Mudri v Jandson (Qld) Pty Ltd

[2023] QSC 239

SUPREME COURT OF QUEENSLAND

CITATION:

Mudri v Jandson (Qld) Pty Ltd [2023] QSC 239

PARTIES:

MIROSLAV MUDRI

(Plaintiff)

v
JANDSON (QLD) PTY LTD ACN 134 304 797

(Defendant)

FILE NO:

BS 12575 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

27 October 2023

DELIVERED AT:

Brisbane

HEARING DATE:

23 & 24 October 2023

JUDGE:

Freeburn J

ORDERS:

1.   The proceeding be dismissed.

2. Caveats numbered 721020998, 721021027 and 721868070 (over the properties pleaded in paragraph 3 of the amended statement of claim) be removed pursuant to s 127 of the Land Title Act 1994.

3.   The parties be heard on costs.

CATCHWORDS:

REAL PROPERTY – CAVEATS – where the plaintiff and the defendant are property developers – where the plaintiff and the defendant discussed a joint enterprise – where the plaintiff contends a completed agreement was entered into and lodged caveats over the properties to secure a caveatable interest – whether a completed agreement was entered into by the parties – whether the plaintiff has a caveatable interest

COUNSEL:

S Fisher for the plaintiff (on direct brief)
The defendant was self-represented by its director, Mr Laverick

SOLICITORS:

No solicitors were involved in this matter

Introduction

1. The plaintiff, Mr Mudri, is a property developer. In 2015 and 2016 he was under some financial pressure. He accepted the invitation of another property developer and friend, Mr Laverick, to share an office space.

2. The two discussed some joint enterprises, including the marketing of some properties that fell into these three broad categories:

   (a)North Coast properties – that is five properties that Mr Mudri or his companies owned on the Sunshine Coast;

   (b)The Chinchilla/Miles portfolio of properties in the Chinchilla and Miles areas which comprised 15 lots owned by Mr Mudri’s company, Smart Group Trading Company Pty Ltd, and 38 lots owned by another of Mr Mudri’s companies, MSM Developments Pty Ltd – which had fallen into liquidation;

   (c)The Hurse Street properties comprising three townhouses in Chinchilla that had been already transferred by Mr Mudri (or his company) to one of Mr Laverick’s companies, Easy Stay Bookings Pty Ltd.[1]

   [1]The transfer to Easy Stay in 2015 is discussed below. Mr Mudri described this as a ‘babysitting’ arrangement.

3. In February 2016, Mr Mudri’s company, Mudri Holdings Pty Ltd, and Mr Laverick’s company Hill Street (Qld) Pty Ltd, entered into a deed of agreement.  The deed was intended to record that Mr Laverick’s company agreed to lend $1.7M to Mudri Holdings so that Mudri Holdings could pay out its existing mortgages over five North Coast properties held by the National Australia Bank and pay for work to obtain development approval.[2]

   [2]The debt owed to NAB was $1.5M and $200,000 was the expected cost of obtaining a development approval.

4. In a sign of things to come, the February 2016 deed records the exact opposite of what was intended. The deed records that Mudri Holdings agreed to lend the money to Hill Street. And, it was not just the drafting of the deed that was mistaken. The deed provided that Hill Street’s security for the loan was consent caveats lodged over the five North Coast properties. The caveats lodged were not consent caveats and so the security that was held by Hill Street lapsed after three months.

5. Mr Mudri claims that three months after the execution of the deed, in May 2016, there was another more detailed agreement, partly in writing and partly oral. He says that the written part of the May 2016 agreement, and its substantive terms, are set out in an unsigned “Terms of Agreement” document. The effect of the agreement contended for by Mr Mudri was to plan for the disposal of three groups of properties and for Mr Mudri and Mr Laverick to each take a 50:50 share of the net proceeds.

6. Mr Laverick disputes that agreement. He contends for a different agreement which only encompassed the North Coast and Hurse Street properties, but not the Chinchilla/Miles properties.

7. In order to prosecute his interest under the agreement Mr Mudri has lodged caveats over the three remaining properties in the Chinchilla/Miles group of properties. He claims that, pursuant to the agreement, he has a 50% interest in those properties. This proceeding was brought to enforce those caveatable interests.

The Issues

1. And so, the issues for resolution fall into three categories:

   (a)Was there an agreement concluded between the parties in May 2016?

   (b)If so, what was the content of, and who were the parties to, that agreement?

   (c)Was that agreement breached and, if so, by who and what are the consequences of, and remedies for, any such breach?

2. Issues (a) and (b) are interrelated: it is necessary to consider the fact of any agreement at the same time as examining the content of the agreements contended for by Mr Mudri and Mr Laverick.

Was there a Concluded Agreement?

1. The “Terms of Agreement” document prepared in May 2016 is a scrappy document and a flimsy foundation for the argument that the parties arrived at a concluded agreement.  For the following reasons I find that there was no concluded agreement in the terms of the document or even substantially in terms of that document:

   (a)The document is unsigned. The parties plainly contemplated a signed document would record their bargain – especially as the deal involved the sales of a number of blocks of land, and the parties had – only three months earlier – recorded a loan for one of the three groups of properties in an executed deed of agreement;

   (b)The document is a draft with numerous handwritten alterations and markings.[3]  Some are cosmetic alterations.  Others are substantive.  For example, the last sentence in paragraph 1 reads: “Laverick is currently processing a Development Application over the Buderim property and will incur further outlays which are capped at $50,000”. The handwritten alterations have crossed out the figure of $50,000 and added a question mark.  That strongly suggests a failure to agree on the cap – which, of course, was contemplated as a part of the overall deal;[4]

   (c)Some of the notations are positive. For example, there are ticks in the margin adjacent to paragraphs 1 to 6. There are no ticks adjacent to the later paragraphs and paragraph 12 has two large question marks adjacent to that paragraph, suggesting that there was no acceptance of that paragraph;

   (d)Some parts of the document are either unintelligible, or do not make sense, or at least have a meaning that is unclear.  Paragraphs 1, 7 and 13 are examples;

   (e)Some vital information is missing. For example, in paragraph 12 the potential buy-out is at a value “that shall be agreed”. And paragraph 13 contemplates a transfer of the Hurse Street properties from Easy Stay Bookings Pty Ltd, one of Mr Laverick’s companies, to Mr Mudri or his nominee.[5] However, that transfer is to occur upon payment in full of the debts at a price that is not specified; [6]

   (f)The document is unclear as to the contracting parties. Mr Laverick and Mr Mudri are personally named as the parties to the Terms of Agreement but the corporate bodies covered by the agreement are not clear.  One of Mr Mudri’s companies, Smart Group Trading Pty Ltd, owned 15 of the Chinchilla/Miles properties. But that company’s name – or at least a very similar name – has been crossed out by the handwritten alterations;

   (g)Even if one assumes that the agreement was intended to bind Mr Mudri and Mr Laverick personally, and to require them to cause their corporate entities to act in accordance with the agreement, the problem is that, for it to be effective, the agreement needs to bind the corporate entities. For example, for clause 13 to be effective, Easy Stay would need to be bound to convey the Hurse Street properties to Mr Mudri or his nominee;

   (h)There is an absence in the evidence of conduct which suggests that the parties were acting in accordance with the Terms of Agreement document. Neither party has been shown to conduct themselves by reference to the Terms of Agreement – this aspect is discussed in more detail below;

   (i)The Terms of Agreement document purports to deal with transfers of land – and, in the case of the Hurse Street properties, re-transfers of land already transferred by means of written transfer documents. Both Mr Mudri and Mr Laverick are experienced property developers.  In that context, it would be surprising if they were content to proceed with sales of land on the basis of an unsigned document with significant shortcomings;

   (j)The precise content of the conversations said to form part of the agreement are illusory.

   [3]The evidence was that the notations were made by at least two different people.

   [4]Whether the parties agreed on a cap was important, not least because the February 2016 deed had already made provision for $200,000 for the development of the Buderim property.

   [5]The transfer of the Hurse Street properties had occurred in 2015. Mr Mudri described this as a ‘babysitting’ transaction – the suggestion being that Easy Stay was merely holding the properties pending a re-transfer.

   [6]This, of course, is an event that may or may not occur. As it happened, the debts have not been paid.

2. The evidence on that last point starts with the affidavit of Mr Mudri which refers to a meeting on a date he cannot recall in May 2016. There were four people at this meeting – Mr Mudri, Mr Laverick, Mr Mead and Mr Harnden. Of the four, only Mr Mudri asserts a concluded agreement. And Mr Mudri does so in a rather conclusionary way:

   “Although the Terms of Agreement document was not signed by the parties, the document accurately reflects the agreement reached between myself and Laverick.”[7]

   [7]See Mr Mudri’s affidavit at [29].

3. It will be noticed that Mr Mudri does not say who said what, and there is no evidence as to what was to become of the unfinished document. Mr Mudri does not attribute to Mr Laverick or to himself any words along the lines of ‘yes, let’s go with the deal as per the amended terms of agreement’ or anything even close to that.

4. The absence of any evidence of a specific conversation, or conversations, means that the court cannot find the pleaded agreement, that is, an agreement that is partly in writing and partly oral. By itself the Terms of Agreement document is not even close to adequate evidence of a concluded bargain – for the reasons already explained.

5. There might be a basis for concluding that the parties reached a consensus if the Terms of Agreement document was supplemented by a conversation where the parties committed themselves to what was recorded in the document. But there is no such evidence.

6. In fact, Mr Mudri’s oral evidence demonstrated the lack of any concluded bargain based on the Terms of Agreement document. During his cross-examination by Mr Laverick, when he was pressed about the lack of a signature on the agreement, Mr Mudri said this:

   Do you have an original with the signatures on it?   No, no.  There’s no signatures on it.  You didn’t want to sign.  You were already dancing.

   …

   You just said to the court that I didn’t want to sign?   Yes.

   So you agree     ?   That’s why it’s unsigned.

   I didn’t want to sign it?   The first one, we signed.

   HIS HONOUR:   You just actually said, “Didn’t want to sign.  You were already dancing.”  Is that what you said?   Yes.

   What does that mean?   Avoiding the – because it – it – this one was signed – the first tranche of property – North Coast properties, and then about that time, we got the three properties, the bank – Westpac released, and we were transferring them at no consideration to Easy Stay.

   Well, what does dancing mean?   Dancing means avoiding.

   Avoiding?   Avoiding.[8] [emphasis added]

   [8]Transcript T1-74.

7. The concession that Mr Laverick did not want to sign, and was avoiding signing, is strong evidence that the parties did not arrive at a concluded bargain.

8. The other evidence on the point does not assist Mr Mudri’s case.

9. Mr Laverick denies any agreement. He says the proposal reflected in the Terms of Agreement was rejected outright. I accept that evidence.

10. Mr Harnden, who had been Mr Mudri’s employee up to March 2016, supports that view. He says that Mr Laverick specifically refused the proposal in the terms of agreement document and that the parties never reached any agreement about the Chinchilla/Miles properties. He says that there were discussions between Mr Mudri and Mr O’Keefe which matured into contracts for the sale of the Chinchilla/Miles properties to Jandson – then Mr O’Keefe’s company.

11. Mr Mead, who was employed by Mr Laverick, also says that he prepared the Terms of Agreement document, and it was “declined” by Mr Laverick.

12. Mr Mudri’s counsel, Mr Fisher, attacked the credibility of both Mr Mead and Mr Harnden. Mr Mead’s evidence was said to be unreliable because he is a solicitor who was struck off for professional misconduct in 1997. Mr Harnden’s evidence was challenged on the basis that he had turned against Mr Mudri and his wife, was motivated by revenge, and had stolen some files.

13. It is unnecessary to make any findings about the comparative credibility of the various witnesses. The evidence that there was a concluded agreement is unconvincing and does not satisfy me to the requisite standard.[9] It is sufficient to note that, of the four people at the meeting, only Mr Mudri says there was a concluded agreement. And his evidence is vague, lacks specificity and, at least to some extent, supports the opposite view.

    [9]Balance of probabilities.

Conduct Consistent with the Terms of Agreement?

1. Mr Mudri’s evidence was that the agreement was agreed because it was acted on. The formation of an agreement can sometimes be inferred from the conduct of the parties.[10] But that is not Mr Mudri’s pleaded case. His case is that the agreement is constituted by the Terms of Agreement document, and by some oral conversations which he has been unable to identify with any precision.

   [10]See Carter, Contract Law in Australia, 7^th ed at [3-05]

2. To state the obvious, it is hard to believe that the parties, experienced in property development and in contracts for the sale of land, would arrive at a significant agreement like this without a proper written record of their bargain and without being able to identify any specific conversations by which the deal was struck.

3. In any event, I am not able to conclude that the agreement comprised, or was evidenced by, the conduct of the parties. Four reasons can be stated.  

4. First, three of the five North Coast properties were sold in 2016 and 2018. The proceeds of those three sales were applied to Hill Street’s mortgage debt. The nett proceeds of those three sales cleared about half, or a little more, of the mortgage debt of $1.7M. That much is consistent with the Terms of Agreement document. However, from then on what happened departs from the deed and the Terms of Agreement document.

5. As I have explained, the February 2016 deed recorded the parties’ agreement that the debt would be secured by consent caveats over the five North Coast properties. By mistake, the caveats lodged on behalf of Hill Street were lapsing rather than consent caveats. There is no suggestion that Mr Mudri offered to remedy that failure so as to comply with the deed. Instead, free of the restrictions of the consent caveats, Mr Mudri sold the two remaining properties. One was a sale to his daughter, and the other was a sale to a third party connected to his cousin. The nett proceeds of sale of those two properties were not applied to Hill Street’s debt.

6. And now, some years later, there is no suggestion that any interest has been paid on the debt.[11]

   [11]Clause 2 of the Terms of Agreement document speaks of interest being paid at 10% pa and a handwritten amendment speaks of the interest being compounded monthly.

7. It is difficult to see how any of that is consistent with the agreement Mr Mudri contends for, or even the February deed. The plain intention of the deed and the Terms of Agreement was that the proceeds of sale for all North Coast properties would be first applied to the debt.[12] That applies even to the Buderim property which was to be the subject of work towards a development approval before it was sold.

   [12]See clause 6 of the Terms of Agreement document.

8. In his evidence, Mr Mudri acknowledged that he is required to account for the proceeds of those sales. However, if there was a binding agreement, it is surprising that Mr Mudri would so flagrantly act contrary to it.

9. Second, as at May 2016, the Chinchilla/Miles properties were held by two of Mr Mudri’s companies, Smart Group Trading Company Pty Ltd (15 lots) and MSM Developments Pty Ltd (38 lots). The latter company was in liquidation and so was under the control of a liquidator. A very significant debt was owed to the mortgagee, Westpac. The Terms of Settlement document recorded this:

   (a)Negotiations with Westpac had got to the point where Westpac was willing to sell all the Chinchilla/Miles properties (presumably as mortgagee exercising its power of sale) for $1.6M and that, for that price, Westpac would release its mortgages over the Chinchilla/Miles properties;

   (b)Mr Laverick had agreed to apply for finance in the amount of $1.6M in order to finance a purchase of the Chinchilla/Miles properties by Jandson (Qld) Pty Ltd – a company then controlled by Mr Stephen O’Keefe;[13]

   (c)If that application for finance was successful, and the purchase was completed by Jandson, then:

   (i)Mr Laverick’s debt, interest and costs would be secured over the Chinchilla/Miles properties and that debt was to be paid by the sale of the properties by Jandson;

   (ii)On the sale of one block at Daisy Street, $75,000 would be allocated to weekly payments to Mr Mudri and Mr Harnden of $1000;

   (iii)The balance of the proceeds of sale of the Daisy Street would be applied to Mr Laverick’s debt, including interest and costs, and then to repayment of the debt owed on the North Coast properties, and then equally divided between Mr Mudri and Mr Laverick. 

   [13]Mr O’Keefe was the accountant for Mr Mudri and Mr Laverick at certain times.

10. The conduct of the parties after May 2016 was not consistent with that plan. As it turned out, the idea that Westpac would accept $1.6M turned out to be overly optimistic. Westpac demanded a purchase price of $2M. Mr Laverick did not apply for finance for $1.6M or for $2M. Instead, he supplied Jandson, then Mr O’Keefe’s company, with $400,000 as a loan. Mr O’Keefe decided not to proceed with a purchase of the Chinchilla/Miles properties because an on-selling arrangement with some third parties failed. The transaction was then rescued by Mr Laverick who was concerned about losing the $400,000 he had sunk into the project. The contract to sell the Chinchilla/Miles properties became an instalment contract and Mr Laverick acquired the shares in Jandson. Jandson then completed the purchase of the Chinchilla/Miles properties in March 2018.

11. That course of events is some deviation from the plan envisaged by the Terms of Agreement document. Under the Terms of Agreement document Mr Laverick’s only obligation was to apply for finance for $1.6M. If that application for finance was successful, then he would be entitled to a mortgage securing his debt. Nothing obliged Mr Laverick to seek finance for $2M. And the subsequent conduct of the parties meant that Mr Laverick acquired Jandson and thus became the effective owner of the properties rather than a mortgagee.

12. For Mr Mudri, Mr Fisher argued that what happened was “not radically different” from what was envisaged by the Terms of Agreement. He said that the parties’ conduct was “broadly consistent” with the Terms of Agreement document. I disagree. The sequence of events, from the moment that Westpac demanded $2M, meant that the parties proceeded down an entirely different path, and they ended at an entirely different destination.

1. Third, a relatively minor aspect illustrates that the conduct of the parties after May 2016 had little to do with what was envisaged by the Terms of Agreement document. Mr Fisher tendered a bundle of 5 pages from Mr Mudri’s Suncorp bank account.[14] The documents were intended to show that Mr Mudri received at least some of the weekly $1000 payments envisaged by the Terms of Agreement document. The payments show that one of Mr Laverick’s entities paid Mr Mudri the following sums:

   (a)$5000 on 1 August 2017;

   (b)$5000 on 16 October 2017;

   (c)$2000 on 30 January 2018;

   (d)$2000 on 16 February 2018;

   (e)$2000 on 1 March 2018.

   [14]Ex 7.

2. That series of haphazard payments is not evidence which can be accepted that weekly payments of $1000 were being made to Mr Mudri in accordance with what was envisaged by the Terms of Agreement document. There is no regularity of payments of $1000. There are no payments for November, December and almost all of January. And the total amounts being paid over the period are significantly less than the equivalent of weekly payments of $1000 to Mr Mudri.[15] And, in each case, the payments are expressly described in the bank statements as ‘loans’.

   [15]The period spans 30 weeks and yet only $16,000 has been paid.

3. Fourth, in 2015 Mr Mudri’s company, MSM, transferred the three Hurse Street properties to Mr Laverick’s company, Easy Stay. Mr Mudri described the arrangement as a ‘babysitting’ of the properties. The term was not precisely explained by Mr Mudri. The agreement behind the babysitting arrangement was not explained by either party. However, there were transfers executed for all three properties at $150,000 each. Stamp duty was paid on each transfer. However, Mr Mudri said that the purchase price of $150,000 for each of the three townhouses was not paid. His evidence was that nothing was paid for the transfer of the three townhouses. Mr Laverick did not dispute that evidence.

4. It seems likely that, in so far as there was a ‘babysitting’ of the properties, the arrangement was designed to keep these properties away from Mr Mudri’s creditors. The babysitting turned out badly. Easy Stay sold the properties to third parties. Mr Mudri says that was done without his knowledge.

5. The Terms of Agreement document envisages that, upon the payment in full of the debts, Easy Stay would transfer the three Hurse Street properties to Mr Mudri or his nominee. The debts referred to must include the $1.7M loaned on the security of the North Coast properties, and the finance supplied for the Chinchilla/Miles purchase – which turned out to be $2M.[16] That event – the payment of the debts - did not occur. It is common ground that the debts owed to Mr Laverick’s companies were not paid. Thus, the event that triggered the obligation to re-convey (at an unspecified price) has not occurred.

   [16]See the discussion above about this.

6. There is no evidence that Mr Mudri offered to pay the amounts outstanding in exchange for the sale envisaged by clause 13 of the Terms of Agreement. There is no evidence of any attempt by either party to engage clause 13.

7. Obviously enough, the conduct of the parties may point to the existence of a concluded bargain, even if that conduct is not strictly in accordance with the alleged bargain. But here there is quite a divergence between what was envisaged by the Terms of Agreement document and what happened. I reject the argument that the conduct of the parties points to the existence of a concluded agreement.     

Conclusion

1. For those reasons, I am not satisfied that the parties arrived at a concluded agreement.

2. Having found that there was no concluded agreement, Mr Mudri’s claim must fail. That means that it is unnecessary to consider whether the agreement was breached, and the consequence of any such breach.[17]

   [17]In some cases, it would be appropriate for the court, notwithstanding the finding of ‘no contract’, to go on to consider whether the contract was breached, and the consequences of the breach. It would be difficult to do that here. The precise agreement is unclear. As explained, some parts of the alleged agreement are unintelligible. Some parts are missing vital terms. 

3. Mr Mudri brought this proceeding to enforce the 50% ownership interest he claimed by means of caveats over the three remaining Chinchilla/Miles properties, described in the statement of claim as the Dawson Street Property, the Daisy Street property and the Price Street and Barnsley Street properties. Those properties are identified in paragraph 3 of the amended statement of claim. The interest that Mr Mudri claimed by the caveats was a 50% ownership interest pursuant to the agreement he pleaded in this proceeding. Mr Mudri has failed to prove that caveatable interest.

4. Thus, the appropriate orders are to dismiss the proceeding and to order that the caveats be removed.[18] I will hear the parties on costs.

   [18]Usually, the form of an order to remove caveats would be in the form: ‘order that caveat no [x] lodged on [date] over property at [property description] be removed pursuant to s 127 of the Land Title Act 1994. However, there is no detail in the material. The titles searches exhibited to Mr Mudri’s affidavit, for example, are from 2012 and 2014 and do not include the caveat details.