Issa v Osman (No.2)

[2017] NSWSC 663

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Issa v Osman (No.2) [2017] NSWSC 663
Hearing dates:	7 April 2016, 30 January 2017, 31 January 2017, 1 February 2017
Date of orders:	08 June 2017
Decision date:	08 June 2017
Jurisdiction:	Common Law
Before:	Garling J
Decision:	(1)   A declaration that the Contract for Sale of Land dated 20 April 2015 between the plaintiffs as vendors and the first defendant as purchaser of the land described in Folio/Identifier 1/514917 and known as 29 Boronia Road, Glenorie NSW 2147, has been validly and lawfully terminated. (2)   Order that the second defendant remove the caveat AK182112 from the title of the property described in (1) above by 4pm Thursday 15 June 2017. (3)   Order that the first cross-claim be dismissed. (4)   Order that the second cross-claim be dismissed. (5)   Order that the defendants pay the costs of the plaintiffs. (6)   Stand over the issue of an inquiry as to damages until 9.30am on 15 June 2017 for directions.
Catchwords:	CONTRACTS – contract for sale of land containing option to purchase Property – option never exercised by defendants – whether valid termination by plaintiffs possible where second defendant remained in possession of Property – whether possession barrier to plaintiffs being ready, willing and able to complete – no barrier – termination effective CONTRACTS – whether implied term that purchase subject to purchaser obtaining finance – implied term inconsistent with express terms of contract – implied term not so obvious that it goes without saying – no implied term PRACTICE AND PROCEDURE – whether second defendant represented by particular solicitor – second defendant denied retainer of solicitor for the conveyance ESTOPPEL – whether plaintiffs estopped from issuing Notices to Complete to first defendant – first defendant claimed plaintiffs made representation that he would be granted extensions of time –– no such representation – specific contractual provisions contrary to asserted representation – unilateral assumption by first defendant EQUITY – whether “common intention” or joint endeavour constructive trust arose from renovations made by second defendant to Property – renovations completed with intention that second defendant would purchase Property – Property never purchased – no common intention or joint endeavour – not unconscionable for plaintiffs to retain benefit of renovations – no evidence to determine value of renovations – no constructive trust
Legislation Cited:	Legal Profession Uniform Law (NSW) No.16(a)
Cases Cited:	B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; (1977) 52 ALJR 20 Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 Caringbah Investments Pty Ltd v Caringbah Business and Sports Club Ltd (In Liq) [2016] NSWCA 165 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 Daniel Behman v Tarek Behman [2015] NSWSC 1787 Donaldson v Natural Springs Australia Ltd [2015] FCA 498 Donis v Donis (2007) 19 VR 577 Heimann v Commonwealth (1938) 38 SR (NSW) 691 Johnson Matthey v AC Rochester Overseas Corp (1990) 23 NSWLR 190 Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 Peters American Delicacy Co Ltd v Champion [1928] HCA 27; (1928) 41 CLR 316. Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79; (2016) 5 WAR 226 Shepherd v Doolan & Ors [2005] NSWSC 42 Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Texts Cited:	Jacobs Law of Trusts in Australia (7th Ed)
Category:	Principal judgment
Parties:	Peter Issa (P1) Eva Mary Issa (P2) Youssef Osman (D1) Mohamed Khaled Osman (D2)
Representation:	Counsel: J O’Connor (P1, P2) M Mando (D1) J Young (D2)   Solicitors: Barrak Lawyers (P1, P2) Severon Legal (D1)
File Number(s):	2016/60481
Publication restriction:	Not Applicable

Judgment

1. This judgment resolves a dispute between three parties relating to a five acre property in Boronia Road, Glenorie (“the Property”).

2. The facts are detailed. They span a period of approximately six years and involve the parties at different times taking stances at odds with their previously expressed views. The proceedings have also been unduly protracted.

3. The hearing of the proceedings commenced before Fullerton J on 7 April 2016. The hearing did not conclude within the time estimated by the parties’ lawyers. Her Honour’s time to complete the hearing was limited by her commitments in the Court’s criminal jurisdiction. Such time as she could and did make available, was not suitable to one or more of the parties.

4. Consequently, the parties agreed that the matter should be listed for hearing before another judge of this Division. Whilst the transcript of the evidence before Fullerton J became an exhibit before me, I, in fact, had the opportunity of observing each of the three witnesses who gave evidence in the proceedings. No party submitted that my decision should take into account, or be based upon, the demeanour of a witness whilst they gave their evidence before Fullerton J. No such restriction applied to the evidence which was led before me.

5. The issues were somewhat complex, although the ultimate result is relatively straight forward. For the reasons which appear below, I have decided that:

1. the plaintiffs, who are the registered owners of the Property, are entitled to the Property, and to possession of it free from any obligations which may have previously existed to either or both of the defendants;

2. there is no valid Contract for Sale in existence over the Property, in which the purchaser is the first defendant;

3. the second defendant is not entitled to any equitable relief with respect to any monies which he expended on renovations to the Property during the course of his occupation of the Property.

Plaintiffs

6. The plaintiffs are married. They own the Property as joint tenants, and lived on it in a fully completed and habitable red brick house (“the red brick house”).

7. In 2004, they commenced, with appropriate local government approvals, the construction as owner/builders of a modern house positioned near the front of the Property which was visible from the road. At the time of events relevant to this proceeding, this house was incomplete. It was usually referred to in the evidence as “the unfinished house”. I will use the same expression in this judgment.

8. As well, on the Property, there is a separate granny flat.

9. The second plaintiff, Mrs Eva Issa, did not participate in any of the dealings with respect to the property, but at all times her husband, Mr Peter Issa, acted on behalf of both of them. There is no need to differentiate, in this judgment, between the two plaintiffs – their interests are and were identical at all times.

The First Defendant

10. The first defendant, Youssef Osman (“Youssef”), is one of the second defendant’s (Mohamed Osman) six sons. One of his siblings is Khaled Mohamed Osman (“Khaled”). Khaled is a medical practitioner.

11. I will refer to members of the Osman family by their first names. I do so for convenience, and without intending any disrespect.

12. Youssef has never lived on the Property. He became involved at his father’s request in the events covered in these proceedings, as the purchaser of the Property via a Contract for Sale entered into on 20 April 2015.

13. It is not disputed that the principal reason for his being the purchaser was because his father was unable to raise the finance necessary to purchase the Property. It also seems clear that at all times, his father, the second defendant, intended to continue to live on the Property as his principal family home until some undetermined time after settlement of the Contract, although the legal title to the Property would not be in his name.

The Second Defendant

14. The second defendant, Mr Mohamed Osman (“Mohamed”) entered into an Option Deed (“the Option”) with the plaintiffs as grantors and himself as the grantee, dated 25 May 2012.

15. That Deed gave Mohamed the option to purchase the Property in accordance with an identified Contract for Sale attached to the Option. All parties agree that the Option came to an end in February 2015. No party propounds its continued existence in these proceedings.

16. Mohamed has lived and was living on the Property at the time these proceedings commenced. Whilst living on the Property, Mohamed has undertaken some renovation work to both the red brick house and the granny flat. The extent and value of that work is in dispute. He has not undertaken any work to the unfinished house. That house remains incomplete and uninhabitable.

Outline of Claims

17. At the outset it is convenient, by reference to the pleadings, to outline the claims of each of the parties. On the basis of their ownership of the Property, and the absence of any legally valid or enforceable competing claims, the plaintiffs claim a declaration that the Contract for Sale of land dated 20 April 2015 between them, as vendors, and Youssef, as the purchaser, has been validly terminated.

18. They seek an order that the second defendant Mohamed, who has been living in the Property, deliver up vacant possession of the Property and that he is not to intervene or impede the plaintiffs in exercising their rights with respect to the Property.

19. They seek an order that the caveat lodged by Mohamed be removed and, finally, that there be an enquiry as to damages.

20. In light of the evidence, and the claims ultimately being advanced by the parties by the end of the proceedings and without opposition, an order granting possession of the Property to the plaintiffs against the second defendant was made on 1 February 2017. Leave was granted to issue a Writ of Possession. It was ordered that that Writ lie in the Registry for a period of 42 days.

21. Accordingly, from the plaintiffs’ perspective, there remains an issue about the Contract for Sale (“the contract for sale issue”), an issue about the removal of the caveat (“the caveat issue”) and any residual relief which may be appropriate.

22. The first defendant, Youssef, filed a cross-claim on 20 March 2016. The cross-claim dealt only with the Contract for Sale of land dated 20 April 2015. In general terms Youssef’s claim was that the contract was still on foot, and was valid and enforceable by him at an appropriate future time. This assertion forms part of the Contract for Sale issue.

23. The conclusion urged by Youssef in this respect depended upon two other circumstances which it is convenient to identify as separate issues. The first such issue is the submission that the Contract for Sale contained an implied term to this effect:

“Completion of this sale is conditional upon the purchaser securing appropriate finance to fund the purchase.”

24. Youssef accepted, although it is not part of the clause which it is proposed should be implied, that his client had an obligation to act reasonably, and to do all such things as may be necessary, acting reasonably, to procure finance. It will be convenient to call this issue “the implied term issue”.

25. The second issue relied upon by Youssef, is that the various Notices to Complete were not validly issued, because the plaintiffs were estopped from making time of the essence, or relying upon any other time provision in the contract by virtue of the past dealings between Mohamed, and themselves (“the estoppel issue”).

26. Finally, Youssef submitted that the Notices of Termination of the contract were not valid because the plaintiffs were never “ready, willing and able” to complete the contract and provide Youssef with vacant possession because his father, Mohamed, was living in the Property (“the completion issue”).

27. Mohamed also set out his claims in a Cross Claim. Although the claims in that Cross Claim filed on 20 March 2016 are comprehensive, ultimately only two were maintained. The first was that Mohamed was entitled to an equitable charge over the Property or, alternatively, over the proceeds of sale from the Property, to the extent of $380,000 being the monies which he had, so he claimed, either spent or expended on renovations to the red brick house and the granny flat (“the constructive trust issue”). He also, by reason of that charge, claimed that he had a valid caveatable interest in the land, and that he should be entitled to maintain the caveat that he had lodged to protect his interest. This argument forms part of the caveat issue to which I have earlier referred. He also claimed the sum of $380,000 as a personal debt owed to him by the plaintiffs in the event that his claim for an interest in the land failed (“the personal debt claim”).

Relevant Facts

28. Many of the facts are not in dispute. Those which are can be relatively readily determined.

29. There is a disagreement between Mr Issa and Mohamed about who initiated the contact between them about purchasing the Property, and about the content of a number of their conversations, or at least a part of those conversations. On these aspects, on the probabilities, and having regard to the impression which I formed of each of them whilst they gave evidence, the account of Mr Issa is the more reliable, and I accept it. I prefer his evidence as being the most accurate account of these conversations.

30. One factor which is of particular significance to me, in coming to this conclusion, is that I accept Mr Issa’s version of the conversation with Mohamed which is set out in paragraph 5 of Mohamed’s affidavit dated 7 March 2016 and responded to by Mr Issa. The conversation centred upon the terms upon which an option would be granted, and in particular the amount of the monthly fee. The monthly fee was agreed at $7,500. Put shortly, Mohamed asserts that of that sum, $5,000 was agreed as the sum necessary to reimburse Mr Issa for mortgage repayments, and that the balance of $2,500 was to be held by Mr Issa and to be credited to Mohamed as a capital payment when he ultimately purchased the Property. This arrangement was inconsistent with the terms of the Option, which provided that the total of the option fee was not to be set off against the Contract price.

31. Mr Issa asserted that the sum of $7,500 was the amount required to pay his scheduled monthly mortgage repayments and other expenses relating to the Property, such as council rates. He says that he did not agree to set aside $2,500 to be credited against the purchase price of the Property. The bank records of Westpac, where Mr Issa’s accounts were held, clearly show that the scheduled monthly mortgage repayments were just under $7,500 being $7,412. These records corroborate Mr Issa’s account and tell strongly against Mohamed’s account that $2,500 would be credited to him by Mr Issa. The terms of the Option also support Mr Issa’s account because the Deed provides that the payments were separate from, and formed no part of, the purchase price. It defies common sense for Mr Issa to either propose, or else agree to, an arrangement the effect of which would be that although he received a sum sufficient to meet his scheduled monthly repayments, he was required to give a credit to Mohamed for about one third of that sum, thereby placing himself at a significant financial disadvantage by way, effectively, of a discount on the purchase price for no apparent benefit.

32. As well, when they gave evidence before me, I formed the view that Mr Issa gave his evidence in a relatively straight forward manner, directly answering questions, even if those answers told against his interests. Mohamed on the other hand had difficulty in answering questions directly, and in most of his answers he attempted to give a version of events that was neither concise nor one which I found believable. He gave the clear impression that he was more intent on presenting and arguing his version of the facts rather than answering the questions directly, or making a concession where appropriate. In reaching that assessment, I make due allowance for the fact that for Mohamed, English was not his first language.

33. Against that background, I turn to the facts in the proceedings which I accept to have been established by the evidence.

34. In about August 2011, the plaintiffs, who acted at all times through Mr Issa, held negotiations with Mohamed about whether they would agree, and if so on what terms, to provide Mohamed with an option to purchase the Property.

35. It seems that by about 20 October 2011, the solicitors for the plaintiffs and Mohamed had concluded negotiations which finalised the acceptable terms for the granting of an option. For a reason which is not explained by the evidence, the Deed was not in fact formally executed until 25 May 2012. But the Deed encapsulated all of the terms which were earlier agreed upon, and which had generally been put into effect by the time the document was signed. The plaintiffs were nominated in the Deed as the grantors. Mohamed was the grantee.

36. The Option provided for a fee of $100,000 payable by way of an initial sum of $10,000 on the date of entry into the Deed, followed by 12 equal monthly instalments of $7,500. This monthly option fee was required to be paid for that period unless the option was exercised earlier. The Deed had attached to it a Contract for Sale of the Property by the plaintiffs to Mohamed for a price of $1.5M.

37. The initial payment of $10,000 was made by Mohamed to Mr Issa in the early part of August 2011. The monthly payment of $7,500 continued to be paid from then until February 2015, except that no payment was made for the month of July 2012 and for the month of December 2013 when Mohamed only paid $1,500.

38. Although the Option was originally intended to be for a 12 month period, because the actual Deed was first entered into in May 2012, the final form of the Deed noted that the option period was for six months from the date of the Deed.

39. The Option also made it plain that the option fee of $100,000 was not to be set off against the purchase price for the Property, in the event that the Option was exercised.

40. Relevantly, the Option Deed contained the following clauses:

“1.3   Any failure by the grantee to pay the [option fee] will give rise to default by the grantee which would entitle the grantor to terminate the deed of option and keep so much of the option fee paid to the grantor.

1.4   Default is deemed to have occurred should the grantee be more than 14 days late in payment of the option fee, time being of the essence.

1.5   The grantor shall be entitled to terminate this option deed after providing a notice of default giving the grantee 7 days to rectify the default. The grantor shall have the right to terminate the option 14 days after providing such notice.

…

2.   If the option hereby granted is not validly exercised, then the grantee acknowledges that the option fee shall be and become the absolute property of the grantor. Additionally, and for the avoidance of doubt, if the option hereby granted is validly exercised, the option fee paid does not form part of the purchase price for the land pursuant to the contract.

…

5.   The grantee may appoint as its nominee to exercise this option one or more persons and corporations and may include themselves (or any of them) as one or more of the nominees, and in the event that the grantee elects to appoint a nominee or nominees, to exercise the option hereby granted, the grantee shall so notify the grantor in writing in the form annexed hereto and marked ‘nomination’. …

7.   The grantor agrees that the servants, agents and workmen of the grantee or its nominee and the servants, agents and workmen of any relevant authority, may at all reasonable times and upon reasonable notice, enter upon the property without or without implements for the purpose of carrying out inspections, measurements, survey works, including completion of construction works, in strict adherence to the DA conditions approved by Council PROVIDED THAT the grantee will not do or authorise any acts which cause any damage to the grantor’s property and, if any damage is caused to the grantor’s property by any act of the grantee, its servants, agents or workmen, the grantee shall be liable to make good all damage if it does not complete a Contract for Sale entered into pursuant to an exercise of the option granted by this deed. For the avoidance of doubt, any work and improvements effected to the property by the grantee after the date of this deed shall become the sole ownership of the grantor absolutely should the grantee not exercise the option or default under the terms of this option deed. The grantee shall not make any claim whatsoever for unjust enrichment or otherwise should he not exercise the option or fail to comply with the terms of this deed. The grantee indemnifies and forever keeps indemnified the grantor against any actions, claims or suits arising from taking possession of the property or effecting any works during the currency of the option deed and after settlement.” (sic)

41. It is not in dispute that the option granted by this Deed was not exercised at any time. A Nomination Notice in accordance with Clause 5 of the Deed was never served. Thus, no nomination was made, and the Option was not exercised.

42. The Contract for Sale which was attached to the Deed, provided, as indicated above, for a sale price of $1.5M, with a deposit of $150,000 on exchange of contracts and a completion period of 42 days after the date of the contract.

43. On 26 June 2012, one month after the execution of the Deed, the solicitors for Mohamed wrote to the solicitor of the plaintiffs requesting a 12 month extension of the exercise date under the Option which had been granted. The letter asserted that the extension had been agreed by the parties themselves. Two days later the solicitor for the plaintiffs responded saying:

“We are instructed to advise that our client does not agree to a 12 month extension of the exercise date under the option.

We confirm that your client has six months from the date of the Deed of Option to exercise the option.

Our client has informed our office that no prior agreement was made between the parties.”

44. Mohamed deposed in his affidavit to a conversation which he said occurred in “June or July 2012”. He asserted that in this conversation he told Mr Issa that he was having difficulty raising finance and that he (Mr Issa) responded that he was happy to extend the option “… as long as you continue to make the monthly payments”. Mohamed recounted that he told Mr Issa that it was difficult to pay the $7,500 each month and that Mr Issa accordingly made an offer that $2,500 would be credited to Mohamed from the total of $7,500 which was to be paid. Mr Issa denies this version of the conversation and, in particular, denies that he agreed to extend the option period.

45. As I have earlier said, I accept Mr Issa’s denial. In addition to the matters to which I have drawn attention, the contemporaneous exchange of correspondence between the solicitors does not support Mohamed’s account of this conversation, but does support Mr Issa’s account. Other documents support Mr Issa’s account.

46. After taking possession of the Property, but before he and his family moved into the Property, Mohamed undertook renovation and improvement work to the red brick house on the Property and to the granny flat. He did not undertake any work to the unfinished house. It will be necessary to give consideration to the extent and value of those renovation works in due course.

47. Mohamed did suggest in his affidavit that he had discussed with Mr Issa undertaking renovations to those two buildings. However, I am satisfied that, on the contrary, the only discussions prior to taking possession of the Property related to work on the unfinished house. That this is so is apparent from a conversation which is said by Mohamed to have taken place at the time the option agreement was made where Mohamed says that he asked Mr Issa for the key and “… to [allow me] work on the house as if I was the owner”. The conversation continued “Does the house have all necessary approvals?” to which Mr Issa is said to have responded “Yes, it does. I assure you that all the work on the house is in accordance with the relevant standards and regulations”.

48. In the context of the discussions, and having regard to the improvements on the land and, in particular, the generally satisfactory state of the red brick house and the granny flat in which Mr and Mrs Issa had formerly been living, I am satisfied that this conversation to the extent that it occurred, referred only to the unfinished house.

49. The terms of Clause 7 of the Option Deed set out at [40] above, also support the conclusion that the only work being contemplated was that for which Council had given a Development Consent. In the circumstances here, that was a reference to the unfinished house.

50. In the course of his oral evidence given on 7 April 2016 before Fullerton J, Mr Issa agreed with Mohamed’s counsel that he understood that when he gave the keys to the Property to Mohamed, he (Mohamed) may paint the red brick house and put in a new bathroom and kitchen. He restated that it was his understanding that the principal work which Mohamed intended to do was on the unfinished house in order to finish it and move into it in due course. He agreed that he did not fix any precise parameters or set restrictions on what Mohamed could do to the existing red brick house. He said that he did not know the extent of the works being done to the Property. He said that at that time he anticipated that Mohamed would be purchasing the Property and would be moving into it and, accordingly, he did not take any objection to Mohamed undertaking some work to the red brick house.

51. The precise terms of any conversation upon which Mr Issa’s understanding was based was not put in cross-examination. He denied that the renovations were of any benefit to him, nor that the red brick house needed any renovations to make it habitable.

52. He gave this evidence to Fullerton J:

“Her Honour:   It was your understanding that Mr Osman would do whatever he wanted to the established house to render it suitable to his needs as a resident, I think you accepted from Mr Young that you allowed that to occur, correct?

A.   That’s correct your Honour.”

53. I accept Mr Issa’s evidence that he had such an understanding. However, I am not satisfied that it was based on the terms of the conversation described by Mohamed, to which I have referred at [47].

54. It was not suggested to Mr Issa during his evidence that it was within his contemplation nor that there was any specific agreement that Mohamed would be entitled to recover the cost of, or value of, any improvements made to any of the buildings on the land in the event that Mohamed did not go ahead with the Contract and complete the purchase. I accept, as it makes good sense, Mr Issa’s evidence that at the time of handing over the keys to Mohammed, his anticipation was that Mohamed would be completing the purchase. There was no agreement, nor any basis for a common understanding between them, that Mohamed would be entitled to recover any of the amounts spent on any renovations if he did not proceed with the purchase of the Property.

55. In November 2012, there was a conversation between the lawyers for the parties. Although the terms of it are not in evidence, it was clearly about the extension of the option period. On 29 November 2012, the solicitors for Mr Issa wrote a letter to the solicitor for Mohamed in the following terms:

“We refer to the above matter and to our recent telephone conversation.

Our client has advised that he is not prepared to grant any further extensions to the notice to exercise the option.

However, in the spirit of compromise and as a sign of good faith, our client is prepared to extend the notice exercise period to 30 April 2013.

Please submit the necessary Deed of Variation to effect such extension.

Please note that our clients are very satisfied with your client’s co-operation and commitment and are happy to accommodate your client, but wish to have certainty and finality to this transaction.”

56. No Deed of Variation was sent in response to the invitation in this letter, and no Deed was ever executed by the parties.

57. In late 2013, Mohamed sold the house in which he was living in Guildford. It seems that after that point in time, he actually moved into the Glenorie property, together with this family.

58. Although the option period which had been extended came to an end, Mohamed continued to pay the $7,500 monthly payments. Mr Issa deposed to a conversation in October 2013 during which he gave permission to Mohamed for him and his family to move into and live in the Property. He says that he asserted that he was willing to allow them to do so “provided you settle quickly and you continue to pay the $7,500”. He said that Mohamed agreed that he would settle soon and that the matter would be resolved before Christmas.

59. From time to time thereafter, it appears that Mohamed would ask for extensions of time for the Option. Mr Issa said that he reluctantly continued to grant such extensions on the basis that Mohamed would continue to pay the sum of $7,500 per month. The last payment was made on 9 February 2015. These oral agreements were never reduced to writing.

60. As earlier indicated, all parties accepted that by February 2015 or shortly thereafter, the Option Agreement had come to an end. The precise date is not of significance.

61. Mohamed says that in about the start of March 2015 and prior to 11 March 2015, he had a conversation with Mr Issa to the following effect:

Mohamed:   “The bank has agreed to provide finance. However, the house has to be purchased in the name of my sons. My sons will pay me for what I have spent on the house.”

Issa:   “OK, I have no problem with that.”

62. Mr Issa agreed that words to that or a similar effect were spoken. However, he added that there were further words in the conversation which he and Mohamed had to the following effect, after the previously recounted version. They were these:

Issa:   “OK, but you need to understand that you did not pay $7,500 this month option instalment, and so the option is now over. I am happy to sell to your sons but there must be a stand-alone contract. Given that the bank has agreed to provide finance, how long do you need to settle?”

Mohamed:   “I only need a week or two.”

Issa:   “OK then, I’d be happy to exchange contracts with your sons provided that the settlement is due within 14 days.”

63. I accept that these additional words were said between Mr Issa and Mohamed. This entire conversation was a basis for Mr Issa’s understanding and belief that finance had been approved to enable the purchase of the Property. Given the contents of the conversation, it was an entirely reasonable belief.

64. It appears that on or about 11 March 2015, new lawyers, Allied Lawyers, were instructed. On that day Ms Taouk, a paralegal with Allied Lawyers, sent an email to Mr Issa’s lawyers. The subject line was in the following terms:

“OSMAN Property Purchase from ISSA … Boronia Road, Glenorie”

65. The body of the document read:

“We have been advised you act on behalf of the vendors of the above property, Peter and Eva Issa. We will be acting on behalf of the purchaser and will provide you with their full details in due course.

Please be good enough to provide us with the Contract for Sale of this property in order that we may canvass this with our clients.”

66. It can be seen from the terms of the subject line, and also the contents of the email itself, that the precise identity of the client or clients of Allied Lawyers was unclear. While the surname “Osman” appeared in the subject line, it was not clear which member or members of the Osman family was being referred to. However, it does appear that they were acting for more than one member of the family because of the use of the plural “their” and “clients” in the body of the email.

67. On 11 March 2015, Mr Issa’s solicitors wrote to Ms Taouk. In relevant terms, it was as follows:

“This transaction was begun some two years ago.

Your client entered into an option agreement and promised my client to pay his loan repayments during the currency of the option agreement. My client purchased a property on the strength of the arrangement, and has been paying interest on both the property being sold and his property that he purchased which he currently resides in.

Your client failed at different times to repay the loan repayments that he promised. My client had to pay a substantial amount of money over that period to cover deficiencies in payments.

Your client did not exercise his option to purchase the property as per the terms of the option agreement.

My client has a good read [sic: need] in good faith to sell the property at the sale price of $1,500,000 even though the property market has increased significantly.

My client expects to receive the full sum of $1,500,000 and without any deductions whatsoever including but not limited to any option fees that may have been paid.

Please confirm at your earliest convenience that your client will enter into a straight unconditional exchange of contracts with a 21 day settlement for the sale price of $1,500,000.

If your client does not agree to the above, my client will have no option but to call off the previous arrangement.”

68. The initial contact of 11 March 2015, was followed up by a further email from Allied Lawyers to the lawyers for the vendors a week later on 18 March 2015. It contained the same subject line, but included the following words:

“We have now had the opportunity to meet with our client and establish the purchaser’s exact position.

Firstly, the purchaser has requested we extend his thanks to the vendor for his patience and apologise for the inconvenience caused.

Our client has advised us of the following:

1.    Mohamed Osman is agreeable to the purchase of the property.

2.    The purchase will be under the name of Mr Osman’s son, whose details we will provide in due course.

3.    Mr Osman is in the process of obtaining a loan approval in the name of his son to finance this purchase and it is anticipated this approval should be available late next week.

4.    Due to this process, we will require more than the stated time of 21 days to settle. However, every attempt will be made to complete as soon as possible.

We anticipate having final approval by late next week and will forward a copy to your office by way of verification and in order that we may proceed to an exchange of contracts and a speedy settlement.”

69. The terms of this email reflect in substance the receipt of instructions from, and for, both Mohamed Osman and his son, Youssef.

70. In response to the email of 18 March 2015, Mr Issa’s solicitors sent a letter in the following terms:

“We are instructed by our clients that they will not agree to extend the settlement date unless your client advances the sum of $250,000 to form part of the deposit and an additional $15,000 which represents the prepayment of the arrears of interest for this month and the next month.

Please obtain your client’s instructions …”

71. This was followed up on 25 March 2015. Apparently in the absence of any response, the follow-up letter provided a deadline of 1 April 2015, either for the matter to be settled or for the payment of the requisite monies referred to in the previous email.

72. A further follow up letter was sent on 1 April 2015, indicating that if Mohamed did not agree with the proposals, Mr Issa would serve a notice to vacate.

73. On 10 April 2015, Ms Taouk of Allied Lawyers, sent a further email with the same subject line, with words to the following effect:

“We have heard of the above matter and have been advised our mutual clients have held independent discussions. We are instructed that our client’s son will be the purchaser of the above property and is finalising the finance for the transaction. The details are as follows:

Purchaser:   Youssef Osman

Address:   ….

Sale Price:   $1,900,000

Deposit:   $380,000

Balance:   $1,520,000.”

74. On 15 April 2015, Allied Lawyers sent a letter to Mr Issa’s lawyers in the following terms:

“We have been advised by the purchaser that the vendor is under the impressions (sic) that our office, and subsequently the purchaser, have failed to contact your office to finalise negotiations of this sale.

We confirm discussions that we have had issues with the emails back and forth and therefore attach copies of the numerous emails forwarded by way of verification.

We understand that due to the inconsistent relationship between our mutual clients, trust is now an issue.

However, our client has contacted us today reiterating the agreement between himself and the vendor as follows:

Purchaser is to be in name of son: Youssef Osman

Purchase price: $1,900,000

Deposit: RECEIVED BY VENDOR $380,000

As discussed, the incoming mortgagee will require at least three to four weeks to be ready for settlement and therefore the earliest time for completion will be four weeks.”

75. Although Mohamed denied whilst giving evidence that Allied Lawyers were acting for him with respect to this transaction, asserting that they had acted for him in other transactions but not in this one because they were acting only for his son in this transaction, I have formed a contrary view.

76. The content and tenor of the letters to which reference has been made above, in the terms that they have been written by Allied Lawyers, makes it plain beyond doubt that, at least up until and including 15 April 2015, they were acting for Mohamed. There is no reason to think that this changed at all after that time. No statement was made by Allied Lawyers at any time that they had ceased acting for him.

77. Notwithstanding the terms of the negotiations, and reference in the email of 15 April 2015, to the necessary time required for completion of the contract, Youssef signed the Contract for Sale, which was dated 20 April 2015, for the purchase of the Glenorie property. I am satisfied that the form of Contract, including the Special Conditions, was prepared by the solicitors for the vendors.

78. There are some features of that Contract for Sale which need to be noted. The first is that the purchase price was $1.9M. The second is that the deposit nominated was $380,000. The third is that the completion date was stated to be 14 days after the contract date, which would have made the completion date 5 May 2015, that is a little less than three weeks after the letter of 15 April 2015 was written. The net sum to be received by the vendors was $1.52M.

79. The contract required vacant possession to be given at settlement and was generally in accordance with the standard form of contract. There were some special conditions.

80. The standard conditions of the contract included a requirement that the purchaser serve the form of transfer on the vendors, and also that if the purchaser was to seek any requisition or make a general question about the property or title, he was obliged to do that within a reasonable time after the contracts were exchanged. It appears that the form of transfer was served in a timely manner. The evidence does not reveal whether any requisitions on title were ever delivered.

81. Clause 9 of the contract provided the vendors with certain rights in the event of a purchaser’s default. It reads:

“If the purchaser does not comply with this contract (or a notice or relating to it) in an essential respect, the vendor can terminate by serving a notice. … “

The clause goes on to deal with rights which the vendors have after termination.

82. Clause 15 addressed the completion date. It reads:

“The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.”

83. Other special conditions which may be relevant include:

“2.   Whole of agreement. The purchaser acknowledges that the purchaser does not rely in this contract upon any warranty or representation made except as are expressly provided herein but has relied entirely upon the purchaser’s inspection of the property and the purchaser’s own enquiries relating thereto.”

…

5.(i)    The time for completion of this contract shall be 42 days from the contract date unless indicated otherwise on the front page of the contract (hereinafter referred to as the completion date). Should either party be unable to complete this contract by the completion date, then the other shall, at any time thereafter, be at liberty to make time of the essence of this contract by serving a notice to complete, of not less than 14 days duration, requiring completion within the time set out in that notice. The 14 day period shall be deemed to be sufficient and reasonable.”

84. According to the affidavit of Mr Issa, on or about 10 April 2015 he had a conversation with Mohamed to the following effect:

Mohamed:   “Brother, I understand that this is not your problem but I spent $380,000 fixing the house and I want to get this back. I have spoken to my son Youssef and he has agreed to buy the property for $1.9 million providing you accept that he can use the $380,000 that I have spent on renovations as a deposit and he will pay me back the $380,000 after he settles.”

Issa:   “What you have spent on the property is not my problem. If you say you have spent $380,000 and that your son will pay you back $380,000 then that is matter between you and him. It has nothing to do with me. For my part, I am sick of waiting and I need this matter to settle within 14 days.”

Mohamed:   “The bank has already agreed to give finance to my son Youssef, and I can settle quickly. I just need you to discount the price of $1.9 million by $380,000 when my son settles with you and he can give me the $380,000.”

Issa:   “On that basis I will exchange contracts with your son. I ask you to please get your solicitors to write to my solicitors so that we can quickly exchange and settle.”

85. I accept that the conversation occurred in these terms. This conversation explains the significant difference in the face value of the original form of the Contract for sale attached to the Option Deed, and the face value of the Contract which was exchanged. The net position of the plaintiffs was improved by $20,000 which would readily represent the total of the three months outstanding payment of $7,500, thus bringing the monthly occupation fee up to date by the time the contract was settled, at least in round terms ($22,500 as against $25,000). Of particular importance is that this conversation reveals that Mohamed was not asserting against Mr Issa that he was entitled to be paid any money by Mr Issa for the value of the work which he says was completed on the Property. In commencing the conversations, Mohamed assured Mr Issa that “… this is not your problem”. Mohamed made a contrary claim in these proceedings.

86. Mr Issa denies that he had any conversation at all with Youssef prior to the exchange of contracts in relation to the terms of the contract. He said he only spoke with Mohamed. Youssef did not give any evidence in his affidavit of any conversation with Mr Issa. However, he did say that he had an “understanding” that Mr Issa would wait for him to arrange the appropriate finance in order to complete the purchase as he had given extensions “for my father for over 3 years”.

87. In cross-examination, Youssef was taken to the Contract for Sale and his attention was drawn to the fact that the completion date was 14 days after the date of exchange of contracts. The following evidence was then given:

“Q.   So did you understand by that – you knew that that meant that the completion date for the sale was to occur 14 days after 20 April 2015?

A.   Yes, but honestly I didn’t take it very seriously, to be honest. I didn’t take this contract very seriously because I was only, only came to the picture to help both parties to complete this, this, the purchase of this property.

Q.   When you say you didn’t take -- a

A.   If I knew it was 14 days, I would have asked for more days, you know. I --

Q.   You realise that this is a legal document?

A.   I understand it is a legal document here and I understand that’s my signature there.

Q.   And you said you didn’t take it very seriously?

A.   I did not, no.

…

Q.   And I asked you is it your usual practice to, when you sign legal documents, not to take them seriously?

A.   No.

Q.   But on this occasion you did?

A.   Yes.”

88. I find on the basis of this evidence, that whether or not he took the signing of the contract seriously, Youssef knew that the completion date was 14 days after the date of exchange which was 20 April 2015. However, although he had not spoken to Mr Issa about it, he formed the unilateral view that he did not think that the vendors would enforce the time fixed for completion.

89. Mr Issa said in his oral evidence, that it was his understanding that Youssef had finance approved at the time he entered into the contract. That understanding is consistent with what Mr Issa says that he was told by Mohamed in a conversation on or about 10 April 2015, to which I referred at [84] above. As well, the fact that the exchanged contract had a completion date of 14 days provides significant support for Mr Issa’s acceptance of what he was told by Mohamed about finance already being approved for Youssef. Particularly is this so, because Youssef had Allied Lawyers acting for him and the purchaser Mr Issa was entitled to be reassured by the fact that Youssef had had the terms of the contract explained to him by his lawyers, including the existence of the completion date and the relatively short period to completion.

90. The conclusion also is consistent with what Mr Issa was told about a month before the contract was signed in the email of 18 March 2015 to which I have referred at [68] above. It was said that approval of a loan was anticipated by the end of the following week, which would have been Friday 27 March 2015. Again, on 10 April 2015, Mr Issa was told that the finance for the transaction was being finalised.

91. The letter of 15 April 2015, to which reference is made at [74] above, refers to the incoming mortgagee requiring a period of three to four weeks to be ready for settlement. This also provides strong support for Mr Issa’s conclusion that finance had been arranged. That is because it appears from a reading of this letter, that the author knows of the identity of a specific incoming mortgagee and has obtained sufficient information to enable the author to conclude that that mortgagee will require the time period identified in the letter.

92. Although the time period of three to four weeks for the incoming mortgagee to be in a position to settle, may at first glance appear to be inconsistent with the exchange of contracts five days later with a 14 day completion period, I do not think that this tells against a conclusion that Youssef would not be able to settle the contract in a timely fashion. There are two reasons for that. First, the period between the email of 15 March and the projected completion date was very close to the lower end of the nominated period. Secondly, even though the contract called for completion in 14 days, there would be an additional period of at least another 14 days relating to the need to serve a Notice to Complete fixing a reasonable further time for completion, which in total would have exceeded the incoming mortgagee time requirement.

93. In those circumstances, I accept Mr Issa’s evidence that it was his understanding that the purchaser, Youssef, had finance approved for the purchase, and that he was able to complete the contract even though there was a short completion time fixed by it.

94. On 6 May 2015, in circumstances where settlement had not been effected, the vendors’ solicitors served a Notice to Complete on Youssef. It fixed the time for completion as being 3pm on Monday 25 May 2015. It warned the purchasers and their solicitors that if settlement was not completed by the specified time and date, the vendor would terminate the Contract for Sale and take such further remedies as were appropriate. The Notice also made time of the essence for the Contract.

95. No letter or email was sent disputing the entitlement of the vendors to serve this May Notice to Complete. No complaint was made by letter or otherwise, that the contents of the Notice were in some way defective. In particular, no correspondence or other communication took place in which it was asserted that there was an implied condition in the contract for sale making it subject to finance, and that as finance had not yet been arranged, the vendor was not in a position to serve the Notice to Complete and that the purchaser was not in a position to complete the contract. There was no assertion that the vendors were estopped from making time of the essence of the Contract because of past conduct. Nor was there any assertion that the vendors would be required to remove Mohamed from his possession of the property prior to settlement.

96. The time for settlement came and went. There was no evidence of any communication between the parties during that period.

97. On 5 June 2015, Allied Lawyers as the solicitors for the purchaser, Youssef, sent a letter which said:

“We refer to the above ongoing matter and have now received instruction from our client regarding the situation.

We are able to advise the following:

(1)   As your client may be aware, our client Youssef Osman attempted to obtain finance for the purchase of the above property but due to the partial construction of the site, he encountered difficulty in obtaining loan approval in his sole name.

(2)    In order to assist the situation and his extended family, our client’s brother, Dr Khaled Mohamed Osman, agreed to being added to the loan application and to become a registered title holder of the property in trust.

(3)    The loan application was submitted in the names of Youssef and Dr Khaled Mohamed Osman.

(4)    Upon conducting the required enquiries for the loan, the bank had discovered numerous entries on the Doctor’s CRAA which had nothing to do with Dr Osman. Upon making further enquiries it was discovered that these entries in fact should have been attributed to the name of the Doctor’s father, Mohamed Khaled Osman and not Dr Khaled Mohamed Osman.

(5)    Immediately upon discovering this, the necessary application was made to Veda and the regulator Dunn & Bradstreet, who acknowledged this error and are taking steps to remove all these entries. It is anticipated that they will require a period of two weeks to complete this.

(6)    It is anticipated once this has been completed the loan approval will be processed and our clients will be in a position to settle.

(7)    In light of the above, we also request the addition of the name of Dr Khaled Mohamed Osman as a purchaser on the contract of sale.

As you can appreciate our clients are doing everything within their power to finalise and complete this settlement and through no fault of their own have encountered yet another obstacle which they are fervently trying to overcome.

We are instructed to extend the client’s sincere apologies for this delay and to assure the vendors that they have every intention of settling the matter as soon as possible.”

98. On the same day, the solicitors for the vendors wrote to the solicitors for the purchaser authorising them to amend the front page of the Contract for Sale to add the name “Dr Khaled Mohamed Osman”.

99. Over three weeks later, on 26 June 2015, the solicitors for the purchaser responded, providing an update on the position with respect to finance. They informed the vendors’ solicitors that they were hopeful of receiving an approval from the bank within the next five to ten working days.

100. On 1 July 2015, there was correspondence from the vendors’ solicitors to Allied Lawyers about adding Khaled’s name to the contract.

101. A considerable period then elapsed. The evidence is silent as to what occurred between the sending of this letter and 13 October 2015. By that stage, Youssef had not settled the contract. On 13 October 2015, the solicitors for the vendors wrote to the solicitor for the purchaser in the following terms:

“We note that in our last conversation some seven days ago, you advised our office that you would obtain your client’s urgent instructions with respect to your client’s intentions with the purchase.

To date, we have not heard from your office, your client, and our client has no option but to terminate the contract of sale.

We enclose for your reference Notice of Termination by way of service.

Would you kindly acknowledge service of this notice.

…”

102. Attached to that letter, was a document entitled “Notice of Termination of Contract”. It recited the existence of the Contract for Sale and then included the following:

“As a result of your default under the contract and the Notice to Complete dated 6 May 2015 making time of the essence for the completion of the contract, we give you notice that the contract is terminated and is entirely at an end. The deposit is immediately payable to the vendor who holds you responsible for all damages and losses resulting from your default.”

103. This did not seem to elicit any written response between the solicitors. However, an instructive exchange of text messages occurred between Mohamed and Mr Issa on 22 October 2015. It was to the following effect:

Mohamed:   “Hi Peter, how are you? Any news on the meeting?”

Mr Issa:   “We are waiting on your solicitor. We haven’t heard back from him. He is not replying to our emails, can you please chase him up. Thanks.”

Mohamed:   “I am. He’s not getting back to me! Can you organise a time with me and I’ll let the solicitor know.”

Mr Issa:   “I’m available any time the solicitors need to be available, I don’t know when they can, that is why your guy needs to contact my solicitor. Thank you”

Mohamed:   “I’ll keep trying. My broker is chasing me for that letter. He needs to finalise the loan. We have a conditional approval from NAB. He assured me everything is good.

…

This time it is different Peter, we are nearly there.”

Mr Issa:   “Mate, I am still making $7500 a month repayments, nearly there doesn’t help me. If my solicitor doesn’t hear from your solicitor by tomorrow, I’ll not be waiting any longer. Sorry, but I’m going broke waiting.”

Mohamed:   “I understand where you’re coming from. Let me know if you need help with the next payment. Hopefully that would make it easier on you.”

Mr Issa:   “Thanks, but you can help us both if you can get hold of your solicitor.”

Mohamed:   “OK leave it with me.”

104. Some contact between Mohamed and Allied Lawyers must have occurred, which led to a telephone discussion. The evidence does not reveal who participated in that discussion, but it must have included Mr Issa’s lawyer and one of the staff of Allied Lawyers. It may have included others. The contents of the discussion were not disclosed in the evidence.

105. On 29 October 2015, Mr Issa’s solicitors wrote to the solicitors for the purchaser:

“We refer to the above matter and telephone conference on Monday 26 October 2015.

We confirm that our client [is] not prepared to accommodate any further request to extend the time to allow your client to settle in view of the fact that the contract is now terminated.

In the spirit of cooperation and without prejudice to our client’s existing rights to sell the property and proceed to litigation against your client, our client is only prepared [to] consider a request [to] extend the time to afford your client an opportunity to purchase the property on the following strict terms:

1.   Your client to acknowledge that the Notice to Terminate is valid and enforceable at law.

2.   Your client to acknowledge that the Notice to Complete was served properly and is valid at both at law and in equity.

3.   Your client to acknowledge that any money paid pursuant to the previous call option documentation and any occupation fees paid, including any money expended on the property, now belongs to the vendors.

4.   Your client to acknowledge that he has no right whatsoever in relation to any money paid up to the date of this correspondence.

5.   Your client to immediately resume repayment of the occupation fee which represents the interest being on the loan being approximately $7,500 per month.

6.   Your client sign legal documentation to the effect that your client will vacate the property within one month of the date of this letter if they are unable to settle and pay my client the total sum of $1,600,000 without any set offs or deductions.

My client requires your client to agree to all the above terms by no later than midday tomorrow.

We look forward to hearing from you as a matter of urgency.” (sic)

106. This letter did not produce any response. A follow up letter was sent on 2 November 2015 by the solicitors for the vendors informing the solicitor for the purchaser that:

“We are instructed that should we not hear a response by 5pm today, our clients will be selling the property effective immediately without further notice.”

107. Even this did not receive a prompt response. However, late on the afternoon of 6 November 2015, the solicitor for the purchaser responded in the following terms:

“We refer to correspondence herein regarding the above matter, and particularly your letter of 29 October 2015.

We are instructed to respond to the contents of your said letter as follows: (using your numbering):

1.   Our client hereby acknowledges and agrees;

2.   Our client hereby acknowledges and agrees;

3.   Our client hereby acknowledges and agrees;

4.   Our client hereby acknowledges and agrees;

5.   Our client hereby acknowledges and agrees;

6.   Our client hereby acknowledges and agrees.”

108. In his evidence, Youssef agreed that he gave instructions to the solicitors to send that letter in those terms, having been provided with or else informed about, the contents of the letter of 29 October 2015.

109. Mohamed denied that Allied Lawyers were acting as his lawyers at that point in time, and gave evidence to the effect that he was unaware of this exchange of correspondence. For reasons which are recounted below, I do not accept that denial. I am satisfied that Mohamed also gave instructions for this letter to be written.

110. According to Mr Issa’s evidence, which I accept, an agreement was reached by the solicitors, in accordance with his instructions, to extend the time for settlement up until 4 December 2015. Settlement did not occur by that date.

111. On 8 December 2015, Mr Issa’s solicitors wrote to Youssef’s solicitor. The letter said:

“We confirm that we have not received to date any confirmation in relation to your client’s readiness to settle.

We have not received evidence that your client’s loan has been approved and a booking reference number.

In the absence of the above, and based on the arrangements agreed between our respective clients, that settlement was to occur no later than last Friday 4 December 2015, our client has now no option but to take possession of the property without further notice.

It would be appreciated if your client will acknowledge our clients rights as per your previous correspondence to allow our office to proceed to sell the property by way of a public auction.

We confirm that our clients will be attending the property by 4pm today to change the locks and take possession of the property.

It is hoped that your client will cooperate fully to avoid unnecessary legal costs and inconvenience.

For the record my client has acted, cooperatively, and in the spirit of compromise and has provided your client ample opportunity to settle on the land.” (sic)

112. At about 5pm on 8 December 2015, Youssef sent a text to Mr Issa. It said:

“I have been following on this every hour of the day. I had a few complications which delayed me and the main issue was with my name.

I have been assured everything is good with loan, I’m only waiting the release of the letter for the approval. I will hopefully be getting an answer tomorrow.

Kindly wait for me til tomorrow. Hopefully I’d be able to say yes or no and we’ll [take] it from there.

Please, we do not want this to turn ugly.

Sorry again for the delay and inconvenience.”

113. In late December 2015, the plaintiffs instructed different lawyers, namely Barrak Lawyers. On 14 January 2016, they wrote to the solicitors for the purchasers. The letter recounted the lengthy history of the matter. It indicated that, particularly since Barrak Lawyers had been instructed in the transaction, they had been making attempts to establish whether the purchaser was to be simply Youssef or Youssef and Khaled Osman as joint purchasers.

114. It went on:

“10.   On 13 January 2016, your office advised by telephone that we will received your advices in writing today – as to whether the contract has been amended such as to categorically identify the purchaser. Whilst we received the courtesy of a telephone call today from Mr Abbas, we have not received a written response from you identifying the position one way or the other as advised.

11.   We confirm that your office has advised by telephone on 13 January 2016 that the amendment is contingent upon finance approval being granted in advance such that, even if the contract has not been amended at present, it may well be amended in the future depending upon whether finance is granted to the original purchaser alone, or to the original and the second purchaser jointly. In other words, as at today, your office is advising that there are two possibilities as to the identity of the purchaser depending whether finance is approved, to whom it is approved, and when it is approved.

12.   We consider this to be unsatisfactory because your requests in June 2015 to amend the contract by inserting the name of the second purchaser, and the vendor’s approval, are not stated to be contingent upon finance approval in advance or any other condition. Such request for amendment and approval were not intended to operate ad infinitum or to create a state of uncertainty with shifting sands as to the identity of the purchaser.

Notices to Complete

13.   As advised by telephone today, the purchaser is severely in breach of contract and our client wishes to conclude this matter.

14.   In light of the above, where you have categorically refused to advise whether the contract has been amended and to provide us with a copy of the amended contract (if any) we attach by way of service upon you, two notices to complete as follows:

(a) Notice to Complete with ‘Youssef Osman’ as purchaser. This notice will be proceeded with in the event that the contract has not been amended as above.

(b) Notice to Complete with both ‘Youssef Osman and Dr Khaled Mohamed Osman’ as purchasers. This notice will be proceeded with in the event that the contract has been amended as above.” (sic)

115. The notices to complete were in identical form save for the name of the purchaser. The time for completion was fixed as 10.30am on 1 February 2016. The notices also recited that in respect of completion, time was of the essence of the contract.

116. On 28 January 2016, in the absence of any response, the solicitors for Mr Issa wrote again to the lawyers for the purchasers. That letter invited the lawyers for the purchaser to take steps to advance the settlement and sought, amongst other things, confirmation as to the appropriate Memorandum of Transfer, and also the provision of a Settlement Adjustment Sheet together with the appropriate s 66 Water Rates certificate and s 603 Council Rate certificate.

117. The letter went on:

“We confirm that our outgoing mortgagee, Westpac, will be present at the settlement on Monday 1 February 2016 at 10.30am and that the payout figure required at settlement is $677,243. The balance of the cheques required to be delivered to us at settlement will be provided to you in a cheque direction shortly after receipt of your settlement adjustment sheet.

We await your urgent response given that time is of the essence and that there will be a breach of an essential term of the contract if settlement is not effected by 10.30am Monday 1 February 2016. We reserve our client’s rights.”

118. In a letter of 28 January 2016, the solicitor for the purchasers addressed the issue of the identity of the purchasers. He described the inclusion of Khaled as representing “a fall-back position which did not eventuate”. The letter went on to say that the Notice to Complete served in the name of the joint purchasers, Youssef and Khaled was “not applicable”.

119. In a swift response on the same day, Mr Issa’s solicitors sent a letter reciting history and including the following:

“Whilst we note your advices, we say: -

1.    There is no objection to the alternate Notice to Complete served on Youssef Osman on 14 January 2016, and this remains current and will expire at 10.30am on Monday 1 February 2016. We reserve our rights in the event that the purchaser not settling prior to the expiration of this Notice to Complete.

2. …

3. …

4.    Given the representation in your letter of 5 June 2015, that the purchasers would be in a position to settle two weeks after 5 June 2015, that is, by 17 June 2015, the purchaser is severely in breach of contract.

5.    In light of your advices today that the contract has not been amended, we call upon you to urgently confirm that Mr Youssef Osman will be settling prior to the expiration of the notice to complete period. If so, please urgently provide us with your settlement adjustment …

6.    For our part, we confirm that the vendors are ready, willing and able to settle, that we have booked the settlement as per the Notice to Complete, and that the outgoing mortgagee will be present at the settlement.

… ”

120. A follow up letter was sent by Mr Issa’s lawyers on 29 January 2016, asking for a response to the earlier questions by no later than 3pm on that day. There was no response.

121. There is no evidence that a settlement adjustment sheet was sent by Youssef’s solicitors to the vendor’s solicitors. No settlement could take place without that adjustment sheet being provided by the purchaser’s solicitors.

122. On 1 February 2016, Mr Issa’s lawyers sent a letter to Allied Lawyers in the following terms:

“Please find attached by way of service Notice of Termination of Contract dated today.

As a matter of record, despite both our oral and written correspondence with you and the service of the Notice to Complete, we have not been advised of any steps being taken by the purchaser to advance settlement or relating to your client’s intentions in relation to the contract. We are completely in the dark as to your client’s intentions.

…

Our clients now demand urgent possession of the property in order to allow them to take necessary steps to attempt to mitigate their losses. We understand that your client has changed the locks to the property and may have stored items of furniture on the premises. We ask that you confirm that your client has vacated the property, that the keys are available for collection from your office by courier by no later than midday tomorrow please.

… ”

123. Attached to that letter was Notice of Termination of Contract, the operative paragraph of which was as follows:

“As a result of your default under the Contract and the Notice to Complete dated 14 January 2016, making time of the essence of the contract, we give you notice that the vendors hereby terminate the contract and that the contract is entirely at an end.”

124. On 1 February 2016, Allied Lawyers wrote to the plaintiff’s lawyers in the following terms:

“We are able to confirm receipt of instructions from our client who has advised the following:

1.    A loan application has been made with the ANZ Bank. The vendor has provided the details of the Banking Manager should your client wish to verify this fact. His details are: Kevin Lee, ANZ Lending Manager: [mobile number].

2.    On this occasion our client has managed to secure a guarantor with substantial financial standing in an attempt to secure the loan.

3.    It is our client’s advice that all parties are doing everything within their power to secure this finance as soon as possible with an approval to be anticipated end of this week.

As the vendor is aware, the issue of the second and partially constructed building on the property has proven to be an obstacle in obtaining finance. These issues have been addressed by the financier in an attempt to secure the adequate loan. Whilst the purchaser is not yet in a position to settle this matter, all steps are being taken by our client to be in a position to do so as soon as possible.”

125. In light of the contents of the documents provided on subpoena by ANZ to which reference is made below at [145]-[147], the instructions given to their solicitors by Mohamed and Youssef (or perhaps both) are rather curious and not apparently accurate. Their application for a loan had been rejected by the ANZ on 22 January 2016. No subsequent application had been made. It was not possible for an approval to be “anticipated by the end of the week”.

126. The email also entirely ignored the existence and effect of the Notice of Termination of the Contract. It seemed to proceed on the basis that it had not been delivered.

127. The lawyers for the plaintiffs responded to that letter on 1 February 2016, drawing attention to the fact that the contract had been terminated prior to the letter being sent.

128. On 2 February 2016, the plaintiffs’ lawyers again wrote to the solicitors for the purchaser drawing attention to the fact that there had been a failure to communicate about the steps necessary to enable possession to be re-taken of the property. The letter reiterated that the contract was at an end and that “your client is not permitted entry into the premises unless by prior arrangement to facilitate removal of any possessions that your client may have stored at the property”. That letter was sent by email and fax to the firm Allied Lawyers. Ms Taouk, on 3 February 2016, acknowledged receipt of it and said that it had been sent to their client for his instructions.

129. On 3 February 2016, Mr Issa received a letter from Land and Property Information indicating that a caveat which prohibited the registration of any dealing at all had been lodged over the title to the property by Mohamed Osman. It made a claim in the following words “Equitable interest under constructive trust”. It said that that interest arose because:

“Direct and indirect contributions towards the maintenance of the land and the repayment of mortgage instalments”.

130. At about that time, Mr Issa made a number of attempts to obtain possession of the property. He was unable to do so because, I am satisfied, Mohamed resisted those attempts.

131. On 22 February 2016, Mr Issa’s lawyers wrote to Allied Lawyers drawing attention to the current state of facts. They demanded vacant possession of the Property, the return of the keys of the Property to their clients and the withdrawal of the caveat. They advised that if agreement was not forthcoming by the close of business on 23 February 2016, they would approach the Court for appropriate orders.

132. On 23 February 2016, Allied Lawyers informed Mr Issa’s lawyers that they no longer acted for the purchaser, and advised that it was appropriate to send correspondence “… directly to Mr Osman at the above address”. The address referred to was 29 Boronia Road, Glenorie, which was where Mohamed was living. Youssef did not live there. This letter is further evidence that Allied Lawyers regarded Mohamed as their client throughout this transaction.

133. As well, Allied Lawyers added:

“Additionally, we advise that we are not the party whom caused the registration of the caveat on the property in question. We suggest you obtain a copy of the registered caveat in order to ascertain the identity of the new legal representative.” (sic)

134. Although the caveat did not contain any direct reference to a legal representative lodging it, it is appropriate to observe that the necessary statutory declaration made by Mohamed, namely that he had a good and valid claim to the estate or interests set out in the schedule, was completed in front of Mr Badarne, a practising solicitor of Wollongong. The firm name for Mr Badarne’s practice is Good Legal Pty Ltd. Mr Badarne and his firm were on the record as acting for Mr Mohamed in these proceedings at the time they commenced and up until the Court reserved judgment.

Applications for Finance

135. Although the evidence contains references being made in the course of conversations or emails to the existence of applications for finance, independently of these references, the evidence supports a finding that only two applications for finance were, in fact, made to enable the purchase of the property.

136. The first of these was made on 23 September 2015, by Youssef to the ANZ Bank. The application was made to Mr Kevin Le, who worked for ANZ Mortgage Solutions. The details of the application noted that the purchase price of the Property was $1.6M and that Youssef wished to borrow $1.36M, which was 85% of the purchase price. It described , in summary, the proposal in these terms:

“Client wishes to seek approval to purchase an investment property.

Servicing with client self-employment income and proposed rental income.

FTC will come from client, gift from parent.

Please note client is borrowing 85% LVR plus LMI on multiple dwellings property.

This site is a development site and the land can be divided for development, hence the client believe it will be worth lots more in the future. Please approval as client have strong and stable business.” (sic)

137. Various documents were provided in support of that application.

138. It appears that the application, whilst dated 23 September 2015 for internal purposes, was completed by Youssef on 16 September 2015 and provided to Mr Le on that day.

139. On 23 September 2015, Mr Johnson Zhang, a pre-assessment officer, responded to Mr Le that the loan application had been received and would be processed.

140. On 25 September 2015, an assessment officer, Mr Nish Sharif, responded with respect to the application in the following terms:

“We regret to advise that this application has been DECLINED due to:

●   Unacceptable security.

●   Partially built property of 130 squares at frame stage in addition to the dwelling and granny flat – clearly not acceptable, property is being purchased well above its current value. Strong owner/builder implications well outside parameters as well as commercial implications re future purposes and 3 properties on land.

●   Serviceability is not evident.”

141. The loan application included a residential valuation which was undertaken for the ANZ by CBRE Residential Valuations Pty Ltd. An inspection was undertaken on 2 September 2015. At that stage the Property was valued at $1.6M being $1.2M for land and the balance for improvements.

142. Youssef gave evidence that he was told by Mr Le that the reason his application for a loan had been refused was because he needed to have a building contract to demonstrate that he would be completing the building on the land, this being a reference to the incomplete house on the land.

143. Whilst it may be that this was the explanation given to Youssef, or at least a part of it, it clearly did not represent the full reason for the loan being declined as the memorandum set out at [140] shows. If the absence of a building contract was the only impediment to the loan being approved, then it is surprising that the existing one was not immediately submitted.

144. Either Mohamed or Youssef, it is not clear which, had in fact obtained a building contract in May 2015. It quoted a sum of $300,000 to undertake building work and complete the unfinished house. It seems unlikely that this was given to the ANZ prior to 25 September 2015, because the absence of a building contract was cited by Mr Le as one basis for refusal of the loan.

145. The evidence also revealed a second application for loan which was again made to ANZ Mortgage Solutions, and in which the borrowers were named as Youssef and Khaled. The application was dated 20 January 2016. Mr Le submitted the application for assessment on 21 January 2016. It noted the purchase price as $1.6M and sought a home loan for $1.44M, being 90% of the total loan amount. The application included the following comments:

“Please assess under medico policy.

Client wishes to seek approval to purchase O/O property.

Servicing with client self-employment income and PAYG income.

FTC will come from client gifts from parent, which have already been paid.

Please note this is a non-standard securities as there is an incomplete building on the land.

Please also note that there are 2 other dwellings on this property that is liveable.

Client does have fixed price building contract to complete the construction and clients will have funding to complete the construction.

Please approve and accept this property as security, given the nature of the purchase for O/O.

Client stable business and professional employment.

…”

146. It seems that the abbreviation O/O refers to the phrase “Owner/Occupier”. The reference to the fixed price building contract appears to be to the one dated May 2015 for $300,000.

147. On 22 January 2016, Niamh O’Byrne, the ANZ assessment officer, responded to Mr Le, advising that the application had been declined due to unacceptable security.

148. That document has some handwritten annotations. The evidence does not enable a conclusion to be drawn firmly about those handwritten annotations. But the probabilities are that they were made by Mr Le in an attempt to persuade the assessment officer to reconsider the matter. In any event, no approval has been forthcoming from the ANZ with respect to any loan.

149. In the course of the hearing of the proceedings, two Notices to Produce were served by the plaintiffs upon the solicitors for the second defendant. Those Notices to Produce sought the production of any documents in their possession which related to applications for finance being made and the results of those applications. When called upon, no documents were produced. If any application for finance had been made, whether directly to a financier, or else to a broker, I would have expected Youssef to have been in possession of one or more documents reflecting the existence of any such applications.

150. In his affidavit sworn on 16 March 2016, Youssef said that he had entered into the building contract. There is in evidence two building contracts. The first is dated 20 May 2015, and appears to have been given to ANZ at some time between the two applications, because a copy was produced on subpoena by ANZ. The second contract, probably the one being referred to by Youssef in his affidavit, was dated 7 March 2016. That contract was with a company called “Intelligent Building and Electrical Services Pty Ltd”. The price was $400,000. There was no evidence that this second contract was given to the ANZ.

151. He then said in his affidavit:

“The application for finance with ANZ Bank is under process and I am waiting for the approval so that I can proceed with the settlement.”

152. Youssef was cross-examined about this paragraph. Youssef said that what he intended to convey was that although the application to the ANZ Bank had been rejected, that Mr Le was still trying to get finance “… so we were trying to work around it and this is what I meant …”. He later gave the following answers:

“Q.   When you prepared that affidavit, by that stage, you were aware that both your application in September 2015 and your application in January 2016 had been declined. That’s true isn’t it?

A.   Yes.

Q.   So why did you tell the Court in your affidavit that the application for finance with the ANZ is under process if you knew that both applications at the time you swore your affidavit on 16 March 2016 had been declined?

A.   Because I was still trying.

Q.   So you’re saying that you were trying obtain finance from the ANZ Bank?

A.   I was still talking to Mr Kevin Le at that time.

Q.   You were talking to him, so it wouldn’t surprise you if there’s no further material produced by the ANZ Bank other than the material I’ve shown you in relation to your two loan applications?

A.   I don’t think there would be any application from them. There would be probably more communications or emails or phone calls. I’d have to look into that.”

153. Youssef accepted in cross-examination that he has not since March 2016, when he swore his affidavit, obtained any approval for finance to purchase the property.

154. Although other evidence was given in the course of cross-examination by both Youssef and Mohamed about attempts to obtain finance, none of them were accompanied by any details of the kind which would permit a finding of fact to be made that they had actually approached any financial institution to obtain finance to purchase the Property. On a number of occasions both Youssef and Mohamed said that they had spoken with a mortgage broker about obtaining finance, or else a mortgage broker was looking for finance for them.

155. I would be prepared to accept that those statements were accurate. However, there is a significant difference between speaking to a mortgage broker, or having a mortgage broker make appropriate enquiries on one’s behalf, and actually submitting an application for finance, albeit via a broker, to a financial institution, together with all of the requisite documents and having that financial institution appraise the application and decide whether to accept it or not, and if accepted, on what conditions.

156. With the exception of the two ANZ applications to which reference has been made above, I am not satisfied that any finding of fact can be made that any financial institution was formally approached to provide finance, and to process an application, or to approve one.

“I just stepped in to fix the problem, not to add to the problem … I was trying to fix it up for my dad, because I know my dad, how hard he was trying to … get finance for this property and otherwise why, why would I step in?”

252. By 29 October 2015, when the letter set out in [105] was sent, a Notice to Complete had been served by the vendor’s solicitors on 6 May 2015, fixing time for completion as being 25 May 2015. On 13 October 2015, a Notice of Termination of the contract was served. That notice called up the failure of the purchaser to complete in accordance with the May Notice to Complete.

253. As is apparent from the earlier recital of the facts in the judgment, there was further discussion leading up to the letter of 29 October 2015 written by the vendors’ solicitors. That letter offered, without prejudice to the vendors’ existing rights, to extend time for purchase of the Property in circumstances where the purchaser was asked to acknowledge that the May Notice to Complete and the May Notice to Terminate were both valid, and the Notice to Terminate was enforceable.

254. On 6 November 2015, the solicitor for Youssef responded, acknowledging and agreeing to those facts. Youssef gave evidence that he instructed his solicitors to make that acknowledgment.

255. It is of relevance here to note that in the contemporaneous correspondence there was no suggestion that the vendors were in any way unable to complete the Contract at the fixed time by not securing vacant possession because they allowed Mohamed to remain living on the property. There was no suggestion that this excused Youssef from completing the Contract nor that for that reason termination of the Contract was not effective.

256. A further Notice to Complete was served on 14 January 2016, calling for completion by 1 February 2016. Correspondence dated 28 January 2016 from the vendors’ solicitors drew attention to the fact of the requirement for completion and outstanding matters. A letter in response from Youssef’s solicitor did not in any way criticise the January Notice to Complete addressed solely to him, nor did it assert that there was any lack of a basis for its service. On 1 February 2016, a Notice of Termination of the contract was sent. In the letter by which that notice was served, reference was made to the fact that Mohamed had changed locks to the Property and had stored items of furniture on the premises.

257. The letter in response dated 1 February 2016 did not challenge the legitimacy or efficacy of the February Notice of Termination. It did not raise as an obstacle to a valid termination the fact that the Mohamed was said to be in possession of the Property, and that vacant possession could not have been given.

258. When Mr Issa gave evidence, counsel for Youssef did not challenge him in cross-examination about whether the vendors were in a position to complete the contract and give Youssef vacant possession at either of the times nominated for completion. That factual matter was simply not touched upon.

259. I am satisfied that the vendors were at all times ready, willing and able to complete the Contract for Sale, and that the possession of the Property by Mohamed, did not in the circumstances constitute a barrier on their part to giving vacant possession as required by the Contract to Youssef.

260. In my view, the facts demonstrate that Youssef did not regard the fact that his father was in possession of the Property as being an issue which went to the finalisation of the Contract. On the contrary, the evidence persuades me that Youssef consented to his father continuing to live in the Property even after he purchased it, and for an undefined period after the settlement of the Contract which possession would continue at least until he had paid his father the sum of $380,000.

261. Mohamed’s occupation of the Property, during the period from August 2015 until proceedings commenced in 2016, was not the subject of any formal tenancy. There was no lease in existence which governed the terms upon which he could occupy the Property. To the extent that he occupied the Property under the terms of the Option, the parties agreed that that came to an end in February 2015.

262. He occupied the Property at the will of the vendors. Importantly, he had no legal interest in the Property which would have contradicted the legal interest acquired by Youssef upon purchase. Such arrangement as Mohamed had to remain at the Property was terminable at the will of the vendors.

263. In all of the circumstances, if Mohamed’s occupation of the Property was to be regarded as a barrier for the obtaining of vacant possession, I would have expected that Youssef’s solicitors would have raised that with the vendors’ solicitors when they received either or both of the Notices to Complete, and when they received either or both of the Notices of Termination of the contract. The fact that they did not do so simply indicates that Youssef did not regard Mohamed’s presence on the Property as a matter which had to be addressed by the vendors prior to completion, in the sense that the vendors were required to oblige Mohamed to move out and to have the Property completely vacant for Youssef.

264. This attitude is consistent with Youssef’s evidence that he became involved as the purchaser of the contract in order to assist his father. He did not suggest that any time he intended to live on the Property. The clear impression he gave was that he anticipated that his father would continue to live on the Property. The proposition that Mohamed’s continued occupation of the Property demonstrated of itself and without more that the vendors were not ready, willing and able to complete the sale of the land to Youssef is not made out.

265. This claim fails.

Two Notices of Termination

266. As the facts above show, the vendors served two Notices of Termination of the Contract for Sale. The first was October 2015, relying upon the May Notice to Complete. The second was in February 2016, relying upon the January Notice to Complete.

267. In seeking the declaration that the Contract had been validly terminated, the plaintiffs relied on either or both of the Notices. They did not differentiate between them.

268. In contending to the contrary, Youssef also did not differentiate between the two Notices. He submitted that both Notices were invalid because the vendors were not ready, willing and able to settle on either occasion. Youssef did not argue that the October Notice of Termination had been waived by the conduct of the vendors, nor did he seek to argue that there had been an affirmation of the contract after the October Notice of Termination such that the vendors could not rely upon it.

269. In light of the attitude of the parties, I have proceeded to consider the issues which arise without making any differentiation between the two Notices of Termination. However, my conclusions would be identical if reliance was placed by the vendors only on the Notice of Termination served in February 2016 based solely upon the January Notice to Complete.

The Caveat Issue

270. This is a claim made only by the second defendant, Mohamed. In his cross-claim, amongst other relief which is now not relevant, Mohamed claimed a declaration that he had a caveatable interest in the Property and further, a declaration that his interest was equal to a proportionate share of the value of the Property measured by reference to the sum of $380,000, which Mohamed claims as the sum he invested in the Property by undertaking renovations to it. Alternatively, Mohamed claims a declaration that Mr and Mrs Issa owed him the sum of $380,000.

271. The pleading, relevantly, asserted that Mr and Mrs Issa permitted and encouraged Mohamed “… to carry out renovation work and improvement to the Property”. Based upon that conduct, Mohamed pleaded that he continued in his uninterrupted possession and occupation of the Property and carried out a substantial amount of renovation and improvement work to the Property. He values that work at $380,000.

272. In his affidavit, Mohamed said this:

“As soon as I took possession of the Property, I commenced substantial renovation and improvement on the Property. I wanted to bring the house up to standards in order to be able to obtain finance to complete the purchase of the Property. These renovations and improvements include fencing, constructing road, clear trees, excavation and levelling. I did not keep a record of all the expenses which I incurred on such renovations and improvements but.” (sic)

273. He then set out a general description of the sort of work which he carried out in the red brick house, the granny flat and on the land more generally. At the conclusion of that paragraph, he said that he estimates the amount which he spent to improve the Property as being at least $275,000. At no time was the difference between the estimated amount spent and the value said to be added of $380,000, the subject of any evidence or explanation.

274. The caveat which Mohamed caused to be lodged over the Property in early 2016 claimed that he had an equitable interest in the Property under a constructive trust which was claimed to arise because of “direct and indirect contributions towards the maintenance of the land and the repayment of mortgage instalments”.

275. I have earlier indicated that I do not accept Mohamed’s claim that any of the monthly payments made by him during the period he occupied the Property were intended to be set aside for Mohamed’s benefit as a capital sum towards to the cost of the purchase of the Property. I have also concluded that the whole of the monthly sum was paid to the plaintiffs pursuant to the Option as a fee for his monthly occupation. Although the plaintiffs may have applied the monthly payment to their mortgage obligations, there is no basis for a constructive trust to be imposed to reflect those circumstances. Mohamed’s counsel did not maintain such a claim in final submissions.

276. In oral submissions at the conclusion of the case, Mohamed’s claim was refined in this way by his counsel:

“Up at the point of March 2015 under Baumgartner principles, there is unquestionably, I submit, a constructive trust. The Baumgartner constructive trust does not rely on any express, implied, any form of agreement. It is based purely on the principles of unconscionability.

He has done this amount of work for the property … He has, I submit, an equitable interest in relation to the land as of March 2015.”

277. As the submission makes clear, the constructive trust claim arises from the fact that Mohamed carried out work on the Property.

278. Counsel for Mohamed submitted that the constructive trust which he claimed his client was entitled to would be given effect to by the Court determining the existence of an equitable charge over the land to the value of that trust or, alternatively, over the proceeds of sale of the land. He submitted that such interest was sufficient to warrant the existence of the caveat.

279. It is convenient in considering this claim to commence with the identification of legal principle In Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, Deane J (with whom Mason J agreed) said (at 613-614):

“Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court. It differs from those other forms of trust, however, in that it arises regardless of intention. … the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained. … Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion could be contrary to equitable principle.”

280. At 615, he said:

“The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate process of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles. …”

281. At 620, Deane J said:

“… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do …”

282. The principles underlying that decision were applied by the High Court in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137. There the joint judgment of Mason CJ, Wilson and Deane JJ drew attention to the judgment of Deane J in Muschinski, to which I have referred above, and applied the principles there discussed. In so doing, the High Court approved of the judgment of Mahoney JA in the Court of Appeal in Baumgartner and in particular said this (at 147):

“The significance of this statement so understood is that it asserts that the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognize the existence of the equitable interest amounts to unconscionable conduct, and that the trust is imposed as a remedy to circumvent that unconscionable conduct.”

283. Toohey J at 152 concluded that the principle discussed in Muschinski could equally operate to create a constructive trust based on either unconscionable conduct or one based on unjust enrichment.

284. In Daniel Behman v Tarek Behman [2015] NSWSC 1787, Rein J collected in a convenient form, principles to be applied in considering whether or not the Court ought impose a constructive trust upon parties to reflect a claim to a proprietary interest in land. Rein J drew attention to an earlier decision of White J in Shepherd v Doolan & Ors [2005] NSWSC 42, and then said:

“33.   I derive the following principles from Doolan:

(1)   The enquiry for the purpose of determining whether there was a common intention is an enquiry as to the actual intention of the parties. The law does not impute a presumed intention to the parties based upon what the Court considers fair and reasonable persons would have intended.

(2)   The intention need not be that the parties have a specific share of the property.

(3)   Intention may be established by:

(a)   agreement as to how the property should be held,;

(b)   the express statements of intention;

(c)   intentions inferred from conduct.

(4)   A common intention that a party have a beneficial interest in property owned by another will not be inferred merely from their joint occupation of the property … nor the doing of repairs, renovations, maintenance, decoration or improvement … (Pettitt v Pettitt [1970] AC 777 at 805-6, 811, 816, 826; Gissing v Gissing [1971] AC 886 at 900, 910; Burns v Burns [1984] Ch 317 at 326, 328, 342).

(5)   The intentions may be inferred from financial contributions, direct or indirect to the acquisition of property including the paying of mortgage or the payment of expenses which free up funds for that purpose … In the case of ‘the common intention’ constructive trust, there is no presumption that the beneficial interest is in proportion with the contribution of the purchase price.

(6)   Declarations about intentions before or at the time of the transaction or so close in time after the transaction as to constitute a part of it, can be relied on.

(7)   A plaintiff must show that he or she acted to his or her detriment in a way referrable to the agreement or intention that she have an interest in the property.

(8)   Conduct which is insufficient to establish a common intention as to ownership of the property may be sufficient to constitute relevant actions to the plaintiff’s detriment to establish a trust if the common intention is established otherwise.

(9)   Conduct may be both the evidence from which an intention that the plaintiff has a beneficial interest can be inferred, and the act of detrimental reliance.

(10)   …

(11)   The constructive trust may arise after the acquisition of a property where the common intention is formed at a later time. …”

285. In Jacobs Law of Trusts in Australia (7th Ed), the learned authors state [at 1219] that orthodox legal theory would suggest that a person who expends time and money in improving another’s property acquires no proprietary interest by so acting. They conclude that equity does not have an obligation to intervene in that circumstance.

286. At the centre of a constructive trust is the notion that property was acquired, or improvements made to a property, pursuant to a common intention or else as part of a joint endeavour. That common intention or joint endeavour has not been fulfilled and the consequence is that equity is persuaded where it is unconscionable for one or other of the parties to retain the entire property, or all of the benefit of the work, to intervene and impose a constructive trust.

287. What is missing in Mohamed’s claim, as a matter of fact, is any form of common intention or joint endeavour, which has not been fulfilled.

288. The initial relationship between the vendors and Mohamed was determined by the Option. That Option gave Mohamed legal rights, but there was no suggestion of any joint venture or endeavour between him and the vendors. The ultimate end point of the Option was a legal right which Mohamed had to acquire the Property. Whether he chose to exercise that right or not was a matter entirely for him. The vendors had no role to play in that decision. If that decision was made, then Mohamed acquired the Property absolutely, subject to due conveyancing steps. If the decision was not made, the position continued as it was, namely, that the vendors were entirely entitled to the Property.

289. The terms of the Option do not support the existence of any joint endeavour between the parties. Rather it seeks to regulate their several rights. It is not possible to infer the existence of a joint endeavour or any common intention with respect to an interest in the land from the terms of the Option. This conclusion would be sufficient, without more, to deny the remedy of a constructive trust.

290. However, in deference to Mohamed’s submission, it is appropriate to turn to the entirety of the facts. As discussed at [43] and [47]-[49] above, the only discussions which occurred prior to Mohamed taking possession of the Property, related to him undertaking further construction work on the unfinished house. Those discussions and any specific obligations arising from the Option can be put to one side in relation to this particular claim because all parties accept that Mohamed did not do any work at all on the unfinished house.

291. As described in [50]-[53] above, Mr Issa had an understanding that Mohamed was going to do some work to the established house “… to render it suitable to his needs as a resident …”. He agreed that he permitted this to occur. He was not told by Mohamed of the detail of the work which was intended either before it was undertaken or whilst it was being undertaken. There was no specific discussion between Mohamed and Mr Issa about any arrangement to deal with the costs of the work, in the event that Mohamed did not ultimately purchase the Property. Mr Issa’s evidence, which I accept, was that at the time he allowed Mohamed into occupation, he did not take any objection to his doing some work to the red brick house because he anticipated that Mohamed would be purchasing the Property.

285. These facts, in the context that Mohamed’s occupation of the Property was pursuant to the Option, do not seem to me to rise to a level where the Court could conclude that there was some joint relationship or endeavour involved in the renovation works to the red brick house which would lead to equitable relief.

286. The parties agreed specifically in the Option that any construction work of any kind on the unfinished house would inure to the sole benefit of the plaintiffs in the event that the option was not exercised, and Mohamed did not purchase the Property. Mohamed specifically gave away his right to make any claim by way of “unjust enrichment or otherwise” against the plaintiffs if he did not proceed with the option to purchase.

287. However, it seems to be contended, having regard to the permission given by Mr Issa to Mohamed to undertake some renovation work to the red brick house, that it is unconscionable for him to retain the benefit of such work. The highest the claim for Mohamed rises is that he said to Mr Issa that he wanted Mr Issa to “… allow me work on the house as if I were the owner”. He said that Mr Issa’s response to that was “that’s fine”.

288. Mohamed gave no evidence as to any understanding which he formed based on that conversation. He gave no evidence that he undertook work with any anticipation in mind other than that he would become the purchaser of the Property.

289. His affidavit suggests that the reason that he did the renovation and improvement work on the Property was that he wanted to “bring the house up to standards in order to be able to obtain finance to complete the purchase of the property”. From the context of that statement, it appears that he was there referring to the unfinished house. The evidence about this is, at best, ambiguous. Taking it as a reference to the red brick house, it is no more than a statement that he did the work in anticipation of completing the purchase of the Property.

290. At the time the work was being done, and after it was completed, Mohamed was living in the Property and obtaining the benefit of the work. The fact that Mohamed undertook work on the Property voluntarily with the knowledge of, in a broad sense, and without objection from, the vendors did not constitute any form of joint endeavour nor did it constitute any contractual relationship between them with respect to that work. The work was not said to be being done for and on behalf of the vendors, nor at their request. What was plain was that Mohamed was doing it to make his occupation of the Property more comfortable, as he perceived it, and in advance of his purchasing the Property, which he then fully intended to do.

291. These facts and circumstances do not give rise to any demonstration that it is unconscionable on the part of the vendors to retain such value of that work as exists. Mohamed undertook the work for his own purposes and in the anticipation, perhaps optimistically, that he would be purchasing the Property. That anticipating did not come to fruition. There is nothing unconscionable about the value of the work inuring to the benefit of the vendors.

292. I reject the proposition that equity would give any relief to Mohamed with respect to the work which he had done, by way of a constructive trust or otherwise.

293. This claim must fail and, accordingly, Mohamed has not demonstrated that he has any caveatable interest in the Property and the caveat must be removed.

294. This conclusion is not reliant upon, but is supported by, the concession made by Mohamed’s lawyer in the exchange of correspondence in October 2015, at [105]-[107] above, by which Mohamed agreed that any monies which he had expended on the Property “… now belongs to the vendors”.

295. Even if there were underlying circumstances that raised a need for equitable relief, it would have been necessary to have considered other circumstances which would be relevant before granting relief. From February 2015 to, at least, the conclusion of the hearing before me in February 2017, namely a period of about two years, Mohamed remained in occupation and possession of the Property and paid no occupation fee at all. Had he continued to make the same payments as were called for under the Option, then he would have paid to the vendors a sum of about $200,000. No such payments were made. A question would arise before equitable relief would be granted to Mohamed as to whether, in seeking such equitable relief, Mohamed was “… doing equity”. That is, before obtaining relief, should Mohamed be obliged to pay the occupation fee as he previously did.

296. Further, the only evidence of the monies actually spent on the Property is a single statement by Mohamed in his affidavit to the following effect:

“I estimate the amount which I spent to improve the property to be at least $275,000.”

304. That statement followed a description of the renovation work which he says he carried out to the red brick house, the granny flat and general work on the property. Mohamed did not attempt to prove by reference to invoices for work and materials or by reference to appropriate hourly rates and labour costs, what had actually been spent on the red brick house and the granny flat. The evidence was insufficient to allow any firm conclusion about the monies which had been expended on the Property.

305. As well, in considering whether it would be unconscionable for the plaintiffs to retain the benefit of that work, a question may arise as to whether they (the plaintiffs) have obtained any benefit from the work. A benefit is not always reflected by, or to be equated with, the monies actually spent on the Property. One way in which such a benefit may be identified is through a valuation of the Property, including identification of the additional value created by that work. Neither party called an expert to address this issue. However, there was in evidence a residential valuation and security assessment made by CBRE Residential Valuations Pty Ltd for the ANZ Bank, which was dated 2 September 2015, namely at a time after the work appears to have been carried out. The valuation valued the land at $1.2M, and the improvements at $400,000.

306. The valuation does not readily support the claim by Mohamed that a sum of $380,000 reflects the benefit to the plaintiffs of the work which he carried out. Mr Issa gave evidence that he and his family had lived in the Property up to the time when, or shortly before, the Option was entered into. He gave evidence that the Property was in an entirely liveable state. I certainly could not conclude that that existing improvements of the red brick house and granny flat were so poor that they had little or no value at all.

307. In other words, there is no evidence which would enable the Court to readily conclude whether there was any benefit at all, let alone what the value of the benefit to Mr and Mrs Issa was from such work as was carried out.

308. Mohamed’s counsel submitted that the arrangements made between Mohamed and Youssef Osman and reflected in the contract for sale, namely a deposit of $380,000 (which was accepted between Mohamed and Youssef as being a sum to be paid by Youssef to Mohamed) meant that the Court should accept that Mr Issa on behalf of the plaintiffs had accepted and acknowledged that the value of the work Mohamed did was $380,000. I am unable to agree with that submission.

309. Looked at from Mr and Mrs Issa’s perspective, the sale price to Youssef was no less, and marginally ($20,000) more, than the sale price of which they had first agreed to transfer to Mohamed for the Property. That sale price was at, or approaching, a reasonable market value as the valuation, to which earlier reference has been made, demonstrated.

310. Put differently, Mr and Mrs Issa were obtaining a reasonable market price for their property at settlement. The arrangement proposed by Youssef and Mohamed was said by Youssef to have arisen in circumstances where, in early 2015, he had been approached jointly by Mr Issa and his father, and Mr Issa had asked him to “get involved or help his father to complete the purchase”. In his oral evidence, he said that he had a discussion with Mr Issa about the sum of $380,000. He was asked this question, and gave this answer, about that:

“Q.   … he said that was the approximate amount that your father had done in improvements for the property?

A.   Something like that, yes.”

311. To the extent that this evidence is to be taken as an acknowledgement by Mr Issa that he was satisfied that the sum of $380,000 was the appropriate and fair sum to represent the value of the work carried out by Mohamed on the Property, I reject it. The question was put in a leading form. The answer was equivocal. There was no evidence offered in Youssef’s affidavit about this conversation. Mohamed’s evidence was to the effect that the arrangement had been made between him and his son and then communicated to Mr Issa.

312. Earlier reference has been made to that conversation, but it is convenient to refer to it now. It is contained in paragraph 21 of Mohamed’s affidavit of 7 March 2016. He deposed to a conversation in March 2015 to the following effect:

Mohamed:   “You know that I have been fixing and improving the Glenorie House for some years and I have spent large sums of money on it. If you buy the house, you have to pay me what I have paid. I will stay in the home until you pay me what I have spent.”

Youssef:   “OK, I agree with that.”

313. What followed from that agreement was the proposal set out in the email of 10 April 2015, to which reference is made at [73] above. This was clearly a proposal by Mohamed and Youssef as to the terms upon which Youssef would purchase the Property.

314. Assent to the contract in those terms, which had the consequence that Mr and Mrs Issa would receive the net sum which they had always intended to receive, does not mean, nor does it justify, a finding that, Mr Issa admitted that $380,000 represented the true value of the work to the vendors; nor does it justify a finding that that sum was in fact an appropriate sum in respect of which the principles of equity would, if otherwise available, justify relief.

315. I am wholly unsatisfied that the conduct of Mr and Mrs Issa in not reimbursing Mohammed for the value of any of the work which he undertook whilst in possession of the Property, is unconscionable.

316. In these additional circumstances, there is no reason for a constructive trust to be brought into existence to provide an appropriate mechanism for equitable relief. I dismiss this claim.

317. It follows that Mohamed has no interest in the Property and is not entitled to maintain his caveat since it is only based upon that constructive trust, giving rise to an interest in the Property.

The Personal Debt Claim

318. As noted in [27], one of the alternative claims for relief made by Mohamed in the Cross Claim was a declaration that the vendors owed him the sum of $380,000. This was a claim in personam and not relevantly for an interest in the Property.

319. The claim expressed in this way was not the subject of any submissions by counsel for Mohamed in his final address. He called attention to the declaration as an alternative form of relief to the claim for an equitable lien or charge.

320. No attempt was made in the evidence to prove any basis for a claim of direct personal liability. Having regard to the evidence about the state of knowledge of the vendors about the manner in which they learnt that work was being undertaken on the Property, and in light of the fact that the detail of what was intended to be, and what was in fact done, was unknown to them, I cannot detect any basis for a direct claim against the vendors, in personam, for $380,000.

321. The claim to the extent that it is maintained must be dismissed.

Enquiry as to Damages

322. A claim was made by the plaintiffs for an inquiry as to damages. It is not clear if such a claim is maintained in light of this judgment. It will be appropriate to stand over this claim for seven days to enable the parties to consider their position and, if so advised, to seek further directions.

Conclusion

323. I have concluded for all of the reasons which have been expressed, that the plaintiffs are entitled to possession of the Property free of any obligations to either the first or second defendant. I have concluded that the contract for sale which existed between Youssef and Mr Issa was validly terminated, and that it is no longer in existence. Finally, I have concluded that Mohamed is not entitled to any equitable or other relief with respect to such monies as he in fact expended on renovations on the Property during the course of his occupation of the Property.

324. It follows that the following orders and declarations ought be made:

1. A declaration that the Contract for Sale of Land dated 20 April 2015 between the plaintiffs as vendors and the first defendant as purchaser of the land described in Folio/Identifier 1/514917 and known as 29 Boronia Road, Glenorie NSW 2147, has been validly and lawfully terminated.

2. Order that the second defendant remove the caveat AK182112 from the title of the property described in (1) above by 4pm Thursday 15 June 2017.

3. Order that the first cross-claim be dismissed.

4. Order that the second cross-claim be dismissed.

5. Order that the defendants pay the costs of the plaintiffs.

6. Stand over the issue of an inquiry as to damages until 9.30am on 15 June 2017 for directions.

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Amendments

09 June 2017 - Review amendment

Decision last updated: 09 June 2017