Peter F Burns Real Estate Pty Ltd v Thamm & Hodby No. Scgrg-98-705 Judgment No. S501

PETER F BURNS REAL ESTATE PTY LTD v THAMM AND HODBY
[1999] SASC 501

Magistrates Appeal

DEBELLE J. This is an appeal from a decision of a magistrate concerning a series of dealings in a parcel of land on Yorke Peninsula. The magistrate has made only a few findings of fact. Furthermore, the reasons for judgment of the magistrate do not set out the facts in a comprehensible chronological order. It has been necessary, therefore, to read the whole of the transcript of what was an unduly lengthy trial. The transcript of evidence comprises 1,171 pages. There are some 120 exhibits.
The essential steps in the dealings in the relevant parcel of land are in large part not in dispute. The dispute concerns the capacity in which the parties participated in those dealings. The dealings are as follows:
Sale by the National Australia Bank (“the National Bank”) of Lot 99 Government Road, Corny Point to the respondent Thamm by contract dated 17 February 1993. The price was $25,000.
Subsequent sub-division of Lot 99 into 13 allotments.
Sale of eight of the 13 allotments by Thamm for the sum of $40,000 by contract completed on 22 October 1993.
Sale of two of the 13 allotments by Thamm for the sum of $17,000 by contract completed on 23 December 1994.
Sale of the remaining three allotments for the sum of $25,000 by contract completed on 2 October 1996.

The appellant, who was the plaintiff in this action, claims that the respondent Thamm was at all times acting as either a kind of trustee or nominee for it and the respondent Hodby in respect of certain land dealings. I have expressed the claim in this vague alternative because the claim itself is vague. It claims that Thamm and Hodby have failed to account for the proceeds of the dealings in the land. For their part, Thamm and Hodby deny that the plaintiff had any interest in the land dealings or the proceeds of those dealings. In addition, they claim that the plaintiff had failed to account to them for all of the proceeds of the sale of the eight allotments on 22 October 1993. Thamm and Hodby say that this was a joint venture between themselves in which the plaintiff had no beneficial interest. There was no issue between Hodby and Thamm in these proceedings.

The Parties

The plaintiff is a real estate agent and a property developer. It was incorporated on 26 August 1992. The directors of the company are Michael James Burns (“Michael Burns”) and his brother, Christopher John Burns (“Christopher Burns”). The company employs Peter Charles Burns (“Burns”) who is a brother of the directors of the plaintiff company. It was Burns who had the greatest involvement in the dealings the subject of this action allegedly on the part of the plaintiff. Burns was adjudicated bankrupt on 27 August 1992, the day after the incorporation of the plaintiff company. The plaintiff is the successor of a real estate business previously carried on by a company called Peter F Burns Pty Ltd, which had been founded by the father of the three brothers.
Thamm is a retired accountant. Thamm and Hodby have been close friends for some 30 years. Thamm had from time to time discussed his financial affairs with Hodby. Thamm had been an accountant employed by Glover Gibbs Pty Ltd when that company was taken over by Balfours. He was made redundant. He then received a substantial termination payment.
Hodby carries on business as a land developer. He was a qualified land broker. He has two brothers, Dean Hodby and Ross Hodby. They have all, at one time, been land brokers. At the time of the trial Dean Hodby still practised as a broker under the name of Barossa Land Brokers. In the 1980’s Hodby had closed his own land broking business. He then took up employment with Peter F Burns Pty Ltd as a project co-ordinator. According to Hodby, he ceased that employment in 1991. Burns suggested that the arrangement was a sham. The magistrate found that in a sense it was. Nothing turns on this fact other than that it demonstrates that both Burns and Hodby were prepared to seek to disguise the true nature of their dealings.
Hodby had been a friend and business associate of Burns for many years. Their relationship had entirely soured by the time of these proceedings. In the 1980’s they were together involved in various real estate developments. In 1985 they acquired a shelf company called Kalarka Pty Ltd (“Kalarka”). Kalarka is a trustee company. Burns and Hodby were both shareholders in Kalarka. Hodby concealed his interest. His shares were held by a friend, Mr Con Nakos. Hodby was a director of the company for one day only. Nakos was a director of the company from 10 May 1985 until 24 March 1988. The present directors of Kalarka are Burns and his wife. The magistrate found that Hodby had a one half interest in the company. There is no appeal from this decision.
Kalarka had carried out a sub-division of land at Corny Point on Yorke Peninsula in the 1980’s. One of the allotments created by the sub-division was Lot 99. At the beginning of 1993, Kalarka still held Lot 99 and some other allotments which had remained unsold. As already noted, the issues in this appeal concern dealings between 1993 and 1996 in relation to Lot 99. It was Hodby’s evidence that at the beginning of 1993 he and Burns had no joint ventures on foot. For his part, Burns claimed that they did.
The surveyor who had prepared the sub-division at Corny Point for Kalarka was B.T. O’Callaghan & Associates (“O’Callaghan”). Lot 99 was a large allotment. In 1988 Kalarka had engaged O’Callaghan to divide it into smaller allotments. O’Callaghan prepared a plan. In September 1989 O’Callaghan lodged an application to divide the land into 13 allotments. Lot 99 was subject to a mortgage to the National Bank. In 1991, the bank consented to the resubdivision. However, Kalarka encountered financial difficulties and the application did not proceed. At the beginning of 1993, all that was required to complete the sub-division was an outer boundary survey. O’Callaghan was not prepared to proceed with that survey until he was paid for the work.

A Mortgagee’s Sale

In early 1993 Kalarka was in default on its mortgage to the National Bank. Kalarka was then in serious financial difficulty. The bank entered into possession and in February 1993 proceeded to sell the land as mortgagee. Cliff Hawkins Pty Ltd was appointed agent.

The Alleged Agreement

On 12 February 1993 Burns learned of the National Bank’s intention to sell Lot 99. On the same day he telephoned Hodby. There is no dispute about the fact of this telephone call. There is, however, a substantial dispute as to its content. The conversation is central to the case for the plaintiff. According to Burns, he was at the office of a friend called Laidlaw. He rang Hodby and told him that the National Bank was selling the land. He told him that the price was $27,500 and expressed the view that it was very low and that they should buy it. Burns suggested that the land be purchased in Laidlaw’s name. It is obvious that Burns wished to conceal his involvement from the bank. According to Burns, Hodby agreed that “at that sort of price we would have to buy”. Burns said that Hodby told him he was with Thamm and that Hodby said something along the lines that Thamm was a “nice, quiet country lad” and it would be ideal to put the land in his name. Burns said that he then said to Hodby, “I could not care less whose name it went in so long as we got it”.
Laidlaw was with Burns and overheard this conversation. Laidlaw says there were two telephone conversations between Burns and a person whom he understood to be Hodby. The two telephone conversations were, he said, a very short time apart. During the first conversation, Laidlaw said that Burns asked him, “Can we put land in your name?”. Laidlaw said that he replied that they could provided it was lawful. Laidlaw said that Burns then hung up and asked Laidlaw if he was willing to purchase the land. Laidlaw agreed. Burns then called Hodby again and told him Laidlaw was willing to act as the purchaser. Laidlaw said that, after this second conversation, Burns said to him that Thamm had agreed to purchase the land.
Hodby gives quite a different account of this conversation. He said that he was driving a tractor when he was telephoned by Burns. They discussed the price at which the Bank was selling Lot 99. They believed it to be too low a price. They discussed the obligation of the mortgagee to seek to obtain the best possible price. He said that Burns had told him that he was concerned he had given his trustee in bankruptcy information to the effect that the land was worth some $200,000. Hodby denied that there was anything in the telephone conversation that purported to be an agreement either between him and Burns to purchase the land or between him and the plaintiff. He said that Thamm was not present during this telephone conversation. He denies that Laidlaw’s name was ever mentioned.
Shortly after that telephone conversation, Hodby telephoned Thamm to tell him that Lot 99 was being sold by the National Bank at a mortgagee’s sale for a price which he said was “ridiculously cheap”. They decided that the land had a good potential for profit in a subdivided form. They agreed to buy the land. They agreed that Thamm was to contribute to the purchase of the property and Hodby was to assist him in the venture including completion of the sub-division. Thamm gave evidence that he intended to use monies he had available to him from the payment he had received when he retired from Glover Gibbs.
The magistrate made no finding as to the terms of this telephone conversation apart from finding that Laidlaw was present and was asked by Burns to act as a nominee purchaser. The magistrate made no finding whether an agreement had been made on 12 February. Nor did he make any finding as to the terms of the agreement. The latter fact is not surprising. The only evidence as to the terms of the alleged agreement was given by Burns. His evidence is extremely vague. It is remarkable for the absence of any evidence as to the terms of important aspects of the agreement. In addition, the magistrate was very critical of his evidence, finding that Burns was discredited as a witness and that he could attach no weight to what Burns said in his evidence stood alone.
Burns’ evidence concerning the telephone conversation on 12 February was that he had rung Hodby to inform him that the National Bank was seeking to sell the land. He was asked as to Hodby’s response and other questions concerning the alleged agreement. The evidence reads:
“Q. What did he say.
A...... He certainly agreed that [at] that sort of price we would have to buy it. He told me he was with Malcolm at the moment and being somewhere along the lines nice, quiet country lad, he would be ideal to put it in his name.
Q.Did you say anything in response to that.
A...... Yes, I did. I told him didn’t, couldn’t care less whose name it went in, so long as we got it. It had been discussed for quite some time prior.
Q.With whom had you had discussions.
A...... I had discussed it with Barry and Michael and John Papandrea but predominantly with Barry.
Q.Under what circumstances did you discuss Lot 99 with Barry. First, where did such discussions take place. If there was more than one at different places, let us know.
A...... Ordinarily the office or it might have been at lunch. It was discussed over a period. I saw Lot 99 a bit as a chance to get back. I had been all that long into bankruptcy, I knew I wasn’t in a position to contract, to do any of these deals which is why the company did. It saw it as a chance to sort of - it was never going to be a huge deal in comparison to what we had previously been doing, but it was an opportunity that was certainly going to present itself and it couldn’t present itself to anybody more favourably than we had the knowledge of what it was really all about.”

He then went on to say that he discussed the matter on numerous later occasions with Hodby. He said that he had had a meeting with Thamm and Hodby on the day the contract was signed. He said that he had discussed with Hodby the payment of the deposit. He added that, after the contract had been signed, Thamm had said to him that he was willing to act “so long as I don’t have to put my hand in my pocket for anything”. Burns did not know that Thamm had paid part of the deposit. Later he said that he had agreed with Hodby that “it was a 50/50 deal with the company and Hodby”. In cross-examination, Burns admitted that it was on 12 February 1993 that he first learned that the National Bank was intending to sell Lot 99.

The suggestion that Burns had discussed buying Lot 99 with his brothers and with Hodby before 12 February 1993 must be rejected since the National Bank had not previously offered the land for sale and Burns first learned of its intention to do so on 12 February. Thus, the first occasion on which the proposal could have been discussed was 12 February 1993. In addition, there were no minutes or other documentary record of this alleged discussion between Burns and his brothers as directors of the plaintiff nor is there any evidence as to what the brothers believed the details of the contractual arrangements to be concerning issues of the kind already mentioned. The evidence of the prior discussions is therefore plainly false. Further, both the evidence of Burns and Laidlaw suggests that the matter had not advanced beyond a mere proposal on 12 February. Their evidence does not suggest that an agreement was reached. In fact, one is left to infer generally from Burns’ evidence that Hodby had agreed to the proposal. That inference is to be drawn from later evidence he gave that Hodby agreed to a “50/50 deal” with the company. There was no evidence when that agreement was reached.
The unreliability of Burns’ evidence can be demonstrated in a number of ways but one particular inconsistency is his evidence that Thamm had said that he did not want to put his hand in his pocket for anything. That evidence is entirely inconsistent with what had already occurred by the time that statement was allegedly made in that Thamm would have already paid $800 towards the deposit.
Another remarkable feature of Burns’ evidence is that it is silent as to the terms of the agreement. Burns did not give any evidence on that issue beyond stating that it was to be a 50/50 deal between Hodby and the company. There is nothing on such important aspects of the arrangement as the person or persons who would pay the deposit and later pay the balance of the purchase price. It is silent as to who is to bear the costs of further survey work for the outer boundary survey which Burns knew had to be done and the earthworks which were required. It does not indicate whether Thamm was to receive some fee or other reward for his willingness to act as a front for Burns and Hodby in this transaction. The agreement asserted by Burns meant that Thamm was exposed to a liability to pay the balance of the purchase price to the National Bank and all stamp duty, registration fees and other costs necessary to complete the transaction. There is no suggestion in his evidence as to any kind of indemnity to Thamm in respect of all of those outgoings nor as to how, or by whom, those outgoings were to be paid. The inconsistencies in the evidence of Burns and the absence of evidence on important aspects of the agreement raises significant doubts as to whether there was any agreement of the kind alleged by Burns. I will return to this issue.
On 12 February 1993, Burns and O’Callaghan also had a telephone conversation. Kalarka still owed fees to O’Callaghan for the survey work in relation to Lot 99. O’Callaghan had received information about the sale of Lot 99 by the National Bank. He was concerned whether he would be paid. O’Callaghan made a note of this conversation. According to O’Callaghan, Burns said that O’Callaghan would have to look to Kalarka for his fees. The magistrate uses this conversation to show that Burns was involved in the resubdivision of Lot 99 and, by implication, to show that Burns and Hodby had agreed to acquire Lot 99 from the bank as mortgagee. The magistrate has erred in concluding that it demonstrates an agreement between Burns and Hodby. O’Callaghan had been dealing with Burns for many years concerning the Kalarka sub-division. Fees were due to him. As O’Callaghan said in his evidence, he was merely ringing to enquire about being paid what was due to him. Burns has fobbed him off in the conversation. If Hodby and Burns were going to buy Lot 99 in the name of Thamm, subdivide the land into 13 allotments and sell them, it is likely that Burns would have told O’Callaghan that he would be paid his fees when the lots were sold. Burns clearly knew that O’Callaghan’s assistance was essential if the application to divide the lands was to proceed. The conversation does not in any respect point to any agreement between Hodby and Burns concerning the acquisition of Lot 99 from the National Bank. Instead it points in the opposite direction.

An Agreement between Thamm and Hodby

In the days following 12 February 1993, Burns did nothing further about Lot 99. However, Thamm negotiated with Cliff Hawkins Pty Ltd and on 15 February 1993, Thamm entered into an unconditional contract to purchase Lot 99 from the National Bank for the sum of $25,000. The contract specified the date of settlement to be 15 April 1993. A deposit of $2,000 was paid, Hodby contributing $1,200 and Thamm $800. Thamm agreed with Hodby that the balance of the purchase price ($23,000), stamp duty and other costs associated with the transfer would be paid from his termination payment. They agreed that he would be the registered proprietor of the land but would account to Hodby for one-half of the profits in consideration for Hodby financing and providing the technical and other support to complete the sub-division, as well as managing the unsubdivided land. It was agreed that Burns would be appointed agent for the sale of the allotments.
On 19 February 1993 O’Callaghan received a telephone call from Burns. His note of the conversation states that Burns told him that on 18 February 1993 Thamm had purchased the land and that Thamm would be ringing to discuss it with him. Burns asked if the Lands Titles Office would permit the outstanding application for resubdivision of Lot 99 to continue if there had been a change in ownership. In his note of this conversation, O’Callaghan had put Thamm’s name in inverted commas. His evidence was that he did not think that Thamm existed. The magistrate found that what Burns had told him did not alter O’Callaghan’s perception that Burns was involved in the purchase. This is a surprising conclusion and must be rejected. Burns had done no more than tell O’Callaghan of a change of ownership and had asked if the application for sub-division could proceed.
On 22 February 1993, Hodby and Thamm executed two short handwritten documents which recorded the agreement they had reached. The first is headed “Heads of Agreement” and states that it concerns Lot 99 Corny Point. It provides:
“Thamm to provide balance of Purchase Price at settlement.
Hodby to provide tractor work and survey costs.
Each party to receive 10% interest on money outlayed (sic).
Both Thamm and Hodby to have the right to choose and retain a block each for their children.”

The second is a declaration of trust. It reads:

“I MALCOLM GRAHAM THAMM of Norton Summit Accountant declare that I will hold Lot 99 Corny Point purchased from The National Australia Bank for myself and Barry Patrick Hodby as tenants in common in equal shares.”

On 31 March 1993 Thamm executed a further declaration of trust to give effect to their agreement. Their evidence was that the document was executed so that the profits made by the joint venture between Hodby and Thamm could be off-set against tax losses Hodby had available in his unit trust. This second declaration of trust reads:

“I, MALCOLM GRAHAM THAMM of Greenvalley Road, Norton Summit South Australia 5136 Accountant do solemnly and sincerely declare that:
1/ I am or am entitled to be the registered proprietor of Lot 99 of Section 156 in the Hundred of Carribie being the whole of the land comprised in Certificate of Title Registrar (sic) Book:
VOLUME 4271 FOLIO 331
2/ That the said land is TRUST PROPERTY held by me in trust for THE HODBY UNIT TRUST.
And I make this solemn declaration conscientiously believing the same to be true in substance and in fact.”

This second declaration of trust was executed on the same day as Thamm executed, as purchaser, the transfer of Lot 99 by the Bank as mortgagee. The explanation for the fact that the declaration is inconsistent with the documents executed by Hodby and Thamm on 22 February is that Hodby and Thamm had decided to take advantage of the tax losses Hodby had available in his unit trust.

After Thamm had executed the transfer, Hodby and Thamm sent the transfer documents to Hodby’s brother Dean at Barossa Land Brokers with instructions to act on the settlement of the transaction. Although the contract with the National Bank stated that settlement was to occur on 15 April 1993, settlement did not occur on that date. On 23 April 1993, Hodby arranged a bank cheque to be sent to his brother Dean to enable the settlement to proceed. Barossa Land Brokers did not usually act for the plaintiff or its associated companies. The plaintiff’s land broker was a Mr Midson at Rothe and Midson.

Settlement with the Bank Delayed

Hodby and Thamm explained the reason why, contrary to the agreement made on 22 February 1993, it was Hodby and not Thamm who drew the cheque to enable the purchase to proceed. Hodby had instructed his brother Dean to insist that at settlement the National Bank produce the title for Lot 99. However, the bank had some difficulty in securing the title. The evidence is not entirely clear why the bank was presented with that difficulty. In the ordinary course it would have held the title as mortgagee. However, it seems that it had given the title to O’Callaghan when O’Callaghan had lodged the application for division of Lot 99 into 13 allotments. O’Callaghan was perceived by the Lands Titles Office as having some kind of control over the title. In any event, it is sufficient to know that the bank had difficulty in being able to secure the title and arrange completion of the contract to sell to Thamm. That caused the settlement to be delayed. Thamm and Hodby wished to be ready to settle whenever the bank required it. They therefore agreed that Barossa Land Brokers should have in its possession a cheque to be ready to settle whenever the bank required it. A further reason why it was convenient to proceed in this way was that it enabled Thamm to avoid incurring a substantial penalty by withdrawing funds from his termination payment which had been invested in a form of rollover investment.
The settlement was also delayed by actions taken by Burns. On 28 May 1993 Burns caused Kalarka to lodge a caveat preventing any dealing in Lot 99 by the National Bank as mortgagee. The caveat claimed that the bank had improperly exercised its power of sale. Burns had not consulted Hodby before giving instructions to lodge the caveat. The evidence shows that Burns has given two reasons for lodging the caveat. In his evidence, he said that his purpose was to delay the settlement with the National Bank so that he could work out a means by which he could benefit from the dealings in Lot 99 notwithstanding his bankruptcy. However, O’Callaghan gave evidence that Burns had told him that he was lodging a caveat for the purpose of challenging the power of sale by the bank. His notes suggest that this conversation occurred on 28 May 1993. On 20 July 1993 the National Bank applied to remove the caveat and the caveat was removed on 20 August 1993. However, settlement with the bank did not occur until 18 October 1993. The fact that Burns gave two different reasons for lodging the caveat is a further pointer which justifies the magistrate’s unwillingness to accept his evidence. It is unnecessary to ascertain the true reason for Burns’ decision to lodge the caveat. It is sufficient to note that it delayed the settlement.

The Sale of Lot 24

Before proceeding to deal further with the issues concerning Lot 99, it is necessary to note one other quite separate transaction in relation to another parcel of land which formed part of the Kalarka sub-division. On 19 November 1992, Hodby was registered as mortgagee of Lot 24 Bayview Road, Corny Point which was part of the original sub-division. The registered proprietor of the land was Kalarka. On 19 November 1992, Hodby, as mortgagee, sold the land for the sum of $13,000. Although the contract specified that settlement would occur on 30 January 1993, settlement did not occur until 8 June 1993. It is unnecessary to examine the reasons for the delay.
The proceeds of settlement were paid into the trust account of the plaintiff. Hodby had ascertained that O’Callaghan’s fees to conduct the outer boundary survey for Lot 99 were $3,000. By letter dated 7 June 1993, Hodby authorised the plaintiff to pay rates and taxes to the District Council of Warooka, land tax, and the sum of $3,000 to O’Callaghan. O’Callaghan received the fees on 1 July 1993. The settlement statement states that the land was sold for $12,200 whereas the price was in fact $13,000. The proceeds were applied as follows:

$

Commission to the plaintiff 1,100.00

District Council of Warooka - Arrears of rates 2,832.60

Land tax 282.60

B T O’Callaghan 3,000.00

Hodby

4,984.80

12,200.00

There is a trust account statement of the plaintiff which states that the proceeds were $12,150. It is unnecessary to examine the reason for the discrepancies I have noted. They are extraneous to the issues in this appeal. There was a dispute whether the proceeds belong to Hodby or to the plaintiff. It is unnecessary to examine that question as Hodby received the proceeds and neither Burns nor the plaintiff claims them in these proceedings. Furthermore, the magistrate found that the sum of $3,000 paid to O’Callaghan came from Hodby’s funds derived from the sale of Lot 24 Bayview Crescent and there is no appeal from that finding.

On 12 May 1993 O’Callaghan received a request from the National Bank to withdraw the application for resubdivision so that it could proceed to settle its contract to sell Lot 99. On 19 May O’Callaghan telephoned Burns to discuss preparation of the plans for resubdivision and their lodgment. Later, on 28 May, Hodby spoke to him and told him that his brother Dean Hodby was the broker for Thamm. Hodby says he gave instructions to O’Callaghan to proceed with the resubdivision but O’Callaghan has no note of such a conversation. On 10 June 1993, Burns rang O’Callaghan to tell him that he was sending the cheque for $3,000 and to ask him to proceed with the outer boundary survey. O’Callaghan did the outer boundary survey.

The Subdivision is Approved

On 21 August 1993 Thamm went to O’Callaghan’s office. O’Callaghan said in his evidence that he was surprised that he existed. On 25 August 1993 Thamm also gave O’Callaghan instructions to proceed with the resubdivision of Lot 99. Approval for the resubdivision was granted on 7 September 1993. It was necessary to carry out some earthworks on the new allotments so that they would be fit to sell. Burns arranged for that work to be done. It cost $3,930.

Eight Allotments Sold

In the meantime, the plaintiff had been acting as agent to sell the 13 allotments into which Lot 99 was to be divided. Through Christopher Burns, the plaintiff negotiated a contract to sell 10 allotments to Berimall No. 2 Pty Ltd (“Berimall”) for $50,000. The contract was dated 23 June 1993. It named the vendor as Thamm and Thamm signed the contract. The contract was subject to a number of conditions including a condition that Thamm as vendor had obtained approval for the division of the land into 13 lots before settlement. Berimall had difficulty in obtaining the funds necessary to purchase the land. The contract was later amended to be a contract to sell eight allotments for $40,000 to a company related to Berimall which was called Sontell Pty Ltd (“Sontell”). Thamm signed the amendment to the contract.

Simultaneous Settlements?

Hodby and Thamm gave evidence that, after the execution of the contract with Berimall, they had decided to arrange simultaneous settlement of that contract and Thamm’s contract to purchase Lot 99 from the National Bank. Their purpose was to use the proceeds of the Berimall contract to fund the purchase from the bank. They therefore instructed Barossa Land Brokers to send the executed transfer to Rothe and Midson whom Burns had said would be acting as land brokers on the sale to Berimall. Hodby recovered the bank cheque he had given his brother and re-banked it on 22 June.
It appears that it was originally intended by all parties that, if possible, as two settlements they should occur simultaneously. Burns said that there were discussions to the effect that ideally simultaneous settlements would happen but it was believed that there was a good chance they would not. In Action No. 1429 of 1995, Michael Burns swore an affidavit on 24 July 1995 in which he stated that the settlement with the National Bank had occurred on 22 October. That was the same day as settlement of the contract between Thamm and Sontell. In his evidence to the magistrate, he recanted but admitted that a simultaneous settlement would have been ideal. As already mentioned, Thamm and Hodby both asserted that it was intended that there should be simultaneous settlements. In addition, Dean Hodby believed that the settlements would be simultaneous. Rothe and Midson were acting as the land broker in both transactions. The broker who actually handled the transactions was Midson. As will be seen, his conduct of the transactions left much to be desired.
Although it was intended that the settlements should occur simultaneously, there was a dispute whether that intention was realised. Thamm and Hodby asserted that it was. However, the plaintiff asserted that Thamm’s contract to purchase Lot 99 from the National Bank was completed on 18 October 1993 and that the contract with Sontell was completed on 22 October. There had been some questions about Berimall’s capacity to complete. Notice to complete was sent by Midson as the agent for Thamm. There were further negotiations and in the result, it was agreed that Sontell should be substituted as purchaser and, as already noted, the contract was amended to sell eight allotments for $40,000 instead of 10 allotments for $50,000. The dispute as to the date when the contract for the sale of Lot 99 between the National Bank and Thamm was completed was relevant because it concerned the manner in which the funds necessary to complete the transaction were provided. If the settlements were simultaneous, the proceeds of the sale to Sontell could be effectively used to fund the purchase from the National Bank. Neither party called a witness from the bank to prove when the settlement with the bank occurred.
The magistrate found that the contract between the National Bank and Thamm was completed on 18 October 1993. The balance of the purchase price was $23,000. The magistrate found that the funds for the purchase price and other costs were provided from two sources. Michael Burns drew $8,500 from an account in the name of his wife. The plaintiff obtained a short term increase in its bank overdraft enabling a cheque to be drawn for $14,724.77, making a total of $23,224.77. The sum of $23,224.77 was sufficient to pay the balance of the purchase price and an adjustment of council rates in favour of the Bank in the sum of $224.77. It was not sufficient to cover stamp duty and registration fees. Settlement occurred on 18 October. The transfer was not immediately stamped or registered. On 22 October 1993 the transfer was stamped. It was lodged for registration at 11.15 am on 22 October. The magistrate found that the plaintiff paid the stamp duty and registration fees.
The settlement with Sontell occurred on the afternoon of 22 October 1993. Midson did not himself attend on settlement. Instead, he quite improperly allowed Burns to attend in his place. Midson had no authority from Thamm to delegate the task to Burns. Upon settlement, Burns received a cheque for $38,113.23 drawn in favour of Thamm. Burns endorsed the cheque “Please pay Peter F Burns Pty Ltd” and then signed the endorsement “M.G. Thamm”. Burns had no authority to make the endorsement. He took the cheque and paid it into the plaintiff’s bank account. It was paid into the plaintiff’s business account, not into its trust account. This was a highly irregular, if not unlawful, transaction. It reflects most adversely upon Burns. It reflects also on the propriety of Midson’s conduct as the proceeds of the sale ought to have been paid into the trust account of Rothe and Midson. Midson’s evidence was that he did not know what happened to the proceeds - a quite alarming admission. The plaintiff then applied the proceeds of the sale of the land to reimburse itself for the funds necessary to complete the purchase of Lot 99 from the Bank. The funds were also used for the purpose of paying stamp duty and other costs in relation to the completion of the contract with the National Bank and for the purpose of paying the cost of the earthmoving work. Midson did not charge any fee for his services for acting on either transaction. The plaintiff did not charge any commission for the sale of the eight allotments to Sontell.

The Settlement Statements

Settlement statements have been prepared by both Rothe and Midson for both transactions. Both the statements are dated 22 October 1993. The statement for the sale of Lot 99 by the National Bank to Thamm is addressed to Thamm. It shows that the stamp duty was $475 and registration fees were $86. There was an adjustment of council rates in favour of the bank for $224.77. The settlement statement also shows a deposit of $2,000. Of course, that had not passed through the trust account of Rothe and Midson. Midson admitted that he did not know who had paid the deposit. The settlement statement shows that the plaintiff had paid the stamp duty and registration fees, as well as the two amounts of $8,500 and $14,724.77. The plaintiff’s bank statement shows that it drew a cheque to pay the stamp duty and registration fees which totalled $561. The plaintiff’s bank debited that cheque on 22 October 1993, the same day as the proceeds of the sale of the eight allotments from Thamm to Sontell were paid into the account.
The settlement statement for the sale of the eight allotments to Sontell is also addressed to Thamm. It is very short. It simply states that the sale price was $40,000 and that there was an adjustment of council rates in favour of Thamm in the sum of $113.23. It states that the total due to Thamm was $40,113.23. Notwithstanding the terms of the document, the funds had been paid by Burns into the plaintiff’s bank account. There are bank statements which show that the plaintiff drew a cheque for the sum of $14,724.77 and a cheque for $561 to pay for stamp duty and registration fees. However, there is no objective evidence to show when those cheques were paid. The settlement statement for the transaction is dated 22 October. There is no settlement statement dated 18 October. Nevertheless, I do not think it is necessary to interfere with the finding by the magistrate that the contract between the Bank and Thamm was completed on 18 October 1993. However, it is fair to comment that the plaintiff knew that the settlements would occur very close to one another and that the funds which were used to enable the purchase from the National Bank would be promptly recovered from the sale to Sontell.

Two More Allotments Sold

In mid 1994 the relationship between Hodby and Burns disintegrated. Thamm appointed a different agent to sell the remaining five allotments. The new agent was Hale Real Estate Agency. In November 1994 Hale Real Estate arranged the sale of two more allotments for a total of $15,000. On 23 December 1994 the contract was completed. The proceeds were $14,814.63. Pursuant to an agreement between Thamm and Hodby, the proceeds were paid into Hodby’s bank account on 23 December 1994. The plaintiff did not become aware of the sale until about May 1995.

A Caveat is Lodged

Three allotments remained for sale. They were allotments 110, 111 and 112. They are the land comprised and described in Certificate of Title Register Book Volume 5159 Folios 142, 143 and 144 respectively. In 1995 two caveats were lodged to prevent dealings by Thamm in Lots 110, 111 and 112. It seems that they were lodged after members of the Burns family had learned of the sale of the two allotments in 1994. The first caveat was prepared by Midson and is dated 10 May 1995. It was not lodged until 18 May. The caveator is not the plaintiff but Michael Burns. He claimed to be beneficially entitled in “some as present indefinable share or shares” in the land. He asserted that he had contributed monies to the purchase of the land.
Thamm warned the caveat. On 24 July 1995 Michael Burns commenced an action in the Supreme Court of South Australia seeking an order restraining Thamm from dealing with the land. It was Action No. 1429 of 1995. He also claimed a declaration that he was entitled to the entire beneficial interest in Lots 110, 111 and 112. He also sought a declaration that Thamm should account for the proceeds of the sale of the two allotments sold in November 1994 and a declaration that Thamm held allotments 110, 111 and 112 in trust for him. In his affidavit filed in support of the application, he said that he had paid the balance of the purchase price, namely, $23,000, being $8,500 drawn from his wife’s savings account and $15,285.77 from funds withdrawn from the plaintiff company. In a later affidavit he said that it had been agreed that the plaintiff and Hodby would share the proceeds of sale and acknowledged that the plaintiff ought to be the company. On 4 September 1995 Burns swore an affidavit in which he said Thamm had no interest in the land and that he and Hodby had agreed that Thamm should act as a nominee purchaser and the proceeds should be equally divided between Hodby and the plaintiff company. On 27 September 1995, an order was made that the proceedings be struck out, it being noted that there was an intention to institute separate proceedings in the name of the plaintiff company.

A Second Caveat

In the meantime, a second caveat had been lodged on 5 September 1995 on behalf of the plaintiff. It claimed to be “beneficially entitled to an estate in fee simple in one undivided moiety in the said land having contributed towards the purchase of the said land pursuant to an oral agreement with [Thamm and Hodby] whereby it was agreed that the caveator and [Hodby] would be entitled to the land in equal shares”.
It will be immediately noticed that the claims made in the two caveats are quite inconsistent with one another. In addition, the claim made by Michael Burns in the Supreme Court Action No. 1429 of 1995, the first action, that he was entitled to the beneficial interest in Lots 110, 111 and 112 and to the proceeds of the sale of the two allotments sold in November 1994 is entirely at odds with the claim by the plaintiff in the later caveat.
On 2 November 1995 the plaintiff issued proceedings out of the Supreme Court of South Australia (Action No. 2332 of 1995) naming Thamm and Hodby as defendants. In those proceedings it claimed that Thamm should account for one-half of the proceeds of the two allotments sold in November 1994 and that Thamm held one undivided moiety of the allotments 110, 111 and 112 in trust for the plaintiff. It also claimed orders that Thamm and Hodby be restrained from dealing with the three allotments or the proceeds of the two allotments sold in November 1994. The effect of the plaintiff’s claim in this action was that the plaintiff was acting as a front to enable Burns to share in the proceeds of the agreement he allegedly had reached with Hodby. Thamm defended the claim and made a counterclaim that he and Hodby were entitled to the proceeds of the sale of the eight allotments sold to Sontell and that the plaintiff account to him and Hodby for those proceeds. The plaintiff defended the counterclaim denying that Hodby was entitled to any part of the proceeds of the sale of the eight allotments. Hodby also defended the claim. In his defence he denied that he and Burns had made any agreement in the course of the telephone conversation on 12 February 1994. He made a counterclaim for an order that the plaintiff account to him for the proceeds of the sale of the eight allotments. The proceedings in the Supreme Court were prosecuted at some length. Ultimately, on 26 November 1996, an order was made transferring the proceedings to the Magistrates Court.

Thamm was able to secure a contract to sell Lots 110, 111 and 112. The plaintiff agreed that Thamm could sell the allotments without prejudice to its rights. By contract dated 30 August 1996, Thamm sold the allotments for $25,000. The proceeds of sale were $23,084.34. One half of the proceeds, namely $11,542.17 was paid into court. The other half was paid to Thamm.

The Magistrate’s Decision

The magistrate found that the plaintiff and Hodby were the persons who had an interest in Lot 99 both in its original form and as divided into 13 allotments. He held that the plaintiff had decided to purchase the land using a third person to conceal from the National Bank the involvement of Burns and Hodby. He found that the plaintiff was acting as a front for Burns. He further found that the plaintiff had provided the funds to buy the land from the Bank. In his reasons for judgment he overlooked the finding that Thamm and Hodby had paid the deposit. Consistent with his finding that Thamm had no interest in Lot 99, the magistrate dismissed the plaintiff’s claim against Thamm and Thamm’s counterclaim against the plaintiff. He further found that Hodby had a half interest in the sale of the eight allotments and in the other five allotments. He held that Hodby’s counterclaim should fail, not upon the basis that Hodby had not proved that the plaintiff should account for the eight allotments but upon the basis that Hodby had failed to account for the sale of the two allotments sold in 1994. He gave judgment for the sum of $10,250.48 which he said was the sum remaining due and owing by Hodby to the plaintiff. He directed that the balance of $1,291.69 be paid to Hodby. The magistrate published draft reasons. His attention was drawn to the fact that he had overlooked in his accounting the payment of the deposit of $2,000 by Thamm and Hodby. He amended his reasons to allow for that fact.
The magistrate was justifiably concerned that Burns had acted in a way to conceal the dealings in Lot 99 from the trustee in bankruptcy. He ordered that a copy of his reasons be sent to the trustee. He further ordered a stay of execution on the plaintiff’s judgment for a period of 28 days to enable the trustee to make a claim for these funds. He further ordered that if the trustee made no claim for the benefit of the judgment, the judgment would be satisfied by payment of the sum of $10,250.48 out of the monies paid into court. The magistrate also made quite a detailed order as to costs. I will refer to the terms of that order later in these reasons.

An Appeal and Two Cross-Appeals

The plaintiff appealed to this court complaining, among other things, of the orders as to costs. I will later deal with that part of the appeal. The plaintiff also complained that the orders made by the magistrate did not reflect his reasons in that the magistrate had found that Thamm had no beneficial interest in the 13 allotments, that the magistrate had failed to make a declaration that Thamm held the proceeds of the 13 allotments on trust for the plaintiff and Hodby, and that there should be an accounting as between the plaintiff and Hodby. Both Thamm and Hodby cross-appealed complaining that the magistrate had erred in finding that the plaintiff had a beneficial interest in the 13 allotments and in dismissing their claims the plaintiff should account to them for the proceeds of the sale of the eight allotments to Sontell. They also cross-appealed against the orders as to costs.
If the plaintiff were to succeed, it would be entitled to the declaration it seeks as against Thamm. But for the reasons which follow, I conclude that Thamm and Hodby succeed on their cross-appeals. The consequence is that the plaintiff’s claim should be dismissed.

No Memorandum in Writing

For the purpose of understanding the issues in this appeal, it is necessary to examine more closely the basis on which the plaintiff makes its claim. The plaintiff’s claim as pleaded in the statement of claim is that Burns, as its agent, orally agreed with Hodby in the telephone conversation on 12 February 1993 to acquire Lot 99 and develop it by subdividing it into allotments, selling the allotments and dividing the proceeds. It is also pleaded that Hodby and the plaintiff would appoint Thamm as their agent to purchase the land and hold it in trust for Hodby and the plaintiff in equal shares and that Hodby would act as the plaintiff’s agent for the purpose of appointing Thamm as their agent. It was pleaded that the arrangement that Thamm should purchase the land was entered into because of a desire of Hodby not to disclose his financial interest in the acquisition and the development of Lot 99 and because of the desire of Burns, the plaintiff company and members of Burns’ family or associated companies to conceal that they were buying the land back from the National Bank. The plaintiff does not assert that there is any document which either evidences this agreement or its interest in the land. As already mentioned, the plaintiff led evidence purporting to prove that, when Burns found out that the Bank was selling Lot 99, he held discussions with his brothers, Michael and Christopher, and that they agreed that the plaintiff would purchase Lot 99 with Hodby. There are no minutes or other documents which record that decision.
The magistrate took the view that the issues in this case turned on the credibility of witnesses. That was a relevant factor. Plainly, the evidence of Burns was entirely at odds with that of Hodby and Thamm. The magistrate noted that the version of the facts given by each of the principal witnesses were irreconcilable. He did not name the principal witnesses. Presumably, he was referring to Burns, Hodby and Thamm. There were also issues as to credit between other witnesses and either Burns, Hodby or Thamm. The magistrate’s approach to the issues of credit were summarised in this passage:
“In a case such as this, where the versions of the principal witnesses are irreconcilable, the final resolution of issues of credit often depends upon which of the versions best fits together with the proven facts and which versions are corroborated by other evidence.”

As a general rule, that is a satisfactory approach but there was in this case a good deal more to examine than merely to consider which version of the facts fitted best with proven facts. The case turned on a series of dealings in land. The plaintiff’s case was based on the oral agreement which, it alleged, was made between Burns and Hodby on 12 February 1993. The plaintiff did not point to any document to prove the agreement or the terms of the trust to which it alleges Thamm is subject or to prove that it had any kind of interest in the land. There was, therefore, no memorandum in writing sufficient to satisfy s 26 of the Law of Property Act, 1936 which provides:

“26. (1) No action shall be brought upon any contract for the sale or other disposition of land or of any interest in land, unless an agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised.
(2) This section does not affect the law relating to part performance, or sale by the court.”

In the absence of any memorandum or other writing, it was necessary for the magistrate to examine whether there was any act of part performance or any other basis in law or equity for the plaintiff’s claim. In the particular circumstances of this case, s 26 assumed an especial importance since in order to succeed the plaintiff had to go behind what the documents concerning the dealings in Lot 99 and in the sub-divided allotments show and to put a particular gloss upon them. Yet the magistrate did not once mention this significant provision. The failure of the magistrate to do so is one of several factors which calls his reasoning into question.

Another unsatisfactory feature of the magistrate’s reasons is that he fails to have regard to the substantial volume of documentary evidence which stood in the path of the plaintiff’s case. The plaintiff was faced with a series of dealings in land where all of the relevant documentation belied any interest of the plaintiff. It was not simply that there was no memorandum or other document which evidenced any interest of the plaintiff. Instead, the interests of Thamm are documented extensively and Hodby’s interests are evidenced by the agreement and declaration of trust executed on 22 February 1993. It is convenient to list each transaction noting the documents pertaining to each.
Sale of Lot 99 from National Bank to Thamm.
Contract naming Thamm as purchaser dated 15 February 1993. Transfer T7597801 naming Thamm as purchaser. Contract completed 18 October 1993.

Sale of eight allotments from Thamm to Sontell.
Contract naming Thamm as vendor dated 23 June 1993 and amended on date not specified. Transfer T7776300 naming Thamm as vendor (P27). Contract completed 22 October 1993.
In addition, Notice to Complete delivered to purchaser on behalf of Thamm and naming Thamm as vendor.

Sale of two allotments from Thamm to D.J. Dinan and Helmar Holdings Pty Ltd.
Contract not proved. Transfer T7850191 naming Thamm as vendor. Contract completed 23 December 1994.

Sale of three allotments from Thamm to J.S. Bobridge.
Contract naming Thamm as vendor dated 30 August 1996. Transfer not proved. Contract completed 2 October 1996.

Although the last of the four transactions was effected without prejudice to the respective claims of the parties, there was no dispute that Thamm was the registered proprietor of the land. Thus, Thamm was the only person who could transfer the estate in fee simple in those three parcels. In addition to these documents, there are the two settlement statements prepared by Midson and addressed to Thamm. The first settlement statement relates to the sale of Lot 99 from the National Bank to Thamm. The second statement relates to the sale of eight allotments from Thamm to Sontell. It is addressed to Thamm as vendor and shows that the balance of proceeds is due to Thamm. Thus, on the face of all of those documents, Thamm was the only person who had an interest in the above parcels of land. However, as Thamm had exercised the agreement and declaration of trust on 22 February 1993, Hodby was entitled to a one half interest in the proceeds of the land.

Finally, the reasons of the magistrate are unsatisfactory in that he finds for the plaintiff notwithstanding his finding that Burns was discredited as a witness and that he would attach no weight to what Burns said if his evidence stood alone and notwithstanding other manifest problems in accepting the evidence of other witnesses called for the plaintiff. In addition, he accepts Thamm as a truthful witness but rejects Hodby for reasons which are unsatisfactory. Even if Hodby’s evidence is rejected, that is not a reason for accepting the plaintiff’s case since the evidence of Thamm remains.

The Weaknesses in the Plaintiff’s Case

There are a number of obvious difficulties in the plaintiff’s case and with a claim for part performance. First, all of the documents relating to the dealings in Lot 99 and the 13 smaller allotments are in the name of Thamm. There is nothing in any of the documents which gives even a hint of any interest to the plaintiff. The plaintiff’s case requires that one go behind these transactions and find that in truth they were being conducted for parties other than Thamm. Indeed, the plaintiff acknowledges in its statement of claim that its intention was to deceive the National Bank. In short, the plaintiff’s case is contrary to what the documents show. It is a case where the plaintiff acknowledges an intention to deceive.
Secondly, the plaintiff’s case involves a scheme to deceive not only the National Bank but also Burns’ trustee in bankruptcy and so defraud the creditors of Burns. As the magistrate found, Burns set out to disguise his personal involvement in the dealings. In addition, the magistrate was not prepared to rely on Burns’ evidence.
Thirdly, the plaintiff’s case is contrary to the documents prepared by Midson who was, to all intents and purposes, acting as the agent of Burns if not also of the plaintiff. Those documents are the Notice to Complete addressed to Berimall and, more significantly, the two settlement statements which are both addressed to Thamm, the second of which shows Thamm as the person entitled to the proceeds of sale. Midson gave evidence-in-chief that Burns instructed him to act for Thamm in both transactions. Midson did not send the settlement statements to Thamm because he did not have Thamm’s address. In his evidence, Midson said that he was informed by Burns that Thamm was a middle man for the plaintiff and Hodby. He did not check that with Thamm. He said he regarded Thamm as a figurehead. However, at no time did Midson indicate that the proceeds of the sale to Sontell should be paid to any person other than Thamm. Later, when requested by Thamm to do so, he delivered to Thamm the remaining certificates of title for the allotments but only after confirming with Burns that he was at liberty to do so. They were returned on 6 December 1994.
Fourthly, although Thamm is shown as the registered proprietor entitled to sell the 13 allotments, Thamm and Hodby had executed documents which show Hodby’s interest. The magistrate accepted the evidence of Thamm and Hodby that the agreement and the declaration of trust which were dated 22 February 1993 were executed on that day. He rejected the plaintiff’s submission that they were a fabrication. He had difficulty in reconciling those documents with the declaration of trust dated 31 March 1993. Although he notes Thamm’s evidence that this later document had been executed in order that Thamm and Hodby could benefit from tax losses available to Hodby, he does not rely on that evidence. There is no reason why the magistrate should have rejected that evidence, particularly since he had found Thamm to be an honest witness.
The magistrate was critical of the evidence of Hodby. His criticism is essentially based on the declaration of trust dated 31 March 1993 which he believes is entirely inconsistent with the agreement and declaration of trust made on 22 February 1993 between Thamm and Hodby. He believed that the intention to use the Hodby unit trust was a device to deceive the Commissioner of Taxation and was thus adverse to Hodby’s credit. While Hodby may be criticised on that score, it does not lead to the conclusion that the arrangements made between Hodby and Thamm did not exist. The fact remains that Hodby and Thamm documented the arrangements between them. There is simply no documentation to support the plaintiff’s case.
The magistrate also concluded that the arrangement as evidenced in the agreement and declaration of trust dated 22 February 1993 did not come to pass, pointing to the fact that Thamm did not pay the balance of the purchase price and Hodby did not carry out the development work. He concluded that the original agreement between Thamm and Hodby must have changed. Plainly, it did. But that is not a reason for concluding that the essential terms of the agreement between Thamm and Hodby, namely, that Thamm would buy the land in his own name and that he and Hodby would divide the proceeds did not remain on foot.
In short, the magistrate has found that the documents executed on 22 February 1993 were not a fabrication but he does not rely on them for reasons which are unsatisfactory. There is no reason why the magistrate should not have relied on them. He erred in not doing so. Given that conclusion, the magistrate’s finding that the documents are not a fabrication is very telling. Those documents are entirely contrary to the plaintiff’s claim. They close the door against the plaintiff’s claim. The plaintiff seeks to establish an interest in land dealings by Thamm where it is unable to point to any document in support of its claim. By contrast, all the documents point only to Thamm as the person interested except for the documents executed on 22 February 1993 which show Thamm and Hodby as the parties with the beneficial interests. In short, the plaintiff seeks to explain away the documents. By contrast, Thamm and Hodby rely on them.

The Issues of Credit

To add to the plaintiff’s difficulties are the issues as to the credit of its witnesses. Burns was a key witness for the plaintiff, probably its most important witness. On a number of occasions the magistrate was very critical of the evidence of Burns. He found that Burns “stands as a discredited person, one willing to twist the law to suit his own ends”. However, in the result, he accepted the case presented by the plaintiff. That apparent inconsistency is compounded by the fact that the magistrate formed what he called a “favourable” impression of Thamm. He said that Thamm “appeared to give his evidence honestly”. Earlier in his reasons, he had described Thamm as “a careful man”. It is not possible for both Burns and Thamm to be correct. The magistrate accepts Burns’ evidence in preference to Thamm on the dubious basis that Thamm’s evidence as to the frequency with which he lunched at hotels with Burns and Hodby had “a different flavour from that suggested by Thamm’s counsel when cross-examining Burns”. In a case of this kind, that is a very unreliable ground on which to prefer one witness over another, particularly given that there are documents which, on their face, support the case presented by Thamm and Hodby. The magistrate also preferred the evidence of Burns over that of Hodby. That is despite the fact that he found that Hodby gave his evidence “carefully and precisely”. But, as already mentioned, even if Hodby’s evidence is rejected, that is not a reason for accepting the plaintiff’s case since the evidence of Thamm remains.
The magistrate was critical of Thamm for not promptly seeking from Midson the proceeds of the settlement with Sontell. The magistrate has overlooked Thamm’s evidence that he had been informed by Hodby that, because of commission, surveying and developments costs, there was little by way of proceeds from this sale. He did not then think it necessary to claim the proceeds. In addition, he was not then concerned about recovering the certificates of title for the other allotments. However, he began to be concerned in April the following year when he needed to prepare his accounts for income tax purposes and he needed the certificates of title to check a notice he had received from the Council for rates. Thamm’s explanation is understandable. At that stage the parties were still on good terms. He was prepared to rely on whatever Hodby had told him. Where necessary, Thamm was active in prosecuting what he believed to be his entitlement. I refer, in particular, to his attempts to recover from Midson the certificates of title against the reluctance of Midson to release them to him.
Furthermore, the magistrate’s reasons for rejecting Hodby’s evidence are unsatisfactory. I have already mentioned that the magistrate’s reasons for not relying on the documents of 22 February are unsatisfactory.
Another ground on which the magistrate relied to reject Hodby’s evidence is that he accepted Laidlaw’s account that, in the course of the conversation between Burns and Hodby on 12 February 1993, Burns had asked him to act as a nominee purchaser of Lot 99. The magistrate says that this corroborated Burns’ evidence that the plaintiff company was involved as principal. But neither Burns’ account of this conversation nor Laidlaw’s account says anything about the plaintiff company’s involvement. At no time did either Burns or Laidlaw state in the course of their evidence that the plaintiff’s company’s name was mentioned in the telephone conversation between Burns and Hodby. A further difficulty in relying upon the evidence of Laidlaw is that, even at its best, there is nothing which indicates that Hodby and Burns came to an agreement to use a nominee on this occasion. At best, they were discussing a proposal concerning this land. Finally, Laidlaw said that Thamm’s name was mentioned on this occasion. Yet, Thamm denies being present and Thamm is accepted as an honest witness. In short, the evidence of Laidlaw provides no basis for preferring the evidence of Burns.

Another witness, who the magistrate identified as supporting the evidence of Burns and whose evidence the magistrate said “sits well” with the fact that it was the plaintiff who funded the purchase of Lot 99, was a Mr Buss. At the relevant time, Mr Buss managed the finance company. He had known both Burns and Hodby for a long time. He was friendly with them. He had arranged finance for other projects in which Burns and Hodby had been engaged. The magistrate relied on the evidence of Buss that in March 1993 Hodby and Burns came to his office and sought his advice concerning the financing of Lot 99. He also said that some months later Hodby and Burns came to see him again to discuss the same subject. Hodby denies any such conversation with Burns.
A reading of the evidence of Buss shows that it is extremely vague and of little, if any, probative value. He gave evidence that on 8 March 1993 (not 9 March 1993 as the magistrate found) he had a meeting at 12.15 pm with Burns and Hodby at which they sought finance to purchase land back from the National Australia Bank on Yorke Peninsula. He believed it to be a lunch time meeting. He admitted in cross-examination that he did not know whether the purchaser was to be a person or a company. His impression, to use his words, was that Burns and Hodby were involved jointly. He could not assist them with finance. When he saw them the second time, he reiterated that he could not assist. It is apparent from his evidence-in-chief that he knew nothing of the details. He certainly did not state anything which indicated that the plaintiff company was involved. There are other difficulties with his evidence. He relied on a diary note for the purpose of recalling the meeting. In cross-examination it emerged that the only diary note read, “P.F. Burns Pty Ltd”. That is not the name of the plaintiff company. There are a number of companies in this group. There was no note of either Burns’ name or Hodby’s name and no note that the meeting included lunch. He could not recall the date of the second meeting and there was no note of it in his diary. He was unaware that Hodby had a bank cheque to enable completion. He knew nothing of Thamm’s financial position. His evidence is, on his own admission, one of impression only. The evidence of Buss is not only vague but it does not indicate that the plaintiff had any interest in acquiring Lot 99. It is equally consistent with Burns being an agent for Hodby. It does not prove that the plaintiff had an interest in the land. It does not “sit well” (to use the magistrate’s phrase) that it was the plaintiff who funded the purchase of Lot 99. There is a further difficulty with the magistrate’s findings on this issue. The magistrate was confused. Having dealt with his evidence he adds:
“The fact that Burns and Hodby saw Buss together points again to Burns being a principal in this transaction.”

That finding is entirely inconsistent with his finding that the plaintiff was the principal.

Finally, and perhaps most significantly, on 8 March 1993, the date of the first of the alleged meetings, Hodby did not have to seek funds. He had funds available against which he later drew a bank cheque. Furthermore, there is no reason to believe that Thamm would not have been able to pay the balance of the purchase price from the termination payment in accordance with the agreement he had made with Hodby on 22 February 1993. As to the second meeting, there was then no need for funds because it was anticipated, at least by Hodby and Thamm, that the settlements would be simultaneous.
The magistrate accepted the evidence of Midson’s wife, and a witness called Candetti. None of those witnesses proved any fact which assisted in deciding the question whether the plaintiff had an interest in these land dealings. Furthermore, none of these witnesses provides any basis for preferring the evidence of Burns to that of Hodby. The magistrate also accepted the evidence of Midson. His evidence concerned the timing of the settlements and other issues related to the settlements.
Another witness whose evidence could be considered to provide some assistance for the plaintiff’s case was Michael Burns. But, on examination, it is apparent that he knew very little. He admitted that he had little recollection and essentially relied for his information on what he learned from his brother Peter Burns. His evidence essentially concerned the use of his wife’s funds and the extension of the plaintiff’s overdraft to enable the purchase of Lot 99. The magistrate accepted his evidence, notwithstanding that in the first of the actions commenced in the Supreme Court he had made a claim which was entirely at odds with the claim by the company. He claimed that he was the person beneficially entitled to the land and that action was brought in his name to enforce that claim. In an affidavit sworn in support of his claim, there is no mention that the plaintiff had any interest in the land. Two months later, in a second affidavit, he recanted stating that the monies were advanced on behalf of the plaintiff company, stating “that it had always been agreed that the company was entitled to a one half share in the land with Mr Hodby”. He purported to explain his earlier affidavit by stating that it had been prepared as a matter of urgency. Urgency is hardly a satisfactory explanation for a claim which is entirely inconsistent with the claim by the company. His evidence too is unsatisfactory. His willingness to give two conflicting versions as to the person entitled to the interests in the land shows that he was prepared to say whatever was required. His evidence cannot be relied on.
To summarise, the magistrate was not prepared to accept the evidence of Burns standing alone. The witnesses Laidlaw and Buss did not provide material support for the evidence of Burns. The evidence of Michael Burns could not be relied on. The plaintiff’s case was not improved by the oral evidence.
In my view, there was no basis for going behind what the documents showed. The oral evidence in support of the plaintiff’s case was entirely unsatisfactory. It did not prove an agreement of the kind alleged. The magistrate ought to have dismissed the claim.
The plaintiff’s case is not improved when one examines the facts to determine whether there were any acts of part performance upon which it could rely.

Part Performance

There is some debate as to what must be proved in order to establish acts of part performance which will be sufficient evidence of a contract. The test stated in Maddison v Alderson (1883) 3 App. Cas. 467 by Lord Selborne LC at 479 requires that the alleged acts of part performance must be “unequivocally and in their own nature referable to some such agreement as that alleged”. A more liberal test was stated by Upjohn LJ in the Court of Appeal in Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 189 which cited with approval a passage in Fry on Specific Performance (6th ed.) p 278. That test requires that the acts “must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged”. The test was referred to by the House of Lords in Steadman v Steadman [1976] AC 536. In Regent v Millett (1976) 133 CLR 679 at 683 Gibbs J, with whom the other members of the court agreed, said that the test enunciated by Lord Selborne had been consistently accepted as a correct statement of the law. Referring to McBride v Sandland (1918) 25 CLR 69 at 78, he added:
“It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged.”

Gibbs J noted the decision in Steadman but did not find it necessary to deal with the questions raised by that decision. Both the strict test and the more liberal test have been applied at different times by courts in Australia: see the decisions noted in Australian and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21 per Hill J at 36 - 37. In Pattison v Mann (1975) 13 SASR 34, Bray CJ at 40 and Zelling J at 46 noted the test in Steadman with apparent approval.

I respectfully agree with Meagher Gummow and Lehane, Equity - Doctrines and Remedies, (3rd ed.) para 2040 that the majority of the House of Lords in Steadman did not endorse a literal understanding of Upjohn LJ’s proposition. Lord Salmon (at 569 - 570) noted that there are passages in Fry on Specific Performance which are inconsistent with the passage relied on by Upjohn LJ and added (at 570):
“It has never been held, nor, so far as I can discover, ever before the present case, suggested, that acts alleged to be in part performance of parol contract take the contract out of the statute unless they make plain the general nature of the contract. I can find no reason for departing from that principle.”

That test is not far removed from Lord Selborne’s test. For reasons given below, the plaintiff would fail to satisfy Lord Salmon’s test. Lord Simon (at 564) held that the facts had to show “that it was more likely than not that those acts were in performance of a contract to which the defendant was a party”. The House of Lords was not unanimous in its approach. In the absence of a unanimous approach, I respectfully agree with the Full Court of the Federal Court of Australia in Australian and New Zealand Banking Group Ltd v Widin (supra) at 37 that it is for the High Court to decide whether to adopt Steadman in Australia. In the meantime, it will be necessary to apply the views of Gibbs J in Regent v Millett.

The magistrate found that the fact that the monies to buy the land came from the plaintiff and from a member of the Burns’ family was the strongest single factor pointing to the acceptance of the plaintiff’s assertion that it had a beneficial interest in Lot 99 and in the 13 allotments created from it. But, as the magistrate’s reasons disclose, in reaching that conclusion he entirely overlooked the fact that Thamm and Hodby had paid the deposit. The payment by Thamm of part of the deposit is entirely inconsistent with the agreement alleged by Burns. Burns said in his evidence that Thamm was prepared to allow the land to be purchased in his name provided that he did not have to put his hand in his pocket. But Burns did not know that Thamm did put his hand in his pocket to pay part of the deposit. These facts are entirely inconsistent with the evidence of Burns on this question. Burns’ evidence cannot be relied on. More importantly, the fact that Thamm paid the deposit is inconsistent with Thamm acting as a front for Burns and Hodby. If, as Burns asserts, Thamm was a mere middle man and did not wish to be out of pocket, the likelihood is that both Burns and Hodby or at least one of them would have provided funds with which Thamm could pay the deposit. In other words, the fact that Mrs Burns and the plaintiff arranged the funds to enable the purchase by Thamm from the National Bank is not an unequivocal act referring to the contract of the nature alleged by the plaintiff. Instead, the payment of the deposit by Thamm and Hodby is an act unequivocally referring to the agreement they had reached. It is no answer to state that the arrangements would have been the same as have hitherto existed between Burns and Hodby in connection with the sub-division by Kalarka. Those arrangements had come to an end. Hodby held interests in a number of allotments in what had been the Kalarka sub-division as mortgagee in some other capacity. The arrangement to buy Lot 99 from the National Bank fell quite outside what had occurred before.
In addition, the fact the plaintiff arranged payment of the balance of the purchase price to the National Bank and arranged and paid for the earthmoving work are equally consistent with the plaintiff acting as the agent of Thamm and Hodby as with the plaintiff having a beneficial interest in the land. The plaintiff was a land agent. Arranging earthmoving work of the kind performed in this case was the kind of work that a land agent might organise. The payment of the purchase price was not made entirely by the plaintiff. The sum of $8,500 was contributed (to use a neutral term) by Mrs Michael Burns. The plaintiff contributed $15,285.77, being the balance of the purchase price, an adjustment for council rates, stamp duty and registration fees. Those contributions were made when it was known that Sontell intended to settle in a few days. As soon as Sontell completed the contract, Mrs Burns and the company were repaid in full. The contributions were, in fact, short term loans. It must be immediately acknowledged that this was not the usual kind of transaction which a land agent might engage but it must be viewed against the background of a long history of dealings between Hodby and Burns. In addition, it had been the original expectation that the contract with the Bank would be completed at the same time as the contracts with Sontell. That did not eventuate and funds had to be found quickly. It is reasonable to infer that the plaintiff was willing to arrange a short term loan. Alternatively, the funds might have been lent to advance either the interests of Burns or the plaintiff in some manner as yet undisclosed. It is not necessary to determine why the funds were provided in this way to enable completion. It is enough that the transaction is not unequivocally referable to a contract of the kind alleged by the plaintiff.
Finally, if, as the plaintiff asserts, the agreement entitled it and Hodby to share the proceeds, why was it that Hodby made no contribution to the purchase price particularly as it was necessary for the plaintiff to seek an extension of its overdraft and the monies belonging to Mrs Burns. There is no suggestion that Hodby was unable to fund the purchase. He had already drawn a cheque to enable settlement at an earlier date but had re-banked that cheque. It cannot be said that the arrangement was entered into in order to conceal the involvement of Hodby and Burns, since the involvement of Burns would have been disclosed by the fact that the plaintiff company made a significant contribution to the price.
For all of these reasons, the plaintiff is unable to point to any act which is unequivocally referable to a contract of the nature it alleged to have existed.
As Gibbs J noted in Regent v Millett at 682, the principle upon which the doctrine of part performance rests was stated by Lord Cranworth LC in Caton v Caton (1866) LR 1 Ch App 137 at 148 in these terms:
“... when one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money.”

Those principles embrace aspects of the law of estoppel, unconscionability, and fraud. It is unnecessary, therefore, to examine whether the plaintiff has made out any case on either of those grounds.

For all of these reasons, the magistrate ought to have dismissed the plaintiff’s claim.
When one stands back and looks at the magistrate’s reasons as a whole, two things stand out. The first is that the magistrate has accepted that the plaintiff proved that it had an interest in these land dealings without being able to produce one document to support its claim and where the evidence relied on, namely, the advances said to have been made by Mrs Burns and the plaintiff are equivocal. By contrast, the arrangements which Thamm and Hodby said existed were documented and the magistrate accepted Thamm as a witness of truth. The magistrate was not prepared to believe Burns. Second, the plaintiff’s case requires that Thamm lent his name to a series of dealings in land, expose himself to a liability to pay the balance of the purchase price, stamp duty and registration fees and other costs without any fee or reward. It strains one’s credulity to breaking point to believe that obligations of that kind would be undertaken without some fee or reward or at least some assurance that Thamm would be completely indemnified. Burns gave no account of any arrangement to protect Thamm’s financial position. In the absence of such arrangement, it is not possible to accept the plaintiff’s case.
In addition, the fact that the plaintiff’s case is that it was a party to a scheme to deceive the trustee in bankruptcy of Burns and the creditors of Burns gives little cause for confidence in its claim. Standing alone, that fact does not necessarily mean that the agreement could not have been made. But when joined with the real doubts as to reliability of the witnesses called by the plaintiff and the important fact that all the documents tell against the plaintiff’s claim, it is not possible to conclude that the plaintiff has proved its claim.
By way of a passing comment only and in no respect forming part of these reasons, it might be noted that the plaintiff is not in any respect out of pocket for either assisting in the completion of a contract or in paying for the earthworks. It was immediately reimbursed for those costs on completion of the sale by Thamm to Sontell. Furthermore, consistently with the agreement they made, Thamm and Hodby are willing to pay commission and promotion costs to the plaintiff.

The Order as to Costs

The magistrate made a detailed order as to costs in paras 5 to 11 of the order which are in these terms:
“5.     I order that subject to the qualifications mentioned below, the plaintiff have its costs of actions to be taxed upon the scale relating to complex actions as contained in the Third Schedule to the Magistrates Court Civil Rules for claims between $10,001 and $20,000.
6.     I order that the plaintiff’s counsel fees required to be paid by the defendants be for six hearing days.
7.     As between the two defendants I direct that the defendant Hodby pay three quarters of the plaintiff’s taxed costs and the defendant Thamm one quarter.
8.     I order that the plaintiff pay Hodby’s counsel fees for 12 days those costs to be taxed or agreed upon the Supreme Court scale.
9.     I order that the plaintiff pay Thamm’s Counsel fees for the time he spent in court less six days upon the Supreme Court scale.
10.    I direct that the plaintiff pay the defendants costs to be taxed or agreed upon the Supreme Court scale for the period 2 November 1995 until 6 November 1996 relating to pleadings or steps taken in the Supreme Court other than steps taken of and incidental to the application for extension of time to remove caveat.
11.    I direct that the defendants pay the plaintiff’s costs on the Supreme Court scale of and incidental to the application for an extension of time of time for removal of the caveat and I direct that the defendant Hodby be responsible for three quarters of those costs and the defendant Thamm responsible for one quarter of those costs.”
The plaintiff appealed against paras 6, 7, 8, 9 and 10 of those orders. Despite the fact that I have concluded that the magistrate should have dismissed the plaintiff’s claim, it is still unnecessary to examine these orders since Thamm and Hodby seek to retain the benefit of each of these orders. The magistrate gave detailed reasons for these orders. Given that I have concluded that the magistrate ought to have dismissed the plaintiff’s claim, there is no need to consider the appeal against para 7 of the order.
I deal first the para 6 of the order. In the magistrate’s view, the trial of the action had been unduly long. In his reasons, the magistrate identified the issues which caused the trial to run for 18 days and decided that it could have been heard in six days. It was for that reason he allowed the plaintiff only one third of its costs. There is no need to repeat the magistrate’s reasons. I entirely agree with them. Further, any reading of the transcript confirms that the plaintiff pursued many issues which were clearly irrelevant. There is no reason to interfere with the order.

The issues in paras 8 and 9 may be considered together. The magistrate’s reasons for the order that the plaintiff should pay counsel fees to the defendant’s counsel for 12 out of the 18 days were as follows:
“I now turn to consider the position with respect to those hearing days as to which the plaintiff will not get costs. The defendants say that not only should the plaintiff be deprived of costs, but that the plaintiff should pay the defendants costs of and incidental to those hearing days. The plaintiff raised and pursued the issues upon which it failed over the objection of counsel for the defendants. The plaintiff did so against the background of there being late discovery. The plaintiff’s pursued those issues, it having been plainly pointed out by the court to all parties that a prolongation of the hearing would, in any event, lead to a result where the legal costs greatly exceeded that which was at stake. The plaintiff persisted in seeking to prove and establish a chain of evidence which, at the end of the day, was conceded to be unproven even upon the balance of probabilities. Even if that concession was not made, my findings, in any event, and independently of that concession were to the same effect. The plaintiff took the chance and ran the risk of a costs order against it with its eyes open. The defendants should have their costs as against the plaintiff with respect to time spent in court upon irrelevant issues or issues upon which the plaintiff was unsuccessful. As mentioned earlier, I would therefore direct and order that the plaintiff pay counsel fees to the defendants counsel for two thirds of the hearing days.”

In reaching this conclusion he had regard to the fact that the trial ran for so long largely as a result of the attempts of the plaintiff to prove a financial relationship between Hodby and the plaintiff and, more particularly, between Hodby and Burns in the 10 year period or so prior to the transactions in question. The plaintiff failed on that point. In appropriate circumstances, the court may order a successful plaintiff to pay part or all of the defendants’ costs: Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129; Cretazzo v Lombardi (1975) 13 SASR 4. No basis has been demonstrated for interfering with the magistrate’s conclusion that the plaintiff should pay the defendants’ costs.

The plaintiff also appealed against the order that the counsel fees payable by the plaintiff should be paid on the Supreme Court scale. The magistrate’s reasons for this order were that the plaintiff had been warned that it was at risk as to costs in pursuing irrelevant issues and that the plaintiff had led the evidence over the objection of the defendants. The magistrate had a discretion as to the terms upon which the plaintiff should pay the defendants’ costs: Rule 106(6) of the Magistrates Court Rules. I think that the magistrate has erred in simply ordering that the fees be paid on the basis of counsel fees in the Supreme Court. Instead, he ought to have fixed what he believed to be an appropriate rate for counsel fees. The scale of fees in the Supreme Court allows to junior counsel fees up to $1,350 per day, which is twice the counsel fee which would be allowed in the Magistrates Court. It cannot be overlooked that this was an action in the Magistrates Court and any order as to costs should reflect that fact. Costs are not a tool to punish a party but to allow a fair reimbursement of the costs incurred. In this case, the appropriate order as to costs was to allow counsel fees at the rate of $1,000 per day.
The magistrate’s reasons for ordering in para 10 that the plaintiff pay the costs of Thamm and Hodby in respect of the proceedings brought by the plaintiff in the Action No. 2332 of 1995 in the Supreme Court in respect of its separate claims for declarations as to ownership and an accounting between the parties, that is to say, all costs other than the costs associated with extending the time for the removal of the caveat lodged on 5 September 1995, was grounded on Rule 101.02A of the Supreme Court Rules. That Rule provides that, subject to a named exception which is not now relevant, unless the court otherwise orders, no order for costs will be made in favour of a plaintiff where the amount recovered in a civil claim is less than $75,000. The magistrate held that the plaintiff would have been aware that its claim would fall far below the jurisdictional limit. For that reason, the plaintiff could not recover any further costs for the action in the Supreme Court. The magistrate was entitled to reach that conclusion, particularly given that the solicitors for Hodby and Thamm had both warned the plaintiff’s solicitors that the action ought to have been brought in the Magistrates Court and put the plaintiff’s solicitors on notice that they sought to be indemnified for their costs in the Supreme Court. The magistrate has identified the period for which the defendants should have their costs. He has had regard to the fact that some of the work would have been necessary in any event. He has ordered that Hodby and Thamm recover their costs on the Supreme Court scale for the period from 2 November 1995 until 6 November 1996 save for the costs relating to the application to extend time for removal of the caveat. I am not satisfied that there is any ground for interfering with this order. The reasons indicate that the magistrate has had regard to all relevant factors and does not take into account any irrelevant factors. It cannot be suggested that his decision is plainly wrong.
The orders I will make as to costs will reflect these reasons.
For all of these reasons, the appeal by the plaintiff will be dismissed and the cross-appeal of Thamm and Hodby will be allowed. There will also be an order dismissing the plaintiff’s claim. It will be necessary for an accounting to be made as between the parties as well as orders as to costs and interest. I direct the parties to bring into court minutes which give effect to these reasons.

$
Commission to the plaintiff	1,100.00
District Council of Warooka - Arrears of rates	2,832.60
Land tax	282.60
B T O’Callaghan	3,000.00
Hodby	4,984.80
12,200.00

[1999] SASC 501

29 November 1999