Giacci v Giacci Holdings Pty Ltd [No 2] - [2011] WASC 135

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: GIACCI -v- GIACCI HOLDINGS PTY LTD [No 2] [2011] WASC 135

CORAM: EM HEENAN J

HEARD: 13 MAY 2011

DELIVERED : 13 MAY 2011

PUBLISHED : 18 MAY 2011

FILE NO/S: CIV 1414 of 2008

BETWEEN: ANTONIO CARMINO GIACCI
Plaintiff
AND
GIACCI HOLDINGS PTY LTD
First Defendant
MARIO MICHELE GIACCI
Second Defendant

Catchwords:

Order for sale of property in lieu of partition - Controversies arising in implementation of order for sale - Conduct of sale originally committed to successful plaintiff - Prior interlocutory injunction to compel plaintiff to appoint real estate selling agent and undertake advertising - Injunction to restrain executory contract of sale to plaintiff himself - Second executory contract of sale to plaintiff himself - Application by second defendant for injunction to restrain second sale and to compel sale by auction - Independent person substituted to have the conduct of the sale - Undertakings as to damages

Legislation:

Nil

Result:

Interim injunction granted

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Mr P J Patterson
Second Defendant         :     Mr P J Patterson

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Taylor Smart
Second Defendant         :     Taylor Smart

Case(s) referred to in judgment(s):

Davies v Wright (1886) 32 Ch D 220
Dixon v Pyner (1850) 7 Hare 331; 68 ER 135
Domville v Berrington (1837) 2 Y & C (Ex) 723; 160 ER 585
Elworthy v Billing (1839) 10 Sim 98; 59 ER 549
Giacci v Giacci Holdings Pty Ltd [2010] WASC 349
Holliwell v Seacombe [1906] 1 Ch 426
Murray v Geoffroy (1918) 18 SR (NSW) 259
Nugent v Nugent [1908] 1 Ch 546
Nullagine Investments Pty Ltd v The Western Australian Club (Inc) [1993] HCA 45; (1993) 177 CLR 635
Re Robinson; Pickard v Wheater (1885) 31 Ch D 247
Sidny v Ranger (1841) 12 Sim 118; 59 ER 1076

EM HEENAN J: This is an application by the second defendant for a second injunction to restrain the completion by the plaintiff of an executory contract for the sale of this property purportedly entered into to implement the orders for sale and other orders made in the judgment in this action after trial on 27 October 2010. This is the second occasion on which disputes or controversies have arisen in relation to the conduct of the sale of the land ordered by the court and it requires some brief account of the history and of the principles of authorities relating to the conduct of court ordered sales of land whether under RSC O 53 or otherwise.
After the trial of this action in October 2010 and for reasons published on 30 November 2010: Giacci v Giacci Holdings Pty Ltd [2010] WASC 349 judgment was entered on 27 October 2010 ordering, among other things, that:
1.All that land, being the whole of the land in certificate of title vol 75 folio 160A known as lot 265 Ducane Road, Gelorup (Land) owned by the plaintiff and the first and second defendants as tenants in common in equal shares, be sold on the basis of unencumbered vacant possession.
2.The plaintiff have the conduct of the sale of the Land and for that purpose:
2.1the plaintiff as soon as practicable shall engage, in the name of the plaintiff and the first and second defendants, a qualified and certificated real estate agent carrying on business in the city of Bunbury and its surrounding districts (Agent) to act on such sale;
2.2cause the Agent appointed by the plaintiff:
2.2.1to recommend a reserve price for the sale of the Land;
2.2.2to adopt the reserve price recommended by the Agent as a reserve price for the sale of the Land; and
2.2.3to market, advertise and otherwise offer the land for sale by way of private treaty;
2.3the plaintiff, upon being notified by the Agent of the recommended reserve, shall give notice to the first and second defendants by their solicitors of such reserve.
3.At any time within the period of three months from the date of the appointment of the Agent by the plaintiff, the Agent may recommend an alteration to the reserve price adopted for the sale of the Land and upon such recommendation being made by the Agent in writing the plaintiff shall adopt the recommended altered reserve price as the reserve and give notice of the same to the first and second defendants in the manner herein before specified.
4.The first and second defendants shall have liberty to apply to the Court on three days' notice in respect of the reserve price.
5.If within three months of the date of retainer of the Agent by the plaintiff no acceptable offer is received by the Agent, the plaintiff shall request the Agent to provide recommendations in writing as to how the Land is to be marketed by public auction, including the period of advertising, the form of advertising and a recommended auction reserve.
6.Thereafter the plaintiff shall cause the Land to be offered at a public auction in accordance with the Agent's recommendations.
7.The first and second defendants shall have liberty to apply to the Court on three days' notice in writing if the defendants seek any variation to either the reserve price or to the terms or date of such auction.
8.On any sale of the Land made pursuant to the terms of this order:
8.1the plaintiff shall be authorised by this order to sign for or on behalf of himself and the first and second defendants any transfers, notice of appointment of agent or other documents necessary to give effect to the sale of the Land;
8.2any sale shall be pursuant to the current applicable Joint Terms and Conditions for the Sale of Real Estate published by the Law Society of Western Australia and the Real Estate Institute of Western Australia (Inc), unless otherwise ordered by the Court on application by any party.
9.Each party to the action will be at liberty to bid at auction or make offer by way of private treaty for the purchase of the Land and the following orders shall apply:
9.1in the event that any party's offer in respect of the Land is accepted such party need not pay a deposit;
9.2the successful bidding party's interest in the Land shall be treated on account of payment of the purchase price such that if any single party hereto being a tenant in common in equal shares is a successful bidder, then one third of the purchase price (less any commission fees and expenses in respect of such sale) the subject of any contract will be deemed to have been paid on account of the purchase price and if two parties being both tenants in common then two thirds of the purchase price (less any commission fees and expenses in respect of such sale) will be deemed to have been paid on account of the purchase price.
10.The parties have liberty to apply generally.
11.The first and second defendants cooperate fully with the Agent appointed by the plaintiff in the sale process and without limiting the generality of the foregoing on reasonable notice of not less than one business day make available the Land for inspections.
…
and other further and consequential orders and directions.
In February 2011 the first and second defendants applied for an interlocutory injunction to restrain the plaintiff from completing an executory contract for the sale of the land which the plaintiff had entered into to sell the property to himself and which was dated 21 January 2011. That was an unconditional contract to sell the land to the plaintiff for cash for $1,500,000. As the evidence on the application for the interlocutory injunction showed, the plaintiff had not caused the land to be advertised for sale in the region and, before appointing any agent for the sale, had sought a recommendation as to a suitable reserve price from a suitable agent and then immediately appointed the agent and sold the property to himself at the reserve price.
I concluded that the plaintiff had failed to make genuine efforts to ensure that the property was properly marketed, and had failed to ensure that the sale price was agreed upon after there had been sufficient opportunity for any interested purchasers to make offers. Accordingly, upon the usual undertaking as to damages being given by the first and second defendants, I granted an interim injunction on 10 February restraining the plaintiff, whether by himself or his servants or agents, until 5.00 pm on 3 March from attempting to complete or enforce that executory contract of sale. The matter was then listed for rehearing to determine whether there should be any continuation or variation of the interim injunction and to enable the defendants to bring an application, should the wish, concerning how the land should be offered for sale and whether the conduct of the sale should remain in the hands of the plaintiff or, if not, whether any and, if so, which trustee or receiver should be appointed to conduct the sale on behalf of the court, and who should be responsible for the additional court costs of that appointment.
In the events which transpired, the plaintiff did not contest a continuation of the injunction or seek to rely upon or implement the executory contract of sale of 21 January 2011 already mentioned. Instead, as is apparent from affidavits filed in this most recent application, the parties agreed that the land should be suitably advertised for sale in the local area, along the lines recommended by the agent who had been initially approached by the plaintiff, Mr G Mason, and that the period of advertising expiring on 30 March should be allowed in order to attract potential purchasers. It was common ground between the parties that the agent originally appointed, Mr G Mason, or his firm, was well qualified and experienced to conduct such a program and be agent for the proposed sale which, nevertheless, remained in the conduct of the plaintiff.
During this advertising period a number of third party potential purchasers approached the agent or visited the property. However, for reasons which are disputed, and which need not for these purposes be resolved, no third party bidder or would be purchaser maintained or continued any interest in the purchase of the property and it is now accepted between the parties that the plaintiff and the defendants are the only persons or bodies presently seriously interested in purchasing the land.
During the advertising period the second defendant made a cash offer for the property in the amount of $1,520,000 on or about 2 March 2011. On or about 15 March the second defendant amended this offer, increasing it to $1,580,000. Thereafter, on 27 April 2011 the plaintiff made a cash offer for the purchase of the property in the amount of $1,600,000.
The agent reported that during the advertising period he had received no offers in respect of the property from any third party prospective purchaser.
During the advertising and marketing period the defendants were invited by the agent to make their best and final offer to purchase the property and that resulted in the increased offer by the second defendant on 15 March. The solicitors for the plaintiff wrote again to the solicitors for the defendant on 29 March, inviting the defendants to make their best and final offer to purchase the property and ask for a response by midday of 31 March. By that letter the solicitors for the defendant were informed that it was open to the plaintiff to accept the best offer then made.
There then being no further offers, the plaintiff made an offer to purchase the land himself for cash in the amount of $1,600,000 and, as the vendor having control of the sale, then entered into a contract to sell the property to himself for that sum. This contract is dated 27 April 2011 and it was accepted by the plaintiff on behalf of all three co-owners on that same date.
The second defendant has now brought this latest application for an injunction to restrain the plaintiff from implementing or completing the contract for the sale of the land to him in the amount of $1,600,000 dated 27 April 2011 and again offers undertakings as to damages in support of his claim for an injunction. He also seeks other relief, in effect, requiring the property to be sold by auction at which there would be an opportunity for all potential bidders to enter into a fully informed auction and thus ensure that the best market price for the property is achieved.
In support of this second application for an interlocutory injunction counsel for the second defendant submits that when his client sought advice whether or not his offer for $1,580,000 for the property had been accepted, and, if it had not been accepted, what if any other offers for the land had been received, he was met with silence. The second defendant complains that he was not informed that the plaintiff had made an offer for $1,600,000 for the property and says that if he had known that he would have made an offer for $1,610,000. By implication he suggests that he would have been prepared to improve on any price which had been offered in a selling process of which he was aware.
In answer to these protests by the second defendant, counsel for the plaintiff submits that the plaintiff has followed exactly the procedure for the sale of the land contained in the judgment of 27 October 2010, and has complied with the programming for the advertising of the property for sale which was agreed upon by the parties after the interlocutory injunction of 10 February. The plaintiff submits that he was under no obligation to disclose to the second defendant the existence of any higher offer or offers or to mention their price, and was not obliged to inform the second defendant that he himself intended to make, or had made, an offer or the amount of that offer. He submits that the executory contract for the sale of the land to himself in the amount of $1,600,000 is a legally enforceable and binding contract of sale and that he is entitled to complete it.
From these and further submissions from counsel for the parties I concluded that an interim injunction on terms should be granted to restrain the plaintiff from completing this second contract for the sale of the property of $1,600,000 without, at least for the time being, discharging or annulling that contract. I ordered that the property should be put up for sale by public auction, that the conduct of the sale should be taken out of the hands of the plaintiff, that the auctioneer should be the agent, Mr G Mason, and that the proposed terms of the sale and the remuneration of the auctioneer should, if not agreed by the parties, be determined by a Registrar of the court to whom the auctioneer could apply at any time for directions. This means that the conduct and the sale by auction from now on shall be under the direct control of the court and that the auctioneer appointed shall have full liberty to apply to the court in relation to any matter arising in connection with the sale and will not be bound or authorised to act on the instructions of the plaintiff or, for that matter, the other co-owners. The terms of the orders and directions made in relation to the auction and how these vary the original terms for the sale of the land contained in the judgment of 27 October appear later in these reasons.
At this point it is necessary to refer to the principles which have been established in relation to such sales of land by the court and to some authorities which illustrate their application. The procedure in relation to sales of land ordered by the court is to be found partly in RSC O 53 but that rule of the court does not itself confer power to order a sale unless it is necessary for the purposes of the proceedings then before the court. In the present case the power of sale is to be found in s 126 of the Property Law Act 1969 (WA) and the rule does not provide a substitute means for obtaining such an order of sale in lieu of partition: Re Robinson; Pickard v Wheater (1885) 31 Ch D 247, 248 ‑ 249.
In an action for the sale of land held in co-ownership it has now become conventional, but not obligatory, for the conduct of the court ordered sale to be given to the plaintiff in the partition action unless good reason is shown to the contrary: Murray v Geoffroy (1918) 18 SR (NSW) 259 and Nullagine Investments Pty Ltd v The Western Australian Club (Inc) [1993] HCA 45; (1993) 177 CLR 635. However, it is well recognised that the conduct of the sale can be given to another party if it is more in his interests to get the best price: Davies v Wright (1886) 32 Ch D 220 and that if one of the persons conducting such a sale is not a trustee, he is nevertheless expected to display a high standard of conduct and if he should fail to do so may be deprived of the right to conduct the sale or associated rights: Holliwell v Seacombe [1906] 1 Ch 426, 431.
Unless expressly granted leave by the court to bid at any sale, a plaintiff or another co-owner of the land is not permitted to make an offer for the purchase of the land or to bid at any auction. Should such an owner nevertheless offer to purchase, bid at any auction or succeed in entering into a contract for the purchase of the property, whether openly in his or her name or surreptitiously through dummies, that transgression will be treated as a basis by the court to annul the ensuing sale: Domville v Berrington (1837) 2 Y & C (Ex) 723; 160 ER 585 and Dixon v Pyner (1850) 7 Hare 331; 68 ER 135. Despite the more modern convention of allowing the conduct of the sale to be granted to the successful plaintiff, in earlier times the person having the conduct of the sale was never given leave to bid: Sidny v Ranger (1841) 12 Sim 118; 59 ER 1076 and there are some observations in the books to the effect that the conduct of the proceedings for sale should preferably be given to an independent person and not usually given to a person who has leave to bid as a prospective purchaser of the sale.
Leave to bid at the sale should be obtained by every party to the action who wishes to bid: Nugent v Nugent [1908] 1 Ch 546, 550 and the principle is that a person ought not to put himself in a position where his interests and duties conflict and if that person does the sale is voidable unless confirmed by the court ‑ as to the circumstances under which a court will annul or set aside such a sale see Elworthy v Billing (1839) 10 Sim 98; 59 ER 549, but it need not always do so.
These authorities establish that, at all times, the court retains its control and supervision over the sale which has been ordered by judgment and may intervene to annul or prevent a sale which is conducted otherwise than in accordance with the orders of the court or which results from a conflict of duty and interest by the person who has the conduct of the sale. As in the present case, an intervention to restrain or annul a sale may have the effect of depriving some of the co-owners of an advantageous offer for the sale of the land and risk a lower price being achieved at any subsequent or substitute sale. This risk can be avoided, as it was in Sidny v Ranger by directing that the restraint of the sale ordered shall only operate in the event that no higher bid or offer is achieved at the subsequent sale or auction. Hence, in the present case, the injunction which I have ordered is designed to ensure that the sale to the plaintiff at $1,600,000 will stand unless a more advantageous price is obtained at the auction which has now been ordered.
Counsel for the plaintiff maintained his client's opposition to the application for the interlocutory injunction on the basis that an order for sale by auction and the accompanying directions would result in further delay and probably significantly increased expense.
I accept that both those consequences are probable if not inevitable. As for delay, however, I cannot but conclude that the plaintiff has, without breaching any terms or conditions of the sale ordered by the court, sought to take advantage in his own self interest from his position as the person having the conduct of the sale and to secure a sale to himself in circumstances where he must be taken to have known of the second defendant's desire to secure the property for himself. The ensuing contract is, therefore, the product of a conflict between duty and interest and for that reason must yield, if needs be, to a higher price which might yet be offered if the full circumstances and details of bids are known.

As for additional expense, there are ample opportunities for suitable correction and adjustment. If the auction fails to obtain a sale price in excess of $1,600,000 then the offer of the plaintiff of 27 March will stand. If a higher price is secured but is insufficient to meet the additional expenses of the sale, then the ensuing loss would be damages which would, prima facie, be recoverable under the undertaking for damages given in return for the injunction. The same would apply if the auction was a failure and the expenses of the auction need to be recouped. The principle is obvious, namely that unless a sale by auction achieves a pecuniary result for all the co‑owners which is more advantage than would occur through completion of the existing contract of sale to the plaintiff of $1,600,000, then the losses or expenses associated with the grant of this injunction and the delay in the implementation of the plaintiff's contract of 27 April should be met by the second defendant. His entitlement to a one-third share in the net proceeds of the sale provides an ample fund to ensure that any such liability will, if necessary, be satisfied.
Consequently, and for these reasons, I made orders on the injunction application as follows:
1.The plaintiff be restrained and an interim injunction is hereby granted restraining him whether by himself, or his servants, agents or otherwise, until further order of this court, from implementing or completing the executory contract for the sale and purchase of the land dated 27 April 2011 for $1,600,000, save as to complying with the Duties Act 2008 (WA).
2.The question of whether or not the plaintiff should be permanently restrained from implementing or completing that contract of sale be adjourned for determination until after the date of the auction of the property, which is next ordered.
3.The defendants must file an undertaking of damages in the usual terms within seven days.
4.The terms of the judgment entered in this action on 27 October 2010, in cl 2 of that judgment, conferring the conduct of the sale of land on the plaintiff be varied as follows:
(a)From 13 May 2011 the conduct of the sale of land shall be conferred upon Mr Gregory Edward Mason ('Mr Mason') or his agent, of Bunbury Land and Estate Agency of 183A Spencer Street, Bunbury, in the State of Western Australia, real estate agent, in order to hold a public auction of the property at a place he will nominate, in Bunbury, and at a date and a time which he will nominate being not later than 28 days from 13 May 2011.
(b)Mr Mason or his agent shall, not later than seven days from today, give notice to the parties and advertise publically in the Bunbury region the time, date and place of the auction which he has been ordered to conduct.
(c)The terms of sale at the auction and the remuneration of the auctioneer shall be the standard REIWA rates and terms for like sales subject to one exception to be mentioned, unless there is objection by any of the parties for cause shown within seven days, in which event the terms of sale of the auction and the remuneration of the auctioneer shall be such as to be set or fixed by the Principal Registrar or Acting Principal Registrar of this court upon application made to him by the parties, on which liberty to apply to him is granted.
(d)The exception referred to in the previous subparagraph relating to the standard terms and conditions of the sale for the auction shall be that Mr Mason, or his agent, as the auctioneer shall have authority to sign a contract for the sale of the subject property to the successful bidder or bidders at the auction, if any, so as to create a conditional contract for the sale of the land to that bidder at that price. Such a conditional contract for the sale of the subject land shall be upon the condition that it be approved by the Principal Registrar or Acting Principal Registrar of this court upon application made to the court within seven days of the date of the sale, or such further period as the Principal Registrar may allow.
5.It shall be at the discretion of the auctioneer appointed whether or not to conduct any further and if so what advertising of the property for sale in and around the Bunbury area, it being noted that an advertising campaign acceptable to the parties has already been conducted.
6.The proceeds of the sale, or the entitlement to any proceeds of the sale may only be disposed of in accordance with an order of this court, whether by a Judge or the Principal Registrar.
7.In the event that at the auction to be held in accordance with this order, there is no bid at least $10,000 greater than the sum of $1,600,000 which is the subject of the executory contract of sale to the plaintiff dated 27 April 2011, that contract shall stand and the plaintiff or any party may apply to the court to dissolve the injunction previously granted.
8.For further clarification, the terms of par 9 of the judgment of 27 October 2010 relating to the payment of deposit and credit being given for the interest of the purchaser who is a co‑owner shall apply mutatis mutandis to the sale by auction.
9.This order will vary par 2 of the judgment of 27 October 2010, and pars 3 to 8 inclusive of that judgment no longer apply on the basis that the time which has passed from 27 October 2010 to now has been sufficient for the observance of those paragraphs.
10.The plaintiff and each of the first and second defendants shall have liberty to bid at the auction.
11.All questions of costs and compensation be reserved.