Gao v Zhu
[2002] VSC 53
•6 March 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 6371 of 1999
| PENG YUAN GAO | Plaintiff |
| v. | |
| YU JING ZHU | Defendant |
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JUDGE: | HABERSBERGER, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 6 MARCH 2002 | |
DATE OF JUDGMENT: | 6 MARCH 2002 | |
CASE MAY BE CITED AS: | GAO v. ZHU | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 53 | |
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CATCHWORDS: Application to set aside contract of sale of real estate – Suggestion by judgment creditor that sale at an undervalue – Judgment debtor under pressure to sell quickly – No evidence that sale fraudulent or a sham – Purchaser not personally served with application and not appearing – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In Person | |
| For the Defendant | In Person |
HIS HONOUR:
This matter came before me by the plaintiff's summons dated 4 March 2002. Mr Gao sought the following orders from the Court and I quote verbatim:
1."In respect to the Exclusive Sale of Authority made between the defendant and Williams Estate Agents of 300 Stephensons Road Mount Waverley 3149, the plaintiff manage the sale of the property other than the defendant.
2.The Contract Note for sale the property of 168 Hansworth Street Mulgrave 3170 [Volume 8938 Folio 042] made by between the defendant and purchaser of Suchada PIPATVEERAWAT of 6 Agnes Court, Glen Waverley 3150 on 8th February 2002 to be set aside.
3. The net proceeds of the sale for the property would be paid to the Court.
4.The plaintiff would serve this order of the Court to the said Agent and the Commonwealth Bank as soon as after the order made.
5. Costs of this application.
6. Such further other orders as the Court may deem fit."
As appears from my reasons for judgment given in this case on 26 February 2002[1], Ms Zhu sold the property of 168 Hansworth Street, Mulgrave ("the Mulgrave property") by contract of sale dated 8 February 2002. Ms Zhu had purchased this property in the middle of last year for $223,000, of which $45,000 was contributed by Ms Zhu and $178,000 was borrowed from the Commonwealth Bank of Australia.
[1][2002] VSC 47
Today, Ms Zhu gave evidence that the Mulgrave property was sold for two reasons. First, no, or only one, mortgage repayment has been paid to the Commonwealth Bank of Australia ("the Bank") and the Bank was seeking to realise its security. Secondly, in order to have the judgment entered against Ms Zhu on 23 May 2001 set aside, she was required, by the order of Eames J made on 12 December 2001, to pay the sum of $35,000 into Court by 23 January 2002. (However, on 26 February 2002, Ms Zhu withdrew her application to extend the time to pay the $35,000 into Court. The judgment previously obtained by Mr Gao for the sum of $163,000 plus interest of $35,681.37 and costs of $1,600 therefore stood.) Nevertheless, the contract had been entered into by Ms Zhu in purported compliance with Justice Eames' order.
It was clear at the hearing on 26 February 2002 that the sale price of the Mulgrave property of $195,000 would not enable Ms Zhu to pay the sum of $35,000 into Court. Therefore, on that occasion, I varied Justice Eames' order by requiring that all net proceeds be paid into Court on completion of the contract of sale. In her evidence today, Ms Zhu acknowledged that there would be very little left by way of net proceeds. She explained that she had hoped that if she paid out the Commonwealth Bank's debt she would perhaps be able to borrow the $35,000, or whatever sum was required after settlement of the sale of the Mulgrave property, to pay that amount into Court. She had subsequently given up this idea and thus accepted that the judgment against her must stand.
It seems clear that there will be virtually nothing left to pay into Court once the Commonwealth Bank debt has been paid and the expenses of the sale have been taken into account. In an affidavit sworn on 4 March 2002, Mr Gao deposed that the monthly payments to the Bank were about $1,426. This suggests to me that the Bank's debt would be at least $186,500 and quite possibly more. Mr Gao also pointed out that the Estate Agent's Exclusive Sale Authority indicated that the agent might be owed about $8,300. Ms Zhu said that her solicitor would be charging about $500 for the conveyancing.
As I understand it, Mr Gao's application to set aside the contract of sale is based on his concern that nothing will be paid into Court from the sale of this asset of Ms Zhu. First, he submitted that $195,000 is well below the market price of this property. He pointed to the fact that Ms Zhu paid $223,000 for the property only six or eight months ago. He also drew attention to the fact that the estate agent's authority dated 12 December 2001 was for a price of $240,000. Further, in his affidavit Mr Gao deposed that on 23 January 2002 Ms Zhu had signed a Contract Note for the sale of the Mulgrave property for the sum of $243,000. Mr Gao said that Ms Zhu telephoned him to tell him of the sale and that during that conversation he told her that she should also pay into court the $94,000 which had been put on term deposit with the ANZ Bank on 16 May 2001. Mr Gao claimed that Ms Zhu did not know that he knew about this deposit. He then referred to the fact that by a handwritten note dated the same day, 23 January 2002, the purchaser purported "to withdraw my offer on the above property because I am unable to get finance." Mr Gao said that this reason was "unacceptable". I note that the subject to finance clause of the contract permitted the purchaser to end the contract if a loan of "not less than $255,000" was not able to be obtained by 31 January 2002 from Interstar Securities. The unusual comparison between the minimum amount of the loan and the purchase price of the Mulgrave property may explain why the purchaser was quickly able to claim that finance could not be obtained. Nevertheless, based on these facts, Mr Gao submitted that Ms Zhu was now deliberately selling at an undervalue so that there would be nothing left to be paid into Court against which he could execute.
Given the past conduct of Ms Zhu of apparently trying to hide her assets from Mr Gao and then quickly selling them when he finds out about them, he has a justifiable concern with the purchase price of $195,000. However, no admissible evidence of the current market value of the Mulgrave property has been produced. Ms Zhu said she probably paid too much for the Mulgrave property and that although she hoped to get $240,000, the pressure from the Bank and the order of Justice Eames meant that she was forced to sell the property for a lesser amount.
Mr Gao also alleged that there was some under the counter cash element in the transaction to bring the price back to what Ms Zhu paid for the property last year. In his affidavit in support, Mr Gao said:
"There must have [been] some cash dealing behind second Contract Note, which the dealing was between the defendant and purchaser only."
However, there was no admissible evidence proving that allegation. It remained only a suspicion. Ms Zhu gave sworn evidence denying a cash element. Due to the importance of this issue between the parties, if Ms Zhu's statement is later proved incorrect, there will be serious consequences for her particularly as she has been found guilty of contempt of court once already in this proceeding.
Although I have my suspicions about this sale, there is, in my opinion, simply no basis on which I could order that it be set aside. The scarce amount of evidence before me does not justify a finding that the contract of sale is fraudulent or a sham. Absent such a finding, the Court has no power to set aside the contract. Therefore, I refuse to make the order sought.
Mr Gao's summons also sought an order that he be permitted to sell the property. He asserted that if he could sell the property for more than $223,000, then this would allow more money to be paid into Court from the net proceeds. However, Mr Gao had difficulty in appreciating that the Court cannot set aside a contract simply because the purchase price is not as much as the creditors of the vendor might have hoped. In any event, as I am not ordering that the sale of the Mulgrave property be set aside, there is no opportunity for Mr Gao to take over the sale of the property.
A further reason for dismissing Mr Gao's application is the position of the purchaser. At the commencement of this hearing, I asked Mr Gao on whom he had served the application. Mr Gao responded by filing an affidavit of service sworn on 6 March 2002 in which he swore that he had delivered the summons and his affidavit and the exhibits to a number of people, including the purchaser Suchada Pipatveerawat on 4 March 2002. Mr Gao told me that the Court documents were left in the letter box of the purchaser at 6 Agnes Court, Glen Waverley, which was the address of the purchaser in the Contract Note. Mr Gao said that he did not know whether anyone was in the Glen Waverley premises when he left the documents in the letter box. Mr Gao also explained to me that he had found six envelopes in the letter box all addressed to "Suchada Papatveeravat" and that he therefore believed that this was the correct spelling of the purchaser's surname, and not "Pipatveerawat" as appeared in the Contract Note.
In my opinion, the purchaser was a necessary party to any application to set aside the contract of sale. As far as the purchaser was concerned, the summons was the originating process. Personal service of the summons on Suchada Pipatveeravat was, therefore, required by the Rules of Court (r.6.02(1)). Even if I am wrong in this conclusion, in my opinion, given the importance of the plaintiff's application to the purchaser, the Court should not proceed to make an order setting aside a contract of sale where the purchaser has not been personally served. For all I know, the purchaser may have been quite unaware of this application. The only way to ensure that he or she knows of the application is to personally serve the relevant papers.
For all of these reasons, I refuse to set aside the contract of sale. The order of the Court will be that the plaintiff's summons filed 4 March 2002 is dismissed.
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