Re Di Felice, Fillizio Ex parte Di Felice, Fillizio v Bent, Everett Thomson
[1982] FCA 65
•07 APRIL 1982
Re: FILLIZIO DI FELICE (also known as PHILIP DI FELICE)
Ex parte: THE SAME
And: EVERETT THOMSON BENT; VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY
X No. 53 of 1979
Contract
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Fitzgerald J.
CATCHWORDS
CONTRACT - Option to purchase - exercise of option - compliance of exercise of option with terms of option contract - notice of exercise of option accompanied by alternative proposal - repudiation - failure to accept repudiation.
Quadling v. Robinson (1976) 137 C.L.R. 192 followed
Green v. Summerville (1979) 50 A.L.J.R. 50 referred to.
Wodar Investment Development Ltd v. Wimpey Constructions U.K. Ltd (1980) 1 W.L.R. 277 referred to.
CONTRACT - Uncertainty of terms - construction so as to find an enforceable obligation - construction to avoid inconsistency or absurdity.
Cudgen Rutile (No. 2) Pty Ltd v. Chalk (1975) A.C. 520, dicta of Lord Wilberforce referred to.
CONTRACT - Illusory bargain - terms to be fixed by a party's solicitor - party given latitude of choice as to means of performance.
George v. Roach (1942) 67 C.L.R. 253 applied
Goedcke v. Kirwan (1973) 129 C.L.R. 629 considered.
CROWN LANDS - sub-lease of leasehold Crown lands - ministerial approval - whether failure of ministerial approval avoids sub-lease - whether registration of sub-lease signifies approval.
Land Act 1962-1978 (Qld) s.274(2)(a)
Tweed Motors (Qld) Pty Ltd v. Moran Motors Pty Ltd (1975) 39 A.L.J.R. 279 referred to. BANKRUPTCY - Bankrupt seeking to restrain transaction by controlling trustee appointed under Bankruptcy Act Part X - BANKRUPTCY ACT 1966 (Cth), s.212A.
EVIDENCE - Party's evidence patently untrue - failure to call witness who must have been able to give vitally important evidence - inferences drawn. Steinberg v. F.C.T. (1975) 134 C.L.R. 640 referred to.
CONTRACT - Alteration of sublease after execution - whether consensus ad idem - whether sublease avoided by alterations.
CONTRACT - Statute of Frauds - alterations to sublease not attested by party - performance - Property Law Act 1974-1978 (Qld) ss. 11 and 59.
CONTRACT - assent after alteration to sublease as altered - Estoppel and Ratification - whether relevant conduct and knowledge is that of bankrupt or trustee in bankruptcy.
Koenigsblatt v. Sweet (1923) 2 Ch. 314 applied
O'Young v. Walter Reid and Company Ltd (1923) 47 C.L.R. 497 applied.
Kok Hoong v. Leong Cheong Kweng Mines Ltd (1964) A.C. 993 referred to.
CROWN LANDS - Sub-lease of leasehold Crown lands - prohibition on lessee holding lease on trust - whether existence of trust avoids lease -
Land Act 1962-1978 (Qld) s.91, s.274(2)(b), s.296.
BANKRUPTCY - Application by debtor for order relating to decision of controlling trustee - "justice and equity".
Bankruptcy Act 1966 (Cth) s.212A
Ex parte James (1874) 9 Ch. App. 609 referred to. A. INTRODUCTION
HEARING
BRISBANE
#DATE 7:4:1982
ORDER
The application is dismissed.
JUDGE1
This is an application under s.212A of the Bankruptcy Act 1966 (Cwlth), by Fillizio Di Felice, also known as Philip Di Felice, (the bankrupt).
On 15 May 1979 the bankrupt executed a Deed of Assignment pursuant to Part X of that Act by which Everett Thomson Bent (the trustee) was appointed controlling trustee. However, the bankrupt remains registered as lessee under the Land Act 1962-1978 (Qld), of two Perpetual Lease Selections in the Cairns District, Nos. 2591 and 2592.
A registered Sublease of the Selections to Vincent Samuel Huttley and Maureen Mavis Huttley (Mr and Mrs Huttley) expired in late 1981. The trustee accepts that Mr and Mrs Huttley have exercised an option in the Sublease to purchase the Selections, together with improvements and certain equipment (the property), and proposes to conclude a sale of the property to them. The bankrupt disputes that decision of the trustee on a wide range of grounds and seeks orders to prevent effect being given to it. Section 212A, under which the application was brought, empowers the Court to make such order as it thinks just and equitable. Mr and Mrs Huttley were joined as parties to the proceedings by the Supreme Court of Queensland which transferred the matter to this Court under s.35 of the Bankruptcy Act. All parties were represented before me and it was common ground that the substantive question which I should determine is whether the bankrupt has established that there is no valid and enforceable agreement entitling and obliging the trustee to sell the property to Mr and Mrs Huttley.
Detailed reference to the facts is essential and findings which it is necessary to make involve an assessment of the credibility of several of the witnesses. I formed a very unfavourable view of both the bankrupt and his "investigator", one Rosina Gallo, a Mareeba Real Estate Agent, and have generally rejected the evidence of each. The solicitor who acted for the bankrupt in connexion with the sublease transaction, Mr Savage of Messrs. Connolly Suthers and Walker of Townsville, gave no evidence. No explanation was given for his absence. Mr Huttley's evidence needed to be approached with some caution. There were aspects concerning which I thought his evidence was less than totally frank. Mr and Mrs Huttley's solicitor, Mr K.R. Smith of Messrs. Land and Co. of Tully, swore an affidavit and was cross-examined. I was in general disposed to accept his evidence as truthful and accurate although, not suprisingly after a lapse of time, he did not have a perfect recollection. The trustee was also called so that he might be cross-examined. Nothing emerged which indicated any basis for questioning either his veracity or his good faith. He was not cross-examined by Counsel for the bankrupt.
Although it was submitted for Mr and Mrs Huttley that the bankrupt should not be permitted to rely upon some of the matters raised by him as objections to the sale because of their unmeritorious nature and that his own conduct might affect his right to relief, it seemed broadly accepted that the bankrupt had the right to stop the completion of the sale if he could establish that there is no valid and enforceable agreement. Counsel for Mr and Mrs Huttley conceded that, if it was established that there is no agreement arising out of the exercise of the option, there is no other basis upon which the trustee can sell to Mr and Mrs Huttley at the option price. It was not submitted that, irrespective of the option, a contract has been concluded between the trustee and Mr and Mrs Huttley, e.g. in communications exchanged by them or their representatives. On the other hand, it was not submitted for the bankrupt that, even if there is a valid agreement, the trustee still ought not be permitted to complete the sale. There was no acceptable evidence of value, although it appears that the property is now worth more than the option price. However, the suggestion seemed to be that any extra which might be able to be obtained for the property if the bankrupt succeeded was probably not needed to pay the bankrupt's creditors but would benefit the bankrupt.
The bankrupt's principal case was that, after he had signed it, the sublease was altered without his knowledge or consent so that, he said, he was not bound by the document registered. It is necessary to go back to the events leading up to registration. Further, I have been unable to avoid frequent interruptions to the story to refer to one or more of the documents put in evidence. For the sake of clarity, the observations on the documents appear in parenthesis.
The need for such comments and explanations arises out of the very considerable confusion which existed throughout the hearing before me despite the best efforts of the counsel and solicitors who appeared. The solicitors who had been involved at the conveyancing stage seem to have forwarded documents without always sending a covering letter and the full extent of conversations was not proved before me. I have already mentioned the lack of evidence from Mr Savage. Likewise, Mr Daniel, Mr Smith's predecessor, gave no evidence in relation to any contact he may have had with Mr Savage before Mr Smith took over the file, although I consider that of much less importance. Further, no fewer than 10 copies of one version or other of the sublease document were among the many documents put in evidence. For the most part the various copies and the differences between them were not explained or were dealt with by unsatisfactory and often internally contradictory evidence. Having spent a considerable time analysing and comparing them, I am satisfied that, while a number were of little or no relevance, others afford some clue as to the order of events and reference to them is necessary.
B. THE HISTORY OF THE TRANSACTION
1. Prior to taking of possession
In about October 1978 the bankrupt's then solicitor, Mr Savage, submitted a draft Sublease to Mr and Mrs Huttley's then solicitors, Messrs Boyett Stubbin and Daniel of Innisfail, (Exhibit 20). The nominated sublessee in that document was V.M. Huttley Pty Ltd., a company of which Mr and Mrs Huttley are the shareholders and directors. The document was plainly incomplete; for example, no schedules were included.
Mr Smith was at the time an employee of Boyett Stubbin and Daniel, but he did not assume responsibility for the relevant file until 7 December 1978 when he was handed it at Mr Daniel's direction. By then, the draft document first submitted had been superseded. Mr Savage had forwarded a further Sublease, seemingly this time for execution, after Mr Daniel had written him a letter on 7 November 1978 detailing a number of alterations required. (Exhibit 21 was put in unexplained except as a draft sublease obtained from Mr Savage's file. It can be seen by comparison to be an earlier internal draft of Exhibit 20 and quite irrelevant.)
As I have said, Mr Smith took over the file on 7 December 1978, and that day or the following day he saw his clients Mr and Mrs Huttley. Changes were made on the Sublease forwarded by Mr Savage for execution and Mr Smith caused a Deed of Variation to be prepared which was also physically altered after typing. Mr and Mrs Huttley signed an original and duplicate and triplicate copies of both Sublease and Deed of Variation. Mr Smith then sent all three copies to Mr Savage under cover of a letter dated 8 December 1978. No document had then been signed by the bankrupt. I reject the bankrupt's evidence that it was he who signed first.
Mr and Mrs Huttley went into possession of the property on 10th December 1978, although they knew that the Sublease had not been signed by the bankrupt. Probably it suited all parties for Mr and Mrs Huttley to take possession. The bankrupt was living in Victoria and the property would have needed attention. Although they had possession, Mr and Mrs Huttley paid no rental until months later. They were unwilling to do so until they considered their position sufficiently secure.
(It would be a reasonable assumption that Mr Smith retained a copy of the Deed of Variation which he had prepared but that fact was not proved. Exhibit 23 was Mr Smith's file copy of the Sublease. A comparison of Exhibit 23 with other documents suggests that Exhibit 23 is a copy of what became the original registered Sublease, made after signature by Mr and Mrs Huttley and before it was returned to Mr Savage in December 1978 for signature by the bankrupt, to which copy further changes were later made whilst it was in Mr Smith's possession and in use by him as a file copy.)
2. 8 December 1978
The position at the time of the letter of 8 December 1978 from Mr Smith to Mr Savage seems to have been that:
(i) the Sublease forwarded by Mr Savage for execution was substantially an expanded version of the first draft he had earlier submitted, the most substantial differences probably being the substitution of Mr and Mrs Huttley for their company as sublessee and the insertion of the Schedules;
(ii) not all the requirements raised by Mr Daniel in his letter of 7 November 1978 had been met in the Sublease subsequently forwarded by Mr Savage for execution; nor were they all caught up in the changes to that document by Mr Smith or by his Deed of Variation.
(iii) other changes which were made, including the insertion of the names of Mr and Mrs Huttley in lieu of the name of their company as sublessee, had not been mentioned in Mr Daniel's letter of 7 November 1978;
(iv) some of the variations provided for in the Deed of Variation, or made physically on the documents before signature by Mr and Mrs Huttley, may not have been the subject of prior agreement between the parties or their respective solicitors;
and
(v) the possibility remained of the need for further amendments in that the bankrupt's bank, which as mortgagee had been asked to consent, had requested additions which had not been made, and the Minister for Lands, whose approval was necessary under s.274 of the Land Act, had not been approached, and it was not known whether he might require changes as a condition of his approval.
In the circumstances, it is perhaps curious that Mr and Mrs Huttley signed the document at that point. Yet, according to both Mr Smith and Mr Huttley they did so. That statement is clearly supported by Mr Smith's letter of 8 December 1978, which ended with a plea that he be informed urgently whether all matters were agreed upon, at the same time asserting that all had been discussed.
3. 2 March 1979
(a) NARRATIVE
There is little to indicate what occurred between 8 December 1978 and 2 March 1979 when Mr Savage wrote to the Secretary of the Land Administration Commission enclosing what was described as "a photocopy of the proposed Sublease and Deed of Variation of that Sublease", and asking urgent advice as to whether the transaction would be approved. Mr Smith did have the document back in his possession during the period between 8 December 1978 and March 1979, but the reason went unexplained. He gave the following evidence:
"Your Honour, there is a letter dated 20 February 1979 sending the sublease to Connolly, Suthers and Walker, asking them to proceed to obtain the consent of the bank as mortgagee and generally proceed to registration of the sublease, . . .
Why did you have the sublease in February 1979?---"No idea, your Honour. It was a rather funny sort of a deal at this stage. We were having a lot of trouble tidying up the loose ends."
The letter referred to was not put in evidence.
The copy document forwarded by Mr Savage to the Land Administration Commission on 2nd March 1979 bore the signatures of Mr and Mrs Huttley, plus their initials in four places. It also carried the signature of the bankrupt.
(. The document produced to this Court by the Land Administration Commission as a copy of what was forwarded to it by Mr Savage under cover of his letter of 2 March 1979 bears marks such as ticks, crosses and question marks. I am satisfied that these marks were made by an officer of the Land Administration Commission whilst examining the document in the course of his duty on some date subsequent to 2nd March 1979 and are therefore to be ignored.
. Before proceeding, I pause to note a curious feature which added to the confusion earlier referred to. Both the registered original and the registered duplicate of the Sublease including the Deed of Variation were tendered and there was reference to the registered triplicate during the evidence. The three copies are not in all respects identical, although the differences do not seem to be of great significance. As between the original and duplicate documents registered, the principal differences appear to be that in the duplicate the words "and the balance thereof" are missing from clause 3(a), the words and symbols "and ( )" were not struck out in clause 3(d), the word "for" in clause 3(i)(ii) does not have a line under it, initials are missing from various places, and additional signatures of Mr and Mrs Huttley are missing from page 15. These differences are reflected in various of the exhibits, and assist in enabling them to be placed in context.
Apart from such matters as backsheets and an error in the order and numbering of two pages (which may safely be ignored) the copy document submitted to the Land Administration Commission on 2nd March 1979 is similar in all these respects to the duplicate registered document, which indicates that it was the document which subsequently became the registered duplicate which was copied and forwarded to the Land Administration Commission on 2nd March 1979. (As will be seen, the duplicate registered document had other alterations made to it after 2nd March 1979, as did the original registered document.)
. I have referred above to Exhibit 23 which had its source in Mr Smith's file. Annexure A to the bankrupt's affidavit and Exhibit 2, which also formed part of the bankrupt's case, originated in Mr Savage's file. Exhibit 3 and Annexure A seem, like Exhibit 23, to be copies of the document which ultimately became the original registered Sublease. Whilst the executed document was with Mr Savage, a copy was made of what became the original registered Sublease. It was the copy then made which became the source of Annexure A and Exhibit 3. I cannot tell whether that copy of what became the original registered document was made before of after the duplicate, in its then form, was photocopied and sent to the Land Administration Commission on 2nd March 1979. But the copying was done prior to early April 1979 when, as will be seen, Mr Smith made further alterations to the signed document before returning it to the bankrupt's bank.
. Apart from differences which still exist between the registered original and the registered duplicate, Annexure A and Exhibit 3 correspond with the document forwarded by Mr Savage on 2 March 1979 to the Land Administration Commission. All bear the bankrupt's signature in addition to the signatures of Mr and Mrs Huttley.)
(b) FORM OF THE DOCUMENT SIGNED BY THE BANKRUPT
The bankrupt completely failed to persuade me that there were any changes made after he signed and before his solicitor, Mr Savage, made the copy of the original which became Annexure A and Exhibit 3, or the copy of the duplicate which he forwarded to the Land Administration Commission on 2 March 1979.
On the contrary, I find that Annexure A and Exhibit 3 are copies of the original Sublease signed by the bankrupt and that the document which Mr Savage forwarded to the Land Administration Commission on 2 March 1979 was a copy of the duplicate Sublease signed by the bankrupt, both original and duplicate having previously been signed by Mr and Mrs Huttley.
The bankrupt at the hearing specified the alterations on the original registered Sublease which he swore were made after he had signed and without his knowledge or consent. In effect, he said that there were no alterations when he signed. The position was quite different in fact. Indeed, it is probably a fair reading of paragraph 12 of his affidavit, sworn in this matter at about the time it was commenced, that it contradicts the oral evidence given at the hearing and acknowledges that, when the bankrupt signed, the document had been altered to the extent apparent on Annexure A.
The bankrupt also swore at the hearing that, some time before he executed his Deed of Assignment, on one version of his evidence "a couple of months prior to that", he met Mr Bent who was to become his trustee. He said that prior to that meeting, he had received a copy of the sublease document from a finance company through which he was attempting to arrange finance; Annexure A to his affidavit and Exhibit 3 were copies of the document he then received. It had been supplied to the finance company by Mr Savage who was making efforts on behalf of the bankrupt to find finance.
Allowing for the differences still existing between registered original and registered duplicate, the document supplied by Mr Savage to the finance company and by it to the bankrupt accords with the document submitted by Mr Savage to the Land Administration Commission on 2 March 1979.
By the bankrupt's own admission he was in possession of the document which became Annexure A to his affidavit and Exhibit 3 well before he signed the Deed of Assignment, perhaps as early as March 1979. I reject entirely his evidence that he told Mr Bent on that occasion that he was unhappy with the alterations on that document.
The trustee's evidence was that it was not until two years later, about April 1981, that the bankrupt started to question alterations to the document. The trustee was not cross-examined by counsel for the bankrupt. Having seen and heard the bankrupt, I can readily understand that his counsel could not discover which version of the bankrupt's story he could put to the trustee.
The bankrupt had obtained the copy document which he had prior to executing his Deed of Assignment with the co-operation of his solicitor, Mr Savage. He admitted that he continued contact with Mr Savage for some 12 months after the Deed of Assignment, during which period Mr Savage attempted to obtain mortgage finance on the property to relieve the bankrupt's financial position. The bankrupt did not complain to Mr Savage about unauthorized alterations, or ask him for an explanation, or, so far as one can tell, did he ever ask Mr Savage about the final form of the documentation; although, according to the bankrupt, he was throughout that period attempting to obtain the final version of the document through his trustee. Nor was any protest about alterations made by the bankrupt to Mr and Mrs Huttley or their solicitor.
(c) THE SECOND SCHEDULE EQUIPMENT
One alteration upon which the bankrupt placed great store was the striking out of the original clause 8, which in the document forwarded by Mr Savage for execution had dealt with a sale by the bankrupt to Mr and Mrs Huttley of equipment listed in the Second Schedule to the Sublease in return for a payment of $10,000 contemporaneously with the first payment of rental. Contrary to the bankrupt's story, I find that clause 8 had been struck out by Mr Smith prior to any signature by Mr and Mrs Huttley although the Second Schedule was left untouched.
In the first draft document submitted by Mr Savage, the option price had been $289,000.00 and the only equipment included in the subject matter of the option was that described in the Third Schedule. Clause 8 of that draft Sublease provided for the sublessee to buy other equipment, to be listed in the Second Schedule, for $10,000.00 payable contemporaneously with the first instalment of rental. Mr Daniel, in a postscript (b) to his letter of 7/11/78, required an additional provision, obliging the bankrupt to repurchase the Second Schedule equipment in the event that a sale of the Selections pursuant to the option did not eventuate. No such change was made by Mr Savage in the document forwarded for execution. Clause 8 was struck out of that document by Mr Smith who, however, overlooked the need for a consequential deletion of the Second Schedule. As one more boost to the rampant confusion, Mr Savage's Fourth Schedule to the Sublease, an Agreement for Sale to be executed consequent upon an exercise of the Option, misdescribed the subject matter of the sale, mentioning the Second Schedule equipment instead of referring to the Third Schedule equipment. Mr Smith missed that error also. However, by his Deed of Variation, Mr Smith provided for the price payable on a sale pursuant to the option to be increased to $299,000.00 and for the sale to include, as well as the Selections, "all improvements erected thereon and fixtures, fittings plant and machinery", thereby including the Second Schedule equipment in the subject matter of the Option.
The Second Schedule equipment and arrangements between the parties for its use and sale was one of the many matters on which the bankrupt gave quite inaccurate evidence. It was also an aspect on which Mr Huttley was less than satisfactory in his testimony.
To some extent at least, it may be that such difficulties were the product of ongoing doubt for a considerable period as to what Mr and Mrs Huttley proposed with respect to that equipment. As late as 6th April 1979, as can be seen from a letter of that date from Mr Smith to Mr Savage which is referred to below, it seems that, although the Second Schedule equipment was by then included in the subject matter of the option, it was nonetheless still in contemplation that Mr and Mrs Huttley might wish to purchase it separately prior to exercise of the option. Were Mr Huttley to be believed on the point, there was also at some time a loose and undocumented arrangement between him and the bankrupt that, if the Second Schedule equipment was not purchased and the option was not exercised, some unquantified payment would be made for its use at the termination of the Sublease. I will return to these matters.
I reject the bankrupt's story that the document which he signed provided for the payment of $10,000 to him for the Second Schedule equipment along with the first instalment of rental. He at no time explained why, if that were so, he omitted to ask for his money which, according to him, he needed urgently.
I find that, with the exception of the error in the Fourth Schedule which mistakenly refers to the Second Schedule equipment instead of the Third Schedule equipment, the ultimate agreement in a contractual sense between the parties with respect to the equipment was as set out in the documentation signed by Mr and Mrs Huttley in December 1978 and then by the bankrupt prior to 2 March 1979. As I have already pointed out, one can see the form of the document at the time of signature by reference to Annexure A, Exhibit 3, and the copy document forwarded by Mr Savage to the Land Administration Commission on 2 March 1979. There was no subsequent alteration with respect to the parties' agreement concerning the Second Schedule equipment. That can be confirmed by a comparison of the registered documents and the documents previously mentioned in this clause.
(d) DIFFERENCES BETWEEN THE REGISTERED SUBLEASE AND THE DOCUMENT SIGNED BY THE BANKRUPT
By a comparison of the original and duplicate registered Sublease with Annexure A, Exhibit 3 and the copy document submitted to the Land Administration Commission under cover of the letter dated 2 March 1979 from Mr Savage, it was possible to determine the alterations which were made after signature by the bankrupt. The comparison revealed the following differences:
(i) The words and figures "Dated The Thirtieth Day of November 1978" have been added to the first page immediately under the heading "SUB-LEASE";
(ii) The words "As Joint Tenants" have been added to the names and address of Mr and Mrs Huttley on the first page;
(iii) The words and figures "First Day of November 1978" have been added to the first page as the commencing date of the term of the Sublease;
(iv) The words "First" and "November" have been inserted in Clause 2 as the date for payment of rental in each of 1979 and 1980;
(v) The words and figures "TEN THOUSAND DOLLARS ($10,000) of", the word "said", and the words "and the balance thereof" have been added to clause 3(a) so that it reads:
"The Lessee covenants and agrees with the Lessor that -
(a) he will duly and punctually pay TEN THOUSAND DOLLARS ($10,000) of the said rental hereinbefore reserved at the times hereinbefore mentioned to the account of the Lessor at Bank of New South Wales, Mareeba Branch and the balance thereof as the Lessor shall from time to time in writing direct and there shall be no necessity for the Lessor to make any formal or legal demand for the same;"
(In the duplicate registered, the words "and the balance thereof" were not inserted.)
(vi) There has been a deletion from clause 3(d) of the word and symbols "and ( )"; (This deletion was not made in the duplicate registered.)
(vii) A power of attorney clause has been physically attached to page 6 of the Sublease and numbered 5(a).
(viii) The following clause 6(a) has been typed onto the bottom of page 6:
"6(a) The Lessees VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY DO HEREBY DECLARE that they have each attained the age of eighteen (18) years and are qualified in accordance with the requirements of the Right Honourable The Minister for Lands to hold the subject land as sub-lessees."
(ix) The following clause 8 has been attached to page 8, the original clause 8 having been struck out by Mr Smith prior to signature by Mr and Mrs Huttley:
"The Lessor shall duly and punctually pay the Crown rental due and payable upon the said land without recourse or contribution being sought by the lessor from the lessee."
(x) The 29th November has been inserted as the date in 1978 when the bankrupt signed and the 30th November has been inserted as the date in 1978 when Mr and Mrs Huttley signed.
(xi) The Second Schedule has been struck out.
(xii) The 10th December 1978 has been inserted on its first page as the date of the Deed of Variation.
(xiii) Reference has been included in recital (a) of the Deed of Variation to the 30th November 1978 as the date of the Sublease.
(xiv) Clause 1 of the Deed of Variation provides for the deletion of inter alia clause 3(b) of the Sublease and the substitution of a different clause 3(b). As typed, this obliged Mr and Mrs Huttley to "pay all Crown rents and all local authority general rates. . . ". The words "Crown rents and all" have been struck out.
(xv) Reference has been included in clause 4 of the Deed of Variation to 30th November 1978 as the date of the Sublease.
(xvi) There is one additional signature by Mr and Mrs Huttley and their initials have been added in a number of places.
(This is not so in the duplicate registered.)
(xvii) The initials "F.D." appear near clause 5(a). None of the alterations in question involved any change in the terms of the Option or in the form of the proposed Agreement for Sale set out in the Fourth Schedule to the Sublease.
4. 2 March 1979 to 6 April 1979
(a) NARRATIVE
To determine when, and in what circumstances, the alterations after the bankrupt's signature were made, it is necessary to return to the narrative.
The Secretary of the Land Administration Commission wrote to Messrs. Connolly Suthers and Walker on 14 March 1979 in the following terms:
"Re: Perpetual Lease Selections Nos. 2591 and 2592, Cairns District. F. Di Felice to Vincent Samuel Huttley and Maureen Mavis Huttley. Proposed Sublease. Your reference: PDS:SP
With reference to your letter of 2nd March 1979, concerning the above, I have to inform you that a sublease, as proposed, in terms of the draft agreement submitted, will be allowed if in order and lodged promptly, in triplicate, provided:
(1) the sublessees furnish the usual declaration they have each attained the age of 18 years and are qualified to hold;
(2) the Deed of Variation is annexed to the original Sublease and a stamped duplicate thereof is annexed to each of the other two copies of the Sublease;
(3) the consent of the Bank of New South Wales as mortgagee of the head lessee is endorsed on the Sublease Agreement;
(4) the manner in which the Sublessees intend to hold the Sublease, i.e. as joint tenants or as tenants in common in certain specified interests, is inserted in the Sublease Agreement;
(5) the commencement date of the term of the Sublease is inserted in the appropriate place in the preamble to the Sublease Agreement;
(6) Clauses 2 and 3(d) of the Sublease Agreement are duly completed in all particulars;
(7) amended Clause 3(b) of the Sublease Agreement as inserted by Clause 1 of the Deed of Variation is amended by deletion of the words "Crown rents" where appearing therein;
(8) a Clause is inserted in the Sublease Agreement making payment of Crown land rents solely the responsibility of the Sublessor; and
(9) the Sublease Agreement date is inserted in (a) of the preamble and in Clause 4 of the Deed of Variation.
Please note that it is mandatory under the provisions of Section 274(2)(e) of the Land Act 1962-1978 for all Subleases, irrespective of the length of term thereof, to be lodged in this office for registration."
A copy of that letter was forwarded by Mr Savage to Mr Smith under cover of a letter dated 2 April 1979 which read:
"RE: HUTTLEY AND DI FELICE
We refer to our recent telephone conversation with Mr Smith and enclose copy of letter received from the Land Administration Commission. We will attend to the necessary amendments on return of the Lease documents from the Bank of New South Wales. Although the Bank of New South Wales has not returned the documents, we have been advised that the Lease is satisfactory to them and that their consent is to be endorsed.
We note that we have still not received any money from your client. Please let us have same forthwith."
The Bank had in fact returned the document but to Mr Smith not Mr Savage. On 29 March 1979 the Bank had written to Boyett Stubbin and Daniel as follows:
"Re Sub-Lease F. Di Felice and V.S. & M.M. Hutley Refer - Mr. K. Smith
We refer to our telephone conversation of 27/3/79 and confirm that Bank is prepared to consent to the sub-lease, subject to:-
1. Insertion of Power of Attorney clause in lease document.
2. Insertion of Clause relating to payment of rental moneys in the duplicate and triplicate copies of the lease.
In regard to Item (1) a clause on the following lines would suffice:-
"The lessee hereby irrevocably constitutes and appoints the lessor and the executors administrators and assigns of the lessor and any mortgagee for the time being of the said land and if such mortgagee shall be a Bank then the Attorney for the time being in Queensland or any Manager for the time being of such Bank the true and lawful Attorney and Attorneys of the lessee on behalf of the lessee to execute a surrender or any assignment of this lease without any payment or compensation to the lessee PROVIDED ALWAYS that such powers of surrender and assignment shall be exercised by the lessor and the executors administrators and assigns of the lessor and/or such Mortgagee during such period only as the lessor or the Mortgagee shall be entitled to re-enter and determine this sub-lease sufficient proof whereof shall be the statutory declaration of the person or persons claiming such right to re-enter and determine this sub-lease."
We enclose:
. Forms of Consent (3)
. Sub-Lease (In triplicate)
. Deed of Variation (In triplicate) . . . "
There is no evidence to identify the party from whom the Bank had received the document or when, save that it must have been prior to 29th March 1979. It was almost certainly Mr Savage who sent the document to the Bank; it was his client who was the Bank's customer and needed its consent, and other evidence suggests that the document was in his possession by the beginning of March, when he copied it and sent a copy to the Land Administration Commission. The document when sent to the Bank was almost certainly signed by the bankrupt as well as Mr and Mrs Huttley, since the Bank's consent was required. The Bank did not suggest otherwise, as it might be expected it would have done, in its letter of 29th March 1979, or at least in that part of the letter put in evidence.
When the document was sent to the Bank prior to its return on 29 March 1979, changes to meet the requirements of the Land Administration Commission's letter of 14th March 1979 had not been made: see Mr Savage's letter of 2nd April 1979. However, for reasons which will appear, I think it probable that the addition to clause 3(a) had been made (item (v) supra.). I will return to that matter in a moment.
While the document was in Mr Smith's possession after he received it from the Bank, Mr and Mrs Huttley attended on Mr Smith at his office. At that time, the words "as joint tenants" were added to the names and address of Mr and Mrs Huttley on the first page, the power of attorney, clause 5(a), was typed and physically attached to the document, and Mr and Mrs Huttley further initialled the document. It was probably then that the additional signatures of Mr and Mrs Huttley were made at the foot of the Fourth Schedule (p.15 of the document).
Mr Smith wrote on 6 April 1979 to both Mr Savage and the Bank. It is unnecessary to set out the letter to the Bank which is quite consistent with the letter to Mr Savage and concluded by requesting the Bank to note its consent on the document which was returned to it and, after noting its consent, to forward the document to Messrs. Connolly Suthers and Walker so that other matters might be attended to. The document and a cheque in favour of the Bank for $13,500.00 were enclosed.
The letter of 6 April 1979 from Mr Smith to Mr Savage was as follows:
"Re: Huttley lease from Di Felice
We refer to your letter of the 2nd April and advise that we have had inserted in the Lease Agreement the power of attorney clause required by the Bank of New South Wales. This has been initialled by our clients and we confirm the undertaking given to us by 'phone on the 2nd April that you will have your client initial this additional clause prior to registration. The Lease in triplicate, Deed of Variation in triplicate and Consent Forms have been returned to the Bank of New South Wales, Mareeba, after signing where required by our clients together with our clients cheque for $13,500.00 for the credit of your client's account.
We enclose our clients cheque in favour of your firm's Trust Account for $11,500-00.
Although this was agreed to sometime ago it does not appear to be recorded that the understanding between the parties concerning the purchase price of the equipment and other property in the event of the option being exercised is that if the lessee buys the equipment for $10,000-00 then the sale price for the balance of the property on the exercise of the option will be $289,000-00 but if the lessee does not buy the equipment then the total sale price upon exercise of the option will be $299,000-00.
We have received your letter attaching letter of consent from the Land Administration Commission. We have attended to item 4. As indicated by you the remainder of the items could be attended to after the Bank has returned the documents to you. However, with regard to item 7 we do not agree that the words 'crown rents' should be deleted from the Deed of Variation but rather it should be included in a separate Agreement (or incorporated in the Lease itself) that the Sub-Lessor remains solely responsible to the Crown for land rents. Our client still requires to be able to pay the rents.
Our clients are arranging the insurance as previously discussed.
P.S. We enclose a copy of first page of the letter from the Bank N.S.W. dated 29th March, 1979 setting out power of attorney clause."
The claim, in the third paragraph of that letter from Mr Smith that Mr and Mrs Huttley had the right to purchase the Second Schedule equipment separately for $10,000.00 was never again adverted to. Nor is there reference to Mr Huttley's alleged arrangement for an unqualified payment for the use of the equipment if it was not purchased. I am not persuaded that either matter was pursued to the point at which it formed part of the parties' agreement.
Mr Smith gave evidence, which I accept, that Mr Savage had given him the undertaking referred to in the letter.
The payments of $13,500.00 and $11,500.00 together comprised the first year's rent of $25,000.00 payable under the Sublease.
(b) ALTERATIONS OF CLAUSE 3(a) TO PROVIDE FOR PAYMENT OF PART OF RENT TO THE BANK
The evidence concerning the making of the alteration to clause 3(a) of the Sublease (item (v) supra.), is unclear, but I consider it likely that such alteration was not made on the occasion at about the beginning of April 1979 when Mr Smith saw his clients, Mr and Mrs Huttley, but had been made previously, prior to the initial submission of the document to the Bank.
It may be that the addition was made when, for some reason otherwise unexplained, the document had reverted to Mr Smith's possession between 8 December 1978 and 2 March 1979. However that may be, it was made after signature by the bankrupt. It does not appear in any of Annexure A or Exhibit 3 or in the copy document forwarded by Mr Savage on 2 March 1979 to the Land Administration Commission.
Whilst uncertain as to exactly when or how the amendments were made, and incorrect in his evidence in chief when he suggested that they were made at Boyett Stubbin and Daniel prior to first signature by Mr and Mrs Huttley in December 1978, the tenor of Mr Smith's evidence was that the additions to clause 3(a) were in the document prior to his returning it to the Bank on 6th April 1979. His letter of that date strongly suggests that it was not at that time that they were made. Further, under cover of the same letter Mr Smith sent the Bank a cheque for $13,500, a larger amount than that provided for in clause 3(a), suggesting that the figure of $10,000 had been earlier inserted in clause 3(a) and superseded. It seems extremely unlikely that an incorrect lesser amount would have been added contemporaneously with, or later than, the payment. Since a provision requiring a payment to it was obviously a matter of concern to the Bank, it might be expected that the document would so provide before it was first submitted to the Bank for its consent. That that had been done is supported by the paragraph numbered 2 in the Bank's letter of 29 March 1979 from which it appears that changes which had been made to clause 3(a) on the original document had not been carried through onto the duplicate and triplicate copies.
The requirement in clause 3(a) of a payment of $10,000.00 to the Bank seemed to be one of the bankrupt's principal complaints. Although, as I find, that requirement was added after the bankrupt signed the document, it was not added without his authority.
The question of payments to the Bank had loomed large throughout. The document as initially signed provided for all rental under the Sublease to be paid to the Bank. The bankrupt did not want money paid to the Bank which might and probably would appropriate it to his indebtedness. On the other hand, Mr and Mrs Huttley wished to pay sufficient to the Bank to ensure that it did not exercise its powers as mortgagee over property of which they were sub-lessees. The Bank, which was being asked for its consent, required payment of at least part of the bankrupt's debt to it.
Included in the bankrupt's evidence was the following passage:
"I knew there was an amount of $13,500 to go to the Bank. The Bank was quite happy on that and the other 11 went to pay Connolly Suthers and Walker $11,500. This $10,000 that is put in the first page is unknown to me."
In the circumstances, the bankrupt's attempt to assert that the alteration to clause 3(a) was made without authority although the addition provided for payment of a lesser sum to the Bank than the bankrupt acknowledged was ultimately agreed seems to me not only to fail but to afford one more indication of his unreliability.
5. 6 April 1979
To summarize the position as at 6th April 1979:
(a) Mr and Mrs Huttley had taken possession of the Selections;
(b) the Land Administration Commission had required various changes to the document which had been signed by Mr and Mrs Huttley and the bankrupt;
(c) the bankrupt's bank had required the insertion of a power of attorney clause into the document;
(d) clause 3(a) of the signed document had been altered to accord with an arrangement which had been arrived at for a payment to the bank out of the first instalment of rental;
(e) Mr Smith had made one of the changes to the signed document required by the Land Administration Commission and had inserted the power of attorney clause required by the Bank;
(f) Mr and Mrs Huttley had added a further signature to the signed document and had initialled it in a number of places;
(g) it had been agreed that the amount to be paid to the Bank be increased and that the balance of the first year's rental be paid to the bankrupt's solicitors;
(h) Mr Savage, the bankrupt's solicitor, had promised that the other changes required by the Land Administration Commission would be made and that the bankrupt would initial the power of attorney clause;
(i) it was in those circumstances that Mr and Mrs Huttley paid and the bankrupt accepted $25,000.00 rental under the Sublease.
6. The Appointment of the Trustee
After 6th April 1979 the document remained in the possession of the Bank and was unchanged at least up until 28th May 1979. By that time, the bankrupt had executed the Deed of Assignment on 15th May 1979.
On 28th May 1979 the Bank wrote to Messrs. Connolly Suthers and Walker as follows:
"Re: Di Felice and Huttley
We confirm our telephone call of 25/5/79 that Bank has advised that they require the initials of Mr Di Felice against insertion of Power of Attorney Clause in the Sub-Lease before they will execute consent.
We enclose three copies of Sub-Lease and Deed of Variance for further attention and return as soon as possible."
Mr Savage replied by letter dated 21 June 1979:
"RE: DI FELICE & HUTTLEY
We refer to your letter of 28th May 1979 and now return Sub-Lease and Deed of Variation appropriately endorsed. Please endorse your consent and return the documents as soon as possible."
It was between 28 May and 21 June 1979 that the initials "F.D." were placed on the document near clause 5(a).
On 20th June 1979 Mr Smith wrote to Mr Savage saying that Mr and Mrs Huttley proposed to pay the Mareeba Shire Council arrears of rates plus accruing interest in view of a threat by the Council to sell the Selections, and proposed to deduct from the next rental payment to fall due the amount so paid plus interest at current bank rates in respect of the period from the payment until the due date for payment of the rental.
On 29th June 1979 Mr Smith wrote to the Land Administration Commission, inquiring as to outstanding Crown rental payments. His letter indicated an awareness that the Sublease had not then been lodged for registration. Details of arrears were provided by the Land Administration Commission by letter dated 26th July 1979.
On that same day, and obviously therefore before receipt of the letter from the Land Administration Commission, Mr Smith had a conversation with Mr Savage in which Mr Smith was informed that a trustee had been appointed under Part X of the Act. Mr Smith informed Mr Huttley of that fact soon afterwards. I do not accept that an absence of "official notification" of the trustee's appointment was treated as significant by Mr and Mrs Huttley or their solicitor.
Some further payment must have been made to the Bank, perhaps by the trustee, because on 10th July 1979 the Bank wrote to Mr Savage enclosing the document and stating that the debt had been cleared, the Bank's security was being released, and that the Bank's consent was no longer necessary.
Perhaps influenced by the indication given by the Land Administration Commission in its letter of 26th July 1979 that, before any step would be taken to forfeit the leases, "the registered lessee and mortgagees would be afforded the opportunity to protect their interests", Mr and Mrs Huttley did not pay the arrears of Crown rental until after they were contacted by the trustee, who wrote to them a letter dated 21st November 1979 as follows:
"RE: PHILIP DI FELICE
You may already be aware that the abovenamed debtor has entered into a Deed of Assignment with his creditors under the provisions of Part X of the Bankruptcy Act. If not, this letter is to advise that he has assigned his assets to me as Trustee and by law his property now vests in me. I have in my possession copies of the agreements entered into by you with him in respect of the property at Mareeba and I note that the agreements provided for a payment of $25,000 per annum by way of a rental and that you also have an option to purchase.
Would you kindly note my interest and that the payments due under the agreement should be made to me as Trustee. I would appreciate acknowledge (sic.) of this letter and if it would assist you in acknowledging, it would suffice if you would sign the copy of the letter enclosed and return it to me as soon as possible."
Mr Smith wrote back to the trustee on 10th December 1979, which was 1 year from the day upon which Mr and Mrs Huttley first went into possession. The letter stated:
"RE: PHILIP DI FELICE
RE: V. & M. HUTTLEY PTY LTD
We act for Mr & Mrs V. Huttley of Mission Beach to whom you addressed your letter of the 21st November.
We return the duplicate copy of your letter signed by Mr Huttley acknowledging notice of your appointment as Trustee on Mr Di Felice's assets.
We enclose our clients' cheque in your favour for $17,294.88 being the annual rental of $25,000 less adjustments. We attach a separate summary of the adjustments deducted from the rental.
In relation to the Crown rents we enclose photocopy of letter from the Land Administration Commission dated the 26th July, 1979 and further photocopy of letter from the Land Agent of Cairns dated the 27th November,1979. It was a condition of the sub-lease (as contained in the Deed of Variation thereto) that our client would pay all Crown rents and all local authority general rates etc.
We also enclose photocopy of rate notices for the half year ended 30th June, 1979 for both lease selections and similar rate notices for the half year ended 31st December, 1979 with the Mareeba Shire Council receipt no. 17319. As our client was liable for the increase in rates since the 30th June, 1979 the amount deducted from the rental payment is the amount equivalent to the general rates for the latter half year.
In relation to interest we enclose copy of our letter to Mr Di Felice's Solicitors, Messrs Connolly Suthers & Walker on the 20th June, 1979 which sets out the basis on which interest is claimed. We did not receive a reply to that letter."
There is nothing to indicate that the trustee was unwilling to accept the arrangements adopted by Mr and Mrs Huttley for payment of the rent under the Sublease; on the contrary, he seems to have adopted them: see his letter of 23rd October 1980, referred to below. The inaccuracy in the last sentence of the fourth paragraph of the letter is consistent with the fact that Mr Smith had not received a copy of the document in its final form and did not know that Mr Savage had further altered the Deed of Variation and added a fresh clause 8 to the Sublease.
Meanwhile, Mr Savage had written to Mr Smith on 5th December 1979 requesting a statutory declaration in respect of the consideration payable in the transaction, and indicating an intention to stamp and register the Sublease. The signed declaration was forwarded by Mr Smith under cover of a letter of 4th January 1980. The document was stamped by Mr Savage and lodged for registration under cover of a letter from him to the Land Administration Commission dated 28th February 1980.
On 8th February 1980 the trustee had written to Mr Savage but the letter was not put in evidence. Mr Savage's reply, a letter dated 14 February 1980, stated inter alia:
"We have kept Mr Di Felice advised of all matters and have asked him to convey to you the situation from time to time."
On 15th April 1980 the Land Administration Commission wrote to Mr Savage returning the document submitted for registration and requesting a declaration by Mr and Mrs Huttley that they had each attained the age of 18 years and were qualified to hold the Selections. A reply from Mr Savage dated 20 April 1980 pointed out that the declaration was included in the document (cl. 6(a)).
7. Registration of the Sublease and Subsequent Events
The Sublease was registered in the Land Administration Commission on 16 July 1980 and the duplicate and triplicate copies returned to Connolly Suthers and Walker on 23rd July 1980. According to Mr Smith he did not receive a copy of the registered document until late 1980 or early 1981 when he saw for the first time the additional changes which had been made.
By letter dated 23rd October 1980 the trustee wrote to Mr Smith pointing out that the next annual rental payment was due on 10th December 1980 and asking that there be paid on or before that date "the amount of $25,000 less the proper adjustments". The letter also asked that the trustee be informed as to the likelihood of Mr and Mrs Huttley exercising their option to purchase in the Sublease.
The trustee wrote again on 18 December 1980 asking whether or not the annual rental of $25,000 had been paid and that, if not, it be paid as soon as possible. His letter crossed with a letter from Mr Smith dated 15th December 1980 enclosing a cheque for $22,857.17, being the rental due on 10th December 1980 less adjustments for Crown rental and rates. That letter said, inter alia:
"Our clients are intending to exercise the option but are unable to say at this stage whether they will do so."
The trustee replied by letter dated 19 December 1980 enclosing a receipt and stating, inter alia -
"I note your clients intention to exercise the option and I look forward to hearing from you further in due course."
There is some doubt whether the amount deducted in respect of rates and Crown rental was paid on time by Mr and Mrs Huttley. The trustee wrote to Mr Smith on 11th February 1981, 14th May 1981, and 25th May 1981. In the last of these letters he indicated that he, the trustee, had paid the Crown rental and asked that it be refunded to him and that he be informed whether rates had been paid or not. No evidence given before me dealt with any response to the trustee's letters on the subject. Nor was there any evidence as to whether Mr and Mrs Huttley did make the payments of Crown rental and rates referred to at about the time they deducted them from the payment of rental under the Sublease in December 1980 or whether it was only later that they did so. However, Mr Smith did give evidence that he was involved in all payments of rental under the Sublease and that the entire sum of $75,000, being three payments each of $25,000, was paid either as rental or in discharge of outgoings. No suggestion was made to the contrary and no argument based upon a finding to the contrary was advanced before me.
8. April 1981: The Exercise of the Option and the Bankrupt's Complaints
Correspondence from the trustee which was put in evidence reveals that on 10th February 1981 he had a long discussion with the bankrupt concerning his affairs and that on 13th March 1981 he wrote to the bankrupt, informing him that Mr and Mrs Huttley proposed to exercise the option but wished to make a cash offer, and asking the bankrupt to contact him to discuss that matter.
By letter dated 15th April 1981 Mr Smith wrote to the trustee as follows:
"RE: V.S. & M.M. Huttley and F. Di Felice
As you are aware we are acting for Mr and Mrs Huttley of Mission Beach and Mareeba who are the sub-lessees from Filizzio Di Felice of a property at Melone Road, Mareeba described as Portion 98V, 99V, 101V and 103, County of Nares, Parish of Tinaroo, being Perpetual Lease Selection No's. 2591 and 2592 containing areas of 252.8805 hectares and 256.7807 hectares respectively.
We do not have our client's stamped copy of the sub-lease at the moment but the copy we do have was not altered, to our knowledge, after the date of signing. This sub-lease was varied by a Deed of Variation and both documents were completed sometime in 1978.
In terms of Clause 9 of the sub-lease, as varied by the Deed of Variation, our clients, or their Nominee, have the option of purchasing the Lessors interest in the leasehold lands and certain equipment at a total consideration of $299,000.00. The price was reduced from $300,000.00 because of some arrangement over insurance.
This letter is to give notice of exercise of that option on behalf of the sub-lessees V.S and M.M. Huttley."
The letter went on to indicate that Mr and Mrs Huttley were prepared to make a cash offer of $200,000 for the property, to state that any cash purchase would be made by their nominee, and to ask whether such a cash offer as was indicated was acceptable.
The trustee wrote back a letter dated 28th April 1981 stating:
"RE: PHILIP DI FELICE and RE: YOUR CLIENTS V.S. & M.M. HUTTLEY
I acknowledge receipt of your letter of the 15th April 1981, which fortunately arrived a few days before I had a conference with Di Felice, as you know I had been chasing him for some considerable time. He would not agree to any cash offer which was substantially less than the purchase price of $299,000. He asked to peruse the copies of the agreements which are held by me and expressed discontent when certain alterations had been made of which he said he was not aware and which I note have not been initialled by him. He also said that he had not seen a fully signed, dated and stamped copy of the agreement and he asked me to write to his solicitors Messrs. Connolly, Suthers and Walker for the purpose of obtaining a copy from them. I wrote to those solicitors on the 15th April, 1981 but have not heard from them as yet.
However, I do note the notice given by your clients that they wish to exercise the option as set out in the agreement. . . . "
The letter went on to state that the cash offer was not acceptable, and said:
"As soon as I obtain a copy of the agreement and have a further discussion with Di Felice I will communicate with you further."
The trustee did not receive a copy of the registered document until late April or early May 1981 and he sent a copy to the bankrupt under cover of a letter of 4th May 1981.
I find that it was on the occasion of the discussion between the bankrupt and the trustee referred to in the trustee's letter of 28th April 1981 to Mr Smith that the bankrupt first questioned alterations to the Sublease document. By then, as the bankrupt and Mr and Mrs Huttley all knew, there was a potential buyer for the property, a Mr Gowings, prepared to pay considerably more than was payable by Mr and Mrs Huttley under the option (or so it was believed). Up until then, the transaction had been of considerable benefit to the bankrupt, and had not been regarded as other than favourable, at least so far as could be judged by anything he had said or done. I also find that on no occasion prior to the commencement of these proceedings did the bankrupt or his solicitor communicate to Mr and Mrs Huttley or their solicitor any query as to the documentation and that the first time they heard anything of that matter was the letter dated 28th April 1981 from the trustee to Mr Smith.
By then, the term of the Sublease had largely expired, and notice had been given exercising the option.
9. The Period May 1981 to August 1981 and the Proposed Agreement for Sale
The remaining communications were not completely proved but the following letters were put in evidence.
On 1st June 1981 Mr Smith wrote to the trustee as follows:
"RE: Philip Di Felice and V.S. & M.M. Huttley
We refer to your letter of the 28th April and Mr Smith's subsequent telephone conversation with you.
As advised previously and as recognized in your letter under reply our clients have exercised the option to purchase contained in the Sub-lease dated 30th November 1978. Our clients are now desirous of entering into a formal Agreement for Sale as provided for in the Fourth Schedule to the Sub-lease with necessary modifications in terms of the Deed of Variation. It would be appreciated if you would proceed to have the Agreement prepared at an early date as our clients are anxious to complete the purchase as soon as conveniently possible. They would prefer to have it completed around the 1st July but it is recognized that this could be difficult to achieve due to the shortage of time.
So far as the balance of purchase money to be secured by mortgage is concerned it is noted that Clause 2C of the Deed of Variation is somewhat obscure. The agreement between the parties, as is evidenced by correspondence between their respective solicitors at the time, was that this balance would be payable over ten years with interest at the rate of 8% p.a. The reference in the clause to instalments to $30,000 was meant to be a rough estimate of the annual payments of principal and interest and should never really have been inserted anywhere in the Agreements.
We look forward to receiving the necessary documents for completion at an early date.
As you are aware our clients would prefer to make an overall cash payment but it is appreciated there are difficulties in this regard at your end. If at any time after completion of Agreements and Mortgages and settlement of the sale there is a possibility of an arrangement being reached whereby the mortgage debt could be purchased as a discount then our clients would be most interested in discussing this with you."
The final sentence of the third paragraph is not accurate. There was no agreement as was there asserted. The source of the problem with respect to the provision concerning the payment of the purchase price by instalments seems to have been paragraph (c) of a postscript to Mr Daniel's letter of 7 November 1978, which stated:
"(c) The Agreement for Sale referred to in the last clause above has not been finalised but will be in the following mail. In the meantime you might like to get instructions from your client. Our basic instructions are to the effect that the price of $289,000-00 will be payable by a deposit of $100,000 with the balance over a maximum of 10 years by yearly instalments of approximately $30,000-00 plus interest owing at the time of payment of such instalment. Interest will be at the rate of 8% per annum on balances owing from time to time and calculated from the completion of the sale on daily rests."
The deposit appears to have been overlooked by Mr Daniel in calculating the need for 10 "yearly instalments of approximately $30,000.00". When Mr Smith came to prepare the Deed of Variation he had just received the file and seems to have relied heavily on postscript (c) although, deliberately or otherwise, omitting the word "yearly".
The trustee wrote back on 16th June as follows:-
"Re: Philip Di Felice & V.S. & M.M. Hutley (sic.)
We acknowledge receipt of your letter of the 1st June 1981. It will be difficult to have all the relevant matters attended to before the 1st July 1981 but I am taking the necessary steps to have a formal agreement for sale prepared.
I note your comments concerning the balance of the previous money referred to in clause 2C of the Deed of Variation. It appears that we may have to disregard the amount of $30,000 and simply take the basis of the payment of the balance as being ten annual payments of principle with interest at the rate of 8%."
On 7th July the trustee again wrote to Mr Smith referring to a letter of 1st July from Mr Smith which was not tendered and continuing:
"We would have no objections to your client terminating the payment of rental under the Sublease as from the 30th June 1981, so long as interest at the rate of 8% is paid on all outstanding moneys under the purchase as from the 1st July,1981."
Mr Huttley in his affidavit acknowledged an obligation to pay such interest although Mr Smith had disputed the obligation in a letter which he wrote to the trustee on 28th July 1981. I have some difficulty in understanding what was being discussed since rental had been paid for the final year of the term of the Sublease, which extended past the beginning of July, 1981. In the same letter of 28th July 1981 Mr Smith said:
"We submit a formal Agreement for Sale in accordance with the Schedule to the sub-lease with necessary modifications to suit the circumstances. You will note that this Agreement, in triplicate, has already been signed by Mr and Mrs Huttley. We now request that you execute this as trustee of Di Felice's property."
Mr Smith gave evidence that arrangements were made for him to prepare the Agreement for Sale in a telephone conversation which he had with the trustee.
I will come back to the Agreement for Sale, including the "necessary modifications".
The trustee had also received a letter, dated July 23rd, 1981, from the bankrupt's "investigator", Miss Gallo. She stated that the property had been listed with her real estate agency for sale in 1978 but that she had been unable to find a cash buyer and that it had been withdrawn until further notice when leased to Mr and Mrs Huttley. However, at the beginning of 1981, she had been requested by the bankrupt "to line up a buyer because on 31.10.1981 the Lease Agreement would expire and he wanted to sell it for Cash to pay all his Creditors and would then return to Queensland to start afresh."
Miss Gallo's letter to the trustee continued:
"At present we have a buyer who has offered $400,000, subject to inspection. However, as the lease does not expire till 31.10.81 we suggest to wait for the 3 1/2 months, as it does not pay to break the Lease Agreement at this stage in particular when the Lessee has crops that will be ready for harvest within a month or two. However, at this stage you may reassure the creditors that the Property will be sold and all will get paid."
On 5th August 1981 the trustee wrote to the bankrupt enclosing a copy of the letter he had received from Miss Gallo, a copy of his reply, and a copy of the Agreement for Sale which had been submitted to him by Mr Smith. His letter to the bankrupt said, inter alia:
"I have been requested by the solicitors for Hutley (sic) to execute this as Trustee of your property under Deed of Assignment. The legal advice obtained by me is to the effect that I must execute the document.
You are requested to read the formal Agreement and let me know within 14 days whether there are any cogent reasons why I should not go ahead and execute the document."
10. August 1981 to the Present, including the Making of the Present Application
(a) NARRATIVE
The application by which this proceeding was commenced was filed on behalf of the bankrupt on 14th August 1981, which was very soon after the bankrupt consulted his present solicitors. Although the application foreshadowed an assertion that the Sublease was not binding, it did so, not as a basis for recovery of possession, but only in the context of an attack on the option. So far as can be told from the evidence before me, the application was not brought on for hearing, and Mr and Mrs Huttley were not joined as parties, prior to the expiry of the term of the Sublease.
Mr and Mrs Huttley remain in possession of the property despite the fact that, on any view of the matter, the Sublease expired in late 1981. However, their possession has not always been undisputed. It seems that on at least one occasion the bankrupt attempted to resume physical possession of the property and an altercation ensued. Further, the bankrupt sent a letter in the following terms to Mr and Mrs Huttley dated 9 November 1981:
"Re: Sub-Lease of Tobacco Farm situated at Malone Road, Emerald Creek via Mareeba; dated 13.11.78
In reference to the above Lease I would remind you, that the term of three years expired on 31st of October last, and you are hereby requested to vacate the premises at your earliest possible."
There has been other litigation between Mr and Mrs Huttley and the bankrupt in the Supreme Court of Queensland but it has not led to any resolution of any matter now in dispute.
(b) THE ATTACK ON THE AGREEMENT FOR SALE
I have referred above to the proposed Agreement for Sale which was prepared by Mr Smith and to the "necessary modifications" made by him to the form of the Agreement contained in the Fourth Schedule to the Sublease.
Only one term of the Agreement for Sale was made the subject of attack by the bankrupt, that relating to the payment of the balance purchase money. (No point was made of the fact that in the description of the subject matter of the sale Mr Smith changed the phraseology of clause 1 of the Fourth Schedule as varied by the Deed of Variation, but not its effect, and thereby glossed over the mistaken reference in the Fourth Schedule to the Second Schedule equipment instead of the Third Schedule equipment.)
Clause 2(c) of the Fourth Schedule Agreement for Sale, as set out in the Deed of Variation, was as follows:
"(c) The balance namely the sum of ONE HUNDRED AND NINETY-SIX THOUSAND DOLLARS ($196,000.00) within a period of ten (10) years from the date of completion of the sale by instalments of approximately THIRTY THOUSAND DOLLARS ($30,000.00) together with interest thereon at the rate of 8% per annum on the balance of purchase moneys from time to time owing such interest to be calculated from the date of completion of the sale by daily rests. The Purchaser shall at his cost execute a Mortgage in duplicate and deliver the same to the Vendor or his Solicitors to secure payment of the unpaid instalments and interest as aforesaid - such Mortgage to be prepared and registered by the Vendor's Solicitors at the expense of the Purchaser and to contain the usual terms and conditions appropriate to such Mortgages provided that execution by the Vendor of a Memorandum of Transfer as herein provided shall be subject to the execution by the Purchaser of the said Mortgage."
As "modified", the same clause in the Agreement for Sale submitted by Mr Smith for the execution of the trustee provided:
"(c) The balance, namely the sum of ONE HUNDRED AND NINETY SIX THOUSAND DOLLARS with a period of ten (10) years from the date of completion of this sale as herein provided by annual installments of not less than NINETEEN THOUSAND SIX HUNDRED DOLLARS ($19,600.00) together with interest at the rate of eight (8) per cent per annum on the balance of purchase money's from time to time owing such interest to be calculated from the date of completion of this sale and purchase by daily rests.
The Purchasers shall at their costs execute a mortgage in duplicate and deliver the same to the Vendor or his Solicitors to secure payment of the unpaid instalments and interest as aforesaid - such mortgage to be prepared and registered by the Vendor's Solicitors at the expense of the Purchasers and to contain the usual terms and conditions appropriate to such mortgages provided that execution by the Vendor of the Transfer of the said land as herein provided shall be subject to the execution by the Purchasers of the said mortgage."
According to the submission for the bankrupt, the clause prescribed by the Deed of Variation, and thus the Option and any contract resulting from its exercise, is void for uncertainty.
(c) THE ATTACK ON THE EXERCISE OF THE OPTION
Further, he says that Mr and Mrs Huttley, by tendering an Agreement for Sale which did not correspond with the Fourth Schedule, and by Mr Smith's letter of 1 June 1981 to the trustee asserting that the terms of the Option did not reflect the parties' agreement:
(a) failed to exercise the option properly;
(b) repudiated the Option and/or any contract resulting from its exercise.
(d) RELIANCE ON THE LAND ACT - THE ATTACK ON THE ROLE OF MR AND MRS HUTTLEY'S COMPANY
The remaining argument advanced by Counsel for the bankrupt, Mr Cooper, involved submissions founded upon the Land Act. It was said the Sublease did not comply with that Act, that Mr and Mrs Huttley were not qualified persons to hold the Sublease because they were nominees for, or trustees for, their company, V. & M. Huttley Pty Ltd, and further that the sublease as agreed was not approved as required by that Act. This last submission had two aspects. One depended on a finding that, contrary to the facts as found by me, the Sublease as registered did not record the totality of the parties' final agreement. The other seemed to amount to no more than that the Sublease registered was not precisely identical with the copy submitted to the Land Administration Commission by Mr Savage on 2nd March 1979 as altered to accord with the Commission's requirements in its letter of 14th March 1979. The submission appears to conflict with an assertion in paragraph 13 of the bankrupt's affidavit. Further, Mr White, a barrister employed by the Land Administration Commission, gave evidence that, in practice, a document may differ from an approved draft provided it complies with the Act and registration indicates that the document registered was approved.
(e) ANOTHER ALLEGED ALTERATION - THE WORDS "OR NOMINEE" IN THE OPTION
Exhibit 37 was a diary note made by Mr Smith of telephone conversations which he had on 19th May 1981 with the trustee and on 20th May 1981 with Mr Huttley. According to the trustee, the bankrupt's particular complaint up to that point was that the words "or nominee" appeared in the option clause and were not initialled; the bankrupt contended that they had been added after he had signed and without his approval. Somehow allied to this in the mind of the bankrupt was the possibility that Mr and Mrs Huttley could sell the property at a large profit to a purchaser whom they might nominate under the option clause. By then, as I have held, the bankrupt knew that Mr Gowings was a potential purchaser. The advantage to him of a direct sale at the higher figure available from Mr Gowings would have been obvious.
I have already held (indirectly) that the words "or nominee" were in the document when it was signed by the bankrupt. They appear in Annexure A to his affidavit, Exhibit 3, Exhibit 23, and the copy document forwarded by Mr Savage to the Land Administration Commission on 2nd March 1979. Further, if it matters, I am satisfied that, although by the time they came to exercise the option Mr and Mrs Huttley wished to resell the property and to nominate the purchaser from them as their nominee in terms of the option, the original purpose of the insertion of the words "or nominee" was not related to a possible resale of the property. Rather the object was to permit Mr and Mrs Huttley to introduce their company as purchaser in the event of the option being exercised if it was then lawful for the company to acquire the Selections. The Huttley company had been named as sublessee in the first draft Sublease but, by the time a document was signed, the names of Mr and Mrs Huttley appeared as sublessee and the words "or nominee" had been inserted in the option clause.
(f) THE COMPANY AS ALLEGED BENEFICIAL HOLDER OF THE SUBLEASE
In order to support the contention that, although named as sublessees, Mr and Mrs Huttley were merely trustees for or nominees of their company, the bankrupt pointed also to other matters.
In correspondence with the Mareeba Shire Council Mr Smith referred to the company V. & M. Huttley Pty Ltd as the lessee from the bankrupt and as responsible for the payment of all rates. Similarly, in correspondence between Mr Smith and the trustee, reference was made, on some occasions at least, to the company rather than Mr and Mrs Huttley. The temptation to regard this as deliberate is strong since no such references appear in other correspondence from Mr Smith, e.g. to the Land Administration Commission or to Mr Savage. On the other hand, in some at least of his letters to the Shire Council or to the trustee, Mr Smith does not clearly differentiate between Mr and Mrs Huttley and their company.
Probably more significant is the role which the company in fact played.
There seems little doubt that Mr and Mrs Huttley would have preferred that the company had been the sublessee, and originally intended that, if possible, it be the purchaser on any exercise of the option.
Plainly also, Mr and Mrs Huttley did not permit their belief that the company could not hold the Sublease to disrupt entirely their plans to use the company in their operation of the property. According to Mr Huttley, he and his wife did carry out farming on the Selections, earning income in respect of which they submitted taxation returns. However, the major farming operations were performed by the company. It was the company which paid the rent under the Sublease (including payments of Crown rental and rates to the authorities), which purchased machinery, and which carried out improvements to the house and contouring on the land; and it was the company which claimed taxation benefits by reference to such payments. As I understood the evidence, the payments were not made by the company at the direction of Mr and Mrs Huttley but were made on its own behalf.
It seems not unlikely that the company had substantial income from other business operations and that it was financially important to Mr and Mrs Huttley that the company be able to offset against that income taxation benefits from expenditures in respect of the property. Mr and Mrs Huttley therefore had to steer between the Land Act and the Income Tax Assessment Act, avoiding a collision with either. Exactly how they did so was not proved.
Mr Huttley gave evidence that there was no trust in favour of the company but the absence of an express trust does not necessarily exclude the possibility of a trust having arisen by operation of law. In considering the evidence in respect of this aspect of the matter, I have kept in mind that it was Mr Huttley and Mr Smith who, had it been desired, could have explained more fully the company's role.
C. THE BANKRUPT'S CREDIBILITY
There is one other matter before I turn to the relief claimed by the bankrupt.
Some of the positive findings which I have made adversely to the bankrupt were supported by little direct evidence. Nonetheless, I feel no hesitation with respect to my conclusions as to the facts.
In the consideration of a matter such as this a Court is not, in my opinion, required to ignore ordinary professional and commercial attitudes and practices. Further, aspects lacking in clarity may receive some illumination from other parts of the pattern. One finding rather than another on a particular matter may result in a more consistent overall picture.
However that may be, I would have drawn the inferences which I did. Not only did the bankrupt fail to call his former solicitor, Mr Savage, who must have been able to give vitally important evidence, but the bankrupt's own evidence was patently untrue: see Steinberg v. F.C.T. (1975) 134 C.L.R. 640.
In any event, it was for the bankrupt to establish the matters on which he relied. I rejected his uncorroborated evidence entirely. There was no evidence, acceptable to me, to support his contentions with respect to those matters which relied upon his testimony or that of Miss Gallo. Whether or not contrary findings were justifiable, he failed to make good the facts for which he contended.
D. THE RELIEF CLAIMED
Consequent upon an amendment sought by the bankrupt in the course of the hearing before me, the substantive orders which he applied for were as follows:
"1. That the decision of EVERETT THOMSON BENT, the Trustee under a Deed of Assignment pursuant to Part X of the Bankruptcy Act 1966 dated the Fifteenth day of May 1979 of the estate of FILIZZIO DI FELICE to enter into an agreement for sale with VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY of Mission Beach in the State of Queensland for the sale and purchase of certain leasehold lands more particularly described in the Schedule hereto and other property be set aside." (The Schedule contained a description of the Selections.)
"2. That the said EVERETT THOMSON BENT be restrained from entering into the said agreement for sale with the said VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY."
"3. (a) A declaration that a document purporting to be a Sublease entered into between the said FILIZZIO DI FELICE and the said VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY in respect of the leasehold property more particularly described in the Schedule hereto and other property of the said FILIZZIO DI FELICE more particularly described in the said document, and containing a purported Option to Purchase is not binding upon the said EVERETT THOMSON BENT;
(b) In the alternative, a declaration that the said VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY have by their conduct repudiated the said Option Agreement, and that the said EVERETT THOMSON BENT is no longer bound thereby;
(c) In the further alternative, a declaration that the said VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY have by their conduct failed to properly exercise the said Option and accordingly the said EVERETT THOMSON BENT is not bound thereby."
If the trustee did know the full details and had a copy of the final document by 7 November 1979, there seems little doubt that he would be estopped from relying upon s.59 of the Property Law Act by his continued acceptance thereafter of benefits under the Sublease. Estoppel may preclude reliance on the statute: Kok Hoong v. Leong Cheong Kwang Mines Ltd (1964) A.C. 993, 1015-1016 (P.C.).
However, as I have said, the exact state of the trustee's knowledge prior to April-May 1981 is a matter of some doubt. He may not have had a copy of the document in its final form, or if he did, he may not have known initially that it contained alterations made after it was signed, or the full circumstances leading up to registration. But he was much better informed by May 1981. He continued thereafter and still continues to recognize the registered Sublease.
The trustee does not assert that, insofar as his approval was relevant, Mr Savage acted at any point without authority. He does not question any of the changes. He was present in Court throughout the entire hearing and, after he had listened to the evidence, did not seek to deny the evidence of a valid and binding agreement. On the contrary, he persisted through his counsel in a submission that the bankrupt's claim should be denied.
I have already referred to the decisions in Koenigsblatt and O'Young as establishing that subsequent assent to a document altered after signature effectively precludes reliance upon provisions such as ss. 11 and 59 of the Property Law Act, because the effect of the ratification is that the position in law is as if the alterations were in the document when it was signed. The bankrupt, however, submitted that the trustee could not ratify the altered document. As I understood the submission, two disparate reasons were advanced:
(i) because there is no relationship of principal and agent between bankrupt and trustee;
(ii) because in making the alterations Mr Savage did not profess to be acting on behalf of the trustee.
No authority was cited in connexion with the first reason, but in respect of the second reliance was placed upon Howard Smith and Company Ltd v. Varawa (1907) 5 C.L.R. 68, which applied the doctrine of Keighley, Maxted and Co. v. Durant (1901) A.C. 240, viz. that if a party to a transaction has no authority to contract on behalf of another person, and does not profess to do so, his action cannot later be ratified by that other person.
The latter argument, and perhaps the former also, assume that, for the doctrine in Koenigsblatt to apply, the alterations subsequently assented to must have been made by a person who purported to act as the agent for the party who had already signed, although unauthorized to do so, and that the subsequent assent is to be seen as no more than a ratification of the agent's unauthorized act in altering the document. Although that approach is discernible in statements in Koenigsblatt and in O'Young, neither decision is confined to that narrow ground. It is sufficient for present purposes to observe that both cases relied heavily upon Stewart v. Eddoes (1874) L.R. 9 C.P. 311, in which the alterations were made by the other party to the contract, who plainly neither had nor professed to have authority to make the alterations on behalf of the party who had already signed. The latter was nonetheless held bound when he later assented to the alterations. In Koenigsblatt, Younger L.J. at p.332 said that "the defendant must be taken to have ratified and acknowledged his signature to the memorandum in its then state". Such an approach seems to me wholly to accord with the principle of the "authenticated signature fiction" by which a party may recognize a writing containing his name but not his signature as a sufficient note or memorandum of a contract for the purpose of provisions read as ss. 11 and 59 of the Property Law Act: see, e.g. Pirie v. Saunders (1961) 104 C.L.R. 149.
Further, the assertion that Mr Savage did not profess to be acting for the trustee when he made the final alterations, at some time after 28th May 1979 and therefore after the trustee's appointment, was not made out in point of fact. Surely the bankrupt does not suggest that Mr Savage did not know of the Deed of Assignment as soon as it was executed. If so, he certainly failed to prove that fact. The surrounding circumstances all point in the opposite direction. The whole notion of seeking to distinguish between the bankrupt and the trustee for these purposes strikes me as quite unreal.
Similarly, in my opinion, it is beside the point that the relationship between bankrupt and trustee is not that of principal and agent. For relevant purposes, the trustee is the bankrupt. I am unable to comprehend why the trustee is any less competent than the bankrupt would have been to acknowledge the bankrupt's earlier signature as applicable to the document as altered. There was no need for the trustee, on his appointment, to sign what the bankrupt had earlier signed. Nor was there any need which I can perceive for the trustee to sign the alterations, if he accepted the document, previously signed by the bankrupt, as altered. However, if there was a signature required, it was the trustee's not the bankrupt's. The bankrupt made no complaint of the absence of any signature by the trustee and the case was not fought on that footing. Had the point been raised, it might have been necessary to consider other documents signed by the trustee, including for example letters in addition to those which were put in evidence.
I hold that the trustee assented to the sublease in its final form and that such assent prevents effective reliance by the bankrupt upon ss. 11 and 59 of the Property Law Act in respect of any alterations made to the document after the bankrupt's signature, whether such alterations were made before or after 6th April 1979.
In any event, it seems to me that there is probably a much simpler answer to this part of the bankrupt's case. Put simply, it would not be just and equitable to grant the bankrupt the relief sought on the basis of the alterations. I will say something more on that question generally at the conclusion of my judgment.
2. Breach of the Land Act
(i) Alleged lack of Ministerial approval
The first limb of the bankrupt's submissions in reliance upon the provisions of the Land Act was that, contrary to s.274(2)(a), Ministerial approval was not obtained to the parties' real agreement with respect to a sublease of the Selections to Mr and Mrs Huttley, or even to a sublease in the form of the document registered.
I have already held that the registered Sublease contains the entirety of the final agreement between the parties. Consideration of whether or not approval was obtained can therefore be confined to an approval in respect of that document.
Basic to the bankrupt's submission was his contention that the effect of s.274(2)(a) is that, without the approval of the Minister no valid sublease can be created. Implicit in the submission, although not developed in argument, was the proposition that the option was part of and inter-dependent with the sublease, and that, even if approval might be obtained at any time during the term of an intended sublease, a notice of exercise of the option within that period was ineffectual if approval was not obtained: cf Butts v. O'Dwyer (1952) 87 C.L.R. 267; Nelson v. Rhodes (1976) 50 A.L.J.R. 345.
Section 274(2)(a) is not expressed as a direct prohibition upon a sublease without approval. Rather it provides that, with certain exceptions specified in s.274(1) but not here relevant, and subject to certain conditions, a lessee of a holding may "with the prior approval in writing of the Minister, sublet the whole or any part of his holding". By virtue of sub-section 4 of s.274 a subletting contrary in any respect to sub-sections (1) or (2) of s.274 is a breach of the conditions of the lease, and by s.295 the lease is made liable to forfeiture.
The High Court has recently stated in American Dairy Queen (Qld) Pty Ltd v. Blue Rio Pty Ltd (1982) 56 A.L.J.R. 47, that the Land Act is not a comprehensive and exclusive code, which wholly displaces existing common law principles regulating property rights; common law principles continue to apply except to the extent excluded by the statute on its true construction. It would be more consonant with the common law to treat a requirement of approval to an underletting as concerned with breach rather than with validity. However, that consideration must yield if s.274 on its true construction provides otherwise.
In Tweed Motors (Qld) Pty Ltd v. Moran Motors Pty Ltd (1965) 39 A.L.J.R. 279, the High Court doubted whether an absence of Ministerial approval under s.121 of the Land Act 1910 as amended, which was the precursor of the present s.274, prevented the creation of a valid sublease. However, there are distinctions between the two sections; for example, whereas s.121 of the 1910 Act permitted a subletting with approval in writing of the Minister, s.274(2)(a) of the current Act refers to a prior approval in writing.
In that connexion, it may be noted that departure from sub-section (2) "in any respect" involves, by virtue of sub-section 4 of s.274, a breach rendering the lease liable to forfeiture. The need for approval to be obtained "prior" to the subletting is only one of a number of requirements prescribed by s.274(2). The approval must be in writing (s.274(2)(a)), and the application for approval must be made not later than 3 months after the date of the agreement to enter into a sublease and must be "accompanied by a draft of the proposed sublease" (s.274(2)(c)). Whilst such requirements can readily enough be accommodated if the potential consequence of a failure to satisfy the section is discretionary forfeiture, it is very difficult to accept that non-compliance with any one or more of them could vitiate a sublease, and be available to be relied upon by one of the parties to the transaction notwithstanding that approval was in fact given by the Minister. The solution to that difficulty may, however, be able to be found in treating some or all of the additional requirements as only directory.
In construing s.274, it is proper to have regard not only to the scope and object of the section but also to other considerations, such as the consequences of insisting upon approval as an essential pre-requisite to a valid lease (Yango Pastoral Co Pty Ltd v. First Chicago Australia Ltd (1978) 53 A.L.J.R. 1). Such a construction may well produce unwarranted difficulties which will interfere with normal transactions without producing a significant improvement in the practical and orderly administration of the Act.
As at present advised, I am not convinced that s.274(2)(a) either prohibits by implication the creation of a sublease without Ministerial approval (cf. Queensland Television Ltd v. F.C.T. (1968) 119 C.L.R. 167, 173, 175), or is the sole source of a power of subletting land under the Act, which it conditions on approval being obtained. The concern of s.274 may be with the ability of a lessee to sublet without breaching the lease, rather than with his ability to sublet at all. However that may be, I am of opinion that the necessary approval was obtained.
I do not doubt that registration is indicative of approval to a sublease which is registered. Accordingly, irrespective of what may have been the position at an earlier point of time, in my opinion the Sublease registered was approved well prior to the exercise of the option. Under s.23(4) of the Act, the Minister may delegate his powers, authorities and functions under the Act to the Land Administration Commission. No one questioned that the Minister had delegated to the Commission his power of approval under s.274(2). It was to the Land Administration Commission that Mr Savage wrote on behalf of the bankrupt, on 2 March 1979, for approval of the sublease, and it was the Land Administration Commission which gave approval subject to its requirements by its letter of 14th March 1979 to Mr Savage. It was also the Land Administration Commission which registered the Sublease, an act which seems to me necessarily to contain an approval of the Sublease. I see no difficulty in regarding an approval constituted by the act of registration and the endorsement of a memorial of registration on the document registered as a prior approval in writing relative to the remainder of the term. There seems to be no objection to treating an approval mid-term as effective for the remainder of the term: cf Nelson v. Rhodes, supra.
However, I prefer the view that the relevant approval in the present case was the Land Administration Commission's letter of 14th March 1979. In my opinion, the Sublease submitted for registration and registered was "in accordance with" the approval which had been given by that letter to Mr Savage. When s.274(2)(e) of the Land Act requires a sublease lodged for registration be "in accordance with" an approval which has been previously given, it does not mean that if there is any verbal difference, however irrelevant to the purposes of the Land Act, between the document submitted for registration and the draft approved, modified in accordance with the approval given, the approval does not extend to the document lodged for registration which may not be registered, and further is, on the bankrupt's submission, invalid.
This part of the bankrupt's case, like a number of his other submissions, proceeds on the assumption that the point raised was open to him despite the events which occurred and his own involvement. In view of my conclusion that the bankrupt fails to make good his argument, it is sufficient for me to say that I think that it is entirely doubtful that that assumption is correct.
(ii) Alleged Trust in Favour of V. & M. Huttley Pty Ltd
The other aspect of the bankrupt's case founded on the Land Act is dependent upon a finding that Mr and Mrs Huttley held the Sublease as trustee for the company. I think that whether or not they did so is irrelevant. However, in case I am wrong and the matter goes further, I have attempted to make all available findings of primary fact which might be relevant to a conclusion as to whether or not such a trust existed.
The submission for the bankrupt was founded upon s.274(2)(b) which supplements s.91. The intended operation of s.91 is to define those who are not qualified "to apply for or hold any selection"; amongst those excluded are trustees. Section 274(2)(b) imposes the same disqualification with respect to those who may be sublessees.
But whether or not, if those provisions stood alone, it might be arguable that a lease or sublease to a trustee is void, that assertion cannot stand with s.296. Sub-sections (1) and (2) of that section provide:
"296(1) The right or title of any person to any holding or interest in any holding acquired or held by him in evasion of or by fraud upon this Act shall be liable to be forfeited
(2) Any person who, save as prescribed, acquires or holds as a trustee, agent or servant of or for any other person -
(a) any . . . selection; . . .
. . .
or any interest in any such holding shall be deemed to have acquired or hold the holding or his interest therein by fraud upon this Act and shall be liable in respect of such holding or interest to the forfeiture prescribed."
The underlying assumption of s.296 is that, where there is a trust contrary to the intent of the Act, the holding or interest in a holding which is held on trust does exist but may be forfeited. It is implicit in the very notion of forfeiture that there is something to be forfeited, and that the Act proceeds on this footing is emphasised by s.297 whereby forfeiture is made discretionary and not mandatory.
It is unnecessary to pursue the meaning of "interest" in s.296. Whether a sublease to a trustee is itself liable to forfeiture or merely renders the lease liable to forfeiture is irrelevant for present purposes. What is significant is that there is nothing in the Act to suggest that the fact that a lessee or sublessee is not qualified vitiates the lease or sublease. On the contrary, as I have already said, the Act makes it plain that the estate in question does exist. No authority was cited to the contrary.
Mr Robin, who appeared for Mr and Mrs Huttley, sought to rely on s.296(2A). It may well be that it was the intention of the draftsman of that provision to exonerate from the operation of sub-section 2 of s.296 a trust the beneficiary of which is a family company. However, if so, he seems to me to have failed in his objective. Whereas liability to forfeiture arises under sub-section 2 if there is a relationship of "trustee agent or servant", the exemption under sub-section 2A is confined to the relationship of "agent or servant".
For the reasons I have given the bankrupt's attempt to rely on the Land Act fails. Of course, nothing I have said means that a further approval to the sale of the Selections pursuant to the Agreement for Sale is not necessary: on the contrary, Butts v. O'Dwyer supra, indicates that a further approval is necessary and that, pending such an approval, the sale is conditional upon its being obtained.
3. Failure to Exercise the Option and/or Repudiation
The bankrupt started with the proposition that, for an option to purchase to be turned into a binding contract, the offer which it contains must be accepted in exact compliance with its terms. Reference was made to United Scientific Holdings Ltd v. Burnley Burrough Council (1978) A.C. 904. The only way in which it was suggested that that was not done in this case concerned the attempt to renegotiate the transaction in the letter of 15th April 1981 by which the option was exercised.
In Quadling v. Robinson (1976) 137 C.L.R. 192 an option to purchase a sugar cane farm, the sale of which required the consent of the Central Sugar Cane Prices Board, required payment of a deposit of $25,000 within one month of the exercise of the option. The optionee gave a notice stating, inter alia:
". . . WE HEREBY EXERCISE THIS OPTION", and later continuing: "Upon receipt of the consent of the Cane Prices Board you will be paid the sum of TWENTY FIVE THOUSAND DOLLARS ($25,000.00) . . . ".
The High Court rejected the submission that the statement made in connexion with the performance of the contract meant that the option had not been exercised.
The position of Mr and Mrs Huttley in the present case is so much stronger than the position of the optionees in Quadling v. Robinson that the submission that the option was not exercised is hopeless. The letter of 15th April 1981, by which the option was exercised, asserted no view whatever as to the effect of the resultant contract; it did no more than enquire whether the vendor might be interested in a different proposal.
The bankrupt also relied upon the letter from Mr Smith dated 1st June 1980 and particularly the passage asserting that clause 2(c) of the Agreement for Sale, according to the Deed of Variation, did not reflect the parties' true intention.
I cannot find in that letter, or elsewhere in the evidence, an insistence that Mr and Mrs Huttley would not proceed unless their view of the matter was adhered to, or an assertion that they would not perform the contract according to its terms, but would only do what, according to them, the parties had intended. There was no repudiation of the contract of sale which had resulted from the exercise of the option: Quadling v. Robinson, supra; Green v. Summerville (1979) 50 A.L.J.R. 50; Woodar Investment Development Ltd v. Wimpey Constructions U.K. Ltd (1980) 1 W.L.R. 277.
The bankrupt also relied upon the form of Agreement for Sale signed by Mr and Mrs Huttley and tendered for the signature of the trustee. As previously noted, clause 2(c) had been modified by Mr Smith to accord with the contention of Mr and Mrs Huttley as to what the parties had intended with respect to the payment of the balance purchase price. The same conclusions as in the previous paragraph are even more easily arrived at in view of the trustee's letter of 7th July 1981.
Finally, I note that even if Mr and Mrs Huttley could be said to have repudiated, the repudiation has not been accepted but, on the contrary, the trustee has recognised the continued exercise of the agreement to sell. Indeed he is prepared, it seems, to execute an Agreement for Sale in the form tendered.
As to that, the absence of an entitlement to rectification, or even a claim to such an entitlement, does not seem to me to stand in the way of the trustee accepting that the clause as formulated in the Deed of Variation was neither satisfactory nor truly indicative of what the bankrupt and Mr and Mrs Huttley intended, or would have intended had they or their solicitors given the matter proper attention.
4. Uncertainty
The bankrupt's most substantial point concerned the alleged uncertainty of clause 2(c) of the Agreement for Sale, relating to the payment of the balance purchase price. As I have already indicated, the form of the clause as prescribed by the Deed of Variation was the product of inadequate attention. However, there was no assertion on any side that rectification might be appropriate. I could not on the evidence hold that the parties intended to contract in different terms, or be satisfied as to what those different terms were.
It was not submitted for Mr and Mrs Huttley that the trustee had agreed to a modification of the clause from the form in which it was set forth in the Deed of Variation. Nor was it suggested that, if the clause is bad as it stands, part of it could be saved by severence of the remainder.
The Courts have resolutely sought to prevent parties from escaping contractual obligations, voluntarily undertaken, on the artificial ground that that which has been agreed is void for uncertainty. There may no doubt be cases where a contract is flawed by a defect or omission which is so basic to the whole transaction that it is simply beyond recognition as a contract by a court of law. However, in many other cases, the matter seized on by the party seeking to escape, often after having had the benefit of the contract for a period, is far from fundamental. If the contract is held to be void in such a case, great injustice may result. The present matter affords an example. The option was an integral part of the whole consideration for the rent paid by Mr and Mrs Huttley. The bankrupt's estate has already received the whole benefit which it was intended that it should obtain for, inter alia, the option. The bankrupt now seeks to deny that the option ever had a valid existence. Further, important though it is, the possibility of injustice is not the only potentially unsatisfactory aspect of declaring that a contract fails for uncertainty. Since most contracts are not drawn up by lawyers, too technical an approach must result in the law failing to reflect commercial reality.
The bankrupt's attack on clause 2(c) focused on the first part of the clause, particularly the part dealing with the payment of the balance purchase price. No submission was made that the provision for the mortgage to contain "the usual terms and conditions appropriate. . ." was uncertain. The concession implicit in the absence of such a submission seems to me correct, having regard to decisions such as those of the High Court in Goodwin v. Temple (1957) St.R.Qd. 376 and Axelsen v. O'Brien (1949) 80 C.L.R. 219.
Further, such difficulties as there are with respect to the clause in relation to the calculation and payment of interest are mere difficulties of construction.
The basic structure of the clause can be perceived by imagining a comma inserted after the reference to the amount of $30,000.00; the part of the first sentence before the comma concerns the payment of the balance purchase price, and the part of that sentence after the comma relates to the calculation and payment of interest. Interest forms no part of the instalments of "approximately Thirty Thousand Dollars ($30,000.00)" for which the clause provides. Words may generally be supplied, omitted or corrected in an instrument where it is clearly necessary in order to avoid absurdity or inconsistency (Fitzgerald v. Masters (1956) 95 C.L.R. 420, 426-427), but there is no indication on the face of the Agreement for Sale that "together with" was meant to read "including". The structure of the clause suggests otherwise.
The scope for debate which exists in respect of interest concerns whether payment of interest is required contemporaneously with or otherwise in addition to each instalment of principal or only within the 10 year period. I have no doubt that that question can be resolved by a process of construction. I am not called on here to decide which is the preferable view.
The critical part of the clause for the purpose of the bankrupt's submission that the Agreement for Sale is void for uncertainty therefore seems to m to be that part which provides for the balance purchase price outstanding after transfer of the property to the purchasers, $196,000 to be payable "within a period of ten (10) years from the date of completion of the sale by instalments of approximately THIRTY THOUSAND DOLLARS ($30,000.00). . .".
I do not think the difficulties arising from the language used can be avoided by regarding the obligation to make full payment within ten years as the only obligation with respect of payment. The clause does not merely give the purchasers the right to make payments by instalments during the period, it directly imposes an obligation on them to do so. That that is so is confirmed and emphasised by the latter part of the clause, from which it appears that what is to be secured by mortgage is "payment of the unpaid instalments". The clause, therefore requires the purchaser to pay the balance purchase price of $196,000 within the designated period of ten years and further requires that the purchaser do so by instalments, but leaves unstated the amount of each instalment, subject only to the requirement that it must be "approximately $30,000" and, subject to any restrictions imported by that requirement, the clause also leaves unspecified both the number of instalments and the occasions of their making.
If that provision is truly uncertain the contract cannot be saved. A requirement that instalments be paid cannot be characterized as merely incidental to an obligation to pay a balance purchase price within a stated period. It would be neither just nor equitable to make an order which ignored the importance of the instalments.
The following statement by Lord Wilberforce in delivering the opinion of the Judicial Committee in Cudgen Rutile (No. 2) Pty Ltd v. Chalk (1975) A.C. 520 seems to me an appropriate starting point in considering whether the relevant part of clause 2(c) is uncertain At p.536, he said:
"Their Lordships consider that, in modern times, the courts are readier to find an obligation which can be enforced even though apparent certainty may be lacking as regards some term such as the price, provided that some means or standard by which that term can be fixed can be found. . .".
The problem with such a provision as that now under consideration is not that it is meaningless but that it contemplates the future resolution of matters left outstanding. At the threshhold of any attempt to resolve whether or not there is a valid contract lies the question of how the clause contemplates those outstanding matters will be settled.
In my opinion, the clause does not envisage any further agreement of the parties. Subject to the stated guidelines, e.g. as to the amount of the instalments, everything is left either to the purchaser or to the vendor's solicitor, to whom the clause delegates the task of preparing the mortgage by which the payment of the balance purchase price by instalments is to be secured.
If the latter is the correct view, the contract is not unenforceable, at least at this point. At worst the contract is subject to a condition precedent dependent for its fulfilment upon the co-operation of the vendor's solicitors: George v. Roach (1942) 67 C.L.R. 253. At best, if the details with respect to the payment of the instalments could be characterized as merely the subsidiary means of carrying out the contract, the Court could settle the terms if the solicitor declined to do so: Axelsen v. O'Brien supra. It is, of course, presently unnecessary to pursue the question of which of the two alternatives is correct.
If, as I think is probably the better view, the details with respect to the instalments are left to the purchasers, the question arises whether the obligation apparently imposed on them to make payment by instalments is illusory.
Tempting though it may be, it is not legitimate to solve the problem posed by such a clause by an approach which, whilst purporting to be an exercise in interpretation, is in truth the substitution of a different formula. For example if, as I think, the clause would be satisfied by seven instalments each of $28,000, it would presumably be satisfied by the same number of instalments different in amount, some slightly less than and others slightly more than the sum of $28,000.
On the other hand, the latitude of choice available to the purchaser is not so great as might at first appear. The joint requirements that the balance purchase price be paid "by instalments" and that the mortgage secure "payment of the unpaid instalments" mean, in my opinion, that any final payment, whether or not at the end of the ten year term, must be considered an instalment and must satisfy the test that it be "of approximately $30,000." If that be so, arithmetically the minimum number of payments of approximately $30,000 in a total sum of $196,000 is six. The maximum number of such payments in such a total sum is seven.
Of course, those conclusions depend upon a judgment as to the range above and below $30,000 within which an amount can be said, in the relevant context, to be "approximately $30,000". Perhaps a deviation of up to 10% might be thought not to go beyond the test of approximation. I see no objection in principal to a Court making such a judgment. In my opinion, the introduction of the word "approximately" does not of itself introduce such a degree of uncertainty that the obligation is bad. I do not think that the use of the word as part of the description of the size of the instalments to be paid makes it impossible to measure whether or not what takes place is performance: cf Life Insurance Company of Australia Ltd v. Phillips (1925) 36 C.L.R. 60, 80.
If I am correct in the approach which I have adopted, the effect of clause 2(c) is to give the purchaser a choice, at least initially, in the number of instalments to be paid, a flexibility, decreasing with each instalment, in respect of the range within which the amount of each instalment may be selected, and at least some discretion as to the timing of the instalments. However, notwithstanding that modern authority is against the implication of terms except in very limited circumstances, I am of opinion that here it is necessary in order to give business efficacy to the agreement to imply into the clause a need for the instalments to be made at approximately regular or at least reasonable intervals, so that the discretion as to the timing of the instalments would be limited greatly by the initial decision which must be made by the purchasers as to the number of instalments by which they will pay the total balance purchase price.
Even if the clause gives the purchasers a greater discretion than I have suggested, it does not, in my opinion, fail.
The balance of authority strongly supports the view that whilst there is no contract if a promisor has a discretion as to whether or not he will perform what purports to be a promise (Placer Development Ltd v. The Commonwealth (1969) 121 C.L.R. 353), an agreement is not void for uncertainty and does not fall short of being a concluded contract because it leaves one party with a latitude of choice as to the manner in which agreed stipulations will be carried into effect: Thorby v. Goldberg (1964) 112 C.L.R. 597; Lewandowski v. Mead Carney - BCA Pty Ltd (1973) 2N.S.W.L.R. 640. In Godecke v. Kirwan (1973) 129 C.L.R. 629, the present Chief Justice expressed the tentative view that only subsidiary matters might be left to one of the parties (p.647). But the majority of the Court said that in general a contract did not fail to be binding because a matter was left to the determination of one of the contracting parties: see at p.642 per Walsh J., with whom Mason J. agreed.
In Lewandowski the employer had a discretion as to the salary he would pay, limited only by an obligation to pay not less than a specified sum, and the contract was upheld by a NSW Court of Appeal consisting of Jacobs P. and Hardie and Bowen JJA. Here the discretion is not as to the amount to be paid but only as to the manner of payment.
In my opinion, the option was not void for uncertainty and the Agreement for Sale does not fail on that ground.
5. Justice and Equity
It was common ground that I should decide the bankrupt's claim that there is no valid and enforceable agreement arising from the exercise of the option. There was no dispute that the necessary jurisdiction existed under s.212A of the Bankruptcy Act. The bankrupt claimed to be entitled to relief if he could establish that there is no valid and enforceable agreement.
Since I am of opinion that the bankrupt has failed to establish that there is not a valid and enforceable agreement, I am content to dismiss the claim. However, I should add that the assumption underlying the case for the bankrupt seems to me plainly incorrect. Where, as here, equitable relief is sought the permissible inquiry must be wider. Further, it is by no means clear to me that, in considering what is just and equitable for the purpose of s.212A of the Bankruptcy Act, the Court is wholly confined to orthodox consideration appropriate to disputes between parties to transactions including, where appropriate, considerations relevant to the discretionary grant or refusal of relief.
In my opinion, the option was not void for uncertainty and the Agreement for Sale does not fail on that ground.
5. Justice and Equity
It was common ground that I should decide the bankrupt's claim that there is no valid and enforceable agreement arising from the exercise of the option. There was no dispute that the necessary jurisdiction existed under s.212A of the Bankruptcy Act. The bankrupt claimed to be entitled to relief if he could establish that there is no valid and enforceable agreement.
Since I am of opinion that the bankrupt has failed to establish that there is not a valid and enforceable agreement, I am content to dismiss the claim. However, I should add that the assumption underlying the case for the bankrupt seems to me plainly incorrect. Where, as here, equitable relief is sought the permissible inquiry must be wider. Further, it is by no means clear to me that, in considering what is just and equitable for the purpose of s.212A of the Bankruptcy Act, the Court is wholly confined to orthodox considerations appropriate to disputes between parties to transactions including, where appropraite, considerations relevant to the discretionary grant or refusal of relief.
It seems to me that in a case such as the present, involving an attempt by a bankrupt to vitiate or restrain completion of a transaction by his trustee and a third party, the considerations relevant to a determination of what is just and equitable will often go beyond a theoretical assessment of the strict legal rights of the parties to the transaction. For example, it is not readily obvious to me why it would be just and equitable to permit a bankrupt to insist that his trustee rely upon a commercially immoral defence. Further, in assessing what is just and equitable, some regard may on occasions have to be had to persons not directly involved in a transaction; for example, the bankrupt's creditors. In other words, additional factors may have to be brought to account in determining what is just and equitable in the circumstances: see Ex parte James (1874) 9 Ch App 609, recently referred to in re Wyvern Developments Ltd (1974) 1 W.L.R. 1097.
Thus, it may be that in a case like the present, the bankrupt ought not be permitted to insist upon a plea that there is no signed writing merely because, for some technical reason, part performance cannot be fully made out as an answer. There is some scope for debate as to the current principles with respect to part performance (see e.g. Woden Squash Courts Pty Ltd v. Zero Builders Pty Ltd (1976) 2 N.S.W.L.R. 212 and Ogilvie v. Ryan (1976) 2 N.S.W.L.R. 504). However, there has been, at least in the past, some rigidity with respect to what is required to raise the equity by which the operation of a statute requiring a signed writing may be avoided: see e.g. McBride v. Sandland (No. 1) (1918) 25 C.L.R. 69, 78-79. A similar inflexibility as to what is required with respect to the doctrine of equitable estoppel or estoppel by acquiescence (see e.g. Willmott v. Barber (1880) 15 Ch D 96, 105-106) has been greatly relaxed by more recent authority: the cases are collected in the as yet unreported decision of the Full Federal Court in Reed v. Sheehan, in which judgment was delivered on 11 January this year. Even if it is not found possible to adopt in Australia a similar modern approach to the doctrine of part performance, it seems to me that s.212A of the Bankruptcy Act may permit the Court in an appropriate case to refuse to permit a party raising the lack of a signed document to insist upon a technical deficiency where part performance is put forward as an answer. For example, one of the requirements for the application of the doctrine of part performance, according to McBride v. Sandland (supra.), is that the act relied on must have been done by a party to the agreement. Leaving aside a possible complication in a case such as the present in which the involvement of the company may have been contrary to the Land Act, the Court in exercising its power to do what is just and equitable ought surely be ready in an appropriate case to lift the veil if that is necessary to permit reliance upon acts performed by a person's family company. To refuse to do so seems to me to be to deny one of the realities of modern life in which a family company is frequently a family's alter ego for commercial purposes.
I do not, of course, suggest that the power of the Court under s.212A of the Bankruptcy Act is unrestricted. However, there is no occasion here for me to consider what limitations there are either in point of power or in point of discretion.
In the present case, I consider that, on the findings which I have made, it would make a mockery of s.212A of the Bankruptcy Act to set aside the option and the contract resulting from its exercise, by reason, for example, of the alterations to the document; such an order would seem to me the very antithesis of what is "just and equitable" between the parties to these proceedings.
In view of the conclusion at which I have otherwise arrived, I do not consider it is necessary to deal specifically with other matters which were raised, such as laches on the part of the bankrupt. Further, no question arises in the circumstances as to what if any conditions could or ought be imposed upon the grant to the bankrupt of equitable relief, or whether and if so how that could be done in these proceedings.
The only order which I make at this point is that the application be dismissed. I give liberty to apply. I will hear the parties further as to costs.
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