JJJP Properties Pty Ltd v Colin Peacock & Ors
[2024] VCC 471
•17 April 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-05226
| JJJP Properties Pty Ltd (ACN 616 182 819) (in its capacity as trustee for the JJJP Property Trust) | Plaintiff |
| v | |
| Colin John Peacock & Ors (according to attached Schedule) | Defendant |
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JUDGE: | HER HONOUR JUDGE BURCHELL | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21 – 24 November 2023, written submissions dated 4, 12, 20 and 22 December 2023 | |
DATE OF JUDGMENT: | 17 April 2024 | |
CASE MAY BE CITED AS: | JJJP Properties Pty Ltd v Colin Peacock & Ors | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 471 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT – SPECIFIC PERFORMANCE – REPUDIATION – DAMAGES – DUTY OF CARE
Catchwords: whether the plaintiff is entitled to specific performance – whether the defendants complete the contract of sale with the third defendant – whether the plaintiff is entitled to damages in lieu of specific performance – whether the defendants repudiated the agreement – quantum – whether caveats should be removed - whether the contract was repudiated – whether the repudiation was accepted – whether the contract was terminated – whether the contract was affirmed by conduct – whether the third party owed a duty of care as solicitors – whether the third party breached their duty of care – whether the breach of duty caused loss and damage
Legislation Cited: Evidence Act 2008 (Vic), s 128; Penalty Interest Rates Act 1983 (Vic), s 2; Supreme Court Act 1986 (Vic), s 38; Wrongs Act 1958 (Vic), s 55(1)
Cases Cited:Black v Garnock (2007) 230 CLR 438; Avco Financial Services Ltd v Fishman [1993] 1 VR 90; J & H Just Holdings Pty Ltd v Bank of NSW (1971) 125 CLR 546; Jacobs v Platt Nominees Pty Ltd [1990] VR 146; Hili Mimi v Millennium Developments Pty Ltd [2003] VSC 260; Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; Wright v Insert Pty Ltd [2022] VSC 1; Circuit Finance Australia Limited (in liquidation) v Panella & Anor [2011] NSWSC 311; Brien v Dwyer (1978) 141 CLR 378; Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (1985) 157 CLR 17; Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115; Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632; South Dowling Pty Ltd v Cody Outdoor Advertising Pty Ltd [2005] NSWSC 391; Tropeano v Riboni [2005] VSC 229; Perry v Suffields Ltd [1916] 2 Ch 187; Kazacos v Shuangling International Development Pty Ltd [2016] NSWSC 1504; Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; Castaway Avenue Pty Ltd v CSC1957 Investments Pty Ltd (2023) VSCA 30; Nund v McWaters [1982] VR 575; Ryder v Frohlich [2004] NSWCA 472; Holland v Wiltshire (1954) 90 CLR 409; Waystone Pty Ltd v M Property Group (2015) VCC 1422; Tropical Traders Pty Ltd v Goonan (1964) 111 CLR 41; Sargent v ASL Developments Ltd (1974) 131 CLR 634, 642; Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; Wendt v Bruce (1931) 42 CLR 245; Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298; Canberra Advance Bank Ltd v Benny (1992) 115 ALR 207; that JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378; Coastal Estates Pty Ltd v Melevende (1965) VR 433; Champtaloup v Thomas (1976) 2 NSWLR 264; Immer (No 145) Pty Ltd v Uniting Church of Australia Property Trust (NSW) 182 CLR 26; Barooga Projects (Investments) Pty Ltd v Duncan [2004] QCA 149; Poort Development Underwriting (Victoria) Pty Ltd (No 2) [1977[ VR 454; Allianz Australia Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632; Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; King v Poggioli (1923) 32 CLR 22; Black Uhlans Incorporated v New South Wales Crime Commission (2002) NSWSC 1060; Kettle and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108; Rhodes v Badenach [2000] TASSC 160; Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509; Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (1979) Ch 384; About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370; AVWest Aircraft Pty Ltd v Clayton Utz (A Firm) (No 2) (2019) WASC 306; David v David (2009) NSWSC 8; Curnuck v Nitschke (2001) NSWCA 176; AJH Lawyers Pty Ltd v Hamo (2010) 29 VR 384; Scottsdale Homes Pty Ltd v Gemkip Pty Ltd [2008] QSC 326; Yager v Fishman (1944) 1 All ER 552
Publications: Gino Dal Pont, LexisNexis Solicitors Manual Chapter 4, Duties of performance owed by lawyer, “B. scope of the duty of care in torts”
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M Ravech | Rotman & Morris Lawyers |
| For the First and Second Defendants | W Rimmer | Nevett Wilkinson Frawley Lawyers |
| For the Third Defendant | S Bobko | NOH Legal Pty Ltd |
| For the Third Party | T Mitchell SC | McKay Law Pty Ltd |
Table of Contents
Introduction
Issues
JJJP’s dispute with the Peacocks
JJJP’s dispute with Cimen
Cimen’s dispute with Peacocks
Peacocks’ dispute with Giummarra
Background facts
The witnesses
Ms Robertson
Mr Jones
The experts
Mr Cimen
Mr Peacock
Mrs Peacock
Mr Giummarra
First issue for trial: JJJP entitled to an order for specific performance of the JJJP contracts of the farm and business?
The Peacocks’ submissions
JJJP’s submissions
Second issue for trial: If JJJP is so entitled, but the Court makes an order in this proceeding that the Peacocks complete the contracts of sale dated 1 May 2021 (Cimen contracts) of the farm with Mr Cimen:
(a) Is JJJP entitled to an order for damages against the Peacocks, in lieu of specific performance, because the possibility of the latter relief has been aborted?
(b) If so, what is the quantum of those damages?
JJJP’s Submissions
Peacocks’ submissions
Analysis
Third issue for trial: Which of JJJP’s interest as purchaser under the JJJP contracts and Mr Cimen’s interest as purchaser under the Cimen contracts has priority, and whose caveat should be removed?
The Peacocks’ submissions
JJJP’s submissions
Mr Cimen’s submissions
Analysis
Fourth issue for trial: Did Mr Cimen repudiate the Cimen contracts by failing to pay the deposits under the Cimen contracts on or before 5 June 2021?
The Peacocks’ submissions
Mr Cimen’s submissions
Mr Giummarra’s submissions
Analysis
Fifth issue for trial: Did the Peacocks effectively accept that repudiation and bring the Cimen contracts to an end by selling the farm to JJJP under the JJJP contracts on 5 June 2021, or in any other way at any later time?
The Peacocks’ submissions
Mr Cimen’s submissions
Mr Giummarra’s submissions
Analysis
Sixth issue for trial: Did the Peacocks effectively terminate the Cimen contracts on or about 4 August 2021 by serving the Notice of Default and Rescission dated 22 July 2021 and Mr Cimen subsequently failing to comply with it?
The Peacocks’ submissions
Mr Giummarra’s submissions
Analysis
Seventh issue for trial: Did the Peacocks, by their own conduct or by the conduct of an agent or solicitor, elect to affirm the Cimen contracts, so that they were still on foot as at 2 November 2021?
The Peacocks’ submissions
Mr Cimen’s submissions
Mr Giummarra’s submissions
Analysis
Eighth issue for trial: If the Court makes an order in this proceeding that the Peacocks complete the JJJP contracts with JJJP:
(a) Is Mr Cimen entitled to damages against the Peacocks for breach of the Cimen contracts?
(b) If so, what is the quantum of those damages?
The Peacocks’ Submissions
Mr Cimen’s submissions
Analysis
Ninth issue for trial: Did Mr Giummarra owe the Peacocks a duty of care as their solicitor on or before 5 June 2021 to advise them:
(a) the effect of the “subject to finance” clause in the Cimen contracts; and/or
(b) that they were not free to sell the farm to a third party unconditionally unless and until Mr Cimen had terminated the Cimen contracts under the “subject to finance” clause?
The Peacocks’ submissions
Mr Giummarra’s submissions
Analysis
Tenth issue for trial: If yes to 9, did Mr Giummarra breach that duty?
The Peacocks’ submissions
Mr Giummarra’s submissions
Analysis
Eleventh issue for trial: If yes to 10, did Mr Giummarra’s breach of duty cause the Peacocks loss by reason of the Peacocks entering into the JJJP contract on 5 June 2021?
The Peacocks’ submissions
Analysis
Twelfth issue for trial: If yes to 11, what is the quantum of that loss?
The Peacocks’ submissions
Analysis
Conclusion
HER HONOUR:
Introduction
1The plaintiff (“JJJP”) sues the first and second defendants (“the Peacocks”) seeking specific performance of a contract between them for the sale by the Peacocks to JJJP of 252 Coolart Road, Moorooduc, Victoria (“the farm”). Further, JJJP seeks damages against the Peacocks for breach of the contract of sale in lieu of specific performance (“JJJP contracts”). JJJP seeks an order that the third defendant’s (“Mr Cimen”) caveat registered on the title to the farm, be removed.
2Mr Cimen, by way of counterclaim, seeks:
(a) Against the Peacocks, an order for specific performance of contracts for the sale of the farm and an associated poultry farm business, between the Peacocks as vendor and Mr Cimen as purchaser. In the alternative, Mr Cimen seeks damages against the Peacocks for damages for breach of the contract of sale (“the Cimen contracts”); and
(b) Against JJJP, an order that its caveat registered on the title to the farm be removed.
3The Peacocks do not admit JJJP’s claim against them. They deny Mr Cimen’s claims for specific performance and seek an indemnity from the third third party (“Mr Giummarra”) against any liability to JJJP and/or Mr Cimen for professional negligence.
4Mr Giummarra denies liability to the Peacocks.
5In my judgment, the primary case succeeds, the Cimen contracts fail and, as a consequence, the third-party claim ought to be dismissed because no damages flow.
6My reasons are set out below.
Issues
7The issues in dispute are as follows.
JJJP’s dispute with the Peacocks
8The preliminary question to ask is whether JJJP is entitled to an order of specific performance of the contracts of sale dated 5 June 2021 of the farm and the associated business with the Peacocks?
9Further, If JJJP is so entitled to such an order, but the Court makes an order in this proceeding that the Peacocks complete the contracts of sale dated 1 May 2021 of the farm with Mr Cimen:
(a) Is JJJP then entitled to an order for damages against the Peacocks, in lieu of specific performance, because the possibility of the latter relief has been aborted?
(b) If so, what is the quantum of those damages?
JJJP’s dispute with Cimen
10Which of JJJP’s interest as purchaser under the JJJP contracts and Mr Cimen’s interest as purchaser under the Cimen contracts has priority, and whose caveat should be removed?
Cimen’s dispute with Peacocks
11Did Mr Cimen repudiate the Cimen contracts by failing to pay the deposits under the Cimen contracts on or before 5 June 2021?
12Did the Peacocks effectively accept that repudiation and bring the Cimen contracts to an end by selling the farm to JJJP under the JJJP contracts on 5 June 2021, or in any other way at any later time?
13Did the Peacocks effectively terminate the Cimen contracts on or about 4 August 2021 by serving the Notice of Default and Rescission (“the Notices”) dated 22 July 2021 and Mr Cimen subsequently failing to comply with it?
14Did the Peacocks, by their own conduct or by the conduct of an agent or solicitor, elect to affirm the Cimen contracts, so that they were still on foot as at 2 November 2021?
15If the Court makes an order in this proceeding that the Peacocks complete the JJJP contracts with JJJP:
(a) Is Cimen entitled to damages against the Peacocks for breach of the Cimen contracts?
(b) If so, what is the quantum of those damages?
Peacocks’ dispute with Giummarra
16Did the third party owe the Peacocks a duty of care as their solicitor on or before 5 June 2021 to advise them:
(a) The effect of the “subject to finance” clause in the Cimen contracts; and/or
(b) That they were not free to sell the farm to a third party unconditionally unless and until Mr Cimen had terminated the Cimen contracts under the “subject to finance” clause?
17If yes to paragraph (a), did Mr Giummarra breach that duty?
18If yes to paragraph (b), did Mr Giummarra’s breach of duty cause the Peacocks loss by reason of the Peacocks entering into the JJJP contract on 5 June 2021?
19If yes to the preceding paragraph, what is the quantum of that loss?
Background facts
20By contract of sale dated 5 June 2021, JJJP purchased the farm for the sum of $1,500,000.00. JJJP paid a deposit of $75,000.00, the sum of $1,425,000.00, being the balance of the purchase price, was payable at settlement which was due to take place on 25 October 2021 pursuant to the terms of the contract.
21Settlement did not occur. Alternatively, Mr Cimen claims he is entitled to take the farm as purchaser under an earlier separate contract of sale which he entered into on 1 May 2021. On 25 June 2021, Mr Cimen registered a caveat on the title of the farm as purchaser relying on his 1 May 2021 contract. The caveat operates to prevent JJJP from becoming the registered proprietor of the farm.
The witnesses
Ms Fiona Robertson
22Ms Robertson, as JJJP’s conveyancer, gave evidence about the Property Exchange Australia Limited (“PEXA”) system and that the stamp duty requirement had been satisfied by JJJP. Ms Robertson gave evidence with the intention of assisting the Court to the best of her ability. There is no reason to doubt her evidence.
Mr Terry Jay Jones
23Mr Jones is a director and company secretary of JJJP. I accept Mr Jones as a witness of truth who gave evidence with the intention of assisting the Court to the best of his ability. There is no reason to doubt that his evidence reflected his genuine recollection of the matters discussed. Mr Jones said that, on receiving the email dated 3 August 2021, he had paid his deposit, relied on the warranties and had a signed contract. He did not understand how another contract could be valid when Mr Cimen only paid the deposit after JJJP and still did not have finance in place.
24Mr Jones said that, around 22 August 2021, the Peacocks asked JJJP to step away from the contract because they were being intimidated by Mr Cimen, and it was now affecting their health. Around this time, Mrs Peacock was taken to hospital suffering heart attack symptoms and Mr Peacock was on medication for depression.
25Mr Jones recalls in the middle of September 2021, his solicitors requested that JJJP delay its settlement. The settlement was delayed until 5 November 2021 because of the Cimen caveat. All the finances and PEXA was ready. He was hopeful the mess would be sorted out.
The experts
26Mr Peter Ferrier, JJJP’s expert, Mr Ben Rose, the Peacocks’ expert, and Mr Christopher Rann, Mr Cimen’s expert, gave concurrent evidence at trial in relation to property valuation.
27Mr Ferrier and Mr Rose were careful and considered witnesses, who were ready to make appropriate concessions. Their reports were comparable in outcome.
28Conversely, Mr Rann was not an impressive witness and I do not give any weight to Mr Rann’s report in circumstances where:
(a) It was disclosed that he does not have the relevant experience in assessing poultry farms as a going concern. All previous valuations undertaken by him in the past were poultry farms that were sold for alternate use. The intention was to remove the farm and none were sold as a going concern such that the valuation was on an “as is” basis.
(b) His report contained numerous errors that had to be rectified.
(c) He did not attach his letters of instruction from his retaining solicitors.
(d) His list of comparables contained his conclusion only with no details or analysis given in support of his conclusion.
(e) Out of the three experts, his valuation was an outlier, and he could not give plausible reasons as to why his conclusion giving a 50% increase in capital value of land from November 2021 to May 2023 was so different.
(f) None of the comparables relied on by him were similar to the farm the subject of the present claim and none were sold as a going concern or a poultry farm.
(g) Despite removing two of the comparables for May 2023 with two of the highest sale prices from his report under cross examination, he nevertheless maintained his conclusion, even though the facts had changed.
(h) He failed to attach relevant supporting or source documents to his report, for example, the planning permit and the relevant s 32.
Mr Alpaslan Cimen
29Mr Cimen was also not an impressive witness. His credibility is in issue in light of the repeated misrepresentations made by him to his lender which were the subject of a s 128 certificate under the Evidence Act 2008 (Vic). I am unable to rely on his evidence absent an objective foundation.
30Mr Cimen conceded that he did not have the money from his lender yet. It was conditional on the valuations being returned in the normal timeline and the loan documents signed.
31Mr Cimen relied on a Commonwealth Bank of Australia (“CBA”) bank statement for the period 1 to 31 May 2021 with a balance of $236,972.83 in the account name of Jolly Kebabs. He relied on this to assert that he was able to pay the deposit under the Cimen contract.
32Mr Cimen referred to a screen shot of three accounts with the account numbers redacted in support of a total of $683,276.50 in the names of ALP Investment Trust in the sum of $3,616.04, 40 Railway Broadmeadows in debit of $77,229.68 (available $486,740.00) and 560 Pascoe Vale Road with a balance of minus $2,000.00 (available $196,563.60). He tried to explain who the entities were, and who held the accounts and how they related to him but there were no documents before the Court.
33Mr Cimen agreed that the major banks were not happy with the inclusion of Special Condition (“SC”) 13.1 of the contract of land to provide finance to use the land for the poultry business.
34On 8 June 2021, Mr Cimen made a statutory declaration to be given to his lender that, as owner of the land, he would not operate any poultry business on the farm. Mr Cimen said that at the time, he did not intend to operate a poultry business on the farm. Despite this claim, it became apparent that he always intended to operate a poultry business on the farm. To meet a requirement of his proposed lender, Mr Cimen signed a statutory declaration outlining that he would not use the property as a chicken farm. Mr Cimen never intended to uphold the commitments in this statutory declaration, he always intended to operate a poultry business on the farm.
35Mr Cimen was experienced in buying and selling property in Victoria, and, therefore, he knew the importance of paying the deposit in buying and selling property. Mr Cimen did not pay the deposit five days from the date of the Contracts on 24 May 2021, as the Contracts provided for. He said that no one asked him to pay the deposit because it was subject to finance.
36Mr Cimen had the contact details of the Peacocks’ solicitor, Mr Giummarra, and emailed him on 18 May 2021. At any time, he could have obtained the trust account details from Mr Giummarra to pay the deposit.
37By email dated 20 May 2021, Mr Cimen’s solicitor wrote to Mr Giummarra requesting the removal of SC 13 for the purposes of his loan application and concluded that:
Should your clients reject our client’s requests, he will be forced to re-consider his commitment to the subject conveyance.
38Mr Cimen asked for a second extension of two weeks to obtain finance. When the time passed, he says he remained committed to the purchase. Mr Cimen said he had “no idea” what his obligations where in relation to the deposit. He claimed that he was confused because no one asked him to pay it, this he maintained even though he knew it was due given his previous experience buying and selling properties. He thought that the contract was unconditional but he still did not pay the deposit.
39On 9 July 2021, the Peacocks’ solicitor wrote to Mr Cimen’s solicitor confirming that the Peacocks’ view was that the contract was ended. Mr Cimen placed a caveat on the farm which stated that he was a purchaser of the land pursuant to a contract dated 1 May 2021. Mr Cimen still did not pay the deposit. He said he paid it when it was requested on 3 August 2021.
40By email dated 17 July 2021, the Peacocks’ solicitor wrote to Mr Cimen’s solicitor stating that his clients were very understanding of Mr Cimen’s disappointment but remained of the view that the contracts have ended and felt that Mr Cimen could not go on to purchase the farm. Mr Cimen conceded that, even though he felt he wanted to continue on with the purchase, he still did not endeavour to pay the deposit.
41On 17 July 2021, Mr Cimen received two Notices of default and rescission. Item 7 of the particulars of default noted a failure to pay the deposit of $75,00.00 by the due date. Item 8 referred to 12% interest and $660.00 in legal fees. Mr Cimen had 14 days to remedy the default, otherwise without further notice, the contract would be rescinded. He said that it did not cross his mind that the contract would be rescinded.
42Mr Cimen paid the deposit by 3 August 2021, but he did not pay the interest or legal costs. He said that his lawyer did not tell him that he had to pay interest and legal costs.
43On 2 August 2021 (incorrectly dated 22 July 2021), a different offer was put to Mr Cimen. It stated that the Peacocks were prepared to proceed without objection to the sale of the farm and business to him if by 5.00pm on 5 August 2021:
(a) he paid the full deposit under both contracts;
(b) confirmed in writing that both contracts were unconditional; and
(c) confirmed in writing that Mr Cimen had the necessary finance to complete settlement on the due date.
44The Peacocks reserved their rights under the default and rescission notes in the event that the conditions in the letter were not adhered to.
45Mr Adam Hanley, the selling agent, (“Mr Hanley”) told Mr Cimen that they had issues organising a valuation. Mr Cimen claimed he heard from his broker and solicitor that there were issues in having access to the farm to conduct the valuations. Mr Cimen claimed that “from day one” (being 22 January 2021) his broker was searching for finance. Mr Cimen has not discovered any communications attempting to organise a valuation prior to 2 August 2021. He claimed that, in or around June 2021, he called Mr Hanley to attempt to arrange a valuation. But the Peacocks had already sold the farm to someone else. The broker was asking for more time for the valuation. However, this was not set out in his witness statement. The Court Book also does not contain documents seeking arrangements to organise a valuation prior to 2 August 2021.
46On 2 August 2021, the Peacocks wrote to Mr Cimen by email stating that they had not heard back from Mr Cimen’s solicitor about getting a representative from the bank on site to do a valuation.
47On 16 August 2021, Mr Giummarra emailed Mr Cimen’s solicitor stating that there has never been a long-standing inability to get the valuer to the farm and the Peacocks were at the time actively offering to assist Mr Cimen with the valuation process.
48As at 16 August 2021, no lender had given an unconditional letter of offer. Equity One was the only lender. On 28 October 2021, they issued a letter of offer for a first mortgage of $975,000.00 for a 12-month term with an option to renew. The letter of offer was subject to a valuation. Equity One arranged for a valuation to be carried out.
49Mr Cimen further claimed that there was an offer from Australia and New Zealand Bank (“ANZ”), but he has not discovered it. It is not referred to in his witness statement or in the Court Book.
50Even as at 1 December 2021, Mr Cimen did not have the finance in place. Mr Cimen completed identification documents which were carried out remotely on 7 December 2021. Steps were still being taken by Mr Cimen and his solicitor to enable settlement to go through. By purchaser declaration and acknowledgment dated 23 November 2021, Mr Cimen confirmed and acknowledged that the pullet rearing business currently operating on the farm would cease at and from the date of settlement and declared and acknowledged that the farm would be devoid of a going concern. He said this is what the bank wanted. Mr Cimen signed the declaration as a director and secretary of a company.
51Under the business sale agreement, Mr Cimen was required to get Seasons Ranch Organic’s (“SRO”) approval and an assignment of the pullet contract to Mr Cimen’s entity. He was still obtaining references for the assignment around 11 November 2021.
52Settlement was due on 2 November 2021 (which was Melbourne Cup Day). It did not occur on 3 November 2021. Mr Cimen said his solicitor had issues with the PEXA system and he could not upload documents onto the system. He then corrected himself and said that his solicitor put in all his documents, but the vendor did not upload all of their documents and there was no response from the Peacocks. He claimed he waited for the JJJP caveat to be taken off. However, as at 11 November 2021, he was still trying to get the pullet contract in place (Mr Cimen’s solicitor’s letter dated 11 November 2021), and as at 2 December 2021 he was still trying to obtain finance. Mr Cimen conceded that this was one of the reasons settlement did not go through on 3 November 2021.
53Alpaslan Investments Pty Ltd was set up to purchase the farm and was the nominated purchaser. It paid ongoing costs to the finance broker and it is not a party to the proceeding. The money was going to be put through the company.
54In re-examination, Mr Cimen clarified that he got in touch with his broker in February 2021 and he could not do anything until there was a contract in place in May 2021.
55Mr Cimen clarified paragraph 11 of his witness statement during re-examination that he did not receive a copy of the contract on 22 January 2021, but rather in April 2021. In paragraph 18 of his witness statement, he stated that he engaged his broker, Mr Stewart McGregor (“McGregor”), from Mainstream Capital Corporation, on about 22 January 2021 and confirmed this was the first time he contacted the broker.
56Mr Cimen said that his broker was in contact with four major banks. Because it was getting close to settlement date on 28 October 2021, Mr Cimen said that he let go of the major banks and went to Equity One for a business loan.
57The Equity One loan document was signed on 1 December 2021. The finance was $975,000.00 for a period of 12 months. Mr Cimen signed it but it was not countersigned. On the same date, Mr Cimen signed a guarantee to service the loan and a declaration of the company’s ability to service the loan.
58Mr Cimen gave evidence that he could not recall if he gave instructions to his solicitor to write the 20 May 2021 letter requiring the deletion of SC 13 and stating that, if the Peacock’s rejected the request, he would be forced to reconsider his commitment to the conveyance.
59Mr Cimen recalled that he was told about the JJJP contract in about mid-June 2021.
Mr Colin John Peacock
60Mr Peacock presented as a careful, considered witness who was ready to make appropriate concessions. Any memory lapses were generally explicable by the effluxion of time.
61Mr Peacock obtained a valuation from the real estate agent in around February 2021 which priced the house and land at $1.5m, and the contract of sale of business for plant and equipment in the sum of $80,000.00 and goodwill in the amount of $170,000.00 for a total of $250,000.00. The value was for the prior Bijesh Kariyattil Lonappan contract (“Bijesh contract”) dated 3 March 2021, that was ultimately terminated because Mr Lonappan “couldn’t get the money”. Mr Peacock said that the figure that he had in mind to sell the property was $1.75m. The breakdown was provided by others who were working for him.
62The transferor statement signed by Mr Peacock on 9 November 2021 provided that the consideration for the transfer of the farm was $1.5m with a 5% deposit in the sum of $75,000.00.
63Mr Peacock said that the profits have dropped as shown in the profit and loss statement for financial years 2020, 2021, 2022 and 2023. Only one shed of chickens are grown at a time due to biohazard issues. Under the SRO contract, they have one client with a maximum of three sheds of chickens per year that resulted in a profit of $44,333.71 in 2023. SRO went into administration on 12 December 2022.
64Mr Peacock said that Mr Cimen inspected the farm a couple of times in early February 2021 and that he took the property off the market for a period of 21 days to enable Mr Cimen to try to get finance. He spoke Mr Cimen in the backyard during one of the inspections. Mr Peacock said that he got the “vibe” that Mr Cimen was procrastinating and did not do anything in the 21 days to obtain finance.
65Mr Peacock said that the $2,500.00 part payment of the deposit was due by 6 May 2021 under the Cimen contracts, but it was not his role to chase it up.
66On 20 May 2021, Mr Cimen requested the removal of SC 13. On 24 May 2021, Mr Peacock asked his solicitor for advice about removing SC 13. In his email to Mr Giummarra on 24 May 2021, Mr Peacock stated that the contract had finished as of 22 May 2021 because Mr Cimen did not have his finance in place.
67By email dated 31 May 2021, Mr Giummarra confirmed that the Peacocks were agreeable to deleting SC 13 and providing the extension of time to 4 June 2021. Mr Peacock signed the contract of sale deleting SC 13 on 1 June 2021.
68By letter dated 2 June 2021, Mr Cimen’s solicitor requested a second extension of time to 18 June 2021. Mr Peacock received the letter very late on 4 June 2021. Mr Peacock’s instructions were that the Peacocks were not prepared to extend the contracts any further. These instructions were given to Mr Hanley on the morning of 5 June 2021.
69By email dated 5 June 2021, Mr Peacock informed Mr Hanley and Mr Giummarra that he was not prepared to extend the contracts further and this had dragged on long enough. If Mr Cimen wanted to proceed with his loan application and the farm was still on the market when he got things sorted the Peacocks would look at it. Mr Peacock said he learned that Mr Cimen had not paid the deposit in early July 2021. On 7 July 2021, Mr Giummarra told him that Mr Cimen had not paid the deposit.
70By email dated 9 July 2021, Mr Giummarra wrote to Mr Cimen’s solicitor that the contracts had ended. Finance was due under the contracts within 21 days. Mr Peacock said that Mr Hanley did not send his email to Mr Cimen. Mr Hanley’s second line in his email was ambiguous and should be read in the context of the previous arrangement. That is, if the farm was still available, if and when Mr Cimen obtained financial approval, then the Peacocks would consider selling the farm to him. On 14 July 2021, the Peacocks knew that Mr Cimen thought the contracts were still on foot.
71Mr Peacock instructed his solicitor to send default Notices on 22 July 2021. The default was stated to be a failure to pay the deposit by the due date. The notice required the default to be remedied, interest and legal fees. If there was a failure, the contracts end.
72By email dated 23 July 2021, Mr Peacock wrote to Mr Giummarra to make an offer to Mr Cimen to walk away from the contracts.
73By email dated 2 August 2021, Mr Peacock sent an email to Mr Cimen’s solicitor stating that they were happy to have Mr Cimen’s bank valuer attend the farm to conduct the valuation by Thursday of that week. Mr Peacock said that the email was sent to see if Mr Cimen was ever going to get finance.
74The 2 August 2021 (incorrectly dated 22 July 2021) letter stated that the Peacocks were prepared to proceed without objection with the sale of the farm and business. Mr Peacock described it as an ultimatum and not an offer.
75Mr Peacock agreed that, in the letter dated 2 August 2021, Mr Cimen’s solicitor attempted to accept the offer. On around 4 August 2021, Mr Peacock said to Mr Giummarra that Mr Cimen had not complied with clause 3 of the offer.
76By email dated 11 August 2021, Mr Giummarra wrote to Mr Cimen’s solicitor noting that clause 3 had not been complied with, that is, that Mr Cimen has not confirmed that he has unconditional approval for the land.
77By email dated 16 August 2021, Mr Giummarra wrote to Mr Cimen’s solicitor that Mr Peacock had a meeting with SRO the next day to move forward with offering Mr Cimen a contract and that the Peacocks were actively offering to assist Mr Cimen with the valuation process.
78By email dated 17 August 2021, SRO wrote to Mr Peacock about the contract between two organisations and its rights under clause 17 of the grower agreement “Rights of Assignment”.
79By email dated 26 August 2021, Mr Giummarra wrote to Mr Cimen’s solicitor noting the details of Mr Cimen’s lender and valuer had not been provided as promised and requested.
80By email dated 8 February 2021, Mr Giummarra wrote to the Peacocks attaching a contract of sale with vendor’s statement and the business sale contract. He said if there were any questions, to call. The Peacocks did not have any questions and did not call.
81The Peacocks sent an email dated 24 February 2021 with the newest contract from SRO and gave instructions that they were happy to have the subject to finance and building inspection clauses in the contract of sale but not the soil test. They did not ask Mr Giummarra questions about these clauses.
82Mr Peacock did not understand all the terms of the Bijesh contract, but he did not ask Mr Giummarra for any advice. The $2,500.00 part deposit had been paid to Mr Hanley, his selling agent at the time. SC 14 noted that the contract was subject to a loan being approved at any financial institution by 31 March 2021. Mr Lonappan did not get the loan in time, and his deposit was returned.
83After the Bijesh contract fell over, Mr Peacock said that they ran everything past Mr Giummarra.
84On 18 April 2021, Mr Peacock sent an email to Mr Hanley saying he has gone through the changes that Mr Cimen wants. Mr Hanley made the changes to the contracts and then they would run the changes past Mr Giummarra to make sure they were doing the right thing. He noted that it would cost money to get Mr Giummarra to look over it.
85By email dated 19 April 2021, Mr Peacock sent the proposed changes to Mr Giummarra to have a look at. After making the changes, Mr Cimen signed the changes and Mr Hanley brought it to the Peacocks. Mr Giummarra was not involved.
86Mr Peacock did not ask for advice on SC 13. He did ask for advice on electronic conveyancing in relation to the proposed changes. There was no change to the deposit. He said he felt pressured into a 5% instead of a 10% deposit. Mr Peacock did not turn his mind to how SC 13 operated.
87The deposit was $75,000.00 but $2,500.00 was to be paid into the vendors’ solicitors’ trust account. Mr Hanley had not pointed it out to the Peacocks, so they did not know they needed to point it out to Mr Giummarra. Mr Peacock did not send the signed contract to Mr Giummarra, he thought Mr Hanley would do that.
88On 18 May 2021, Mr Giummarra emailed Mr Peacock to confirm whether the contracts had been signed and exchanged and asked for a copy. He wanted to know about the finance extension that Mr Cimen was seeking. At the time, Mrs Peacock could not send the contracts by attachment. Mr Peacock called Mr Hanley that day or the following day. Mr Peacock confirmed with Mr Hanley that Mr Giummarra did not have a copy of the contracts. He asked Mr Hanley to send them to Mr Giummarra, but Mr Hanley did not them to Mr Giummarra the second time either.
89By letter dated 20 May 2021, Mr Cimen’s solicitor emailed Mr Giummarra in relation to SC 13. Mr Peacock did not call Mr Giummarra about the contents of the email.
90By email dated 24 May 2021, Mr Peacock wrote to Mr Giummarra attaching the 20 May 2021 letter from Mr Cimen’s solicitor. He asked about any financial, legal or tax implications if SC 13 is removed. He told Mr Giummarra that the contracts had finished as of 22 May 2021. Mr Peacock said he was happy for anyone to try to get finance.
91On 24 May 2021, Mr Giummarra said that the Peacocks could not sell to someone else until the contracts were finished. Mr Peacock said that he would grant an extension but keep the farm on the market during that time. Mr Peacock thought that the contracts were finished on 22 May 2021 and did not ask Mr Giummarra if the contracts were finished. They also discussed deleting SC 13. The Peacocks did not ask Mr Giummarra if the deposit had been paid. The Peacocks did not ask how to terminate the contracts or disclose to Mr Giummarra that there was another purchaser.
92The Peacocks’ hope at that stage was that Mr Cimen could come up with the finance. They wanted the farm on the market to let other people come through the property to find people who could pay. In essence, they were hedging their bets.
93By email dated 5 June 2021, Mr Peacock sent an email to Mr Hanley and Mr Giummarra informing them that they were not prepared to extend the contracts any further. Then Mr Giummarra was told that there was a contract with JJJP. Mr Peacock thought the Cimen contracts were finished and subsequently entered into the JJJP contract at 5pm on Saturday, 5 June 2021, the same day the Peacocks sent the email to Mr Hanley and Mr Giummarra.
94On 9 July 2021, Mr Giummarra wrote to Mr Cimen’s solicitor stating that the contracts were at an end.
95On 5 June 2021, Mr Peacock’s state of mind was that the contract “was at an end” on 22 May 2021 and the finance side “was at an end” on 4 June 2021. It was his position that the contracts came to an end because of the finance date on 4 June 2021.
96The goodwill figure was determined by the accountant or Kathie Pollock, a real estate agent at Poultry Farms Australia. He did not know how Kathie came up with the numbers they were just numbers, given to him by Kathie. The documents that Mr Giummarra produced had the price and apportionment between goodwill and plant and equipment blank.
Mrs Tracy Peacock
97Mrs Peacock presented as a careful and considered witness.
98Mrs Peacock acted as the bookkeeper for the farm. She said that the real estate agent split up the farm and the business and priced the house and land at $1,500,000.00. They split it up on a fair assessment of what they could ask for the poultry business. The figure of $1.8m was their dream figure and they thought it was justifiable. The $80,000.00, being the value for the plant and associated equipment, was from the depreciation sheet.
99The income from the farm from end of financial year 2020 (in the sum of $96,735.31) had gone down “a bit” for 2021 to $67,716.79. Mrs Peacock said there was a difference in operating costs. The gas figures were to be reimbursed monthly. They then asked to be invoiced quarterly for the reimbursement costs.
100There has been a decline in profits. The first couple of years they had two sheds of chickens and had to keep the birds longer, so they got paid an extra growing fee.
101On 3 August 2021, Mrs Peacock wrote in her notes “email to Alp + Erci” and “it looks like sale is going through. Ask for settle to be 25/10 and can they sign the section 27”.
Mr Frank Giummarra
102Mr Giummarra presented as a careful, considered witness who was prepared to make appropriate concessions. I accept that he gave evidence with the intention of assisting the Court to the best of his ability. I find there is no reason to doubt that his evidence reflected his genuine recollection of the matters traversed at trial.
103Mr Giummarra prepared the contract of sale, alongside the vendors statement and business sale contract and sent the drafts to the Peacocks on 8 February 2021. Mrs Peacock requested some changes to the s32 and gave instructions in relation to the valuation of the farm and business.
104On 25 February 2021, Mr Giummarra was involved in the request for amendments by Mr Cimen’s then solicitors including the subject to finance clause.
105The Peacocks asked Mr Giummarra to “tick off” the changes around 19 April 2021.
106Mr Giummarra was not involved in the exchange of the contracts. When he heard about it for the first time in May 2021, he immediately contacted the Peacocks. Mr Giummarra agreed that it was reasonable for the Peacocks to assume that Mr Hanley would send the contracts to Mr Giummarra.
107The Peacocks were trying to send the contracts by email attachments on 19 May 2021 but were having trouble sending them through. He agreed that it was possible that he did not ask the agent to send the contracts to him. The email Mr Giummarra received was a request to extend finance for 14 days and to remove SC 13.
108The Peacocks said “If we don't get it by Friday we will put the farm back on the market and if he comes back with the finances we'll re visit it then” which was contrary to how General Condition (“GC”) 14 operated. Mr Giummarra could not remember what he thought about that comment at the time. He agreed that it was contrary to GC 14 and the Peacocks needed advice on it and he did not give that advice in this case.
109On 20 May 2021, Mr Cimen’s lawyers wrote to Mr Giummarra requesting the removal of SC 13 and an extension of the finance date.
110By email dated 24 May 2021, the Peacocks asked Mr Giummarra for advice on the removal of SC 13 and assumed that the contracts were finished from 21 May 2021. They said that they would go on and re-offer the farm. Mr Giummarra could not recall if he thought the Peacocks did not understand GC 14. In hindsight, Mr Giummarra agreed that the comment indicates that they did not understand how GC 14 operated.
111On 24 May 2021, Mr Giummarra called the Peacocks, and he told them that they could not sell the farm until the contracts are finished. Mr Giummarra did not explain to the Peacocks what he meant by the term “finished” (which is the same term as the Peacocks’ email above).
112On 31 May 2021, Mr Giummarra emailed Mr Cimen’s solicitors confirming that the Peacocks agreed to delete SC 13 and extending the finance to 4 June 2021 subject to the farm remaining on the market until Mr Cimen confirms that the contracts are unconditional.
113However, what the Peacocks did not instruct Mr Giummarra was that the contract was unconditional.
114The first time that Mr Giummarra received the contracts was on 1 June 2021.
115The particulars state that $2,500.00 be paid in five days into the vendors’ solicitors’ trust account. Mr Giummarra said that this was unusual. Mr Giummarra could not recall when he became aware that no deposit had been made. It was after the events of 5 June 2021.
116Mr Giummarra received an email dated 5 June 2021, stating that the Peacocks were not prepared to give a second extension for Mr Cimen. This being the day after the date when the contracts would ordinarily be unconditional (but for the default on payment of the deposit). Mr Giummarra thought that the Peacocks were keeping Mr Cimen “on the hook” to give him a chance to get finance. But Mr Giummarra did not give advice that the contracts were unconditional. No further email or advice or caution was given to the Peacocks. Mr Giummarra did not contact the Peacocks until Monday, 7 June 2021.
117The Peacocks received notice of Mr Cimen’s caveat on 2 July 2021. They were very stressed and Mr Cimen’s solicitor told him that he was shocked that the Peacocks had sold the property to another party. 5 June 2021 was the first time that the Peacocks knew that the deposit had not been paid. Mr Giummarra did not know until then that the deposit had not been paid.
118On 22 July 2021, Mr Giummarra sent two default Notices on Mr Cimen in each of the contracts. The contracts would end on 5 August 2021 if they were not complied with.
119On 2 August 2021, Mr Giummarra wrote to Mr Cimen with an offer that, by 5.00pm on 5 August 2021, he pay the full deposit under both contracts, confirming the contracts are unconditional, and confirming that Mr Cimen has the necessary finance to complete settlement. It was sent without prejudice to the default Notices, and he reserved the Peacocks’ rights under the Notices.
120Mr Cimen’s solicitor responded that the deposit would be paid, both contracts were unconditional, and Mr Cimen had obtained finance approval albeit not unconditionally because the financier could not conduct a valuation of the property.
121On 10 August 2021, the Peacocks were of the view that Mr Cimen had not satisfied clause 3. The Peacocks were stressed and were looking for ways to resolve the matter outside of their contractual obligations.
122By 11 August 2021, Mr Giummarra said that clause 3 had not been complied with.
First issue for trial: JJJP entitled to an order for specific performance of the JJJP contracts of the farm and business?
The Peacocks’ submissions
123The Peacocks do not join issue with JJJP’s claim to specific performance of the JJJP contracts.
JJJP’s submissions
124JJJP submit the answer to the above question is yes because the Peacocks no longer join issue with JJJP’s claim for specific performance of the JJJP, so this claim should be taken to be admitted.
Second issue for trial: If JJJP is so entitled, but the Court makes an order in this proceeding that the Peacocks complete the contracts of sale dated 1 May 2021 (Cimen contracts) of the farm with Mr Cimen:
(a) Is JJJP entitled to an order for damages against the Peacocks, in lieu of specific performance, because the possibility of the latter relief has been aborted?
(b) If so, what is the quantum of those damages?
JJJP’s Submissions
125JJJP seek the sum of $220,000.00 comprising of:
126$50,000.00, being the difference in value between what the Peacocks and JJJP’s valuers ascribed to the farm;
127$90,000.00 being the combined value of the deposits, which is made of $75,000.00 paid under the JJJP Land Contract and $15,000 paid under the JJJP Business Contract; and
128$80,000.00 being the value attributed by the Peacocks to the plant and equipment sold under the JJJP Business Contract.
129JJJP seeks an award of $80,000.00 to cover the loss of that plant and equipment, which JJJP will miss out on if the possibility of specific performance of the JJJP Contracts is aborted because the Court orders specific performance of the Cimen contracts.
Peacocks’ submissions
130Despite not taking an issue with JJJP’s claim for damages in lieu of specific performance should this claim become relevant, the Peacocks dispute the quantum of JJJP’s damages.
131The Peacocks favour the valuation of their expert, Mr Ben Rose of Specialised Agribusiness Valuations, and say JJJP should be awarded damages of no more than $50,000.00, this being the difference between Mr Rose’s valuation and the price of the JJJP contracts.
132The Peacocks submit that JJJP failed to prove that the pullet business should be separately valued at $300,000.00, arguing that their witnesses did not provide a convincing explanation of this.
133In emphasising that the court should follow the valuation of Mr Rose, the Peacocks note that Mr Rose appropriately valued the farm as a going concern. The Peacocks contend that this is consistent with the manner in which with farm was sold to JJJP. The Peacocks rely on Mr Rose’s explanation for valuing this way, being that it is usual for these types of farms to be sold as single price, rather than two separate prices for property and business.
134The Peacocks point out that, as per Mr Rose’s valuation, the business added no value over and above the land and its improvements. Therefore, the $1,850,000.00 valuation was really only found in the land and improvements.
135In support of their argument that the business added no value, the Peacocks draw upon Mr Rose’s assessment that, pursuant to the profit and loss statement of the business, and taking into account labour costs, the business was running at a loss and was, therefore, valueless.
136Mr Rose explained how the JJJP business contract came to have $300,000.00 attributed to its price, with $1,500,000 attributed to the land and improvements. A sale of the farm as a going concern includes all the assets required to generate the income. The sale price is negotiated in “one line”, with the allocation of the price between the separate contracts of sale being done retrospectively, based on some financial gain for the vendor, the purchaser or both.
137The Peacocks concede that the deposit paid by JJJP under the JJJP contracts as deposits should be refunded if damages in lieu are to be awarded to JJJP.
138The Peacocks contend that the court should not apply interest under the Penalty Interest Rates Act 1983 (Vic) in relation to the deposit money. The Peacocks submit that this kind of claim is for Hungerfords damages, for loss of use of the deposits, and argue that JJJP has failed to show any real loss due to not having access to these funds.
Analysis
139This relief is sought in the alternative to specific performance if the latter relief is aborted because of a finding that Mr Cimen is entitled to an order for specific performance of his prior contracts.
140JJJP is and has been since the settlement date due on 25 October 2021, ready, willing and able to settle the JJJP contracts. JJJP is, therefore, entitled to an order for specific performance.
141For the reasons set out below, in my view, Mr Cimen is not entitled to an order that the Peacocks complete the Cimen contracts. Therefore, the question of damages against the Peacocks in favour of JJJP does not arise.
142If I am wrong, then the quantum is $220,000.00 based on the following formula:
(a) $50,000.00, being the difference between the value of the farm as determined by Mr Rose and Mr Ferrier of $1,850,000.00 and the JJJP contract price of $1,800,000.00;
(b) $75,000.00, being the deposit for the farm;
(c) $15,000.000, being the deposit for the business; and
(d) $80,000.000 for plant and equipment.
143For the reasons set out above, I give no weight to Mr Rann’s evidence. Mr Rose and Ferrier’s evidence is preferred as Mr Rose valued the farm as a whole on a going concern basis which is consistent with the way in which the farm was sold under the JJJP contract. Mr Ferrier valued the property on a vacant possession basis which is the improvements and land being valued as one and no value has been assigned to the business. The two valuations were in effect consistent with one another as Mr Rose’s valuation was based on the land and improvements and there was no real value over and above the land and improvements used in the going concern. That value is the sum of $50,000.00.
144The Peacocks concede that the deposits paid under the JJJP contracts should be refunded if damages in lieu are to be awarded to JJJP.
145In relation to the value for plant and equipment sold under the JJJP contracts, I find that JJJP is entitled to an award of $80,000.00 to cover the loss of plant and equipment which JJJP would miss out on if the JJJP contracts are aborted.
146Mr Rose assessed the value of the business on a going concern basis as nil. He then assessed the value of the farm totalling $1.85m. Mr Rose said that the plant and equipment had no real value and as such he attributed a value to it of nil. Under cross examination, Mr Rose said that it was a flaw in the way real estate agents value properties of this nature. Mr Rose’s evidence was that when he values properties of this nature, he looks at the value of the broiler sheds and he generally includes all of the loose plant and equipment items that are included in the value of the business because they are assets that are required to generate the income. Mr Rose considered the list of the plant and equipment and gave evidence that none of the items had a high value.
147JJJP’s counsel argued that the items should have some value and that they were to be given to JJJP as part of the contract of sale of business, which Mr Rose conceded. JJJP’s counsel put to Mr Rose that some value should have been given to the plant and equipment because Mr Rose had allocated a nil value to the business. Mr Rose said that, as he had attributed no value to the business, he had not ascribed a value to these assets because they would generally be sold in a separate transaction, and they would probably be sold at an auction or within a trading site themselves. Mr Rose conceded that a value should have been ascribed to the plant and equipment.
148Although in re-examination Mr Rose said that the analysis did not change his overall value, he did admit in cross examination that the plant and equipment were worth something at auction, but it was nominal. In my view, the plant and equipment are physical assets on the ground that JJJP would get it if it bought the business. If there is no value, then the plant and equipment would be free. If the plant and equipment is scrap value, then it is not free and the Peacocks would be paid for it as part of the business.
149As set out above, as a going concern, Mr Rose valued the business at nil. Mr Rose said that it was not profitable to operate the poultry business. If the business is not capable of generating a profit, then it is not commercially rational to continue to operate the business because ultimately it will be cash flow negative. In accounting terms, cash flow is generally represented by profit. Rather than operate the business, an orderly realisation of assets would be at an auction. This means, if there is no value in the business, you sell the assets of the business in preference because those assets have a value.
150In my view, what then should follow is an orderly realisation of assets. This means separately valuing the sheds, and loose plant and equipment as they are all tangible assets of the business. Although in re-examination Mr Rose said that the plant and equipment did not hold zero value, but it held zero value to the business as a going concern, which is why he did not value the items of farming equipment, he also said that the plant and equipment did have some value. If Mr Rose did not attribute a nominal value to the plant and equipment then it is a flaw with the valuation, which he conceded. In light of this evidence, the aggregated value in the valuation is $1.85m does not include an amount for the plant and equipment. Given the plant and equipment were excluded from the net tangible assets of the business, some value ought to be ascribed to these items.
151An orderly realisation of assets occurs at auction at market price. It may or may not be the same as the book value or the value of accounting record keeping given to these items by the Peacocks. I accept that depreciation is not market value: it might be an indication of market value, but not necessarily. I also accept the Peacocks’ counsel’s submission that I have no evidence before me as to the market value of the plant and equipment and what price each of the items could attain at auction. However, Mrs Peacock had attributed a book value of $80,000 to these items. In the absence of any other evidence as to an expected auction value of the plant and equipment, I adopt the book value put forward by the Peacocks as a representation of the market value.
152Finally, in opening submissions, JJJP sought interest at a rate prescribed under s 2 of the Penalty Interest Rates Act from 10 June 2021, for loss of use of the deposits paid under the JJJP contracts. In closing submissions, the question of interest was not addressed by JJJP and I take this ground to be abandoned.
153Alternatively, I agree with the Peacocks’ submission that the claim for Penalty Interest has not been made out. JJJP did not plead and prove any basis for interest under s2 of the Penalty Interest Rates Act.
Third issue for trial: Which of JJJP’s interest as purchaser under the JJJP contracts and Mr Cimen’s interest as purchaser under the Cimen contracts has priority, and whose caveat should be removed?
The Peacocks’ submissions
154The Peacocks make no submissions on this issue.
JJJP’s submissions
155JJJP makes the following submissions if the Court concludes that the Cimen contracts were not effectively terminated by the Peacocks and remain on foot.
156JJJP submits that Mr Cimen is not ready and able to pay the balance of the purchase price (an obligation which remains to be performed under the contracts), and, therefore, is not entitled to an order of specific performance. On Mr Cimen’s own evidence, it was conceded that he would need “re-approval” to settle the Cimen contracts. JJJP relies on the submissions set out at paragraph 39 of the Peacocks’ Closing Submissions to support its view that there is insufficient evidence before the court to demonstrate that Mr Cimen has the ability to raise the finance needed to settle the Cimen contracts.
157If the Cimen contracts are deemed to remain on foot and Mr Cimen is entitled to an order of specific performance of those contracts, then JJJP submits that its interest should be given priority because it has the better of two equal and competing equities. JJJP acknowledges that, because Mr Cimen’s interest as a purchaser arose first in time, the general rule states that priority should be awarded to first in time when merits are equal. However, JJJP notes that this conclusion is predicated on a merits analysis which finds that the two competing equities are equal. As has already been stated, JJJP says that for the following reasons it has the better of the two equal and competing equities:
(a) In the context of priority dispute, the search is for conduct which is both blameworthy and causative. Mr Cimen’s failure to lodge the Cimen Caveat, until after JJJP had already acquired its interest as purchaser under the JJJP Land Contract, amounted to blameworthy and causative conduct, because Mr Cimen’s interest would still have been protected if he had lodged a caveat before JJJP acquired its interest in the Land; and
(b) JJJP would have had notice of Mr Cimen’s claimed interest as a purchaser had Mr Cimen protected his interest as a purchaser and lodged a caveat in a timely manner. As a result, JJJP’s interest should not be extinguished and Mr Cimen’s interest should be postponed by reason of his failure to lodge the caveat, as the caveat would have put JJJP on notice of Mr Cimen’s interest.
158JJJP relies on the following observation of Callinan J, in Black v Garnock:
“ …. What is much more likely to be subversive of the whole of the scheme of the Torrens system is that a person interested in, or entitled to deal with, land, who has not acted fraudulently, might suddenly and unexpectedly be saddled with, or postponed to, an equitable estate or interest in land which could have been, but was not made the subject of protection by prompt lodgement of an instrument or the filing of a caveat pending the lodgement.”[1]
[1] (2007) 230 CLR 438 at [80] (“Garnock”).
159Further, JJJP argues that if Mr Cimen had lodged a caveat on the title to the farm in a timely manner, the Peacocks would have never entered into the JJJP Contracts because the Cimen Caveat would have dissuaded them, because such a caveat would have presented them from being able to settle those contracts.
160JJJP claim that the present case is to be distinguished from:
(a) a case like Avco Financial Services Ltd v Fishman[2] where the prior interest holder, in that case a bank, held an unregistered interest in land but was in a position to protect that interest, and did so, by retaining possession of title documents. If a prior interest holder, in order to protect its interest, maintains the title in its possession as opposed to lodging a caveat, that interest will not be postponed;[3] and
(b) a case, such as Jacobs v Platt Nominees Pty Ltd[4], where the prior interest holder is aware that they hold an unregistered interest, but no caveat is lodged by virtue of a reasonable belief that the lodgement of a caveat is unnecessary and might cause ill feeling. Thus, it was reasonable in Platt Nominees for the daughter not to lodge a caveat for fear of upsetting her father. Consequently, the daughter’s failure to lodge a caveat did not amount to displacing conduct and her interest was not postponed.
[2] [1993] 1 VR 90 (“Fishman”).
[3] J&H Just (Holdings) Pty Ltd v Bank of NSW (1971) 125 CLR 546.
[4] [1990] VR 146 (“Platt Nominees”).
161JJJP cited Nettle J in Hili Mimi v Millennium Developments Pty Ltd, who observed:[5]
“.… priority which might otherwise exist according to the time at which an interest was acquired may be lost where some act or omission by the holder of the earlier interest has led the holder of a later interest to acquire his interest upon the supposition that the earlier did not exist.”
[5] [2003] VSC 260 at [27] (“Mimi”).
162JJJP noted that, proceeding on the basis laid down in Platt Nominees[6], Nettle J further observed in Mimi:
“… that in order to postpone a prior equitable interest holder the subsequent holder must show not only that there has been an act which is capable in all the circumstances of being regarded as unconscionable (such as, for example, the failure to lodge a caveat), but also detriment which renders that act unconscionable. I conclude that in this case those conditions are satisfied, because of the detriment which would be suffered by the third and fourth defendants if they were not accorded priority.”[7]
[6] (1990) VR 146.
[7]Mimi at [39].
163JJJP submits that, in the present case, as in Mimi, the prior equitable holder (Mr Cimen) had reason to suspect the creation of a subsequent equitable interest (the interest granted to JJJP) might be created. Mr Cimen should have been aware of this possibility due to his inability to obtain finance and inability to pay the deposits under the Cimen contracts.
164JJJP argued that Mr Cimen’s failure to lodge a caveat prior to the acquisition of JJJP’s subsequent interest would result in a detriment to JJJP if not accorded priority, as it would deprive JJJP of the land and business which it contracted to purchase on faith of the said register search statement, which showed that the title to the Land was clear. Obviously, the register search statement was clear at the point of purchase because Mr Cimen failed to lodge a caveat.
165JJJP contends that the fact that it was also slow to lodge its purchaser’s caveat is not to the point. No detriment was suffered by anyone as a result and the conduct of the holder of a subsequent interest is not relevant in a priority dispute between it and the holder of the prior interest.[8]
[8] Wright v Inserti Pty Ltd (2022) VSC 1 at [91].
Mr Cimen’s submissions
166With regards to the priority dispute with JJJP, Mr Cimen submits that he did not engage in postponing conduct by not immediately lodging a caveat over the farm. Mr Cimen contends that he did not delay because the Peacocks had no right to re-sell the farm, and in circumstances where he was reliant on their conduct, he did not take the necessary steps to lodge the purchaser’s caveat.
167Mr Cimen notes that, as per Heid v Reliance Finance Corporation Pty Ltd[9], priority will be awarded to the interest created first in time unless the holder of the prior interest has engaged in conduct which would make it inequitable for the prior interest to prevail.[10] Mr Cimen concedes that failing to lodge a caveat can, in certain instances, amount to postponing conduct,[11] but on its own will not be sufficient to displace the existing order of priorities.[12]
[9] (1983) 154 CLR 326 (“Heid”).
[10] Wright v Insert Pty Ltd [2022] VSC 1 at [91] citing Heid.
[11] J&H Just (Holdings) v Bank of NSW (1971) 125 CLR 546.
[12] Fishman at [94].
168Mr Cimen contends the authorities have noted that the holder of a prior equitable interest is not bound by a duty to give notice to the world at large of its interest nor is it under a duty to lodge a caveat. Conversely, he submits the lodging of a purchaser’s caveat is seen as a conveyancing practice.[13] The Court in Platt Nominees viewed it as unfair and not in the interests of justice to deprive the appellant of her prima facie priority purely for failing to register her equitable interest by way of caveat.
[13] Platt Nominees at [151], [159].
169Mr Cimen notes that Platt Nominees was distinguished on its facts in Mimi where failure to lodge a caveat was considered to be postponing conduct. In Mimi, the Court considered that the plaintiff’s failure to lodge a caveat for some months, in circumstances where they did not make any attempts to communicate with the first defendant (who had contracted with a builder to build his house) despite observing construction on the property, amounted to postponing conduct. Nettle J held that the failure to communicate in circumstances where the plaintiff had reason to believe a further interest had arisen warranted postponing his interest in favour of the first defendant.
170Mr Cimen argues that, after discovering the sale to JJJP on 18 June 2021, his first move was to instruct his solicitor to contact Mr Giummarra for an explanation. Following this explanation, Mr Cimen lodged a caveat to protect his interest.
171Mr Cimen submits that his failure to lodge a caveat does not amount to postponing conduct such that it should entitle JJJP to priority. Mr Cimen contends that both parties are entitled to some form of equitable protection over the property. Further, he argues the correct way in which to deal with the competing interests was for the Peacocks to terminate the JJJP contract and assume any liability thereunder at the time which they affirmed his Contracts.
Analysis
172Even if Mr Cimen were entitled to specific performance, in my view, JJJP will be given priority with regards to their competing interest with Mr Cimen, as they had the better equity.
173Both parties have relied on the proposition outlined in Platt Nominees[14] and Mimi[15] that a failure to lodge a caveat will not always amount to postponing conduct, and, therefore, cannot always be relied upon to prove that the merits of two competing equities are not equal and first in time should not be given priority. However, those cases are also authority for the position that, although, a failure to lodge a caveat does not automatically trigger a departure from this general rule, this does not preclude it from being relied upon as postponing conduct.
[14]Platt Nominees.
[15]Mimi.
174Nettle J observed in Mimi[16] that priority will be lost where an act or omission has led the subsequent interest holder into acquiring an interest on the assumption that no previous interest exists.
[16]Mimi at [27].
175I agree with JJJP that, following his purchase, Mr Cimen did have reason to suspect that a subsequent equitable interest may arise, as he was aware of the ongoing difficulties surrounding his own inability to settle, that is, his inability to obtain finance and his failure to pay the deposit. This is bolstered by the fact that the Peacocks had communicated to him that they would be placing the farm back on the market despite offering extensions. For these reasons, Mr Cimen ought to have known that there was a real chance the Peacocks would re-sell the farm, and, therefore, should have protected his interest by lodging a caveat, an act which by extension would have communicated to any incoming purchaser that an interest existed.
176JJJP justifiably assumed that no previous interest existed at the time of purchasing the farm from the Peacocks, as the register search statement did not reveal any interests. Had the caveat been lodged, JJJP would have been put on notice at the time of conducting the search, and the Peacocks would not have been able to settle on the JJJP contracts.
177I also adopt JJJP’s submission that, based on Circuit Finance Australia Limited (in liquidation) v Panella & Anor, the conduct required to undermine priority needs to be both blameworthy and causative. The requirement of conduct being “blameworthy and causative” echoes the requirements outlined above in Mimi, in that it boils down to conduct which “caused the holder of the later interest to act on a false premise” [17]. For the reasons already stated relating to the information that was available to JJJP upon conducting the register search statement, the failure to lodge the caveat caused JJJP to act on the false assumption that no pre-existing interest existed.
[17] [2011] NSWSC 311 at [13] per Pembroke J.
178With regards to the requirement of detriment, as outlined by Nettle J in Mimi[18] relying on the principles in Platt Nominees[19], the clear detriment if JJJP were not awarded priority is that it would not receive the farm and business which they contracted with the Peacocks to receive.
[18]
[19]
Fourth issue for trial: Did Mr Cimen repudiate the Cimen contracts by failing to pay the deposits under the Cimen contracts on or before 5 June 2021?
The Peacocks’ submissions
179The Peacocks submit that repudiation of the Cimen contracts has occurred because Mr Cimen evinced an intention to either not be bound by the contracts, or to fulfil them only in a manner that was substantially inconsistent with his obligations.
180The Peacocks note that despite time being of the essence in the Cimen contracts, Mr Cimen failed to pay the deposits in a timely manner – again, substantially inconsistent with his contractual obligations.
181The Peacocks cite the High Court case of Brien v Dwyer, to solidify the argument that repudiation occurred.[20] Barwick CJ observed that the nature of a deposit and its purpose in a contract for the sale of land, as an earnest for the bargain, makes a purchaser’s failure to pay it so fundamental a breach, depriving the vendor of the security for the purchaser’s performance without which the vendor would not be required to proceed with the contract, that the vendor is entitled to rescind the contract “out of hand”, meaning without notice. .
[20] (1978) 141 CLR 378 (“Brien”).
182The Peacocks note that in Brien, Gibbs J reiterated the fundamental and essential nature of a deposit, and explained how breaching this obligation undermines the contract when he held that “the character and importance of a deposit indicate that the clause requiring payment of a deposit is a fundamental term the failure to perform which goes to the root of the contract and entitles the vendor to renounce further performance”. [21]
[21]Brien at [393].
183The Peacocks submit that even though the Cimen Property Contract did require service of a notice under GC 27.1, this does not inhibit the Peacocks from claiming the right to terminate due to the equitable doctrine that a party to a contract may regard itself as discharged from further performance, where the other party has repudiated the contract by evincing an intention not to be bound or to fulfil the contract in a manner substantially inconsistent with their obligations. In these circumstances, therefore, the innocent party may elect to treat the contract as at an end without serving a notice under GC 27.1.
184The Peacocks contend that, by failing to pay the deposit and provide security for his performance, Mr Cimen evinced an intention to proceed only in a manner that was substantially inconsistent with his fundamental obligations, and they rely on the following evidence to support this argument:
(a) the amount of the deposits was substantial security for the vendor, being 5% of each purchase price;
(b) Mr Cimen has previously been involved in real estate transactions for himself and his construction companies and even was a real estate agent for a time in 2016. The Peacocks say that it can, therefore, be inferred that he was well aware of the importance of the purchaser’s obligation under sale of land contracts to pay a deposit – to which he confirmed his subjective awareness of this fact at trial;
(c) Mr Cimen failed to pay the deposit at all relevant deadlines, being:
(i)on 24 May 2021, when the last instalment was due under the contracts;
(ii)at any time thereafter until 18 June 2021, by which time he knew that the Peacocks had resold the farm and continued to contact the agent to insist that the Peacocks were bound to proceed;
(iii)at any time thereafter until 9 July 2021, by which time his solicitor had acknowledged that the deposit remained unpaid and his solicitor was informed that the Peacocks regarded the contract as at an end, but he continued to insist through the solicitor that the Peacocks were bound to proceed;
(iv)at any time thereafter until 17 July 2021, at which time the Peacocks’ solicitor, Mr Giummarra, again informed Mr Cimen’s solicitor that the Peacocks regarded the contract as at an end, but Mr Cimen through his solicitor was still insisting that the Peacocks were bound;
(v)at any time thereafter until 22 July 2021, when Mr Giummarra served his letter enclosing the self-executing Notices of default and rescission and stating that, in any event, the contracts were already at an end; and
(vi)at any time thereafter until 3 August 2021, when the deposits finally were paid.
185The Peacocks argue that Mr Cimen’s explanation that he had not received a request or demand for payment does not absolve him of his obligation to pay the deposit, or in any way mitigate the repudiation. The Peacocks rely on the case of Progressive Mailing House Pty Ltd v. Tabali Pty Ltd,[22] where the tenant’s persistent failure to pay rent constituted a refusal to carry out its obligations according to the terms of the lease and a persistence in carrying them out in a way substantially inconsistent with those terms.
[22] (1985) 157 CLR 17.
Mr Cimen’s submissions
186Mr Cimen relies on Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd[23] as authority for the proposition that any evaluation of an alleged repudiation depends upon conduct. Here, Mr Cimen is drawing upon the same paragraph as the Peacocks, where the Court held that:
“The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it…”.
[23] (2007) 233 CLR 115 at [44] (“Koompahtoo”).
187In his submissions, Mr Cimen draws upon the test in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd[24], that the “essentiality” of a term is objectively inferred by reference to the surrounding circumstances. Mr Cimen contends, in line with South Dowling Pty Ltd v Cody Outdoor Advertising Pty Ltd[25], if the relevant clause was not identified as being essential from the outset, the court will evaluate the conduct of the parties in order to draw conclusions as to its level of importance. Mr Cimen submits as per Tropeano v Riboni,[26] it is also open for the Court to draw upon post formational events which illuminate the importance of the term.
[24] (1938) 38 SR (NSW) 632 at [642] (“Tramways”).
[25] [2005] NSWSC 391 at [57] – [62].
[26] [2005] VSC 229 at [117].
188Mr Cimen argues that he was always committed to purchasing the farm, having reached this decision with his family. Mr Cimen submits that at no time could his conduct demonstrate an intention not to be bound by the contract.
189Mr Cimen further relies on the cases of Perry v Suffields Ltd[27] and Kazacos v Shuangling International Development Pty Ltd[28] to support an argument that a deposit is not an essential feature of a binding contract for the disposition of an interest in land. Mr Cimen refers to these authorities to rebut the principle from Brien that failure to pay a deposit gives rise to a right to terminate without further notice.[29] Mr Cimen also draws upon the statement of Barwick CJ in Brien which he submits qualifies the overall principle of the importance of the deposit.[30] Barwick CJ noted that where a vendor is aware of a failure to pay the deposit, they cannot delay in exercising a right to rescind, and where a purchaser has been led to disadvantage in reliance on such a delay, a Court of equity may afford the purchaser some relief as the right to recission may have been lost.[31]
[27] [1916] 2 Ch 187.
[28] [2016] NSWSC 1504.
[29]Brien at [386].
[30] Ibid.
[31] Ibid.
190Mr Cimen contends the Peacocks and Mr Giummarra adopted a “lackadaisical” attitude toward the payment of the deposit, and, therefore, their conduct suggests that the term was not so essential that breach gives rise to an immediate repudiation of the Contracts. Mr Cimen argues it would be impractical and uncommercial if all incidences of failure to pay a deposit amounted in immediate repudiation and termination, as parties ought to be within their rights to elect to affirm the contract by extending time to pay the deposit.
191As evidence of this supposed “lackadaisical” attitude, Mr Cimen focuses on the post-contractual conduct of the Peacocks, and the fact that at no point in time, up to and including 7 July 2021, did the Peacocks or Mr Giummarra even realise that the deposit was not paid, and that it was only after receipt of Mr Seyit Erciyas of Erci Lawyers’ letter that they become aware of the fact. Mr Cimen submits that this amounts to a kind of indifference towards the payment of the deposit, and in turn does not indicate that a breach of this term was so essential such that it should provide an apprehension that Mr Cimen had repudiated.
192Mr Cimen also notes that the failure to pay the deposits was a term capable of being remedied, and that damages were a sufficient remedy for any breach.
193Mr Cimen contends that ever since his very first inspection of the farm he has consistently expressed a firm intention to purchase. He argues he informed the Peacocks that irrespective of the price, he definitely wanted to purchase the farm. Mr Cimen submits that he held true to this intention notwithstanding his failure to pay the deposit on 24 May 2021. Mr Cimen asserts that his bank statement in May 2021 demonstrates that he had the money available to pay the deposit.
194Mr Cimen submits that he did not pay the deposit for the following reasons:
(a) The Peacocks failed to provide him with a contract in February 2021 as he requested;
(b) The Peacocks’ selling of the farm to Mr Lonappan without informing him; and
(c) In May 2021, the Peacocks created issues with access to the farm which jeopardised his ability to complete a financier’s valuation.
195With regards to this final point, and the Peacocks’ role in frustrating his ability to access the property for valuation, Mr Cimen said he contacted Mr Hanley on several occasions to organise a valuation but never heard back. In June 2021 after not having heard from Mr Hanley, Mr Cimen was subsequently informed the farm had been sold.
(d) Regarding the email on 24 May 2021, he agreed the Peacocks were seeking his advice as their solicitor in that email. Again, he could not remember what he thought at the time on reading that email but agreed that it was written by a person who did not understand how GC 14 worked.
(e) Regarding the telephone conversation he had with the Peacocks later on 24 May 2021, its purpose was to respond to their email and to provide advice. Mr Giummarra accepted that he did not know how the Peacocks would know what he meant by using the term “finished” in his advice, without further advice about what he meant by “finished”. He accepted that he had not advised them what he meant by “finished”, and even volunteered that he would have written down that advice if he had given it.
388Regarding his email on the morning of 5 June 2021, responding to the Peacocks’ email to the agent into which he had been copied, he said that his response did not include any advice or warning of the kind he had given by telephone on 24 May 2021. Mr Giummarra provided no further advice after that and could not be sure when he read the last email the Peacocks had sent at approximately midday on 5 June 2021.
389The Peacocks submit that Mr Peacock’s responses under cross-examination reveals how confused he was about the operation of the subject to finance clause under the Cimen contracts. Mr Peacock argued that he was under the impression that Cimen contracts had finished on 22 May 2021. Mr Peacock also said at trial that he regretted extending the finance approval time and was an “idiot” for doing so, he said that he decided to so because he and Mrs Peacock were just “good people”. Mr Peacock did concede that “probably, looking back on it” Mr Giummarra was telling them that the Cimen contracts were not finished. It was then put to him that he had not asked for Mr Giummarra’s advice on 24 May 2021 or on some other occasion whether the Cimen contracts were finished, which he conceded he had not. Even his understanding of his position while the extended finance clause was on foot, and when that came to an end on 5 June 2021, was confused.
390The Peacocks submit that a solicitor is not excused from their duty to advise simply because an inexperienced client failed to ask for the specific advice. The Peacocks argue that people hire lawyers to guide them through transactions and provide them advice precisely because they do not understand the legalities themselves. Nor is it an adequate answer, if the client says, when pressed and trying as best as he can some years later to remember advice given in a brief telephone call, that the solicitor “probably” meant the fuller advice the client needed, if the advice given was in all the circumstances misleading and incomplete.
391The Peacocks note that the standard of the solicitor’s duty of care to the client is not minimised by reason that the solicitor acts for a reduced fee. Therefore, whether Mr Giummarra charged a fee for his work or not is irrelevant to this third-party claim against him.
Mr Giummarra’s submissions
392Mr Giummarra submits that his retainer was very narrow and the occasion to give the advice alleged to have been overlooked never arose. As such, he asserts that he discharged his professional and contractual obligations to the requisite standard.
393In support of this position, Mr Giummarra relies on the following matters.
394Mr Giummarra submits that he was retained to prepare the interdependent contracts to sell the farm on 5 February 2021. By email dated 8 February 2021, Mr Giummarra provided the Peacocks with the contracts, including the related s32 statement. He asked if the Peacocks had any questions to “please call”. Mr Giummarra notes that the Peacocks did not call him.
395Mr Giummarra contends that the Peacock’s selling agent, Mr Hanley, edited the contracts to rectify minor errors identified by Mr Peacock, however, he was not given a copy of the revised contracts.
396On 19 February 2021, Mr Cimen’s solicitors emailed Mr Giummarra, seeking the addition of special conditions, including a subject to finance clause. Mr Giummarra says that he called the Peacocks to discuss Mr Cimen’s request for “in principle” agreement to the addition of the three conditions. Mr Giummarra relies on Mr Peacock’s witness statement which did not give evidence that he asked for an explanation or advice on any of the proposed changes. Mr Giummarra contends that he did not give advice on how to respond and Mr Peacock sought no advice on the amendments but rather approved the subject to finance clause but not a clause relating to a soil test. Mr Giummarra says that he then communicated that approval to Mr Cimen’s lawyers.
397Mr Giummarra argues that without informing him the Peacocks then:
(a) engaged a second agent under an exclusive authority, Inline Real Estate;
(b) Mr Hanley continued to negotiate with Mr Cimen, including the rejection of a request for further time to obtain finance;
(c) the Peacocks informed Mr Hanley that Inline Real Estate had been engaged;
(d) while the contracts were being considered by Mr Cimen, the Peacocks entered into the contracts with Mr Lonappan;
(e) under the contracts with Mr Lonappan, which had been drafted by Mr Giummarra, SC 14 (the subject to finance clause) applied and the deposit was payable to the agent; and
(f) the Bijesh contracts were terminated without recourse or notice to Mr Giummarra.
398Mr Giummarra submits that in April 2021, when Mr Cimen’s solicitors requested amendments to Mr Giummarra’s contracts, the Peacocks expressed a view as to the acceptability of the proposed changes to Mr Hanley and asked him to make the amendments. Mr Giummarra contends that, apparently as an afterthought, Mr Peacock emailed him requesting his views on the proposed changes and asked him to take a “quick look”. Mr Giummarra argues that Mr Peacock did not ask him for specific advice other than what might be termed “obvious red flags”.
399Mr Giummarra submits that Mr Peacock’s email “made it plain” that he was unwilling to spend money on legal fees for fear that the contracts may fall over for want of finance. He contends that the Peacocks explained they would make the changes, rather than asking their solicitor to do so. Further, he claims that it was perfectly reasonable for him to assume that the clients understood the clause, specifically as they were unwilling to pay him to given them substantial advice on the amendments, or even to undertake the drafting of the amendments.
400When the Peacocks had not received a response from Mr Giummarra by 23 April 2021, Mr Peacock followed up Mr Giummarra by email, asking for “just a simple yes to my answers and all is good”.
401Mr Giummarra argues that the Peacocks did not even ask him to review the contracts once they were amended by Mr Hanley, further demonstrating to him that they were relying on him for very little, if anything, more than the original drafting and the subsequent conveyance of the farm. Mr Giummarra contends that after the contracts were amended by Mr Hanley, they were not returned to him for review.
402Mr Giummarra submits that further negotiations and redrafting was undertaken without his knowledge or involvement. The contracts were executed on 1 May 2021 without his knowledge. Mr Giummarra notes that the particulars, the provision for the deposits was altered so that $2,500.00 was to be paid into his trust account. Mr Giummarra contends that, Mr Hanley did not explain this to the Peacocks and that he was not told of the amendment or to expect that money to arrive.
403Mr Giummarra submits that, by 18 May 2021, the Peacocks had not told him that the Cimen contracts had been signed. They expected Mr Hanley to do so. Mr Giummarra contends that instead of seeking advice from him, the Peacocks sought advice from Mr Hanley.
404Mr Giummarra argues that Mr Cimen emailed him directly on 18 May 2021 to seek an extension of the subject to finance clause, informing him that “the process is still being worked on”. He says, that on receiving that email, Mr Giummarra directly asked the Peacocks whether a contract had actually been signed and exchanged and asked for a copy. Mr Giummarra submits that he sought instructions on the request for extension of time.
405Mr Giummarra submits that the next afternoon, the Peacocks responded and explained to him that the Cimen contracts had been exchanged, dated 1 May 2021, with a 21-day finance clause, which expired on 22 May 2021. He says that the Peacocks explained to him that Mr Hanley was dealing with Mr Cimen and “we’ve spoken to [Mr Hanley] this morning and told him, we want something in writing from the bank … if we don’t get it by Friday, we will put the farm back on the market”. Mr Giummarra notes that the Peacocks did not send him a copy of the contracts because they were having difficulty sending attachments and expected someone else would forward it. Mr Giummarra submits that the Peacocks did not ask him for advice on the effect of the extension sought by Mr Cimen.
406On 20 May 2021, when Mr Cimen’s lawyers requested a further extension of time for the subject to finance clause to run until 4 June 2021, Mr Giummarra says that Mr Hanley sent the request to the Peacocks, who re-sent it to Mr Giummarra, asking for advice on whether deleting SC 13 would have financial, legal or tax implications. It is noted that that email also stated “[t]he contract of sale has finished as of last Saturday, 22nd May”.
407Mr Giummarra says that he called Mr Peacock on 24 May 2021 to advise on the question asked of him and discuss the extension of time. He says that he clearly explained to the Peacocks that they could not sell the farm until the contract was “finished” and Mr Giummarra submits that he received instructions to extend the subject to finance clause until 4 June 2021.
408Mr Giummarra contends that the advice given in that phone call was correct and complete and discharged him of his obligations.m Further, he submits that, although perhaps not understanding at the time, with the benefit of hindsight, Mr Peacock’s self-deprecation and concession under cross-examination showed how obvious it was that the contracts remained on foot after the 24 May 2021 conversation. Mr Giummarra argues that so much was plain because Mr Peacock agreed to the extension of time and Mr Giummarra said that the Peacocks could not sell to another party until the contract was “finished”.
409Mr Giummarra relies on Mr Peacocks’ evidence at trial that he thought it was “obvious” that he could not sell his farm to two separate people and believed that if Mr Cimen had come up with the finance by 4 June 2021, he could compel the Peacocks to sell the farm to him. Mr Giummarra contends that in these circumstances, Mr Peacock did not ask him whether or when the contract would be “finished”.
410Mr Giummarra submits that he relies on his unchallenged evidence that at the end of the 24 May 2021 conversation, he thought Mr Peacock understood the contracts had not “finished”.
411Mr Giummarra contends that the Peacocks did not tell him that they had another buyer available, and they wanted to terminate the Cimen contracts or that Mr Cimen had not paid the deposits. Mr Giummarra argues that, in accordance with his advice, Mr Peacock instructed Inline Real Estate not to sell to another buyer until after 4 June 2021. He says, he did not know that the Peacocks signed a new s32 on 26 May 2021 which they provided to JJJP.
412Mr Giummarra submits that, on 2 June 2021, Mr Cimen’s lawyers requested a further extension of time, and the Peacocks gave clear instructions to reject that request. He says that at midday, Mr Peacock advised Mr Giummarra that there may be offers coming in shortly and he would be in touch if anything eventuated. Mr Giummarra contends that the Peacocks did not seek advice and he gave none. He says there was no discussion about whether the Cimen contracts remained on foot, and without further recourse to him, the Peacocks sold the farm to JJJP at 3pm that day.
413Mr Giummarra submits that he was excluded from a large part of the negotiations with Mr Cimen and was not informed of the JJJP sale until it had occurred. He says that on the very limited range of matters that he was instructed to perform, he did so in accordance with his duty to exercise reasonable care and skill. Mr Giummarra concludes that:
(a) he told the Peacocks they could not re-sell the farm until the Cimen contracts had “finished” which was a clear indication that they remained on foot;
(b) he was not in a position to advise about termination rights as neither Mr Hanley nor the Peacocks had told him that the deposits had not been paid, or they wanted to terminate or that they wanted to sell to another purchaser;
(c) the Peacocks had not sought advice on the subject to finance clause; and
(d) there was no question about Mr Cimen terminating on the basis of the subject to finance clause, and so there was no obligation to explain or advise about it.
Analysis
414In my view, Mr Giummarra breached his duty of care owed to the Peacocks in having failed to advise them on the effect of the finance approval condition in the Cimen contracts. Specifically, I find that Mr Giummarra failed to advise on the following matters:
(a) that the finance clause was not for the benefit of the Peacocks, but rather, was for the benefit of Mr Cimen;
(b) that the finance clause gave Mr Cimen alone the right to terminate the contracts by written notice, if he did not obtain finance approval by the specified date;
(c) that Mr Cimen could only serve such a notice if he was not in default under the Cimen contracts;
(d) if Mr Cimen did not give such notice, then the Cimen contracts would become unconditional and both parties would then be bound to perform their obligations under the contracts; and
(e) in those circumstances, the Peacocks were not at liberty to sell the farm or business to any other purchaser unless and until the Cimen contracts had ended in that way.
415I rely on the following matters in support of my conclusion.
416On reading the 19 May 2021 email from the Peacocks informing Mr Giummarra that they were having difficulties with Mr Cimen in accommodating his requests for time to obtain finance, it ought to have been clear to Mr Giummarra that the Peacocks had a fundamentally flawed understanding of how the finance approval condition worked. The email demonstrates that the Peacocks regarded themselves as free to put the farm “back on the market” and if Mr Cimen came up with the finance, then they would “revisit it then”. It ought to have been apparent to Mr Giummarra that the Peacocks thought they were discharged from the Cimen contracts if Mr Cimen did not obtain finance in time, and they were at liberty to sell or not sell to him later if he had such finance in place.
417Regarding the 24 May 2021 email, in my view, the Peacocks’ misapprehension was confirmed explicitly. The email stated that “[t]he contract of sale has finished as of last Saturday, 22nd of May”. This statement is clearly inconsistent with the true legal effect of the finance condition. The Peacocks were seeking Mr Giummarra’s advice in the 24 May 2021 email and he failed to give the advice that his clients needed.
418I accept the Peacocks’ position that it is in this context that the oral advice given by Mr Giummarra on 24 May 2021 was inadequate to dispel the Peacock’s misunderstanding of their contractual rights if Mr Cimen failed to obtain finance within the specified time. It was apparent in light of the 24 May 2021 email that the Peacocks thought the Cimen contracts were already “finished” unless they agreed to extend it. In my view, the Peacocks needed advice that the opposite was in fact the case. Mr Giummarra failed to give that advice.
419On 4 June 2021, after Mr Cimen was requesting a further extension of the finance approval date to 18 June 2021, Mr Giummarra was copied into the 5 June 2021 email to Mr Hanley with instructions that the Peacocks would not agree to extend the approval date any further and that they intended to put the farm back on the market. It was clear from the content of the 5 June 2021 email which relevantly provided that if Mr Cimen obtained finance, he could “keep going with it” but there was “definitely no guarantee that if and when his finance comes through the farm will still be available for those conditions”. Mr Giummarra again failed to give advice to the Peacocks that the Cimen contracts were now unconditional unless the approval date was extended again, and the Peacocks had no discretion to refuse to complete the contracts.
Eleventh issue for trial: If yes to 10, did Mr Giummarra’s breach of duty cause the Peacocks loss by reason of the Peacocks entering into the JJJP contract on 5 June 2021?
The Peacocks’ submissions
420The Peacocks contend that their claim is for damages for economic loss.
421The Peacocks say that this is not a case where complex questions of causation arise requiring expert evidence. The two requirements the Peacocks are required to prove under s 55(1) of the Wrongs Act 1958 (Vic) are:
(a) that the negligence was a necessary condition of the occurrence of the harm; and
(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused.
422The Peacocks submit the requirement of factual causation in paragraph (a) is straightforward in this case.
423The Peacocks contend they have suffered loss as a consequence of being bound (if the Court deems this to be the case) to two legally enforceable contracts, a situation that they would not be in if they had been given full non-misleading advice as they required. If they had been given this advice, they would not have entered into the JJJP contracts on 5 June 2023 or, if they had done so, they would have done so conditionally, subject to the Cimen contracts being terminated.
424The Peacocks say the scope of Mr Giummarra’s liability is also straightforward, if the Court accepts the Peacocks’ submissions above that his duty of care extended to giving the full non-misleading advice that would have warned them of the risk of ending up with two binding enforceable contracts on foot.
Analysis
425If the Peacocks had been given the advice on the true operation of the finance clause by Mr Giummarra, then I find that they would not have signed the second contracts with JJJP. I infer this from the terms of the conversation that Mr Peacock had with Inline Real Estate, the selling agent for the JJJP contracts on 5 June 2021.
426If I am wrong in my analysis in the primary proceeding, and the Cimen contracts are enforceable, then the Peacocks’ losses caused by Mr Giummarra’s failure to advise, flow from the Peacocks’ having two enforceable contracts which they are liable to perform, one or both of which may result in orders for damages being made against them.
427I find that in those circumstances Mr Giummarra would be liable to indemnify the Peacocks for any damages awarded against them in favour of either purchaser by reason of there being two contracts as damages in lieu or in addition to specific performance.
Twelfth issue for trial: If yes to 11, what is the quantum of that loss?
The Peacocks’ submissions
428The loss the Peacocks are seeking to recover by way of damages over and above costs orders in the proceeding indemnifying them for costs awarded to Mr Cimen and/or JJJP against the Peacocks:
(a) amounts that the Peacocks may be ordered to pay Mr Cimen or JJJP as damages in this proceeding in lieu of or in addition to specific performance; and
(b) legal costs incurred by the Peacocks in the sale to Mr Cimen (if JJJP’s contract is specifically enforced and Mr Cimen is awarded damages), on the basis that the Peacocks incurred two sets of costs in respect of two sales being on foot at the that they obtain the benefit of the costs in respect of that sale, they will have obtained no benefit from having incurred the cost in respect of the Cimen sale.
429Mr Giummarra has not invoiced the Peacocks for any of his costs in acting for them in the sales. The latter claim is, therefore, limited to costs incurred from September 2021 onwards, after the Peacocks engaged NWF Lawyers. Their costs in respect of the Cimen sale are quantified in that firm’s redacted invoice no 22468.50.
Analysis
430If the Cimen contracts remain on foot (which is not the Court’s anterior finding) but the JJJP contract nonetheless has priority over the Cimen contract, then the Peacocks’ losses will be any damages awarded to Cimen and any deposit money and interest to which Cimen is held to be entitled by reason of the Peacocks being unable to complete the Cimen contract and the Peacocks’ costs thrown away on the lost sale.
431The formulation of those losses are as follows:
(a) The amount of $208,690.00 comprising:
(i)the difference between the current value of the farm as a going concern in the sum of $1,850,000.00 and the sale price under the Cimen contracts in the sum of $1,750,000.00;
(ii)the amount of $82,500.000, being the deposit money; and
(iii)the Peacock’s conveyancing fees thrown away in the sum of $26,190.00 (supported by NWF Lawyers invoice no 22468) on the basis that they will have obtained no benefit from incurring these fees in respect of the Cimen contracts.
432Finally, the Court would ordinarily also award to the Peacocks’ the net loss from costs thrown away on the lost sale in the sum of $10,685.46, comprising $58,585.99 interest on a loan taken out to assist with the purchase of a replacement property from 25 October 2021 and insurance in the sum of $3,779.47 offset against the rental income received of $51,680.00 because the property was to be their primary place of residence and not an investment property. However, the evidence relied on by the Peacocks included two derivative documents which did not disclose the source documents or the author of the calculations. In those circumstances, the amounts have not been sufficiently proven to the requisite standard.
433If the Cimen contracts remain on foot (which is not the Court’s anterior finding) and has priority over the JJJP contracts, then the Peacocks’ losses will be any damages awarded to JJJP and any deposit money and interest to which JJJP is held to be entitled by reason of the Peacocks being unable to complete the JJJP contract. As set out above, that amount is the sum of $220,000.00 comprising of:
(a) $50,000, being the difference in value between what the Peacocks and JJJP’s valuers ascribed to the farm;
(b) $90,000.00 being the combined value of the deposits, which is made of $75,000.00 paid under the JJJP Land Contract and $15,000 paid under the JJJP Business Contract; and
(c) $80,000.00 being the value attributed by the Peacocks to the plant and equipment sold under the JJJP Business Contract.
Conclusion
434For the forgoing reasons, I find that there is judgment for JJJP against the Peacocks and Mr Cimen’s counterclaim and the Peacocks’ third-party proceeding are dismissed.
435I invite the parties to prepare draft orders to give effect to these reasons. Any further issue as to costs will be determined on the papers.
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Certificate
I certify that these 115 pages are a true copy of the judgment of her Honour Judge Burchell delivered on 17 April 2024.
Dated: 17 April 2024
Gideon Lipinski
Associate to Her Honour Judge Burchell
SCHEDULE OF PARTIES
BETWEEN
| JJJP Properties Pty Ltd (ACN 616 182 819) | Plaintiff |
| and | |
| Colin John Peacock | First defendant |
| Tracy Peacock | Second defendant |
| Alpaslan Cimen | Third defendant |
| and | |
| Alpaslan Cimen | Plaintiff by counterclaim |
| and | |
| Colin John Peacock | First defendant by counterclaim |
| Tracy Peacock | Second defendant by counterclaim |
| JJJP Properties Pty Ltd (ACN 616 182 819) | Third defendant by counterclaim |
| and | |
| Colin John Peacock | First third party plaintiff |
| Tracy Peacock | Second third party plaintiff |
| and | |
| Kathie Pollock Real Estate Pty Ltd (ACN 083 194 736) t/a Poultry Farms Australia | First third party |
| Adam Gary Ray Hanley | Second third party |
| Frank Giummarra | Third third party |
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