Mansfield v Ghadie

[2008] FMCA 1489

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MANSFIELD v GHADIE & ANOR [2008] FMCA 1489

BANKRUPTCY – Settlement of Real Property Transaction shortly before sequestration order – full contract price for properties not paid – application by Trustee for orders for monetary judgment, interest and costs – declarations that bankrupt had a vendor’s lien; that lien vested in the trustee; and the trustee is entitled to an order for sale.

Bankruptcy Act 1966 (Cth) ss.120, 121, 122, 181A

Davies v Little John (1923) 34 CLR 174
Fitz-Gibbon v Khoury (Unreported, Supreme Court of New South Wales Equity Division, Powell J, 1 March 1985)
Hewett v Court (1983) 57 ALJR 211
Lysaght v Edwards (1876) 2 Ch D 499
Reliance Finance Corporation Pty Ltd v Heid & Anor [1982] 1 NSWLR 466

Applicant: DAVID IAN MANSFIELD AS TRUSTEE OF THE BANKRUPT ESTATE OF SALIBA HANNA GADIEH

First Respondent: ELIAS GHADIE

Second Respondent: JOHN ELIAS GHADIE

File number: SYG 3242 of 2007

Judgment of: Lloyd-Jones FM

Hearing date: 26 June 2008

Delivered at: Sydney

Delivered on: 31 October 2008

REPRESENTATION

Counsel for the Applicant: Mr Cutler

Solicitors for the Applicant: Access Business Lawyers

First Respondent: No appearance

Second Respondent: No appearance

ORDERS

1. Short minutes of order be prepared and placed before the Court on Friday 7 November 2008.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 3242 of 2007

DAVID IAN MANSFIELD AS TRUSTEE OF THE BANKRUPT ESTATE OF SALIBA HANNA GADIEH

Applicant

And

ELIAS GHADIE

First Respondent

JOHN ELIAS GHADIE

Second Respondent

REASONS FOR JUDGMENT

The proceedings

1. The further amended application filed in Court on 12 February 2008 seeks the following orders:

   1. The first respondent pay interest on the principal sum of $118,039.50 from 2 February 2006 to the date of payment in accordance with section 51A of the Federal Court of Australia Act 1976.

   2. The second respondent pay interest on the principal sum of $67,695.06 from 2 February 2006 to the date of payment in accordance with section 51A of the Federal Court of Australia Act 1976.

   3. A declaration that the transfer of the real property being Lot 1 in Deposited Plan 1091424 from the Bankrupt to the First Respondent is void against the applicant pursuant to s.120 of the Bankruptcy Act, 1966.

   4. A declaration that that the transfer of the real property being Lot 2 in Deposited Plan 1091424 from the Bankrupt to the Second Respondent is void against the Applicant pursuant to s.120 of the Bankruptcy Act, 1966.

   5. A declaration that the transfer of the real property being Lot 1 in Deposited Plan 1091424 from the Bankrupt to the First Respondent is void against the Applicant pursuant to s.121 of the Bankruptcy Act, 1966.

   6. A declaration that the transfer of the real property being Lot 1 in Deposited Plan 1091424 from the Bankrupt to the Second Respondent is void against the applicant pursuant to s.121 of the Bankruptcy Act, 1966.

   7. A declaration that the transfer of the real property being Lot 1 in Deposited Plan 1091424 from the Bankrupt to the First Respondent is void against the Applicant pursuant to s.122 of the Bankruptcy Act, 1966.

   8. A declaration that the transfer of the real property being Lot 1 in Deposited Plan 1091424 from the Bankrupt to the Second Respondent is void against the applicant pursuant to s.122 of the Bankruptcy Act, 1966.

   9. A declaration with respect of the contract for sale of land dated 16 January 2006 between Saliba Hanna Gadieh and the First Respondent, that Saliba Hanna Gadieh is an unpaid seller in the amount of $118, 039.50 and is entitled to a lien over the property situate at 20 Albury Street, Yagoona NSW 2199.

   10. A declaration that, upon the Applicant’s appointment as trustee in bankruptcy of Saliba Hanna Gadieh, the said lien (with respect to 20 Albury Street) vest in the applicant.

   11. An order that 20 Albury Street, Yagoona be sold and the proceeds applied in satisfaction of amounts owing to the applicant.

   12. A declaration, with respect of the contract for sale of land dated 16 January 2006, between Saliba Hanna Gadieh and the second respondent, that Saliba Hanna Gadieh is an unpaid seller in the amount of $67,695.06 and is entitled to a lien over the property situate at 20A Albury Street, Yagoona NSW 2199.

   13. A declaration that, upon the applicant’s appointment as trustee in bankruptcy of Saliba Hanna Gadieh, the said lien (with respect to 20A Albury Street) vest in the applicant.

   14. An order that 20A Albury Street, Yagoona be sold and the proceeds applied in satisfaction of amounts owing to the applicant.

   15. The first and second respondents pay the applicant’s costs of these proceedings.

   16. Such further or other orders in respect of the sale as this Honourable Court thinks fit.

Evidence

1. The following evidence has been filed in these proceedings:

   a)Affidavit of Matthew David Wells, solicitor sworn 17 October 2007;

   b)Affidavit of Matthew David Wells, sworn 25 June 2008;

   c)Affidavit of David Ian Mansfield, liquidator sworn 11 February 2008, filed 20 March 2008.  This Exhibit “DM-1” was annexed to the affidavit.  This affidavit was read.

Background

1. A broad outline of what occurred, so far as relevant to this application, was as follows. Mr Saliba Hanna Gadieh was declared bankrupt on 24 February 2006. The Official Receiver was initially appointed trustee in bankruptcy on 24 February 2006 following the making of a sequestration order by Registrar McIllhatten in proceedings No SYG 3604 of 2005. David Ian Mansfield was appointed the replacement trustee of the bankrupt estate of Saliba Hanna Gadieh pursuant to s.181A of the Bankruptcy Act 1966 (Cth) (“the Act”) on 22 March 2006.

2. The petitioning creditor, a Mr Nick Mikhael commenced proceedings in the District Court of New South Wales and ultimately obtained a judgment against Mr Salaba Hanna Gadieh for $56,311.29. The Bankruptcy Notice (NN3165/05) was served on Mr Salaba Hanna Gadieh on 30 August 2005. The amount sought was $87,822.33. Mr Gadieh failed to pay this amount and committed an act of bankruptcy on 6 December 2005. Mr Mikhael filed a creditor’s petition on 8 December 2005. The relation back period for the purposes of s.122 of the Act commenced on 8 June 2005.

3. Mr Mansfield in his capacity as trustee conducted an investigation into the affairs of Mr Salaba Hanna Gadieh including obtaining a copy of a file from Sattouts Legal.  During the course of correspondence between the trustee’s solicitors, Access Business Lawyers, and Sattouts Legal it became apparent that Sattouts Legal acted on behalf of Mr Salaba Hanna Gadieh as well as two of his nephews Elias Ghadie and John Elias Ghadie (who are the respondents in these proceedings) in relation to a conveyancing transaction which is described below.

4. On or about 5 March 2003 Saliba Hanna Gadieh became the registered proprietor of the whole of the land referred to in the Certificate of Title Folio Identifier 12/27875 known as 20 Albury Street, Yagoona NSW(Exhibit DM-1,8).  In December 2005, Folio Identifier 12/27875 was cancelled and new folios were created for Lots 1 & 2 in the deposited plan 1091424. (Exhibit DM-1, 9,10)

5. Mr Saliba Hanna Gadieh agreed to sell Lot 1 in deposited plan 1091424 (known as 20 Albury Street Yagoona) to his nephew Elias Ghadie (first respondent in these proceedings).  A written contract of sale was exchanged on 16 January 2006 which recorded a purchase price as $475,000 (Exhibit DM-1, 18).  Completion of the contract took effect on 2 February 2006 (Exhibit DM-1, 19).  It was alleged Elias Ghadie breached the contract by only paying $356,960.50 in consideration for the sale.  It is contested that the $118,039.50 remaining is still owing to Mr Saliba Hanna Gadieh.

6. Mr Saliba Hanna Gadieh agreed to sell Lot 2 in deposited plan 1091424 (known as 20A of Albury Street, Yagoona) to John Elias Ghadie (the second respondent in these proceedings).  A written contract for the sale of the land was exchanged on 16 January 2006 which recorded the purchase price of Lot 2 at $450,000 (Exhibit DM-1, 21).  Completion of the contract took effect on 2 February 2006 (Exhibit DM-1, 22).  It is alleged that Mr John Elias Ghadie only paid $382,304.94 in consideration for the sale, thereby breaching his contract.  John Elias Ghadie still owed Saliba Hanna Gadieh the sum of $67,695.06, the balance of the purchase price.

7. Mr John Elias Ghadie claims that he was retained by Mr Saliba Hanna Gadieh to carry out plumbing works on Lots 1 and 2 but was not remunerated.  The agreement was that any remuneration from the plumbing work was to be reduced from the contract price.  Mr Gadieh had a motor vehicle accident and was left incapacitated for approximately six months.  Subsequently, Mr John Elias Ghadie was retained by Mr Gadieh for the management of his business affairs while he was incapacitated.  Mr John Elias Ghadie states that he was not remunerated for the management of the business and states that any remuneration for the management of the business was also to be reduced from the contract price.  Mr John Elias Ghadie’s financial contribution, the plumbing work and the management of the business affairs work amounted to an outstanding balance owed under the contract price.  This amounted to the full consideration of the contract price upon completion (Exhibit DM-1, 26).

8. On 12 October 2006 Mr David Ian Mansfield in the capacity as trustee for the property of Mr Saliba Hanna Gadieh filed a Statement of Claim in the District Court of New South Wales (proceeding number 4931/2006) claiming the sum $93,039.50, interests costs from Elias Ghadie and the sum of $92,695.06, interest and costs from John Elias Ghadie (Exhibit DM-1, 24). 

9. In the defence filed on 21 June 2007 (Exhibit DM-1, 26) both respondents claim that on or about May 2005 an agreement was reached between Elias Ghadie, John Elias Ghadie and Saliba Hanna Gadieh for the sale of the property known as 20 Albury Street, Yagoona.  The agreement was conditional upon:

   a)the purchaser of the property was subject to council consent to develop the land;

   b)the development of the land involved the sub-division of the property into two separate lots namely Lot 1 and Lot 2 respectively;

   c)separate dwellings were to be erected on both Lot 1 and Lot 2 subject to Council consent; and

   d)any financial contribution made by Elias Ghadie and John Elias Ghadie was to be considered a partial payment towards the purchase price of Lot 1 and Lot 2 respectively and that amount would be deducted from the purchase price on settlement. 

   Elias Ghadie admitted to making a financial contribution in the amount of $356,960 to Saliba Hanna Gadieh for the construction of a single dwelling on Lot 1.  John Elias Ghadie admitted to making a financial contribution in the amount of $382,304.94 to Saliba Hanna Gadieh for the construction of the single dwelling on Lot 2.

10. A notice of discontinuance was filed in the District Court proceedings and contained the following terms:

    1) The plaintiff is to commence proceedings in respect of the same cause of action in the Federal Magistrates Court within 21 days, adding in only any claims that may be available to the Plaintiff under the Bankruptcy Act, 1966.

    2) The parties agree that the costs of these proceedings to date be considered costs in the cause in respect of the Federal Magistrates Court proceedings and the parties agree that they will treat the costs of these proceedings as being payable in accordance with any cost orders made in the Federal Magistrates Court, except that the Plaintiff will pay to the Defendants costs thrown away in the agreed sum of $1,350 within 21 days.  (Affidavit of Matthew David Wells, Annexure “C”)

11. The initial application was filed in the Federal Magistrates Court of Australia on 18 October 2007.  An amended application was subsequently filed on 12 November 2007 and a further amended application on 12 February 2008 (which is reproduced in paragraph [1] above).  Mr Elias and Mr John Elias Ghadie filed a Response dated 22 January 2008 which pre-dates the further amended application but effectively pleaded the general issues.  Nothing has been filed on by respondents in response to the third amended application.

Adjournment application

1. Mr Cutler drew the Court’s attention to a facsimile received from Farah Lawyers for the Ghadie’s addressed to Access Business Lawyers (representing Mr Mansfield) dated 19 July 2008.  The contents of that correspondence indicate that the Ghadie brothers were in Lebanon and were requesting consent to an adjournment.  The letter states:

   We refer to the above matter.

   We confirm that this matter is listed for hearing next week on Thursday 26 June and Friday 27 June 2008.

   We also confirm that both our clients have travelled overseas to Lebanon last Sunday to visit their dying grandmother and will return on 25 July 2008.

   We also confirm that our clients were waiting on confirmation for the peace talk in Lebanon which took place in the past two weeks and after receiving confirmation that they can travel to Lebanon and their grandmother was very ill and requested to see them prior to her death, they decided to travel on 15 June 2008.

   We confirm our instructions that our client tried to delay the travel but could not find any booking until late September 2008 and they were concerned that it will be too late to see their grandmother. 

   We confirm that we have faxed a letter to the Court and asked for an adjournment to a date which falls after 25 July 2008. (Affidavit of Matthew David Wells – Annexure “G”)

2. Access Business Lawyers responded to Farah Lawyers on 20 June 2008 as follows:

   I refer to your previous correspondence in relation to this matter, in particular your letter dated 19 June 2008.

   Our client does not require your clients to be present for cross-examination at next week’s hearing.  In those circumstances there is no reason why the trial cannot proceed and our client does not consent to an adjournment.  (Affidavit of Matthew David Wells – Annexure “H”)

3. In a letter from Farah Lawyers to Access Business Lawyers dated 23 June 2008 Mr Elie Farar indicated that “we note that we have no further instructions to act for the hearing of this matter”.  I note this matter was originally filed in the District Court of New South Wales on 12 October 2006 (DM-1, 24).  Those proceedings were discontinued and the proceedings in this Court were filed on 18 October 2007.  The matter was referred to me by Registrar Hedge on 8 April 2008.  On that date I set the matter down for final hearing on 26 and 27 June 2008.  Both parties were represented and present in Court on that occasion.  Since that date Access Business Lawyers have filed material relevant to the scheduled hearing.  However, nothing has been received from Farar Lawyers on behalf of their clients. 

4. There was no appearance by anyone on behalf of the Ghadie brothers at the hearing.  Their solicitors, Farar Lawyers, have indicated in correspondence that they had no instructions to appear.  Despite orders being made by Registrar Hedge on 12 February 2008 for the respondents to file an amended response and evidence on or before 11 March 2008 nothing has been forthcoming.  No evidence was filed on behalf of either the respondents and Counsel for Mr Mansfield indicated that neither of them were required for cross examination.  Therefore, I am satisfied that it is appropriate to proceed with the hearing without granting an adjournment.

Applicant’s submissions

1. Mr Cutler, appearing for the Trustee Mr Mansfield, indicated that the further amended application filed on 12 February 2008 seeks numerous orders in the alternative including orders in relation to voidable transfers or monetary judgments.  Mr Cutler advised the Court that his instructions were to press for orders for monetary judgment (which appear in paragraphs one and two) and that the respondent pay the unpaid amount of the contract (which appears in paragraphs 9, 10 and 11 for Lot 1 and paragraphs 12, 13 and 14 in respect of Lot 2).  Mr Cutler asserts that the bankrupt had an unpaid vendor’s lien .This is established because the full contract price has not been paid and Mr Gadieh was the contracting party.  Mr Cutler also asserts that the lien vests in the trustee in bankruptcy on appointment and the lien should be enforced by an order for sale.

2. Mr Cutler submits that the contracts in relation to 20 and 20A Albury Street were exchanged on 16 January 2006 which was approximately five weeks after the Creditor’s Petition was filed on 8 December 2005.  The Creditor’s Petition was first returnable on 27 January 2006.  The completion of both sales occurred on 2 February 2006 (Lot 1; DM-1, Tab 19; Lot 2; DM-1, Tab 22).  Consequently the duration between the date the contract commenced and completion was a couple of weeks and completion occurred just three weeks before a sequestration order was made.

3. Mr Cutler contends that the purchase price in respect to both lots was not paid and an amount less than the contract price was paid.  In the case of Lot 1, the price was $475,000 but only $356,960.50 was paid (affidavit of Mr Mansfield, paragraphs 26, 31).  In respect to Lot 2, the agreed purchase price was $450,000 but only $382,304.94 was paid (affidavit of Mr Mansfield, paragraph 36, 41).  Mr Cutler refers to correspondence from Sattouts Legal to Messrs Gadieh, E Ghadie and J E Ghadie regarding the subdivision and transfer of the properties known as 20 and 20A Albury Street, Yagoona.  Attached to that letter is a settlement sheet headed Tax Invoice (Exhibit “DM-1”, Tab 20).  That states that the total debits was $739,578.43 which is the sum of the two amounts that Elias Ghadie and John Elias Ghadie paid whereas the combined total of the purchase prices of $475,000 and $450,000 would be $925,000.  Mr Cutler submits that this is the first evidence of the under value of the purchase price. 

4. Mr Cutler submits that Mr Elias Ghadie and Mr John Elias Ghadie have admitted that they paid less than the contract price, demonstrated by a brief review of the proceedings in this matter.  The proceedings first commenced in the District Court of New South Wales where Mr Mansfield as trustee sued for the unpaid amount of these contracts.  Issues were raised by the respondents which led the legal advisors of Mr Mansfield to believe there some bankruptcy issues and equity issues might arise which the District Court would not have the power to deal with.  The District Court proceedings were discontinued by consent and it was agreed that costs in those proceedings would be costs in the proceedings in this Court. 

5. Mr Cutler indicated that the Ghadie’s filed affidavits in the District Court proceedings which have been reproduced in Exhibit “DM-1” (Mr Elias Ghadie, Tab 28; Mr John Elias Ghadie, Tab 29).The relevant paragraphs of Mr Elias Ghadie’s affidavit are 20-22 which state:

   20. On the exchange of contracts the solicitor has marked the deposit as being $50,000.00 on each of the properties with the knowledge that this amount was part of the monies that Saliba owed to me and John.  Annexed and marked with the letter “C” is a copy of a letter from Sattouts Legal confirming the above.

   21. On settlement Saliba and myself agreed that the total amount he owed me was $83,350.00 including the amount he owed me for 2001 which was determined to be $50,000.00 after selling the property at Condell Park.  We also agreed that he pays all legal costs involved in this matter.

   22. Sattouts Legal, on settlement deducted all the monies owed to me and the balance was paid to the mortgagee and to other as per normal transaction. On settlement Saliba instructed Sattouts Legal to have similar amounts deducted from my share and John’s share, and this to be fair on both of us as I always complaining that the purchase price was above market value.

   Mr Cutler submits that the above paragraphs are effectively an admission of what occurred in this matter.  The matter settled for less than the contract price, ostensively on the basis that he was owed other money by the bankrupt, Mr Saliba Hanna Gadieh.

1. The affidavit of John Elias Ghadie (Tab 29) the relevant paragraphs then 18 through to 20 state:

   18. On the exchange of contracts the solicitor has marked the deposit as being $50,000.00 on each of the properties with the knowledge that this amount was part of the monies that Saliba owed to me and to Elias.  Annexed and marked with the letter “C” is a copy of a letter from Sattouts Legal confirming the above.  At all times I thought that we paid more than market price for the duplex.

   19. On settlement Saliba and myself agreed that the total amount he owed me was $96,750.00 including the amount he owed me in 2001 which was determined to be $50,000.00 after selling the property at Condell Park.  We also agreed that he pays all legal costs involved.

   20.  Sattouts Legal, on settlement was supposed to deduct all the monies owed to me and the balance was paid to the mortgagee and to other as per normal transaction.  Sattouts Legal was also instructed to take into account that I have lived with my family in the unit for nearly two years prior to settlement.  Accordingly the amount received on settlement was less than the amount on the contract.  Annexed and marked with the letter “E” is a copy of a letter from Sattouts Legal to that effect.

2. Mr Cutler submits that these paragraphs constitute an admission that the purchase price was not paid on the basis of the existence of other debts owed by the bankrupt, Mr Gadieh. 

3. Mr Cutler indicated to the Court that his client was seeking orders for the monetary judgment (paragraphs 1 and 2 of the further amended application) that both Elias Ghadie and John Elias Ghadie pay the unpaid amount of the contracts.  Mr Cutler asserts that because the contract price has not been paid, the bankrupt Mr Gadieh had an unpaid vendor’s lien because he was the contracting party.  That lien vested in Mr Mansfield on his appointment as trustee in bankruptcy and that the lien should be enforced by an order for sale. 

4. In support of this contention Mr Cutler referred the Court to the decision in Reliance Finance Corporation Pty Ltd v Heid & Anor [1982] 1 NSWLR 466 per Hope, Glass and Mahoney JJA. In that decision his Honour Hope JA (with Glass and Mahoney JJA agreeing) considers the relevant authorities in respect to the doctrine of a vendor’s lien. At 477 his Honour refers to in Davies v Little John (1923) 34 CLR 174 at p.185 Isaacs J said:

   Heid claimed, and his Honour held, that in these circumstances he has a vendor’s lien over the property in the sum of $100,000.  In Davies v Littlejohn (1923) 34 CLR 174, at p 185 Isaacs J, said:

   “The doctrine of ‘vendor’s lien’ is one by equity as part of a scheme of equitable adjustment of mutual rights and obligations applying, unless negatived, to every ordinary contract of sale of land.  In re Thackwray and Young’s Contract (1888) 40 Ch. D. 34, at p.38 Chitty J says ‘As is well known, where there is a contract for sale which is valid and an be specifically performed the equitable interest in the lands at once passes to the purchaser subject to his payment of the money, and on the other hand, the vendor has a lien on the land for the unpaid purchase-money.  That is the law, and it is scarcely necessary to refer to Shaw v Foster (1872) L.R. 5H.L. 321, for that proposition’.

   That this is the correct principle has been stated on many occasions; see, eg, Lysagt v Edwards (1876) 2 Ch D 499.  On the other hand in Davies v Littlejohn (1923) 34 CLR 174, at p.181, Knox CJ said:

   “The rule to be applied seems to be that, where a vendor delivers possession of land to a purchaser without receiving the purchase-money, equity gives the vendor a lien on the land for the money unless there is something in the transaction itself, or in the circumstances, leading to a clear and manifest inference that the intention of the parties is otherwise (Dixon v Gayfere (1857) 1 De G. & J. 655; 44 E.R. 878; Winter v Lord Anson (1872-28) 3 Russ. 488; 38 E.R. 658)”.

   A similar view is to be found in the judgment of Rich J in Wossidlo v Catt (1934) 52 CLR 301, at pp.307, 308, immediately proceeding the passage which I have earlier quoted:

   “In equity a contract for the sale of land passes the property to the purchaser, and the vendor has a lien on it for the price which becomes operative as from the time at which the contract ought to have been completed, and continues until the price is paid, unless a contrary intention appears.  That intention is to be gathered from the words of the contract and the inferences from the nature of the transaction in question”.

   The correct view would seem to be that in theory the lien may arise when an enforceable contract is entered into, but that the nature of the remedies available to the vendor as a result of the lien varies depending upon the extent to which the contract has been performed.  However, even though it may arise earlier, it certainly arises or exists when completion has taken place and part of the purchase price by some means other than payment on completion, as, for example, by the giving on completion of a covenant to pay an annuity to the vendor: Wossidlo v Catt.

5. In Lysaght v Edwards (1876) 2 Ch D 499 at p.506 the issue of equitable lien is described as follows:

   It is that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase – money a charge or lien on the estate for the security of that purchase – money and a right to retain possession of the estate until the purchase – money is paid, in the absence of express contract as to the time of delivering possession.  In other words, the position of the vendor is something between what has been called a naked or bear trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events entitled to what the unpaid vendor is, viz, possession of the estate and a charge upon the estate for his purchase-money.  Their positions are analogous…another way.  The unpaid mortgagee has a right to foreclose, that is to say, he has a right to say to the mortgagor, “Either pay me within a limited time, or you lose your estate”, and in default of payment he became absolute owner of it.  So, although there has been a valid contract of sale, the vendor has a single right in a Court of Equity; he has a right to say to the purchaser, “Either pay the purchase – money, or lose the estate”.

6. In support of the claim that the lien should be enforced by an order for sale Mr Cutler referred the Court to the decision in Fitz-Gibbon v Khoury which is an unreported judgment in the Supreme Court of New South Wales Equity Division by Powell J handed down on 1 March 1985.  In that decision his Honour states:

   The normal remedy for an unpaid vendor is an action for the price, or – which is in the substance the same – a suit for specific performance, or, strictly, for performance in specie (see, for example, Pell v Northhampton and Bramburg Junction Railway co (1866) LR 2 Ch App 100).  However, in cases in which the vendor can demonstrate that he is not otherwise able to obtain satisfaction (Pell v Northhampton and Bramburg Junction railway Co (supra)), a vendor may commence proceedings for the enforcement of his lien by judicial sale (see, for example, Hope v Booth (1830) 1 B & Ad 498) in which proceedings, if it be appropriate, a receiver and manager be appointed pending sale (see, for example, Bishop of Winchester v Midhants Railway Co (1867) LR 5 Eq 17)

Consideration

1. One of the most important features of the vendor’s lien is the ability to foreclose upon the property and recover the monies due from those funds.  Generally a vendor’s lien is a right against property which arises automatically by implication of equity to secure the discharge of a debt. This arises by an operation of law and is not dependent upon contract or upon possession.  A vendor’s lien may, in general, be enforced in the same way as any equitable charge, namely, by sale pursuant to court order.  A vendor’s lien is a lien which equity recognises as arising in favour of a vendor to secure the actual rights to payment of the balance of purchase price under a contract of sale of real estate. 

2. In this matter title has passed and part of the purchase price remains unpaid.  The lien is not lost if the vendor executes an absolute conveyance and parts with the title deeds and gives the purchaser possession.  The lien expires when the vendor receives the consideration he has bargained for.

3. In Hewett v Court (1983) 57 ALJR 211 his Honour Gibbs CJ made a general observation at p.213 in respect of liens in the following terms:

   A vendor’s lien for unpaid purchase money has been said to be founded on the principle that a person, having got the estate of another, shall not, as between them, keep it, and not pay consideration: Mackreth v Symmons (1808) 15 Ves. 329, at 340; 33 E.R. 778, at p.782.

   A vendor's lien for unpaid purchase money has been said to be founded on the principle that “a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration”: Mackreth v Symmons (1808) 15 Ves 329 at 340 ; 33 ER 778 at 782. The lien of a purchaser for the purchase money that he has paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a 46 ALR 87 at 91purchase price will not be allowed to keep the price if he fails to make the conveyance. At all events, the rule has been said to be founded on “solid and substantial justice”: Rose v Watson (1864) 10 HL Cas 672 at 684 ; 11 ER 1187 at 1192. In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor (cf Combe v Swaythling (Lord) [1947] Ch 625 at 628) — the lien is the security for the money which is justly due.

4. In Davies v Little John (1923) 34 CLR 174 his Honour Knox CJ at [181] stated:

   The rule to be applied seems to be that, where a vendor delivers possession of land to a purchaser without receiving the purchase money, equity gives the vendor a lien on the land for the money unless there is something in the transaction itself, or in the circumstances, leading to a clear and manifest interference that the intention of the parties is otherwise…

5. Mr Cutler has referred the Court to the decision in Reliance Finance Corporation Pty Ltd v Heid (Supra) in which his Honour Hope JA deals with the principles of an unpaid vendor’s lien.  The key part of his Honour’s judgment is reproduced above at [25].

6. Mr Cutler submits that the parties established their intention in relation to the payment of the purchase price on the cover pages of the respective contracts (DM-1) at [18] and [21].

7. I accept Mr Cutler’s submissions in respect to the evidence that the contracted purchase price in respect to both lots was not paid and the amount received was less than the contracted amount.  The affidavits of Elias Ghadie and John Elias Ghadie contain admissions that the full purchase price had not been paid.  There is nothing within the contract for sale that suggests that part of the contract price was to be satisfied by a set off in the form of an allowance for outstanding debts between the vendor and the purchaser.  Similarly the affidavits of Elias Ghadie and John Elias Ghadie contain claims of amounts owed to them by Saliba Hanna Gadieh but neither of them appeared to give evidence and be cross-examined on the issue.

8. The result, in my view is that the vendor was unpaid to the extent of $118,039.50 in respect of Lot 1 and $67,695.06 in respect of Lot 2 and that the vendor is entitled to enforce vendor’s liens for those amounts.  Submissions have been made to me by Mr Cutler as to the manner in which those liens may be enforced.  However, I will make no further comment on those submissions at this time but rather direct that short minutes of order be prepared and placed before the Court on 7 November 2008.  Any argument as to the appropriateness or form of those orders may be made at that time. 

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM

Associate: 

Date: 31 October 2008