one of “necessity” (Liverpool City Council v Irwin [1977] AC 239 at 254). In Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450, the Court held that “necessity” would arise where “the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined”, or, at 453, where a contract would be “deprived of its substance, seriously undermined or drastically devalued”.

10. The expressed intention in the document at p.552 is that each of Kerry and Eric are to acquire a block of land. In order to achieve that outcome, as a matter of necessity, the term at ASOC [44](d) must be implied for, if it were not, the contract would be rendered nugatory, worthless and deprived of substance. Without a subdivision, the expressed intention of the parties that each acquire a block of land is impossible, and without an obligation imposed to cause that subdivision, their contract is rendered nugatory, worthless and deprived of substance.

11. Within category (ii) is “a general rule applicable to every contract that each party agrees, by implication, to do all things as are necessary on his behalf to enable the other to have the benefit of the contract” (emphasis added): per Griffith CJ in Butt v M’Donald (1896) 7 QLJ 68 at 70-71.

12. The implication of that general rule led Mc Hugh JA, in a dissenting judgment, in Beaton v McDivitt & Anor (1987) 13 NSWLR 162, to conclude at p. 185-186:

The McDivitts have a contractual duty to do everything necessary on their part to enable the plaintiff to have the benefit of the contract: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. Accordingly, it is and was their duty to do everything in their power necessary to have the land subdivided so as to transfer “lot B” to the plaintiff. No doubt it was not a breach of that duty for McDivitts to wait and see whether the land would be rezoned. But if the land is not to be rezoned, then the fulfilment of the McDivitts' duty requires that they make an application under the present zoning. If that application fails and if it appears that there is no prospect in the foreseeable future of a subdivision being carried through, then it may be proper to conclude that the contract between the parties has been frustrated.

13. The term at ASOC [44](d) is required to ensure that Eric has the benefit of the contract and to the extent that it imposes obligation on Matcove and Kerry, those obligations are consistent with the general rule that is implied into all contracts, as described by Griffith CJ in Butt (above).

14. In Mackay v Dick (1881) 6 App Cas 251 at 263, Lord Blackburn said:

Where in a written contract it appears that both parties have agreed that something should be done, which cannot effectually be done unless they both concur in doing it, the construction of the contract is that each is to do all that is necessary to be done on his part for the carrying out of that thing, though there be no express words to that effect” (emphasis added).

15. In this instance, Kerry, Eric and Matcove had agreed that each of Kerry and Eric were to acquire a block of land. That could not be effectually done, or done at all, in so far as Eric’s block was concerned, without the concurrence of Matcove, as owner of the land, and Kerry, as the co- director of Matcove, and as representative of the Albert shareholders.”

38. Insofar as the Alberts also submit that the result of the appeal does not represent any kind of ultimate success for Mr Fuller, in that the Court had determined only that there was a contract, consistent with the finding made by the primary judge, but that the contract contained a term for co-operation, and that there were further steps upon which Mr Fuller must succeed before he could be said to have been successful, this (No 3) judgment explains, for at least the second time, that Mr Fuller was successful in establishing that there was an agreement which, subject to discretionary considerations, he was entitled to have specifically performed. Moreover, this judgment finalises his success, with a judgment for damages in substitution for specific performance.

39. This Court has done no more than conclude that the terms pleaded by Mr Fuller in the Amended Statement of Claim have been made out. That is the case that has always been advanced by Mr Fuller as plaintiff. Ultimately, Mr Fuller has been successful in establishing that the primary judge erred in rejecting his pleaded terms (a) and (d). Those contentions were opposed by Mr Albert. In those circumstances, there is no reason why Mr Fuller should not have his costs of the appeal, and, subject to what follows, of the proceedings at first instance, in relation to the contractual issues.

40. On a separate point, Mr Albert and Mrs Albert complain that the orders for costs made by this Court have the effect of setting aside all of the other costs orders made by the primary judge, including the order that their costs from the commencement of proceedings until the amendments made to the Statement of Claim were to be paid on an indemnity basis by Mr Fuller, that the Court gave no explanation as to why that order should be set aside, and that they have not been heard in this respect. This Court did not intend to interfere with the primary judge’s exercise of discretion as to costs thrown away by amendments made by Mr Fuller and the late change in the course of his claim. Order 2 made by this Court on 18 May 2021 should be amended to read “Orders 1, 2, and 4 made on 14 July 2020 be set aside”, thus preserving the order for indemnity costs in favour of the Alberts up to 26 April 2019.

Orders

41. The Alberts requested a “short oral hearing” to “explain the points and answer any questions the Court might have”, if there was anything in their submissions that the Court felt it did not understand. Having regard to the above reasons and below conclusions, the Court is not of the view that there is anything which requires elaboration or explanation in an oral hearing.

42. For the foregoing reasons:

1. The contract claim should not be remitted;

2. Specific performance of the Agreement should be declined as a matter of discretion;

3. In substitution for specific performance, Matcove should pay Mr Fuller damages in the sum of $393,750;

4. The Alberts should pay Mr Fuller’s costs of the appeal, in respect of both the contract claim and the redemption claim;

5. The Alberts should pay Mr Fuller’s costs of the proceedings at first instance in respect of the contract claim after 26 April 2019. The primary judge’s order for indemnity costs in favour of the Alberts up to 26 April 2019 should not be disturbed; and

6. The costs of the proceedings at first instance in respect of the redemption claim will be a matter for the primary judge upon remitter to take accounts and order redemption.

43. The following orders should be made:

1. Vary Order (2) made by this Court on 18 May 2021 to read “Orders 1, 2, and 4 made on 14 July 2020 be set aside”.

2. Set aside Order (5) made by this Court on 18 May 2021 and in lieu thereof grant leave, to the extent that it be required, to Mr Albert to rely on his affidavit sworn on 11 November 2020, and to Mr Fuller to rely on the affidavit of Jason Wasiak affirmed 20 November 2020, with costs of the motion filed on 11 November 2020 to be costs in the appeal.

3. Set aside Order (3) made by this Court on 18 May 2021 and in lieu thereof:

1. Give judgment that the third respondent Matcove Pty Ltd pay the appellant the sum of $393,750. This judgment takes effect on 23 September 2021.

2. Declare that the sum referred to in Order (3)(a) is a charge on the third respondent’s land comprised in Folio Identifier 1/1097743 at Moonee Beach.

3. Order that the proceedings be remitted to the Equity Division to take accounts as between Mr Fuller as mortgagor and Mrs Albert as mortgagee of the Mortgaged Share, to order that, upon payment by Mr Fuller within 21 days of the amount certified to be owing, Mrs Albert re-transfer the Mortgaged Share to Mr Fuller, and to determine the costs of the proceedings at first instance on the redemption claim.

4. Order that Mr Albert pay Mr Fuller’s costs of the proceedings after 26 April 2019 at first instance on the contract claim.

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Endnotes

Decision last updated: 23 September 2021