Pipikos v Trayans

[2016] SASCFC 138

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

PIPIKOS v TRAYANS

[2016] SASCFC 138

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Kelly and The Honourable Justice Hinton)

16 December 2016

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY - SALE OF LAND

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - STATUTE OF FRAUDS, SECTION 4 - CONTRACTS TO WHICH APPLICABLE - CONTRACTS FOR SALE OR DISPOSITION OF LAND OR ANY INTEREST IN LAND

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - STATUTE OF FRAUDS, SECTION 4 - NON-COMPLIANCE WITH STATUTE - DOCTRINE OF PART PERFORMANCE - WHAT ACTS CONSTITUTE PART PERFORMANCE - ACTS NOT CONSTITUTING PART PERFORMANCE

Appeal against decision of a Judge of the District Court.

The appellant is the former brother in law of the respondent.  The appellant and his wife, and the respondent and her husband agreed to purchase a property together (the new property).  The appellant paid the contractual deposit as well as the balance of the purchase price and the transaction costs (collectively 'the settlement costs').  The appellant claims that because the respondent and her husband could not afford to contribute to the settlement costs they agreed that the respondent would sell them a half interest in another property owned by the respondent (the respondent's property).  The value of that half interest in the respondent's property was slightly higher than the amount owed by virtue of the agreement so the appellant would pay the respondent $8000.

The trial Judge found in favour of the respondent. Her Honour found that while there were discussions to the effect outlined above, the agreement was not concluded. The Judge also found that the discussions forming the basis of the agreement were between the appellant and the respondent's husband (the appellant's brother) and the respondent was not party to those discussions. The Judge also found that, if there was an oral agreement, it was not enforceable because there was no part performance and the agreement did not comply with the relevant statutory requirements.

The appellant appeals the factual finding that the agreement was not fully concluded. the appellant accepts that the respondent was not a party to the discussions forming the basis of the agreement. Yet, the appellant appeals on the basis that the respondent had knowledge of the agreement, and on the basis of that knowledge executed the transfer by which the property was purchased. The appellant argues that a handwritten note of the respondent, vague in its terms and authored some considerable time after the transaction, is evidence of the respondent's knowledge and acceptance of the overarching agreement and also fulfills the statutory requirements that a contract for the sale of land be in writing.

Held per Kourakis CJ (Kelly and Hinton JJ agreeing), dismissing the appeal:

1.  There was an agreement between the appellant and the  respondent.  It is improbable that the appellant would have agreed to purchase the new property with the respondent and her husband without securing the agreement to receive a half interest in the respondent's property.

2.  The respondent conceded in cross-examination that she accepted the transfer of the new property with the knowledge that her husband had agreed to finance that transfer by giving the appellant a half share in their property.  By acting with that knowledge the respondent bound herself to the agreement.

3. Although there was an agreement, it was not in writing as required by s 26 of the Law of Property Act 1936 (SA). The handwritten note did not refer to any written documents nor to the essential terms of the transaction. There was no complete record of agreement.

4.  There was no part performance.  The purchase of the new property did not refer to any agreement and was complete in and of itself.

5.  The agreement was not enforceable.

Law of Property Act 1936 (SA) 26, referred to.
Thomson v McInnes (1911) 12 CLR 562, applied.
Australian and New Zealand Banking Group v Widin (1990) 102 ALR 289; Caton v Caton (1866) LR 1 Ch App 137; JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; Parker v Barnett (1889) 16 VLR 214; Pipikos v Trayans [2015] SADC 149; Tonitto v Bassal (1992) 28 NSWLR 564, discussed.
Dale v Hamilton (1846) 67 ER 955; Maddison v Alderson (1883) 8 AC 467; McMahon v Ambrose [1987] VR 817; Millett v Regent [1975] 1 NSWLR 62; Ogilvie v Ryan [1976] 2 NSWLR 504; Thwaites v Ryan [1984] VR 65; Riley v Osborne [1986] 193, considered.

PIPIKOS v TRAYANS
[2016] SASCFC 138

Court of Criminal Appeal:  Kourakis CJ, Kelly and Hinton JJ

1. KOURAKIS CJ:      This is an appeal against the dismissal of the appellant’s claim that he held an interest in one undivided moiety of land on Clark Road, Virginia (‘the Clark Road property’).  The appellant Leon Pipikos (‘Leon’) is the respondent’s former brother-in-law. The respondent, Velika Trayans (‘Velika’), has been the sole registered proprietor of the Clark Road property since 2002 when she and her husband George Pipikos (‘George’) purchased it as their matrimonial home.  Leon and George are brothers. 

2. In July 2004, Leon, his wife Sophie Pipikos (‘Sophie’), George and Velika agreed to purchase a property at Penfield Road, Virginia, for $260,000 (‘the Penfield Road property’).  Leon paid the contractual deposit of $2,000, even though George executed the contract, with himself and his nominees, as purchasers.  A loan of $197,261 was provided by Perpetual Mortgagees and Leon paid both the balance of the purchase price and the transaction costs of $74,883.67 (including the contractual deposit) on settlement.  George and Velika did not have funds to pay their half share of the sum of $74,883.67 (‘the owners’ contribution’).  Leon claimed that he, Sophie, George and Velika had agreed that in exchange for Leon and Sophie paying the whole of the owners’ contribution, Velika would sell them half an interest in the Clark Road property for $45,000.  From the purchase price of $45,000 Leon was to retain $37,000 to reimburse him for his payment of George and Velika’s half-share of the owners’ contribution on the Penfield Road property.  Leon was to pay the remainder of $8,000 to George and Velika in cash.

3. The Judge found that George and Leon did talk about a financing arrangement of the kind mentioned above for George and Velika’s share of the owners’ contribution on the Penfield Road property but that they did not reach a concluded agreement to that effect.  That factual finding is challenged. 

4. The Judge also found that Velika was not a party to the discussions between George and Leon.  That finding is not challenged.  However, the Judge’s conclusion that Velika was therefore not bound by any agreement made by George and Leon is challenged on the basis that, on Velika’s own testimonial admission, she knew of George and Leon’s agreement in relation to the Clark Road property and the owner’s contribution.  Acting on that knowledge, she executed with George the transfer by which they took their legal interest in the Penfield Road property.  Leon contends that Velika’s conduct contractually bound her to George and Leon’s agreement.  The Judge failed to decide that issue even though it properly arose on the pleadings and out of the course of the trial, and even though a submission to that effect was put by Leon’s counsel in his closing address. 

5. I find that the Judge erred in failing to find that George and Leon did conclude an agreement that Velika would transfer to Leon a half-interest in the Clark Road property in exchange for Leon paying the whole of the owners’ contribution, on the Penfield Road property, and paying a further sum of $8,000 to Velika and George.  Even having regard to the previous dealings between the brothers, it is most improbable that Leon would have agreed to George and Velika taking a half-interest in the Penfield Road property without securing an agreement that he would receive in return a half-interest in the Clark Road property.

6. Velika denied in her evidence-in-chief, but conceded in cross-examination that, before she and George accepted a transfer to themselves of a legal interest in the Penfield Road property, she knew that George had agreed to finance their purchase of that interest by transferring to Leon a half interest in the Clark Road property.  Velika’s admission is determinative.  The Judge should have found that Velika’s admission proved that Leon and George had concluded an agreement to that effect, and that by her conduct in taking an interest in the Penfield Road property, Velika bound herself to that agreement.

7. The Judge found in the alternative that, even if Velika had agreed to transfer a half-interest in the Clark Road property to Leon, the agreement was not enforceable because it did not conform to the requirements of s 26 of the Law of Property Act 1936 (SA) (the LPA), and because there had been no part performance. In August 2009 at Leon’s request, Velika signed a note acknowledging that Leon held a half interest in the Clark Road property as a result of the arrangements made for the purchase of the Penfield Road property (‘the 2009 acknowledgement’). However, neither that note nor the documentation of the agreement to purchase the Penfield Road property recorded that, in addition to agreeing to pay the whole of the owners’ contribution on that property, Leon had agreed to pay George and Velika an additional $8,000 in exchange for his share. Therefore the Judge correctly found that, there being no memorandum of that term which was an integral part of the consideration, the agreement was not enforceable. The Judge also correctly held that there was no part performance of the agreement. The mere purchase of, and settlement on, the Penfield Road property did not speak to any agreement between the purchasers on how their respective contributions were made or were to be accounted for. It was not, of itself, referable to the particular agreement alleged by Leon.

8. I elaborate on my reasons below.

   The Property Transactions

9. It is convenient to commence, as did the Judge, with a summary of the uncontested facts concerning the real estate transactions of Leon and George.

10. When George and Velika bought the Clark Road property in 2002, it was put in Velika’s name as the sole registered proprietor at George’s suggestion.  The land was vacant land bought with the intention of erecting a shed from which George would conduct a crash repair business.  The shed was built and, later, so too was their home.  George and Velika moved into the home in 2003.

11. During the first half of 2004, George became aware that a nearby property on Taylors Road was for sale.  On 25 February 2004, George signed a contract to purchase it for $299,500.  George told Leon about the property and they agreed to purchase it together.  They borrowed $238,803 from a financier (Suncorp).  Importantly, the brothers and their respective wives contributed equally to the balance of the purchase price and transaction costs of $73,763.60.  George financed his share of that amount by increasing the mortgage over the Clark Road property from about $178,000 in January 2004 to about $225,000.  By mid-June 2004 the mortgage on the Clark Road property stood at $258,420.  Leon and Sophie jointly took a half interest in the Taylors Road property and George held the other half in his name only.  Velika testified that she was not concerned about the omission of her name from the title.  George testified that Velika was upset by it but he was later able to placate her.  The Judge preferred Velika’s evidence in that respect.

12. In mid-2004, the Penfield Road property came onto the market.  There was a dispute on the evidence as to whether George or Leon first noticed it was for sale.  The schedule to the contract records the purchaser as ‘George Pipikos and/or nominee’, that the purchase price was $260,000, and that a contractual deposit of $2,000 was payable.  Settlement was fixed for 29 July 2004.    

13. The memorandum of transfer, which was dated 30 July 2004, recorded an acceptance, as tenants in common, of the transfer of an undivided moiety in the Penfield Road property by each of the couples who held their respective half shares as joint tenants.  Leon, Sophie, George and Velika each executed the memorandum of transfer personally.  The settlement statement shows that the purchase price and transaction costs totalled $272,144.62.  It shows that part of the purchase price was funded by way of a loan from a financier, Perpetual, in the sum of $197,261.  It was common ground that Leon and Sophie paid the contractual deposit of $2,000 and, on settlement, the remainder of the owners’ contribution of $72,883.62.  The total of the owners’ contribution was therefore $74,883.62.

14. Both the Taylors Road property and the Penfield Road property were residential premises.  Both premises were rented and the rent was sufficient to meet the mortgage payments and property outgoings.

15. George and Velika continued to live on the Clark Road property after 2004.  They did not pay occupation rent to Leon.

16. George testified that he suffered from post-traumatic stress disorder after witnessing a collision between a train and a car in 2006 and that he became addicted to gambling thereafter.  His condition also led to matrimonial disharmony and George and Velika subsequently separated. 

17. In 2008, the ANZ held mortgages over both the Clark Road property and the Penfield Road property.  In that year it served default notices with respect to both mortgages.  In November 2009, Leon made a payment of $5,500 to the ANZ on account of arrears on the mortgage on the Penfield Road property, and in December 2009 made a payment to the ANZ Bank of $2,500 on the mortgage on the Clark Road property.  Mortgages in respect of both properties fell into arrears again in 2012 and the ANZ instituted possession actions with respect to both properties.  Velika and George subsequently discharged the arrears on the Clark Road property mortgage. 

18. On 27 July 2012 Leon placed a caveat on the Clark Road property claiming ‘an equitable estate and interest in fee simple in one undivided second part of the unimproved land’ pursuant to a Declaration of Trust dated 3 August 2009.  The caveat was warned by Velika on 17 August 2012.  On 7 September 2012 Leon instituted the proceedings seeking orders effectuating his half interest in the Clark Road property.  Those proceedings are the subject matter of this appeal.

19. On 23 October 2013, George and Velika consented to orders in the nature of a matrimonial property settlement in the Family Court.  George surrendered his interest in the Clark Road, Taylors Road and Penfield Road properties to Velika, who assumed the liabilities in relation to them. 

20. Initially, George collected the rent from the Penfield Road and Taylor Road properties and made the payments on the mortgages and outgoings.  A dispute subsequently arose between the brothers when George appropriated some part of the rent for his own purposes causing the loans to fall into arrears.  At some time before 2014, Leon took over the rent collection from the Taylors Road property.   Leon stopped applying that rent to the mortgage on the Taylors Road property in about July 2014.

21. On 4 February 2014, Leon, Sophie and Velika consented to orders for the sale of all three properties.  The Penfield Road property sold in 2014 for $350,000 and settlement took place on 18 December 2014.  An amount of $196,725.04 was applied in discharge of the ANZ mortgage.  The net proceeds of $133,575.84 were placed into the Suitors’ Fund.  Proceedings have not been issued for any form of accounting with respect to the Penfield Road property.  The Clark Road property remains for sale but has not been sold.  There was no evidence of any attempt to sell the Taylors Road property.

    Evidence of the agreement

22. Next, it is convenient to turn to the evidence on the disputed question. That is the arrangement pursuant to which Leon alone contributed funds for the purchase of the Penfield Road property.  It is convenient to record the Judge’s general comments about Leon’s testimony before recounting it.  The Judge found Leon’s evidence to be ‘superficially plausible’.  However, her Honour found that he was not reliable on contentious matters.  The Judge observed that Leon and George entered into a large number of transactions involving cars, money and land, but neither kept good records of them.  That observation is not in itself a reason to doubt the credibility of Leon’s testimony and indeed it explains the failure to properly document the agreement which Leon claims was made.  The Judge also found that Leon bore George considerable ill-will as a result of the failure of various business dealings.  That is not surprising having regard to the history I have recounted and is commonly encountered in the parties to a civil dispute.  Of itself it is not a matter of great weight.

23. Leon testified that an arrangement was made for the funding of the owners’ contribution in conversations between himself, Sophie, George and Velika.[1]  Leon testified that during an inspection of the Penfield Road property he told George that if he wanted to become equal partners in the Penfield Road property he would have to contribute between $35,000 and $40,000 depending on the price that was ultimately negotiated for the purchase.  Leon testified that George responded ‘I haven’t got any more money’ but then suggested:

    I tell you what. We’ll do a deal with you where we will sell you half our property. Then we could be equal partners on all three properties’. We are brothers, we always work together.

    [1]    Pipikos v Trayans [2015] SADC 149 at [52].

24. According to Leon they returned to George and Velika’s home where all four had the following conversation in the family room:

    AThen we went back to their place and we worked out what price. They told me they paid around $80,000 for their land so, to be fair, you have given me 45 for half of it.

    QSo the arrangement was that you would pay $45,000 for half of their property.

    AThat’s right.

    QWhat was going to happen with the $45,000.

    AI was paying their half of the deposit for Penfield Road and then any surplus money I gave to George.

    QThat was a discussion which occurred at Clark Road.

    AYes.

    QWas the defendant present when those discussions took place.

    AYes, she was, yes.

25. In cross-examination, it was put to Leon that, after inspecting the Penfield Road property with George and Velika, he told George that he would like to ‘go in’ with him on the purchase of the property, but that he would have to find $35,000 to $40,000 for that purpose, depending on how much they negotiated off the asking price of $290,000.  The price was ultimately negotiated down to $260,000.  Leon explained that even though they had negotiated it down together, George signed the contract.  Leon testified that at the inspection George said to him, ‘I want to be partners in this with you’.  Leon responded ‘I can pay my deposit but can you pay your deposit?’. 

26. Leon testified that the conversation continued along the lines of Leon asking whether George had ‘the funds to go’.  It was then that George responded, ‘No.  I’ll sell you half of Clark Road’.  Leon insisted under cross-examination that he ‘wasn’t going to finance [George’s] deposit just for the sake of financing it’.  Leon’s evidence of the conversation reads plausibly.  Importantly, it is inherently probable that Leon would seek something in return for financing on his own land speculation from which George and Velika might ultimately profit.

1. In cross-examination Leon explained how agreement on the price for the half-share in the Clark Road property was negotiated.  Leon testified that he thought that the mortgage on the Clark Road property at the time was about $200,000.  Leon explained that he and George valued the unimproved land at approximately $80,000 – $90,000 and that they settled on a ‘fair’ purchase price for the half-share at $45,000. 

2. In cross-examination, Leon gave the following evidence about the conditions on which he purchased a half-share in the Clarke Road property:[2]

   [2]    Pipikos v Trayans [2015] SADC 149 at [57].

   QSo what were the words that you say George used, do you just say he said ‘the land’.

   AThat he was selling to me?

   QYes, what were the actual words.

   A‘I will sell you half the land of this property.’

   QAlright, did he say ‘unimproved land’.

   ANever.

   Q‘Bare land’.

   ANever.

   QSo you would say that you were going to buy half of the land for $45,000.

   AYep.

   QNot the buildings.

   ANot the buildings.

   QHow were you going to value it.

   AEasy. We were – when the time came to sell the property George said ‘Right, if it ever came time to sell the property, we would have the land valuated at what land is selling around the area’. I’ve even got a message from George where he rings me up once saying ‘The land in this area is selling for around 350, Leon’.[3]

   [3]    Whilst the Judge cites ‘350’ the transcript says ‘250’ at T76 L30.  Nothing turns on this error.

3. It is necessary to make two observations about that testimony.  First, as will appear shortly, the Judge found the answers ‘never’ to be inconsistent with Sophie’s evidence.  On the contrary I understand Leon’s testimony to be only that those particular words were not used.  Nonetheless it is clear that Leon’s evidence was that the agreement was that his half interest was in the unimproved land alone.  The Judge misunderstood Leon’s use of the word never.

4. The second observation leads from the first and concerns Velika’s contention that the agreement was radically uncertain, or, at least, incapable of creating a proprietary interest because the conveyance of an interest in land includes the fixtures unless specific provision to the contrary is made.  Velika contends further that no such provision was made in this case and could never practically be made.  Those contentions attempt to give the agreement described by Leon a legal character which reflects the semantic form but not the substance of the agreement.  The agreement Leon described was for a conveyance of a legal interest in one undivided moiety of the Clark Road property but subject to a collateral agreement that on any accounting of the income generated from the property, or the proceeds of its sale, or on any partition, George and Velika would be credited for the value of the improvements.  The very valuation of the Clark Road property admitted as evidence at trial demonstrated the ease of conducting a valuation of the unimproved land.

5. Leon testified that he subsequently paid between $7,500 and $8,000 to George in cash, being the difference between George and Velika’s shares of the owners’ contribution on the Penfield Road property and the agreed price of $45,000 for his half-share in the Clark Road property. 

6. In cross-examination, Leon gave the following evidence about the cash payment to George and Velika:[4]

   [4]    Pipikos v Trayans [2015] SADC 149 at [59].

   Q$7,558.19 would go to George and Velika.

   AThat’s right.

   QAnd you say you paid them that money.

   AYes, I did.

   QTo the cent.

   AWell, we might have rounded it to 500. We might have rounded it off to 600.

   QWhen did you actually pay them that money.

   AAt the time of the dealings, when the settlement happened and I gave them the money.

   QYou gave it to George.

   AAnd Velika.

   QWho did you give the money to.

   ABoth of them.

   QWho actually received it.

   AGeorge received it.

   QWhere.

   AAt his house.

   QAnd you say at settlement.

   AAfter the settlement.

   QAfter the settlement.

   AYeah.

   QWas Velika there when you gave the money.

   AYes, she was.

   Leon testified that in 2009 Penfield Road was still tenanted but after a period of time George went into possession of the Penfield Road property. 

7. Leon testified that in 2009 when the ANZ served possession notices on Clark Road and Penfield Road properties he spoke to Velika about George’s use of the rent from the Penfield Road property for his personal expenditure and the fact that the mortgage had fallen into arrears as a result.  Leon testified:

   Yes, I did.  We have conversations at her place, or their place I should say and our place and at one time at our place.  I said to Velika, I said ‘Velika, this is getting really out of hand with George, he is really not worried, not concerned what’s happening’ and she said ‘Well, what can I do Leon?’, I said ‘Velika, I have got nothing to show that I own Clark Road and have any entitlement into Clark Road’ and I asked her if she could write me a letter to say that I had half interest in the land at Clark Road and she willingly wrote a letter, she is there ‘I will never let anything happen to this property, I know you own half of it, Leon’.

   The note to which Leon referred is the 2009 acknowledgement which reads:

   I Velika Trayans of Lot 2-119 Clark Road, Virginia SA 5120 agree that Leon Pipikos, is the owner of half of the land, on the above stated property via an agreement between George Pipikos and Leon Pipikos of the purchase of Penfield Road, Virginia property.

   It is signed by Velika and is dated 3 August 2009.

8. Leon testified that the conversation and the signing of that note occurred at his residence in St Peters.  He testified that his mother-in-law, his daughter, Stacey Fogliano and his wife, Sophie, were present. 

9. Leon explained that there was no legal transfer to him of the agreed interest in the Clark Road property because of the informal way in which he and his brother made their arrangements.  The informality of their business arrangements was common ground at trial. 

10. Leon testified that even at the time of the mortgage default he did not demand a legal transfer of his interest in the Clark Road property because:

    Because George – we’re brothers, we’ve always done deals together, you know.  I would never do anything to – I believe even after Velika had written that letter stating that I owned half that property, George rang up and abused me for getting Velika to write that letter;  ‘Don’t you trust me?  What do you think, I’m going to rip you off?’

11. Leon testified that in 2009 when the mortgage repayments fell into arrears he expressed his concern to George who gave him a signed note which read:

    I will put every cent in bank from rent on same day I get rent.

12. The Judge found that Sophie had a limited understanding of financial matters in general, and Leon’s land transactions in particular.  She found her evidence ‘rehearsed and unconvincing’.  The Judge also found that Sophie contradicted her husband concerning the Clark Road property transactions but, as will be seen, the Judge was wrong to do so.

13. Sophie gave evidence which was generally consistent with Leon about the arrangement by which George’s purchase of a half share in the Penfield Road property would be financed.  She testified that George said that he wanted to become ‘partners’ with Leon and Sophie in the Penfield Road property.  When Leon asked how he could do that when he had already re‑mortgaged his home to purchase the Taylors Road property, George responded ‘we will sell you half of our Clark Road property’.  Sophie testified that they agreed that she and Leon would buy a half interest in the Clark Road property, at land value only, in the sum of $45,000.   Sophie testified that was the price for ‘half the land. Nothing to do with the building part of it, anything built, just the bare land, we would pay 45’.

14. Sophie gave evidence that Velika was present throughout the discussions.  In cross-examination Sophie testified that George insisted that she and Leon would have no interest in the house or shed or any other improvement.   Sophie testified that George:

    …wanted to make it specific that we would have no interest in the house or the shed or any improvements he had done to the one side and they were entitled to the right hand where it was just bare land and they would have no expenses, no electricity, no water, no nothing on it, just bare land.

15. The Judge took the view that Sophie’s evidence was ‘not congruent’ with Leon’s evidence.  The Judge did not explain in what way that there was any inconsistency.  The difference between Leon’s and Sophie’s evidence as to whether the word ‘bare’ was used was trivial.  The substance of their evidence was that their interest was to be valued as between them, on the one hand, and George and Velika, on the other, on an unimproved basis.  I understand the testimony of both Leon and Sophie to be that in any partition of the land or distribution between the four of them of the proceeds of the sale of the land, Leon and her could make no claim as to the additional value on the land created by the improvements.  The Judge’s erroneous conclusion that Sophie’s testimony was inconsistent with Leon’s is a material one.  It is an error of a kind which compromises her Honour’s assessment of the credibility and reliability of both Leon’s and Sophie’s testimony. 

16. In re-examination Sophie was taken to an aerial photograph of the Clark Road property.   She testified that she and her husband had purchased the right side of the property with known improvements.  However Leon had testified that the applicable Development Plan did not at any relevant time allow for any such subdivision of the Clark Road property.

17. The Judge found that Sophie was ‘plainly asserting a different agreement to that asserted by her husband’ for the following reasons:

    [67]In re-examination, Mrs Pipikos was taken to an aerial photograph of the Clark Road property.  She suggested that she and her husband had purchased the right side of the property with no improvements and that it could be subdivided from the portion of the property with the house and improvements.  It is not clear on her evidence how she reached that understanding.  Again however, she did not mention the defendant, rather she identified the unimproved portion of the land and said “   that’s the side that he sold to us”.

18. Sophie’s evidence in re-examination reflects her understanding of a possible approach to any sale or partition by agreement, or court order, to disentangle their interests.  Whether or not Sophie’s view was based on a mistaken understanding of the then applicable planning laws is beside the point.  What is important is that Sophie shared Leon’s understanding that in any disentanglement of their interest in the Clark Road property George and Velika would be credited with the value of their improvements.  That was an understanding which, as we shall see, George shared, albeit under an agreement which he maintained was only reached after the Penfield Road property was transferred to him and Velika. 

19. Such difference as there may have been in the understanding of Leon and Sophie as to which of them would be registered as the proprietor of their interest in the Clark Road property is insignificant.  If only Leon was to be the registered proprietor, he would hold the interest on trust for Sophie and, of course, it would be brought into account in any matrimonial property proceedings.  Nor is there any real contradiction in their understanding of the nature of the interest.  Properly understood both were giving evidence that what the parties had agreed to transfer to Leon and Sophie was a half interest in the Clark road property. That half interest was subject to an agreement between them, to which they were bound contractually and in equity, that in any sale or partition Leon and Sophie would not receive any of the value of the improvements on the property.  That Leon knew, but Sophie was ignorant of, the planning regulations, did not mean they had negotiated a different interest in the land.  If a partition which would credit George and Velika with the improvements was prohibited by planning laws, their interest could only be realised by sale and accounting of the proceeds in a way which gave George and Velika the full benefit of those improvements. 

20. Sophie gave evidence that the difference between Sophie and George’s share of the owner’s contribution and the value of the Clark Road property was paid to them in cash in the sum of about $8,000 at about the time of settlement.  There were some inconsistencies between her account and Leon’s account of how that payment was made.

21. The Judge described George as a ‘very difficult witness’.  She noted that he was argumentative and discursive.  The Judge recorded that she approached his evidence with caution. 

22. George claimed that Leon volunteered to pay all of the owner’s contribution to save George having to borrow more money.  George denied telling Leon that he would sell him a half interest in the Clark Road property at the time the Penfield Road property was purchased:

    QI asked you a question about whether there was a discussion about Leon buying a half interest in the land at Clark Road. Was there ever any agreement from Leon to buy an interest.

    ABetween me and Leon but not Velika.

    QWhen was that agreement.

    AI can’t remember exactly. When his relationship broke down with John.

    QGoing back to the settlement at Penfield Road, was there any agreements at that time for Leon to buy a half-interest in the land at Clark Road.

    ANo.

23. George denied that he ever told Velika about any agreement he reached with his brother to sell Leon a half interest in the land at Clark Road.  However as we shall see Velika herself testified that she knew of the arrangement before she and George settled on the Penfield Road property. 

24. In cross-examination George testified that a valuation was undertaken of the Clark Road property in 2011 because, at that time, he did intend to sell the ‘bare land’, to Leon:

    Q     You permitted [the valuer] to inspect the whole of the property.

    AOf course I did.

    QThat was for the purpose of working out how much the land was worth.

    AYeah, but it was bare land value without electricity because I paid for transformer up there, I paid for everything up there.

    QSo the proposal was that the value of the improvements were to be yours and the – what Leon was purchasing was half the value of the land.

    ABare land value minus what I had given because he keeps excellent records and I trusted him, then he did a back-flip to try to scam me and double dip, and then we find out how much he ripped us off as well.

    QThat was in accordance with an agreement that you had made with Leon that that would take place, is that right.

    AThis was with me and Leon; this had nothing to do with Velika at all, and then everything comes out afterwards.

    QI suggest that that agreement was made in Velika’s presence.

    ANo, it wasn’t.  It’s like you’re talking about the …

25. The Judge’s conclusion on this evidence was:

    [77]Accordingly, it seems that George Pipikos agrees that he reached an agreement with his brother to sell him an interest in the Clark Road property.  It is not clear how he intended to follow through with this deal given the property was only registered in his wife’s name.  He was adamant that his wife had no knowledge of this arrangement and had not agreed to it.  It is far from clear when George Pipikos asserts that this agreement took place.  Taking his evidence as a whole, he appears to assert that it was some time after the purchase of Penfield Road, possibly in May 2011, when the property was valued. 

26. The Judge correctly observed that George dated the agreement after the transfer but failed to deal with the significance of Velika’s admission, to which I am about to turn, that she was told that George and Leon had reached this agreement before settlement on the Penfield Road property.  The Judge also failed to notice in that passage the similarity between George’s account of the ‘bare land’ agreement and Leon’s testimony.

27. I mention here that the Judge’s questioning of how George could deliver on the arrangement with Leon when Velika was the registered proprietor is of limited importance.  George, of course, held a substantial equitable interest in the Clark Road property.  At a factual level the evidence showed that the brothers often made investment decisions on behalf of themselves and their respective wives.  They were not always consistent in the inclusion of their wives on the formal documentation of those agreements.  Leaving aside social judgements which may be made about the way they dealt with their respective wives, and leaving aside the legal question of whether their behaviour might constitute unconscionable conduct, it is clear that George made his agreement with Leon anticipating that Velika would join in the agreement. Ultimately she did, albeit under some protest.  Velika made no claim that George acted unconscionably in this respect, nor that Leon’s conscience was, in equity, affected by George’s conduct.  So too with Leon; uncertainty as to whether Sophie was also to be registered as a proprietor on the Clark Road property does not affect the validity of the agreement as between Leon on the one side and George and Velika on the other.

28. The Judge described Velika as having a ‘somewhat unsophisticated understanding of financial matters’.  She accepted Velika’s evidence that she was not actively involved in the financial dealings of her husband.  The Judge found that Velika was directed by George, and that ‘she allowed herself to be directed by him’.  She signed papers and made payments at his request.  The Judge found that Velika gave her evidence as accurately and honestly as possible.  The Judge noted that, on occasions, Velika made admissions against her own interest – in particular Velika’s admission concerning her knowledge of discussions between her husband, George, and Leon about the Clark Road property.  As it transpires Velika’s concession was a reluctant one, only extracted in cross-examination.  In any event, even though an admission against interest may enhance a party’s credit, it may nonetheless be fatal to the substance of his or her case, as it was in this case.  Ultimately the Judge preferred Velika’s evidence to that of Leon where there was any conflict. 

29. Velika denied participating in a conversation in the family room of her Clark Road home when the sale of a half-interest in the Clark Road property was agreed.

30. In her evidence-in-chief, Velika testified as follows about her knowledge of any agreement between Leon and George to sell a half interest in the Clark Road property:

    QAt any time up to 30 July or thereabouts, the time of the settlement, were you aware of any supposed agreement to transfer a half-interest in the Clark Road property.

    ANo.

    …

    QIn relation to the Penfield Road property, did you sign a transfer document as part of the process of the property being transferred to you, George, Leon and Sophia.

    AYes.

    QAt any of those times was it suggested to you by anyone that part of the arrangement involved the sale of a half interest in the Clark Road land to Leon.

    AYes.

31. I pause here to interpolate that Velika’s testimony to this point is an admission that she was aware of an agreement between George and Leon for the sale of a half interest in the Clark Road property before settlement.  That testimony was contrary to the opening address of her counsel.  The questioning which follows was an adept, and ultimately successful, attempt by Velika’s counsel (the particular questions and answers are italicised below) to bring Velika back up to her proof.

    QThis is up to the time of when the Penfield Road property was actually transferred; so we’re talking about a period in July –

    AYes.

    Q– 2004 and we’re talking about a situation where you applied for finance –

    AYes.

    Q– or you participated in an application for finance.

    AYes.

    QYou signed a transfer document which led to the property being transferred, and if we can put a date on that, the transfer document was 30 July 2004.  Settlement on that property occurred on or about – it’s not clear, it must have been around July 2004, end of July.  At any time up to around about the end of July 2004, did you agree to transfer a half interest in the land at Clark Road, to Leon in connection with the Penfield Road purchase.

    ANo.

    QAt any time up to 30 July or thereabouts, the time of settlement, were you aware of any supposed agreement to transfer a half interest in the Clark Road property.

    ANo.

    QDid you later become aware of some supposed agreement to transfer a half interest in the Clark Road land to Leon.

    AYes.

    QHow did you become aware of that?

    AGeorge told me that in lieu of the deposit that he was going to sell Leon half of our land, and I said to George ‘How could you do that?’ I didn’t want Leon to be involved in our family home and I made it clear to George that he is to pay back half of his deposit with a bit of interest to make the benefit Leon. That is what I was clear about with it, with George.

    QAt that point did you do anything more about this agreement that George apparently said he had made.

    ANo.

    QDid you have any hope or expectation about what was to happen in relation to this agreement.

    AWell I was hoping that George would eventually pay back Leon the money that he owed him.

1. In cross-examination, Velika again denied being a party to an oral agreement to sell a half-interest in the Clark Road property, but returned to her first position in evidence-in-chief and testified, in the answers italicised below, that she had become aware of the arrangement before settlement:

   QAnd you heard their evidence that they went back to your house.

   AYes.

   QAnd that was discussed.

   AI don’t – I don’t recall that ever happening.

   QAnd using the word ‘recall’, you deny that that happened.

   AYes, I deny that happened.

   QYou say that did not happen at all.

   ANo, did not happen.

   QI’m suggesting to you that their evidence is the truth –

   ANo.

   Q– that you were present and you were aware that the half-interest in the land at Clark Road was to be purchased by Leon for $45,000.

   ANo, I dispute that.

   QWell, how was it to be paid; what was your idea about that.

   ALeon was to pay George’s half share and then later I found out that George had done this deal with Leon.

   QSo when you say Leon was to pay –

   ALeon – sorry, sorry.

   QWhen you say that Leon was to pay George’s half share, is that what you believed at the time you went to the bank to sign the documents to buy this property.

   AYes.

   QSo – and that was – did you make inquiries on what basis Leon was to pay George’s share.

   ANo because George had told me – George had told me – I can’t remember exactly when – but I wasn’t happy about it.

   QSo when did George tell you, can you –

   ATold me before –

   QWhat.

   AI can’t remember but before – I can’t remember, it’s been so long ago.

   QSo what had George told you.

   AGeorge had told me that Velika, I’ve – ‘I bought the property with Leon and Sophie and because we don’t have the funds I’m giving Leon half of the share of our property’.  I said ‘What?’; I said ‘No way, George, you can’t do that’.  And then I said to him ‘You need to pay  him back a deposit and give him extra money so he doesn’t have any claim to our family home’.

   QNow that was before you went to the bank to sign the papers.

   AYes.

   HER HONOUR

   QSo which papers.  There’s been a lot of bank papers, when –

   AI think about – about the time we had to go sign the – because for the loan.

   QWhich loan.

   XXN

   QFor Penfield Road.

   AYes.  For Penfield Road, sorry.

   QNor I suggest to you that – so at the time you went there, you were aware that there was an arrangement where Leon had bought half of Clark Road, is that right.

   AI’m sorry, I went where?

   QWhen you went to the bank to sign the papers to buy the property.

   HER HONOUR:  Sorry, can you say which property?  I’m getting very confused.

   MR SCRAGG:  The Penfield Road, yes.

   XXN

   QWhen you went to the bank to sign the papers to buy Penfield Road you were aware that there was an arrangement where Leon had bought half of Clark Road.

   AYes, I believe so, at that time, yes.

   QNow and knowing that, you went ahead with the transaction and purchased – and got for yourself a quarter interest in Penfield Road, is that right.

   AYes.

   QAnd George got a quarter interest for himself as well.

   AYes.

2. Velika’s admission is significant for three reasons.  First, it is evidence that the discussions between George and Leon had concluded in an agreement for the sale of a half interest in the Clark Road property before settlement.  At the very least it is evidence of a prior inconsistent statement by George which overwhelmingly leads to the conclusion that Leon’s testimony should be preferred to George’s.  Secondly it is the unassailable foundation for Leon’s alternative case that Velika contracted to sell him a half interest in the Clark Road property by her conduct in accepting a transfer of the Penfield Road property in the knowledge of the agreement made by Leon and George.  Thirdly it explains Velika’s conduct in writing and signing the 2009 acknowledgment that Leon held an interest in the Clark Road property.

3. Velika said she wrote the 2009 acknowledgement at Leon’s insistence.  She claimed he dictated the document, but was dissatisfied with the first version and asked her to cross it out.  She then wrote out the acknowledgement and felt obliged to sign it.  She said she felt intimidated.  As the Judge recorded:

   [89]The defendant said that she wrote out the August document at the plaintiff’s insistence. She said he dictated the document but was dissatisfied with the first version and told her to cross it out. Having written out the second version, she felt obliged to sign it. She said that she felt intimidated by the plaintiff.  She said he gave her a pen and paper.

   Q      Can you remember what was said next.

   A      Leon was just going at me about losing this money, about losing money on this property deal and I was trying to reassure him that no, no, he’s not going to lose it because he’ll get that money back and then he still wasn’t happy about that because of George’s behaviour and then he says he would like something in writing and I said to Leon ‘Leon, you should be discussing this with George not with me.’  Somehow I wrote this for Leon.  I don’t know how I did it.  I was frustrated, I was under duress and I wanted to go back to work.  I had to go back to work.

4. Velika testified that she felt unwell.  She returned to work but was taken to the Lyell McEwen Hospital by a solicitor at the Elizabeth office of the Legal Services Commission.  Velika accepted in cross-examination that Leon never threatened her.  The Judge found:

   [92]I prefer the defendant’s version of events concerning the August document.  It is more consistent with the evidence that she was in her lunch break and the evidence of Mr Koehn that she was observably unwell afterwards.  That is, I accept that the plaintiff dictated the note and that the defendant felt pressured whether by time, the plaintiff or other factors and that she acquiesced in his request.  I do however accept that the plaintiff, whilst he may have been insistent, did not threaten the defendant in any way. 

5. That finding leaves unresolved why Velika felt pressured.  It also fails to consider, in respect of that question, Velika’s admission that she knew the arrangement had been made by George.  The evidence that Velika was unwell or distressed by the events of that day is intractably neutral.  It is equally consistent with a shock appreciation of the consequence of that arrangement years later.  Importantly there is no evidence which could reasonably explain why Velika would sign the 2009 acknowledgement if it did not truly reflect the arrangement she had entered into. 

6. A valuation report of the Clark Road property as at September 2014 was received into evidence.  It showed that the improved value of the Clark Road property was $500,000 and its unimproved value was $250,000.

   There was an agreement

7. The Judge found that Velika did not make an oral agreement to transfer any interest in the Clark Road property to George in the course of a discussion in her home:

   [93]The fundamental premise of the plaintiff’s case is that there was an oral contract between the plaintiff and the defendant whereby the defendant would sell the plaintiff a half interest in the land, but not the improvements, of the Clark Road property for $45,000.00. The defendant says there was no such agreement with her.  This is supported by George Pipikos. Even on the plaintiff’s version of events, the defendant took no active part in the discussion and any dealings were between George Pipikos and the plaintiff.  The defendant does not dispute that some such discussion occurred between her husband and the plaintiff.  Her evidence is that she knew of this before settlement on the Penfield Road property.  George Pipikos says that she is mistaken about this because the deal took place at a later stage. 

   [94]I accept that the two brothers had some discussions about the Clark Road property at about the time of the Penfield Road purchase.  I further accept that the defendant was aware, in general terms, of those discussions at that time but I find that she did not participate in them. 

8. I observe here that the Judge has understated Velika’s evidence in cross-examination when she observed that Velika knew of ‘some such discussion’ about transferring an interest in the Clark Road property to George.  Velika’s evidence was that she knew that George had done a ‘deal with Leon’ and that she had urged George to pay Leon their share of the owners’ contribution so that Leon would not have a ‘claim to our family home’.

9. The clear implication of Velika’s plea to George is that she understood that unless and until George paid Leon out Leon held an interest in the Clark Road property.  The 2009 acknowledgement is of course consistent with that understanding.

10. The Judge referred to the fact that there was never a conveyance of the half interest in the Clark Road property to Leon and that Leon did not pay any of the outgoings.  Neither of those facts is particularly significant in determining whether or not the brothers had reached a concluded agreement.  The payment of the outgoings by George and Velika would have offset the payment of an occupation rent in any accounting.  The failure to procure a legal conveyance given the very informal nature of the dealings between the brothers is equivocal.

11. I am satisfied that the Judge’s finding, albeit not expressly stated, that the brothers had discussed, but not concluded, an agreement for the transfer of an interest in the Clark Road property is affected by error.  The Judge’s:

    ·mistaken apprehension of inconsistency between Leon and Sophie’s account of the agreement;

    ·failure to appreciate the consistency between their account and George’s account of what he claimed to be a later agreement;

    ·failure to acknowledge the evidential significance of Velika’s testimony that George told her that the deal was done;

    ·failure to take into account the consistency between the 2009 acknowledgment and Leon and Sophie’s account;

    ·failure to appreciate the real nature of the agreement which Leon and Sophie described; and

    ·failure to appreciate that Velika’s admission against interest in cross-examination was a back down from the picture painted in opening and in evidence in chief,

    undermines the Judge’s advantage in hearing the evidence.  On this question the contest is between Leon and George.  George’s testimony is internally and externally inconsistent and the Judge for good reason treated it with caution.  The account of Leon is inherently probable.  The evidence strongly supports a finding, which the Judge ought to have made, that the brothers reached a concluded agreement. 

12. The Judge was not satisfied that Leon made a cash payment to George:

    [97]Further, there is no evidence that the balance of the asserted purchase price of $7,500.00 to $8,000.00 was in fact paid.  The defendant and George Pipikos deny any such payment.  The plaintiff and his wife say that it was paid but cannot point to any documentation relating to that payment.  They are both unclear as to the precise amount of the payment.  They contradict each other as to the timing and the circumstances in which they say it was paid.  Indeed, on Mrs Pipikos’ evidence the payment was made to George Pipikos and not to the defendant.   The plaintiff has failed to establish that this payment was made. 

13. Leon and Sophie’s testimony failed to persuade the Judge who heard it and in the absence of supportive objective evidence or circumstance, this Court should not make the finding the Judge could not.  I would dismiss that ground of Leon’s appeal which asks this Court to find that the money was paid.  However, the failure to prove that a term of the alleged agreement was not performed does not necessarily deny the existence of the agreement.  Velika’s testimony was independent evidence, by way of an admission, of its existence.

14. The Judge then turned to the 2009 acknowledgement and said:

    [100]Taken at face value, this is no more than a statement that the defendant is aware of an arrangement between her husband and his brother concerning an interest in the land at Clark Road. It is a statement of her understanding of a transaction between others. It is not an acknowledgment of an agreement between herself and the plaintiff.  I also note, for what it is worth, that Ms Fogliano’s evidence was also that there was an agreement between her uncle and her father – not between the defendant and her father.  She said she recalled what was said because she knew the brothers had purchased land together and was shocked that her father had nothing to show for it.  Further, leaving aside other issues with it, this document does not support the alleged oral agreement.

    [101]Taking all of these matters into account, I find that there was no oral agreement to sell an interest in the Clark Road land between the plaintiff and the defendant. 

15. There was much debate before the Judge, and on appeal, over whether the agreement was an agreement to transfer an interest in kind when what was agreed was an interest in the bare or unimproved land, when the Clark Road property carried substantial improvements.  The debate was on a question which was inaptly framed.  Plainly it was never contemplated that the house and shed on the Clark Road property would in some way be removed so that only an interest in the bare land would be conveyed.  Leon and George had not made such a bizarre agreement.  The Judge found that this left the agreement, if one had been made, bad for uncertainty:

    [104]It is my view that even on the plaintiff’s case, there is no enforceable agreement for sale of an interest in the defendant’s property. As outlined above, the plaintiff was unable to state the actual words of the alleged oral agreement. The best he could do was express an alleged statement by George to the effect that ‘We’ll do a deal with you where we will sell you half our property. Then we could be equal partners on all three properties’.  The agreement does not identify its subject matter, is vague and ambiguous and in my view, unenforceable. …

16. Much more was said by Leon in explanation of the agreement than the answer set out by the Judge. Moreover, as has been seen, Leon’s evidence was broadly consistent with Sophie’s and, but for the question of timing, George’s description of the agreement. Importantly the essence of that agreement is also found in the 2009 acknowledgement signed by Velika. As I have explained, the substance of the agreement was that Velika and George would sell one half of their legal and equitable interest in the Clark Road property to Leon but that in the accounting of their respective interests George and Velika would be credited with the value of the improvements. That agreement was certain and, subject to s 26 of the LPA, contractually enforceable.

17. The Judge’s finding that Velika did not reach an oral agreement to transfer an interest in the Clark Road property to Leon was not the end of the matter.  The existence of a contract by taking a share in the Penfield Road property was an issue before the Judge.  The Judge was wrong to say in [93] of the reasons, as cited above, that an oral agreement with Velika was the ‘fundamental premise’ of the plaintiff’s case.  The statement of claim did not particularise an oral agreement even though that was how Leon put his primary case when opening his case at trial.  During the trial Velika retreated from the position in evidence-in-chief, and admitted in cross-examination that she knew about the ‘deal’ before she took an interest with George in the Penfield Road property. Not surprisingly, in his written closing submissions, Leon’s counsel pressed an alternative case of contract based on Velika’s conduct in taking the interest in Penfield Road with knowledge of the agreement made between George and Leon. 

18. There could be no objection to Leon putting that case.  Velika’s counsel, in opening the defence, drew the battlelines as broadly as they had been drawn in the pleadings asserting ‘critically at no point did the defendant agree or indeed know that George was purporting to pledge [or sell] her interest in the Clark Road property … and indeed she did not find out that until sometime later when she was informed of that’.  Velika’s counsel must have anticipated that Velika’s knowledge of the agreement before settlement may be an issue.

19. After the final address, Leon filed an interlocutory application seeking leave to file a reply to the second defence.  The proposed reply pleaded that the respondent had ratified the agreement made between George and Leon by accepting the half interest in the Penfield Road property and that there had been part performance of the agreement.  

20. Velika opposed the filing of the reply because:

    ·    the plea of part performance was not necessary; and

    ·    the plea of ratification raised a new cause of action.

21. Velika’s counsel did not claim that there was other evidence which would be led on the ratification plea if it were allowed.  The only prejudice identified by Velika’s counsel was the need to make submissions on the law of ratification which counsel described as ‘a specific contractual cure for an incomplete or unperformed contract’.  The Judge refused permission to raise ratification by way of reply because:

    1Leon’s pleaded case and the case run at trial was one of contract made by oral agreement with Velika;

    2Velika by her defence answered that case only;

    3there was undue delay in raising the ratification issue; and

    4further submissions and evidence may be required if the plea were allowed. 

22. Each of those reasons are affected by error:

    1The cause of action in contract pleaded in Leon’s statement of claim was wide enough to encompass an agreement by conduct. 

    2Velika’s counsel dealt with the possibility of a contract case based on conduct and knowledge of the agreement in his opening and had sought to meet that case in evidence-in-chief but ultimately Velika conceded the issue in cross-examination

    3Leon ran the alternative case of contract by conduct from the time of Velika’s concession in cross-examination.  There was no delay in raising that issue because Leon only had evidence on which to base it after Velika made the admission.  Even though Leon’s reply pleaded ratification, in substance it was a plea of contract by conduct.

    4Velika’s counsel had not claimed that further evidence was required and it was impossible to see how it could be necessary.  The only possible evidence was as to exactly what Velika understood and she gave that evidence, albeit unfavourably to her own cause.

23. Despite the distracting reference to the doctrine of ratification, the Judge ought to have dealt with the simple question of whether Velika, by her knowledge of the agreement made by Leon and George, and her subsequent conduct in taking an interest in the Penfield Road property, had contracted to sell on a half interest in the Clark Road property to George.  The answer to that question was that Velika had so contracted.  Velika’s own testimony proves Leon’s case that Velika bound herself in contract by accepting a legal interest in the Penfield Road property in the knowledge of the agreement made between George and Leon.

    Legal Requirement for Disposition of Land

24. However, a contract for the disposition of land must comply with the formalities required by s 26 of the LPA:

    26—Contracts for sale of land to be in writing

    (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.

1. The Judge found that there was no such compliance in this case:

   [105]The memorandum or note of oral agreement must include the terms of the contract, including both the promise and consideration, or price. It was suggested by the plaintiff that the handwritten note of 3 August 2009 constituted such a memorandum. This document is not, in my view, sufficient to satisfy section 26. The note post-dates the alleged oral agreement by some years. It does not meaningfully identify the interest in land to be conveyed. The parties to the agreement are identified as George Pipikos and the plaintiff. George Pipikos was not the registered proprietor. It lacks the terms of any agreement. It does not identify the consideration or any other terms of sale such as when a transfer is to occur.

   [106]The plaintiff alleges that there has been part performance. I do not accept that this is the case. The classic statement of the law on part performance is that in Maddison v Alderson:

   All the authorities show that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged.

   (citations omitted)

2. For the reasons which follow the Judge was right to so find. 

3. In Parker v Barnett,[5] Higginbotham CJ held that the written memorandum required by s 26 of the LPA must be comprehensive:[6]

   In order to comply with the section of the Statute the contract or memorandum must contain all the material and essential parts of the contract, leaving none to be proved by parol evidence.  The memorandum or contract must sufficiently indicate the parties to the contract, the subject-matter, and terms of the contract, including both the promise and the consideration, and it must import an agreement or acknowledge of an agreement to the terms stated in writing.

   (emphasis added)

   [5] (1889) 16 VLR 214.

   [6] (1889) 16 VLR 214 at 221.

4. In Thomson v McInnes,[7] the High Court accepted that documents referred to in a signed memorandum may be relied on to complete the record of the agreement. However, importantly the High Court distinguished between a reference to a transaction and a reference to a document.  In that case the document relied upon and signed by the party to be charged was a receipt of a sum ‘being a deposit and first part purchase money for 320 acres of land in the Parish of Broadwater’.   Griffith CJ said:[8]

   … The reference, therefore, in the document signed must be to some other document as such, and not merely to some transaction or event in the course of which another document may or may not have been written. The reference may, of course, be made in various ways. Whether there is a reference or not depends, first of all, upon the construction of the document which is signed. You must, first of all, find some words in that document which are capable of being construed as referring to another document in the sense I have indicated, that is, as referring to a document and not to a transaction or event. If there are words capable of such a construction, then, and not before, the question arises as to their meaning. As was pointed out by Thesiger LJ in Long v Millar, the rule is merely a particular application of the well known doctrine of latent ambiguity. Parol evidence is admissible for the purpose of showing that a word capable of having reference to a particular thing has really such a reference.

   [7] (1911) 12 CLR 562.

   [8] (1911) 12 CLR 562 at 569.

5. In Tonitto v Bassal,[9] Sheller JA considered the extent to which a memorandum may incorporate by reference other written documents to complete the record of an agreement:[10]

   [9] (1992) 28 NSWLR 564.

   [10] (1992) 28 NSWLR 564 at 572-574.

   Baggallay LJ [in Long v Millar (1879) 4 CPD 450] put it succinctly (at 455):

   … The true principle is that there must exist a writing to which the document signed by the party to be charged can refer, but that this writing may be identified by verbal evidence. I think that in the present case by the words ‘purchase of three plots of land’ the receipt sufficiently refers to the document signed by the plaintiff.

   Perhaps the difficulty perceived in the judgment of the High Court in Thomson v McInnes springs from the language of the third member of the Court of Appeal, Thesiger LJ (at 456):

   … When it is proposed to prove the existence of a contract by several documents, it must appear upon the face of the instrument signed by the party to be charged that reference is made to another document; and this omission cannot be supplied by verbal evidence.

   Thus in the present case if this passage stood alone it might be argued that the letter would have to contain a reference to the ‘option document’. But his Lordship did not stop there. He continued (at 456):

   … If, however, it appears from the instrument itself that another document is referred to, that document may be identified by verbal evidence. A simple illustration of this rule is given in Ridgway v Wharton; there ‘instructions’ were referred to; now instructions may be either written or verbal; but it was held that parol evidence might be adduced to shew that certain instructions in writing were intended. This rule of interpretation is merely a particular application of the doctrine as to latent ambiguity.

   Despite his Lordship's use of the word ‘latent’ I think what he meant was that if the word or words used were capable of referring to a document but it was not clear from the context whether they did or they did not, that doubt could be resolved by parol evidence. So in that case evidence could be led of the agreement in writing which answered the description in the signed memorandum. Such is the method for resolving a patent ambiguity: see generally, Greig and Davis, The Law of Contract (1987) at 404, 417 and 426. This becomes plain from his Lordship's statement (at 456):

   … Although parol evidence may be given to identify the document intended to be referred to, it must be clear that the words of the document signed by the party to be charged will extend to the document sought to be identified … the receipt contains the word ‘purchase’, which must refer to the purchase of the plots of land mentioned in the document signed by the plaintiff; …

   In the present case there is no difficulty, in my opinion, in saying that the expressions used in the letter of 23 September 1988; ‘option’, ‘option to purchase entered into in June 1987’, ‘the option agreement’ and ‘the mode of exercise therein stipulated’ are capable of referring and on the evidence do refer to the written option to purchase. Accordingly in my opinion that letter incorporates the terms of the option to purchase and is a note or memorandum which satisfies the requirements of s 54A. I do not think there is anything in the judgments in Thomson v McInnes to support a different conclusion.

6. Accordingly in Tonitto Sheller JA did not need to determine whether the supplementary evidence which could be adduced was limited to another document referred to in the note relied on or could extend to evidence of an underlying transaction because the ‘option’ referred to in the letter relied on was a written document.  In Australian and New Zealand Banking Group v Widin,[11] Hill J also found it was unnecessary to determine whether supplementary evidence could be relevant because the note relied on did not refer to either another document or transaction.  Nonetheless Hill J did essay this useful survey of the authorities:

   [11] (1990) 102 ALR 289 at 298-300.

   The role which parol evidence may play in identifying the other document or documents which may constitute the sufficient writing is a subject of greater difficulty. It was settled in Thomson v McInnes that parol evidence was admissible for the purpose of showing that a word capable of having reference to a particular thing really does have such a reference. This use of parol evidence is, as Griffith CJ points out at 569, but an application of the well known doctrine of ‘latent ambiguity’. Thus in the case of Ridgway v Wharton (1857) 6 HLC 238, cited by his Honour, the word ‘instructions’ could be read as referring to another document the identity of which was proved by parol evidence.

   However, in Thomson v McInnes their Honours declined to accept that there was a more liberal view to be gleaned from the case law up to that time.  …

   In the United Kingdom the modern law has been said to have been correctly stated in the words of the judgment of Jenkins LJ in Timmins v Moreland Street Property Co Ltd at 130: see Elias v George Sahely & Co (Barbados) Ltd at 655:

   It is still indispensably necessary, in order to justify the reading of documents together for this purpose, that there should be a document signed by the party to be charged, which, while not containing in itself all the necessary ingredients of the required memorandum, does contain some reference, express or implied, to some other document or transaction. Where any such reference can be spelt out of a document so signed, then parol evidence may be given to identify the other document referred to, or, as the case may be, to explain the other transaction, and to identify any document relating to it. If by this process a document is brought to light which contains in writing all the terms of the bargain so far as not contained in the document signed by the party to be charged, then the two documents can be read together… (emphasis added).

   In Elias, a case upon which the appellant strongly relied, the note signed by the party to be charged was a receipt in the following terms (at 651–2):

   $39,000 Barbados 10.2.1975. Received from Fauzi Elias the sum of thirty nine thousand dollars and… cents being deposit on property at Swan Street B'town agreed to be sold by George Sahely & Co B'dos Ltd to Fauzi Elias and/or his nominees. R G Mandeville & Co per E Clarke.

   The giving of this receipt followed a letter in which the purchaser had endorsed a cheque and in which all the terms of sale were set out including the fact that the purchase price was to be $390,000, a matter not referred to in the receipt.

   The Privy Council referred to Long v Millar as a ‘watershed decision’. After quoting from Timmins with approval the board said at 655:

   The first inquiry must, therefore, be whether the document signed by or on behalf of the person to be charged on the contract contains some reference to some other document or transaction. The receipt in this case clearly did refer to some other transaction, namely an agreement to sell the property in Swan Street. Parol evidence can, therefore, be given to explain the transaction, and to identify any document relating to it. Such evidence was led in the present case: it brought to light a document, namely Mr Forde's letter… which does contain in writing all the terms of the bargain… If, therefore, a document signed by the party to be charged refers to a transaction of sale, parol evidence is admissible both to explain the reference and to identify any document relating to it. Once identified, the document may be placed alongside the signed document. If the two contain all the terms of a concluded contract, the statute is satisfied (emphasis added).

   Their Lordships accordingly were of the view that on the facts of that case the requirements of a sufficient note or memorandum were satisfied.

   The decision in Thomson v McInnes has been criticised by the learned authors of Greig & Davis, The Law of Contract (The Law Book Co Ltd, 1987), pp 699–70, as being too narrow and in conflict with the English authority. In Woden Squash Courts Pty Ltd v Zero Builders Pty Ltd [1976] 2 NSWLR 212, Holland J pointed out (at 218) that the statement of principle in Thomson v McInnes appeared to be in conflict with a later statement of the law in Harvey v Edwards, Dunlop & Co Ltd (1927) 39 CLR 302 where a majority of the court, by reference to Stokes v Whicher [1920] 1 Ch 411 at 418, at 307 said:

   It is also well settled that the memorandum ‘need not be contained in one document; it may be made out from several documents if they can be connected together’. They may be connected by reference one to the other; but further, ‘if you can spell out of the document a reference in it to some other transaction, you are at liberty to give evidence as to what that other transaction is, and, if that other transaction contains all the terms in writing, then you get a sufficient memorandum within the statute by reading the two together’ (emphasis added).

   Blackburn J in the Supreme Court of the Northern Territory in Commonwealth v John White & Sons (NT) Pty Ltd (1967) 13 FLR 172 at 177–8 followed Harvey v Edwards, Dunlop & Co Ltd to permit oral evidence to be given of a transaction to which the note signed by an architect referred so as to connect that note with a Government Gazette notice which identified the vendor, the property to be sold and the laws of sale thereby constituting it a sufficient note in writing, rejecting the approach taken in Thomson v McInnes.

7. Returning to this case, I find that the 2009 acknowledgement refers to a transaction and not to a document.  It refers first to an agreement between the brothers and to the purchase of the Penfield Road property, but it does not refer to any document or documents on which the terms of the agreement are recorded.  It does not refer either expressly, or by implication, to any of the documents relating to the purchase of the Penfield Road property from the vendor.  In any event even if those documents were incorporated by reference, those documents still do not contain any terms of the agreement on which Leon brought his action against Velika. There is no mention of an agreement that Leon would pay the whole of the owners’ contribution on the Penfield Road property, allowing George and Velika to have an equal interest to him and Sophie, in return for their promise to sell to him a half interest in the Clark Road property.  Critically, the documents do not refer to the amount agreed for the sale of the half interest.  Nor are there any documents referred to in the 2009 acknowledgement which contain the special terms excluding the value of the improvements from any account between them on a sale or partition of the Clark Road property.

8. I prefer the narrower approach adopted in Thomson v McInnes[12] because it provides greater certainty and conforms with the purpose of s 26 of the LPA. In Harvey v Edwards Dunlop & Co Ltd[13] the majority of the High Court held that an exchange of correspondence of letters containing internal references which were, on their face, interconnected could be read together.  That decision is consistent with the decision in Thomson v McInnes on which both parties relied.  The difficulty which Leon faces is that even if the related Penfield Road property transaction is incorporated it does not disclose the terms of the agreement on which he sues.  It has never been held that a reference to another transaction allows evidence of the terms of the agreement on which a plaintiff sues to be adduced.  Such an approach would defeat the statutory rule. 

   [12] (1911) 12 CLR 562.

   [13] (1927) 39 CLR 302.

9. The 2009 acknowledgement does not comply with s 26 of the LPA.

   Part Performance

10. In Australian and New Zealand Banking Group v Widin,[14] Hill J also considered the requirements of part performance in a case in which the bank had advanced money to its customer by accepting or endorsing bills of exchange on the strength of an agreement that the customer would provide a real property mortgage by way of security but failed to do so.  The question was whether making the advance was sufficient performance to attract equitable assistance.  Hill J held that it did.

    [14] (1990) 102 ALR 289 at 301-304.

11. In Caton v Caton,[15] Lord Cranworth stated the principle as follows:

    … 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, then 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.

    [15] (1866) LR 1 Ch App 137 at 148.

12. It has often been held that the entry into possession alone, or the taking of possession coupled with the expenditure of money by one party on the improvement of property, with the cognizance of the other party to the contract, may amount to part performance.[16]

    [16]   See the cases cited in Halsbury’s Laws of England, 3^rd ed, vol 36, para 416.

13. The degree to which the part performance must be referable to the alleged agreement has proven to be problematic.  It has been held that the part performance must ‘unequivocally’ and of its ‘own nature’ be referable to the agreement.[17]  An act which admits of an explanation other than performance of the contract pursuant to which it is allegedly performed is not sufficient.[18]

    [17]   Maddison v Alderson (1883) 8 AC 467 at 479.

    [18]   Dale v Hamilton (1846) 67 ER 955 at 960.

14. Applied strictly almost no act would qualify as part performance because it is almost always possible to posit an alternative explanation.[19]  That has led to the view that it is sufficient that the act is unequivocally referable to a contract, which is at least consistent with the alleged contract.[20]

    What this ‘special sense’ may be is a question of some difficulty: cf Chaproniere v Lambert [1917] 2 Ch 356 which applied a strict test, with that expressed in Fry on Specific Performance, 6th ed, p 278, section 582; cited with approval in Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 189 where the learned authors say:

    The true principle, however, of the operation of acts of part performance seems only to require that the acts in question be such as 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.

    In the present case, the acts alleged to constitute part performance on the part of the bank were acts required to be performed by it pursuant to the arrangements entered into by it with the bankrupt.

    [19]   Millett v Regent [1975] 1 NSWLR 62 at 65.

    [20]   Fry, E A Treatise on the Specific Performance of Contracts 6^th ed Sweet & Maxwell, London, 921, at 238.

15. In JC Williamson Ltd v Lukey and Mulholland,[21] Dixon J, with whose judgment Gavan Duffy CJ agreed, stated the test as follows:

    The acts of part performance must be such as to be consistent only with the existence of a contract between the parties, and to have been done in actual performance of that which in fact existed. But in such a case the equity which so arises is to have the entire contract carried into execution by both sides. Because the acts done upon the faith of the contract could not have taken place if it had not been made, and the contract is of a kind which it is considered equitable to enforce in specie, a party who has so acted in partial execution of the contract obtains an equity to its complete performance.

    [21] (1931) 45 CLR 282 at 300.

16. In Widin Hill J described the ‘more liberal view’ taken in the United Kingdom as follows:[22]

    [22]   Australian and New Zealand Banking Group v Widin (1990) 102 ALR 289 at 303-304.

    However, in the United Kingdom a more liberal view was taken in Kingswood Estate Co Ltd v Anderson and Wakeham v MacKenzie [1968] 1 WLR 1175 and ultimately by the House of Lords in Steadman v Steadman [1976] AC 536. In the last case the House held that a payment of money coupled with the sending of a transfer and the announcement to a magistrate that the parties had agreed to arrears of maintenance being remitted (save for £100) was a sufficient act of part performance of an agreement for the sale of a matrimonial home.

    The majority of their Lordships accepted that the acts of part performance must, on the balance of probabilities, point to the existence of some such contract as alleged. They approved the decision in Kingswood Estate Co Ltd v Anderson, including the passage from Fry on Specific Performance already set out (see per Viscount Dilhorne at 553, Lord Simon at 561, and per Lord Reid at 542 but see the judgment of Lord Morris, dissenting, and Lord Salmon at 569).

    In Millett v Regent, at first instance (22 July 1974, unreported) Holland J of the Supreme Court of New South Wales applied the rule stated in Kingswood Estate Co Ltd v Anderson. By the time the appeal was heard, the House of Lords had decided Steadman. The New South Wales Court of Appeal [1975] 1 NSWLR 62 expressed differing views as to the applicability of Steadman. Glass JA was of the view that, the High Court having expressed the test in terms of the traditional view in Maddison v Alderson, the Court of Appeal was bound by that formulation and could not apply the more liberal test in Steadman. Neither Hutley nor Mahoney JJA found it necessary to consider whether Steadman was consistent with Australian authority. However, Mahoney JA said at 74:

    The term ‘unequivocally’, and the similar terms which have been used in this regard in other cases, do no more than indicate that, in being satisfied that such a contract was made, the court will require evidence of the appropriate degree of cogency to establish that, eg, the appropriate basis for the intervention of equity against the statute requiring the contract to be in writing is made out: cf Briginshaw v Briginshaw (1938) 60 CLR 336 at 365.

    When Regent v Millett went on appeal to the High Court (reported at (1976) 133 CLR 679; 10 ALR 496) the court was unanimously of the view that part performance was made out. None of the judges found it necessary to consider the questions raised by Steadman. Gibbs J, with whose judgment Stephen, Mason, Jacobs and Murphy JJ agreed, said (CLR at 683; ALR at 499) that the Earl of Selborne’s test in Maddison v Alderson at 479:

    … has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged: see McBride v Sandland (1918) 25 CLR 69 at 78.

    …

    It may be said immediately that if the reasoning of their Lordships in the recent case of Steadman v Steadman is accepted, the appellants’ arguments must fail. However, it is unnecessary for the present decision to consider the questions that are raised by that case.

1. Subsequent Australian authority has not applied the English relaxation of the rule.[23]

   [23]   Ogilvie v Ryan [1976] 2 NSWLR 504; Thwaites v Ryan [1984] VR 65; Riley v Osborne [1986] VR 193; McMahon v Ambrose [1987] VR 817.

2. In Widin Hill J held that the bank’s act in not only advancing the money but in doing so after endorsing or accepting bills of exchange, and discounting them in the market, on the strength of obtaining authority to complete a mortgage was unequivocally referable to an agreement to lend money on the strength of a mortgage.[24]

   [24]   Australian and New Zealand Banking Group v Widin (1990) 102 ALR 289 at 305-306.

3. The purchase of the Penfield Road property, in itself, is not unequivocally referable to, and does not manifest the existence of, an agreement of any kind between the purchasers.  It is certainly not unequivocally referable to, or indicative of a contract for the purchase by Leon of an interest in the Clark Road property.  The purchase of the Penfield Road property is complete in itself.  Importantly the payment of the whole of the owners’ contribution by Leon might be the manifestation of any number of arrangements and contracts of a very different kind to the one Leon alleges. 

   Conclusion

4. For the aforesaid reasons the requirements of s 26 of the LPA have not been met and that failure had not been remedied by part performance. I would dismiss the appeal.

5. KELLY J:             I would dismiss the appeal.  I agree with the reasons of the Chief Justice. 

6. HINTON J:           I agree with the Chief Justice for the reasons he has given that the appeal should be dismissed.