Luhan v Micallef
[2017] VSC 246
•10 May 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 00786
| RICHARD LUHAN and | Plaintiffs |
| ROBERT LUHAN | |
| – and – | |
| GEORGIA MICALLEF | Defendant |
| – and – | |
| RT EDGAR BOROONDARA PTY LTD and others | Third Parties |
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JUDGE: | Mukhtar AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 April 2017 |
DATE OF JUDGMENT: | 10 May 2017 |
CASE MAY BE CITED AS: | Luhan v Micallef |
MEDIUM NEUTRAL CITATION: | [2017] VSC 246 |
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EQUITY ― Equitable remedies ― Specific performance ― Sale of land ― Vendor’s unwillingness to complete ― Legally binding contract ― No vitiating factors ― Vendor claiming importunity to sell from own agent and ‘mistake’ in signing contract ― Purchasers with clean hands and no unconscientious conduct ― Contract price below valuation as subsequently obtained ― Whether damages adequate remedy ― Discretionary principles ― Decree for specific performance summarily granted
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Lithgow | Ascot Solicitors |
| For the Defendant | Mr S Stuckey | Tasiopoulos Lambros & Co |
| For the First and Second Third Parties | Ms L Deery | Lander & Rogers |
HIS HONOUR:
On 28 April 2017, the Court granted the plaintiffs’ application for summary judgment. By their writ, they sought a decree of specific performance of a contract of sale of land at 1315-1355 Beattys Road in Rockbank, which is 5 kilometres south-east of Melton. The land had an area of about 5 hectares. The price was $1.0 million. There was no question at all about the legal validity of the contract; nor the purchasers’ readiness, willingness and ability to complete. The defendant vendor, was 80 years of age at the time, resisted the application only on the ground of the remedy. It was contended on her behalf that there was a case to be tried on the question of whether the discretionary relief of specific performance ought be withheld on the ground that damages was an adequate remedy. She pleads that her own estate agents ‘badgered her’ to sign the contract at her family birthday party held at the Crown Casino. The purchasers were blameless in the whole dealing. After the writ was filed the defendant obtained a market valuation of the land, using a direct comparison approach, of $1.5 million.
In an ex tempore decision, I formed the view that the facts were overwhelmingly in favour of the plaintiffs and it was unjust to deprive the plaintiffs of the benefit of the contract, which the defendant should honour. That is, I decided the defendant had no real prospect of succeeding to deprive the plaintiffs of a decree for specific performance. The case fell into that species of summary judgment application where the Court allowed substantive argument in order to assess the prospects of success. What follows is a recapitulation of those reasons with expanded content.
The plain fact, from which all legal obligations arise, is that, by a contract made on 13 May 2015, the plaintiffs purchased the land at 1315-1355 Beattys Road in Rockbank from the defendant for the price of $1 million. The contract required a deposit of $100,000 to be payable by 18 May 2015. The completion date was 11 November 2015. The defendant as vendor had estate agents acting for her, namely, RT Edgar Boroondara. The deposit was paid on 14 May 2015. On 25 May 2015, at the request of the vendor, the plaintiffs signed a ‘Deposit Statement to the Purchaser’ which, under s 27 of the Sale of Land Act 1962, authorised the deposit moneys to be released to the vendor. Then, on 28 May 2015, the purchaser’s solicitors received a letter from the vendor’s solicitors stating, where relevant:
We act on behalf of Georgia Micallef, the registered proprietor of the Property.
A contract of sale was executed by our client on 13 May 2015.
We are instructed that our client is not in a position to proceed with the sale of the property, and wishes to terminate the contract. The full deposit will be refunded to your client. We propose to draft a deed of termination for signing by all parties to document this.
Please confirm that your client is agreeable to executing a deed of termination.
For such a substantial transaction, the letter is remarkably vague and fails to explain why it is the vendor was ‘not in a position to proceed’. Then, more remarkably, on the same day as that letter, another letter was sent from the vendor’s solicitor saying in effect that she had changed her mind. The letter said:
Please disregard our correspondence of earlier this evening concerning the proposed termination of contract.
We have been instructed this evening that the vendor’s circumstances have changed and they are happy to proceed with the sale.
If you could provide the signed s 27 statement at your earliest convenience that would be great.
On the following day, the deposit was released to the defendant. Then, remarkably, the plaintiffs’ solicitor received a letter from the vendor’s solicitor dated 6 June 2015 which said she had changed her mind again. It said:
Further to our previous correspondence of 28 May 2015, we are instructed as follows:
1)Our client has reassessed her financial situation and has determined that she will not be in a position to proceed with the sale of the property. Our client wishes to terminate the existing contract of sale.
2)We understand that the deposit has been released, and we confirm that our client is in a position to refund the deposit should your client be agreeable to the termination of the contract of sale.
Please confirm whether your client is agreeable to the termination of the contract of sale, and we will prepare the deed of termination for execution by the parties.
The plaintiffs were not agreeable to a termination of the contract of sale. By letter dated 19 June 2015, their solicitor responded concisely by saying ‘We are instructed to state that our clients will not consider your client’s request to terminate the Contract of Sale’.
At that juncture, the plaintiffs, reasonably I think, regarded themselves as parties to a valid contract. As brothers, they had bought the land together in order to build two houses and live there with their families. Moreover and more importantly, in order to complete the purchase, on 8 June 2015, Richard Luhan signed a contract to sell his property at 56 Cottesloe Parade in Taylors Hill for $400,000 and Robert Luhan sold his property at Lot 8, Myrtle Grove Road in Ballan on 29 June 2015 for $257,000. Settlement of both of those contracts occurred on 6 August 2015 and 23 September 2015. This is a powerful fact affecting the equities in this case.
The next event occurred on about 9 November 2015, two days before the completion date. On about that date, the plaintiffs’ solicitor received a letter from new solicitors acting for the vendor which said:
We are instructed that:
1.The Property is our client’s only significant asset and was purchased by her late husband. English is our client’s second language and she has little formal education.
2.The selling agent, Mr Glen Coutinho initially estimated the sale price for the property to our client as approximately $4M.
3.After commencing the sale campaign, the agent revised those estimates downwards to $1.5M, having serious impact on our client’s emotional and mental state.
4.On 13 May 2015, the selling agent attended our client’s 85th birthday party unannounced and asked to speak with her about the Property. During that conversation, he described the Property to her as ‘junk’ and unsaleable. The impact of that conversation on our client was significant and cannot be underestimated.
5.The selling agent then produced a contract of sale with a sale price of $1M and informed our client that she had no alternative but to sign.
6.When the document was produced to her, she was overwhelmed and did not understand the nature of the document that she was signing. She did not understand that the document she was signing was a contract of sale.
7.Your client has an established commercial relationship with the selling agent and is not a genuine innocent third party.
Accordingly, in our view, our client is not bound by the contract of sale and she has a good defence of non est factum to the performance of the contract.
Further or alternatively, our client was under a special disadvantage caused by her age, lack of English and formal education and the social context in which the document was placed before her, and is entitled to resist completion of the contract on the grounds of unconscionable conduct and undue influence.
Our client is prepared to refund to you the deposit you have paid pursuant to the contract of sale immediately and we request that you advise our office whether you would prefer the refund to be by way of cheque or paid into an account and, if the latter, please provide us with banking details.
We look forward to hearing from you.
The eye catching part of this letter is the statement in paragraph 7 that: ‘Your client … is not a genuine innocent third party.’ As I narrate the facts more, it can be found there was no basis for such a statement, and none was asserted in argument. That is, a trial is not needed to investigate any covert or circumstantial facts concerning the purchasers’ procuration of the sale or influence in the sale.
The sale did not proceed. On 3 March 2016 the plaintiffs filed a writ seeking specific performance of the contract. It is an elementary statement of claim and an expectable claim for specific performance. In the circumstances, one would expect the defence to the writ to reveal how and in what way it is said that the purchasers were not an innocent third party or clothed with knowledge about exploitative conduct or vulnerability. But the defence says no such thing. Instead, she squarely looks to allege her real estate agents as having committed a wrongdoing. The relevant part of her defence says this:
10.She says further than an order for specific performance of the Contract should be refused on discretionary grounds and that damages are an adequate remedy.
Particulars
The Defendant:
i.is of Maltese descent;
ii.speaks English as a second language;
iii.came to Australia at the age of 20;
iv.has not had any formal education;
v.is unable to read or write in Maltese and only learned how to read English in her late fifties;
vi.was married at the age of 22;
vii.did not manage her own financial affairs during her marriage;
viii.was widowed on 3 December 2002; and
ix.has poor vision, requires glasses to read and her eyesight is affected by cataracts.
Prior to signing the Contract:
i.on or around 25 March 2015 the Defendant was approached by real estate agent Glen Coutinho, and told that the Land was worth approximately $4 million; and
ii.in or around April 2015, Mr Coutinho revised that estimate to approximately $1.5 million.
On or around 13 May 2015:
i.the Defendant was celebrating her 80th birthday with her family at Crown Casino;
ii.while travelling to the Casino she got lost and became confused and distressed;
iii.once she arrived at Crown Casino she celebrated her birthday with her family and consumed alcohol;
iv.at or around the evening on the same day, Mr Coutinho attended the Defendant’s birthday party without invitation and:
A.told her that the Land was ‘junk’ and was virtually worthless;
B.told her he had found a buyer who had offered $1 million for the property;
C.repeatedly told her that was the only offer she was going to get and that she needed to sign the Contract;
D.badgered her and applied pressure to her to sign the Contract;
E.he told her that the Land size was 15 acres, when she had thought that the Land was 20 acres and in fact the Land was approximately 20 acres;
v.at the time she did not have her glasses and was unable to read the Contract; and
vi.as a result of Mr Coutinho’s conduct and the circumstances in which it took place, the Defendant’s mental state and commercial judgment were temporarily impaired and she signed the Contract in order to get rid of Mr Coutinho and extricate herself form [sic] the situation.
The Defendant intends to join Mr Coutinho as a third party and to seek damages from him.
The defendant’s affidavit in opposition to this application likewise says nothing to suggest a case to be investigated whether the vendors were somehow bona fide purchasers. The affidavits of both plaintiffs explain the circumstances antecedent to the making of the contract. In mid‑April 2015, Richard Luhan says he noticed a ‘For Sale’ sign on the land which identified a real estate agent. They made contact with the agent the following day. The agent was a Mr Glenn Coutinho of RT Edgar. The plaintiffs swear they have not had any previous dealings with that agent or with RT Edgar. An inspection was organised which occurred on 29 April 2015 with a Mr Mark Turner, an estate agent from that same office. The defendant was also present. There is a question whether her two daughters were there as well, although nothing turns on that. The plaintiffs say that the agent indicated that the defendant was seeking $1.4 million for the land.
A second inspection occurred on 2 May 2015 by the plaintiffs and their family. The agent, Mark Turner, was there. The defendant was also there with her two daughters. Robert Luhan deposes:
The Defendant and Mark showed all of us around the property and it was the Defendant who was doing all of the talking and it was the Defendant who explained to us in English what her husband had done on the property. She told us that her husband had done the septic tanks, and how the water operates and she also said that she is getting too old to look after the property and that’s why she is selling. She spoke with a European accent, but we all understood her perfectly and she defiantly [sic, definitely] understand the questions we were asking her. At no stage did she ask her daughter to interpret anything she wanted to say or anything that we asked.
The plaintiffs say that on about 11 May 2015 they made an offer of $1,100,000 subject to the condition that there was no easement affecting the land which would allow the council to do road widening. On the following day, the plaintiffs made enquiries of the Melton Shire Council and were told that there was an area set back from the back fence of the land which the council could repossess to allow road widening works. The plaintiffs say they immediately called the agent and told him about that information gained, and reduced their offer to $1 million.
On 13 May 2015, the plaintiffs depose that the agent rang them to tell them that he and Coutinho had met the defendant with her two daughters, and accepted the offer of $1 million provided the deposit was paid within seven days and that they signed an early deposit release form. The plaintiffs agreed. As I have said, faithful to that, the plaintiffs paid the deposit and signed the early deposit release. Thereafter, the correspondence occurred by which the defendant resiled, then affirmed , then resiled from the contract.
The defendant has filed a rather short affidavit in opposition to the application for summary judgment. Its conspicuous feature is that it does not in any way cast aspersions on the conduct of the purchasers in any way or suggest that they were anything but bona fide. The relevant parts of the affidavit state:
3.… Around the time of First Inspection, I did not indicate to either of the Plaintiffs or the agents Mark and Glenn Coutinho that I was seeking $1,400,000 as the purchase price of the Land. I said to Glenn that the Land should not be advertised for less than $4,000,000.
…
5.… I decided to sell the property because I believed I could sell it for at least $4,000,000 and I wanted to help my children and grandchildren with the sale proceeds.
6.… I was not presented with an offer of $1,100,000 for the sale of the Land or any offer conditional on there being no easement affecting the Land. I did not have any discussion with either Glenn or Mark in relation to such an offer.
7.… On 13 May 2015, I was celebrating my 80th birthday with my family at Crown Casino and consumed alcohol. Glenn and Mark attended by (sic) birthday party at Crown Casino without invitation and:
(a)told me that the Land was ‘junk’ and was virtually worthless;
(b)told me that they had found a buyer who had offered one million dollars ($1,000,000) for the Land;
(c)repeatedly told me that was the only offer I was going to get and that I needed to sign the Contract of Sale;
(d)badgered me and applied pressure for me to sign the Contract of Sale; and
(e)told me that the Land size was 15 acres, when I had thought that the Land was 20 acres and in fact the Land is 20 acres in size.
During this meeting there were no discussions about payment of any deposit. I signed the Contract of Sale at the end of the meeting in order to get rid of Glenn and Mark and continue my birthday celebrations.
8.I was confused about the effect of the document I had signed and I did not believe it was a legally binding contract which would result in the conveyance of the Land. Accordingly I instructed my solicitors to advise the Plaintiffs that I would not be proceeding with the conveyance.
It is significant that she gives no explanation to a critical piece of evidence that on 28 May 2015 she instructed her solicitors that she had changed her mind and was ‘happy to proceed with the sale’.
This is the first occasion on which there was any assertion by her that she had signed the contract after being badgered by the agents and in order to get rid of them. Nor does the affidavit say, but it insinuates, that she signed the contract under a mistake. She says she did not believe it was a legally binding contract. But she does not say what she believed she was signing.
It has to be said this is a most unconvincing affidavit and legally inert as against the plaintiffs as nothing in it looks to somehow clothe the plaintiffs with knowledge of an ostensible special disability (as that term is used in the law of unconscionable bargains) or vulnerability or that she was in any way acting under the importunity or exploitation of her own agents. Nor, as I would emphasise, is there any evidence to explain what the mistake was. What did she think she was signing? The objective facts are plain in that: she had decided to sell the property so it is not as if this was a sale being procured at the behest of anybody; the land was advertised for sale; she had appointed agents to effectuate a sale; and after signing the contract she had changed her mind twice about proceeding with it but in the meantime had taken the deposit. On the question of the deposit, her defence in paragraph 4 admits that she received the deposit and says that on about 8 March the sum of $67,000 was tendered by bank cheque to the plaintiffs’ solicitors who rejected the cheque. But the deposit was $100,000. I can only suppose she had attempted to send to the plaintiffs a cheque for the deposit, net of the commission payable by her to her own agents. Having asked for an early release of the deposit, and obtained it, she then paid her agents commission , and then changing her mind about the contract, she unilaterally sent back a part payment of the deposit having deducted her agents commission.
The defendant has filed third party proceedings against the agents. In substance, she brings a case in contract for failing to use reasonable care or to not acting in good faith in delivering services to her. She alleges she was told by the agents the land was worth about $4 million and then revised that estimate to about $1.5 million. She alleges that she was told the land was ‘junk’, the land had no real commercial value, the market value was less than $1 million, and that she had no realistic commercial alternative to signing the contracts. A case is then put that such representations were false, misleading and deceptive. She seeks damages, based upon the lost chance to either retain the land or sell the land for its true market value. She does not say, in the defence, what the true market value was.
The defence in the third party notice contains informative facts, although this is not evidence. I shall articulate those allegations as follows:
(a) the exclusive sale authority was dated on 25 March 2015 and amended on 22 April 2015;
(b) the agent estimated the selling price to be between $2 million and $2.2 million on the basis of her instructions that the land was located in the Precinct Structure Plan and was 20 acres;
(c) the agents later discovered the land was not in the Precinct Structure plan and was part of the carriageway easement which prohibited any development to that section of the land; accordingly, the limitations on the development of the land made it less appealing to developers;
(d) the agents told her that the estimate selling price should be revised to between $1.2 million and $1.3 million, as recorded in the amended exclusive sale authority; and
(e) they deny calling the land ‘junk’, or badgering her but told her that it was a good offer in all the circumstances, and she agreed to accept it.
On those facts, why should the Court not grant specific performance summarily? The basal principles are established. Specific performance is a discretionary remedy directing a party to a contract to perform obligations under the contract according to its terms. Contracts for the disposition of an interest in land are, more commonly than contracts of any other description, the subject of orders for specific performance: see Meagher, Gummow & Lehane’s, Equity Doctrines and Remedies.[1] If the plaintiff is ready willing and able to complete the contract then that is an exemplification of the maxim that ‘he who comes to equity must come with clean hands’. More so where there is no evidence at all that the plaintiff has somehow contributed to or been unconscientiously involved in the procuration of an improvident transaction. Equity may not decree specific performance if the plaintiff has an adequate remedy at law. But the discretion is not an arbitrary one and where there is a valid contract of a nature which equity ordinarily decrees to be specifically performed, the relief will not be withheld unless for some sound and recognised reason such as delay, or some unconscionable dealing of the part of the plaintiff, hardship or where some other form of order would do justice.
[1]Fifth Edition 654-655.
In an able and valiant submission, Mr Stuckey of counsel submitted that there was a question to be tried whether the ‘mistake’ under which the defendant was here labouring, would result in equity withholding its relief and confining the plaintiff to damages as compensation for the non-fulfilment of the contract. The measure of damages, as a general rule, would be the difference between the value of the property if it had been transferred in accordance with the contract and the price agreed to be paid.
In this case, on the morning of the hearing of the application, the defendant, by her solicitors, saw fit to file an affidavit sworn by her solicitor, exhibiting an ‘Expert Witness Report as at May 2015’ which is also expressed to be ‘returned October 2015’. The reference to ‘as at May 2015’ is to be understood as meaning the valuation as at that month of the contract. But, it appears the valuation was given to the defendant in October 2015, well before the date of settlement under the contract. The report is by Urbis Valuations Pty Ltd and prepared by Mr Brian Dudakov. He gives an estimate of the market value as at 13 May 2015 of $1.5 million, excluding GST. Thus, it appears that at best, damages would be $500,000.
Mr Stuckey’s submissions were not predicated on a mistake in the sense of a vitiating element at common law to the validity of the contract, but equity’s attitude towards a mistake or error when it comes to the exercise of discretion for the availability of a degree for specific performance. In broad terms, equity may look to see if assent was truly lacking due to some mistake, and if so, and depending upon the circumstances, and assuming there is no hardship to the other contracting party, then damages may be an adequate remedy. It all depends on the case. In Dr Spry’s work The Principles of Equitable Remedies,[2] the learned author says:
Specific performance is, as has been seen, a discretionary remedy, and it is well established that the discretionary considerations on which relief is refused may include matters arising through the mistake or error or one or both of the parties. (footnote omitted) Specific performance may hence be refused where there is neither legal mistake leading to avoidance of the material obligations nor matters giving rise to an equitable right of rescission, although where there is an equitable right of rescission specific performance is refused a fortiori. Hence it is sufficient, for the purposes here at hand, to consider merely the ambit of the wider class, that is, of the class of cases where, whatever may be the position as to rescission or other such matters, specific performance cannot be obtained. In these cases it is often found that the party wishing to enforce the performance of the material agreement will not be prevented from establishing such legal rights as he may be found to have; but he is simply refused special assistance in equity.
[2]9th ed at 162-163.
Then this important passage:
So, in relation to hardship, it has been said, ‘the court will not be active in assisting one party to an agreement who has always his remedy in damages to take advantage of the mistake of the other so as to involve him in serious and unforeseen consequences’. (citation omitted) Further, when a misunderstanding or error is relied on by a defendant as giving rise to hardship, it is not sufficient that he can merely show that performance of the agreement would cause him greater inconvenience or is more disadvantageous than he had expected; (citation omitted) he must be able to show that any such inconvenience or hardship would be so oppressive that it would be unjust in all the circumstances – regard being had especially to prejudice to the plaintiff if performing in specie does not take place – to order specific performance. (citation omitted) In deciding whether specific enforcement would be unjust the court also takes into account any right of the plaintiff to obtain damages at law and also its powers to grant compensation or damages in equity. (citation omitted)
Legal authorities have accepted that the role of mistake in the exercise of discretion is unaffected by the fact that the mistake was not contributed to by the plaintiff in any way. But so much depends on the circumstances. The mistake can be unilateral. What must be proved by a party seeking to resist a decree for specific performance is that there would be a hardship to compel them to specifically perform the contract: see Slee v Warke.[3] Before then, in Goldsbrough, Mort and Co Limited v Quinn[4] the High Court endorsed the view that:
[3](1952) 86 CLR 271 at 278-279.
[4](1910) 10 CLR 674 at 687.
A court of equity will not force a party to perform a contract if it is completely satisfied that he in fact never intended to enter into it, and that a hardship amounting to injustice would be inflicted on him by holding him to his bargain.
The question is whether it would be highly unreasonable to enforce the agreement specifically. The Court in Goldsbrough referred to a statement of the principle in Preston v Luck[5] that:
It is very true that in some cases, if the party against whom the specific performance is sought to be obtained satisfies the court by clear evidence that what he on the terms of the contract appears to have contracted for was not in his mind the thing in respect of which he was bargaining, the court will refuse specific performance, but that is only because in cases of specific performance the court does not grant that special equitable relief if it finds, for any reason, that it would be what is called a hardship or unreasonable to compel the defendant specifically to perform the contract.
[5]27 Ch D 497 at 506.
On the overwhelming facts of this case I formed the view that there was no real prospect of successfully persuading a court to decline to order specific performance. Equity does not step in in cases of folly, imprudence or want of care or to deprive an innocent party of the benefit of a contract when the so called mistake was the product of interaction between the defaulting party and her own advisors. And that, I think, is what has happened here. I do not think this can be categorised as a case of mistake. The evidence simply cannot support such a finding. There is no evidence about what the mistake was. The highest the vendor puts it is that she signed it when it was presented to her by her own agents at a time when there was a negotiation for the sale. And, she says, she did it to stop the agents badgering her. Nor is it a case where there was a vulnerability, or an exploitation of that vulnerability. Moreover, the glaring evidence is that the defendant, after instructing her solicitors to not proceed with the contract, then changed her mind and was willing to proceed with it. None of that is explained. It is hard to see how that can be overcome. The irresistible conclusion is that the vendor regretted making the decision to sell.
The technique of equity in giving or declining the special relief of specific performance looks to the proportionality of the hardship. The opinion evidence belatedly adduced about the market value of the land does not of itself show hardship by revealing that she might have got more than for which she agreed to sell it. Above all else , the plaintiffs have on the faith of the contract, sold two items of their own property in order to complete the contract. I think that fact, together with the most feeble facts by which she claims to not have properly assented to the contract, would make the hardship on refusing a decree of specific performance greater than the ostensible hardship on her in realising she missed out on the sale of her land for a price greater than she agreed to.
It is for those reasons, the Court formed the view that there was no real prospects of defeating the claim for specific performance and granted the application for summary judgment.
I ask that counsel in consultation prepare a draft order granting a decree for specific performance with ancillary orders to carry out the dealing. Further, these orders can also be used as the occasion to make procedural directions for the conduct of the Third Party proceedings. If consensual I would be willing to make these orders on the papers.
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