Ritz Bitz Pty Ltd v Cumming
[2023] VSC 418
•21 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 05287
BETWEEN:
| RITZ BITZ PTY LTD (ACN 100 300 927) AS TRUSTEE OF THE RITZ BITZ TRUST & ANOR | Plaintiffs and Defendants by Counterclaim |
| And | |
| DANIEL CUMMING & ORS | Defendants and Plaintiff by Counterclaim |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 July 2023 |
DATE OF JUDGMENT: | 21 July 2023 |
CASE MAY BE CITED AS: | Ritz Bitz Pty Ltd v Cumming |
MEDIUM NEUTRAL CITATION: | [2023] VSC 418 |
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CAVEATS – Application to remove caveat pursuant to Transfer of Land Act 1958 (Vic) s 90(3) – Caveatable interest claimed through alleged oral contract of sale of real property – Specific performance of contract sought by caveator – Subsequent purchaser for value – Whether legally binding sale contract existed – Consideration of prima facie case and balance of convenience – S&D International v Malhotra [2006] VSC 280.
PRACTICE AND PROCEDURE – Application to amend defence to withdraw certain admissions – Whether in the interests of justice to grant leave to amend pleadings – Gregorich v Khouri [2020] VSC 5.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs and Defendants by Counterclaim | L Magowan | BSP Lawyers |
| For the Defendants and Plaintiff by Counterclaim | T Sowden | Christopher James Lawyers |
HIS HONOUR:
Introduction
The defendants, Daniel Cumming and his wife Amanda, along with a company controlled by Daniel, Cuttervale Pty Ltd (‘Cuttervale’), apply by summons for an order pursuant to s 90(3) of the Transfer of Land Act1958 (Vic) (the ‘TLA’) for the removal of a caveat lodged by John Cumming in dealing number AV511434M (the ‘Caveat’) over the title to the property at 337–349 Barkly Street, Footscray (the ‘Footscray Property’). In addition, the defendants seek leave to amend the defence and counterclaim filed 3 March 2023. Relevantly, the leave sought extends to leave to withdraw certain admissions in relation to a contract of sale allegedly entered into for part of the Footscray Property and to rely on s 126 of the Instruments Act 1958 (Vic) (the ‘Instruments Act’).
The second plaintiff, John, is Daniel’s younger brother. He is also in effective control of the first plaintiff, Ritz Bitz Pty Ltd (‘Ritz Bitz’).
By writ filed 19 December 2022, Ritz Bitz and John bring a range of claims against Daniel and Cuttervale and a separate discrete claim against Daniel and Amanda. The claims brought against Daniel and Cuttervale allege, among other things, that Cuttervale was to act as an incorporated partnership for Ritz Bitz on John and Daniel’s behalf and that Cuttervale would acquire a property in Morwell which would be developed and thereafter be used for the purposes of the conduct of a business (the ‘Morwell Property’).[1]
[1]It appears that the business is that of a hotel; see below [76].
Cuttervale is the registered proprietor of the Morwell Property. Amongst the relief sought by Ritz Bitz and John are orders to the effect that Cuttervale sell the Morwell Property, with the proceeds of sale to be paid into the Court. Alternatively, Ritz Bitz and John seek declarations that the Morwell Property is held by Cuttervale on trust for Ritz Bitz in such proportions as are referrable to Ritz Bitz’s contribution to the purchase price. In addition, Ritz Bitz and John seek declarations and associated orders relating to the partnership and relief under the Partnership Act 1958 (Vic).
Daniel and Amanda have been the registered proprietors of the Footscray Property since 9 October 1997. The Footscray Property is a large building of approximately 1,300 square meters, which was formerly, among other things, a dance hall.
Although there is some difference as to when the relevant discussions occurred (on or about July 2015 (according to John) or around 2016 (according to Daniel)), it is not in dispute that John and Daniel had discussions about a subdivision of the Footscray Property and the sale of part to John, who would pay $2 million and that the price would be paid in part, by way of a large deposit, of $800,000.
Amongst the claims brought is a claim by John for specific performance of an oral agreement which he alleges he entered into with Daniel and Amanda in or about July 2015, by which they agreed to sell John part of the Footscray Property (the ‘Footscray Contract’), being that part which was later known as lot 1 on plan of subdivision PS747606V for $2 million ‘on vendors terms’.
John alleges that there were terms of the Footscray Contract that:
(a) the purchase price for lot 1 would be $2 million;
(b) there would be a large deposit representing 40% of the purchase price, namely $800,000, which would be paid in kind by John providing a property for his mother to live in (she then residing at the Footscray Property);
(c) the balance of the purchase price of $1.2 million would be paid on terms, with John to develop a functioning backpackers at lot 1 and pay the $1.2 million 12 months after the establishment of the backpackers; and
(d) John would be responsible for obtaining planning permits and a plan of subdivision with respect to the Footscray Property, such that lot 1 could be sold to him as purchaser, and the balance of the lots be sold as necessary by Daniel and Amanda.
In the defence, the defendants admit the allegations in sub-paragraphs (a), (b) and (d) above and do not admit the allegations in sub-paragraph (c) above, but say further that:
John was at all material times aware that the terms stipulated a 12 month period in which he was required to pay the remaining $1.2m for [lot 1] of the Footscray Property … subject to the subdivision being approved. No agreement was made between Daniel and Amanda of the one part and John of the other part regarding the establishment of a backpackers to finalise John’s purchase of [lot 1], that was not a matter relevant to Daniel and Amanda.
Relevantly, Daniel and Amanda later plead that they were not required to convey lot 1 to John, because the plan of subdivision was not approved by council as per its requirement ‘for the Fire Safety Report to be provided’ and that they did not agree to execute the draft contract that John had later provided them, which ‘was completely different to the original offer’.
It is common ground that although a plan was lodged with council on about 22 August 2016 which provided for a three lot subdivision, the plan was not certified by council and has not been registered.
It is also common ground that on 17 August 2015, John purchased a property at 34 Crothers Street, Braybrook for $665,000 (the ‘Braybrook Property’) and that John and Daniel’s mother lived at the Braybrook Property. For reasons which are not entirely clear, the property was registered in the names of two other siblings, Norman and Dianna. Again, for reasons which are not entirely clear, when the Braybrook Property was sold in April 2020, the proceeds of sale were paid to John and Ritz Bitz.
It is also common ground that in 2017, John obtained a standard form written contract of sale for the sale of lot 1, which he later provided to Daniel and Amanda and which they refused to sign. The content of that contract of sale is in dispute.
About seven years after the alleged making of the Footscray Contract, John instructed solicitors to lodge the Caveat, which was lodged on 8 April 2022. The ground of the claimed interest is an ‘implied, resulting or constructive trust’ and the Caveat seeks to prohibit absolutely all dealings with the Footscray Property.
The Footscray Property appears to have been largely vacant since mid–2019 and is in a dilapidated condition. It seems that part of it is leased to an Indian restaurant and there is a small area used by an upholsterer.
On 2 September 2022, the council issued a building order for minor work in relation to dangerous masonry over the property (the ‘Building Order’). The Building Order was issued pursuant to s 228E of the Building Act 1993 (Vic) and required compliance by 16 September 2022. The Building Order was addressed to Daniel and Amanda as the registered proprietors. John deposes to being sent a copy of the Building Order by Daniel.
On 29 September 2022, Daniel and Amanda’s then solicitor wrote to John’s solicitors advising of instructions to prepare a vendor’s statement and contract of sale for the Footscray Property. The solicitor referred to his clients’ recent discovery that John had placed a caveat on the title to the property and requested John advise of the basis for the caveat.
On 20 October 2022, John’s solicitors responded to the effect that the interest arose pursuant to the Footscray Contract. John’s solicitors advised that they did not understand how Daniel and Amanda could proceed with a sale of the Footscray Property in such circumstances and requested confirmation that Daniel and Amanda would proceed with the Footscray Contract.
Notwithstanding this letter, on 10 December 2022, Daniel and Amanda sold the Footscray Property to Nikolce Talevski for $3 million, pursuant to a written contact of sale (the ‘Talevski Contract’). The contract specifies a deposit of $300,000 which has been paid, with settlement due to take place on 7 February 2023. The section 32 statement attached to the contract of sale contains a copy of the Building Order. Relevantly, the certificate of title, which forms part of the section 32 statement, discloses the existence of the Caveat.
The estate agent who negotiated the sale, Martin Smyth from Rosin Smyth & Partners, deposes that the purchaser is aware of the Building Order and the works required to make the building safe and that the purchase price was adjusted to reflect the risks to the purchaser with the date of settlement being brought forward, so as to reduce the exposure of Amanda and Daniel under the Building Order.
Mr Smyth deposes that settlement has not taken place owing to the Caveat and that Mr Talevski remains ready, willing and able to complete the sale. Mr Smyth deposes to Mr Talevski’s engagement of engineers and a builder with a view to carrying out necessary repairs to the wall and his discussions with potential tenants. He deposes that Mr Talevski is becoming anxious about the prospect of settlement and he is concerned that Mr Talevski may withdraw from the Talevski Contract as a result of Daniel and Amanda’s inability to settle.
John deposes that in early 2023 he became aware that Daniel and Amanda had sold the Footscray Property and that as a consequence, on 7 February 2023, he instructed his lawyers to enquire about the status of the sale.
In a response sent 14 February 2023, Daniel and Amanda’s solicitors, among other things, confirmed that Mr Talevski was aware of the dispute between John, Daniel and Amanda and was aware of the Caveat.
A copy of the Talevski Contract was provided to John’s solicitors, along with an open offer to the effect that Daniel and Amanda were willing to offer the Footscray Property to John on the same terms and conditions as those set out in the Talevski Contract, subject to John agreeing to meet the costs, if any, claimed by the current purchaser.
On 8 June 2023, Daniel and Amanda were served with an emergency order from the council, which relevantly required the owner and occupier to cease to occupy the building and to undertake demolition works by 21 June 2023 (the ‘Emergency Order’). The demolition works have not yet been undertaken and Daniel and Amanda are unwilling to effect them. Daniel deposes that they do not have the resources to undertake them. The current purchaser, Mr Talevski, is apparently willing to undertake the necessary works.
Daniel and Amanda seek orders for the removal of the Caveat so that the sale to Mr Talevski can proceed. They also seek orders for leave to file and serve an amended defence.
John is unwilling to withdraw the Caveat and opposes leave being given to the amend the defence. He contends that he has an equitable interest in the Footscray Property arising under the Footscray Contract, which arose prior to the equitable interest acquired by Mr Talevski pursuant to the Talevski Contract, and hence has priority.
The plaintiffs relied upon affidavits of their solicitor Lucy Evans affirmed 4 July 2023, two affidavits of John Cumming sworn 5 July 2023 and 10 July 2023 as well as an email sent by John to Daniel on 14 February 2022, which was tendered at the hearing.
The defendants relied upon affidavits of their solicitor Victor Andreou sworn 13 June 2023, the estate agent Mr Smyth sworn 21 June 2023, two affidavits of Daniel Cumming sworn 23 June 2023 and 13 July 2023 as well as a fire engineering report relating to the Footscray property dated 5 March 2019, which was tendered at the hearing.
The caveat removal application
The relevant principles relating to an application for removal of a caveat pursuant to s 90(3) of the TLA are not in dispute. The Court’s power under s 90(3) of the TLA is discretionary. The caveator bears the onus of establishing that there is a prima facie case to be tried that it has the estate or interest in land as claimed. If the caveator establishes a prima facie case to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial. There is a relationship between the strength of the claim in establishing a prima facie case to be tried and the extent to which the caveator must establish that the balance of convenience favours the caveator. The stronger the prima facie case, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the land in question in accordance with its normal proprietary rights.[2] In effect, the caveator must discharge the same onus of proof as would be required if the caveator were coming to the Court seeking interlocutory injunctive relief.
[2]Piroshenko v Grosjman (2010) 27 VR 489.
The claimed interest
The first preliminary issue derives from the fact that the ground of the claimed interest in the Caveat is an interest arising as a result of an ‘implied, resulting or constructive trust’. This is a different interest to that now asserted as purchaser under the Footscray Contract.
The misdescription of the interest can be put to one side. In Ms Evans’ affidavit, she deposes that the interest was described as arising pursuant to an ‘implied, resulting or constructive trust’ because at the time of the lodgement of the Caveat, John was unable to recall the exact date in July 2015 that he entered into the Footscray Contract. Ms Evans deposes that the inability to nominate a date meant that the only option available on the PEXA lodgement system for the grounds of a claim was ‘an implied, resulting or constructive trust’. This evidence was not challenged.
Further, John submitted in the case of an application by an affected party for an order for removal of a caveat pursuant to s 90(3) of the TLA, it is open to the Court to make orders for the amendment of the Caveat, given that s 90(3) empowers the Court to make ‘such order as the Court thinks fit’. John relies upon the decision of Gillard J in S&D International v Malhotra,[3] which authority was accepted at the hearing of the application by Daniel and Amanda.
[3]S&D International v Malhotra [2006] VSC 280, [14]–[17] (Gillard J).
In any event, the interest asserted in the statement of claim was articulated by John to Daniel and Amanda, albeit not by the Caveat, but by the letter sent by John’s solicitors dated 20 October 2022. This letter specifically referred to the Footscray Contract and was sent prior to Daniel and Amanda entering into the Talevski Contract.
Even if s 90(3) of the TLA did not empower the Court to make an order amending the Caveat, it would have been open for John to apply for an interlocutory injunction to restrain the settlement of the Talevski Contract, which in practical terms would have resulted in the same outcome. In the circumstances, the concededly inapt description of the grounds of claim can be put to one side.
The conditional sale contract
The second preliminary issue arises from the fact that the subject matter of the Footscray Contract is a lot in an unregistered plan of subdivision. Completion of any contract of sale must be conditional on registration of the plan of subdivision. Registration requires certification of the plan of subdivision by the council and then registration of the certified plan on title.
This issue too can be put to one side; in the case of conditional contracts of sale, including those where the relevant condition is one which requires the registration of a plan of subdivision and hence requires the consent of a third party, a court will nevertheless, in appropriate circumstances, grant equitable relief in the form of orders in the nature of specific performance compelling the vendor to do all that which is necessary to obtain approval for the subdivision and, subject to obtaining the necessary approval, settle the performance of the contract.[4] Such an interest is sufficient to support a caveat.
[4]Hooper v Parwan Investments Pty Ltd & Anor [2023] VSC 227, [72], [84]–[85] (Forbes J); Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419; Rehins Pty Ltd v Debin Nominees Pty Ltd (No 2) [2011] WASC 168.
In order to sustain the Caveat however, John has to establish a prima facie case that the Court will make orders compelling the vendor (here, Daniel and Amanda) to do all that is necessary to obtain approval of the plan and then, subject to obtaining the necessary approval, settle the performance of the Footscray Contract.
So much is recognised by John in that part of the prayer for relief in respect of the Footscray Contract, where he seeks by way of final relief an order for specific performance of the Footscray Contract in the following terms:
An order for the specific performance of the Footscray Contract … namely that the plan of subdivision be forthwith registered (and Daniel and Amanda do all things necessary to register the plan of subdivision) and title in the property forming [lot 1] of the plan of subdivision be forthwith transferred to John upon payment by him of $1.2 million.
Prima facie case – entry into a legally binding contract of sale
The first aspect of any inquiry as to a prima facie case requires consideration of whether there is a prima facie case that John entered into a legally enforceable contract with Daniel and Amanda on the terms alleged.
In circumstances where Daniel and Amanda admit the Footscray Contract (as alleged), that the purchase price for lot 1 would be $2 million and that there would be a large deposit representing 40% of the purchase price ‘which would be paid by John providing a property for his mother to live in (she then residing at the Footscray Property)’, John submits that the prima facie case is easily established.
Whilst I accept that it is appropriate to assess that question in the first instance by reference to the admissions made in the defence, there are some difficulties with the contract as alleged, even allowing for the admissions.
The allegations made in the statement of claim lack precision. This no doubt reflects the fact that the claim involves an oral contract between siblings entered into some eight years ago. The allegation in paragraph 52 that the subject matter of the sale was to contain that part of the Footscray Property ‘later known as lot 1 on plan of subdivision PS747606V’, cannot accurately reflect the discussions which occurred in July 2015 referred to in the particulars, because the plan of subdivision numbered PS747606V had not been prepared and did not exist at that time.[5] So much is implicit in the allegation in paragraph 53 which immediately follows, which alleges that on or about 22 August 2016, the council advised Daniel and Amanda that the plan of subdivision numbered PS747606V had been lodged and that numbering of the various lots had been allocated.[6]
[5]The plan of subdivision was for a three lot plan. On John’s own evidence, at the time of the July 2015 discussions, only a two lot subdivision was discussed. The potential significance of this issue is addressed below.
[6]That allegation is also admitted by the defendants.
There is then a further allegation in paragraph 55 that on 23 August 2016, the council advised that subject to its requirements (which were principally directed at fire safety) it would ‘give agreement for the plan of subdivision to be lodged’. This allegation which is also admitted, appears inconsistent with paragraph 53, which proceeds on the premise that the plan had been lodged. Presumably, paragraph 55 is intended to refer to the council conveying advice to the effect that it would certify the plan of subdivision (as opposed to allowing it to be lodged), which certification would then permit the plan of subdivision to be registered on title and result in the issue of individual certificates of title for each lot. Further, whilst the defendants admit paragraph 55 of the statement of claim, the plea in the defence then continues to allege ‘that upon the issue of the [requisite fire report] to John in 2019 he decided not to proceed with the purchase’. Otherwise, the existing defence includes allegations that the subdivision was not approved ‘by council as per the council’s requirement for the fire safety report to be provided’. On the most logical reading of the present pleadings, there seems to be consensus that the plan of subdivision has not been certified and hence has not been registered. There is also consensus that this is related in some way to fire safety requirements, which the council require to be addressed before certification could occur.
Nonetheless, the statement of claim does not directly engage with the fact that the subject matter of the Footscray Contract was a lot in an unregistered plan of subdivision and settlement could not occur unless and until the plan was certified by the council and then registered.[7] Necessarily, it does not engage with the question of what was necessary to procure certification and who was responsible for achieving certification and obtaining registration.
[7]Albeit the prayer for relief does; see above [39].
Further and relatedly, the allegation in paragraph 52 that the sale was to be for the price of $2 million ‘on vendors terms’, which terms are not identified and are unclear in any event, seems to suggest that the settlement would take place at some undefined point, but not one linked to registration of the plan and completion of the subdivision. Similarly, the allegation in paragraph 62 that Daniel and Amanda had breached the Footscray Contract because they had ‘failed to convey [lot 1] to John upon payment of $1.2 million’, does not reflect that there could be no obligation to convey lot 1 to John without registration of the plan of subdivision. Nor is there a plea of any tender of the $1.2 million, which seems implicitly to be the quid pro quo for the obligation to convey. Nor is it clear how the reference to the $1.2 million is reconciled with the sale on the ‘vendors terms’, whatever they might be.
The pleas in relation to the terms of the Footscray Contract concerning the deposit and payment of the deposit are also unclear. The plea in paragraph 56(b) of the statement of claim (which is admitted) is that ‘there would be a large deposit representing 40% of the purchase price, namely $800,000, which would be paid by John providing a property for his mother to live in (she then residing at the Footscray Property)’.
In paragraph 57 (which is not admitted), Daniel and Amanda are alleged to have represented and warranted that ‘part of the purchase price being $800,000 should be paid in kind by John purchasing a property for John and Daniel’s mother such that she would have a place to live’ and it is further alleged that in reliance upon the representations, John acquired the Braybrook Property for his mother. The relevance of the plea of representations and warranties is unclear. It seems to set the scene for a future estoppel plea or an answer by way of a plea of part performance to a defence based on the unenforceability of the oral Footscray Contract, but neither is followed through to a conclusion in those terms.
In any event, in the defence, the defendants do not admit the representations and warranties pleaded against them in paragraph 57, and in paragraph 58, they plead that the Braybrook Property was purchased for $665,000, which is less than ‘the agreed deposit price of $800,000 … [and that] John subsequently used the Braybrook Property for security for Ritz Bitz to purchase a hotel in Wodonga’. If John were to pay a total purchase price of $2 million to Daniel and Amanda, which price includes a deposit of $800,000, the ordinary understanding of that concept would be for the $800,000 to be paid to Daniel and Amanda. In contrast, a fair reading of the pleading, but not the only reading, is to the effect that the deposit of $800,000 was to be paid in kind. The question of who was to own the Braybrook Property is left unsaid, much less how the purchase of a property otherwise than for Daniel and Amanda could amount to part performance of an obligation to pay them $2 million for lot 1.
In paragraph 60, it is alleged that in ‘2017, Daniel and Amanda were provided with a draft contract of sale to give effect to the Footscray Contract’. The particulars of that allegation refer to the fact that the draft contract of sale is in writing, is to the effect alleged and was provided to each of Daniel and Amanda at a meeting at their solicitor Barry Fried’s office in 2017. The relevance of the provision of the later written contract of sale to John’s claim for specific performance of the oral Footscray Contact is unclear.
In the defence, Daniel and Amanda say that they were provided with a draft contract of sale to give purported effect to the Footscray Contract but that this did not occur at Mr Fried’s office. More relevantly, they plead that Daniel handed the draft contract back to John and told him it was completely different to the original offer and that he, Daniel, ‘would not consider signing it’.
In his evidence filed in relation to this application, Daniel deposes to the fact that John provided him with a draft contract at some time in 2017, which did not reflect the terms of the proposed agreement, not least because a deposit was said to have been paid in the sum of $200,000. Daniel exhibits a copy of the contract of sale provided to him. That contract relevantly specifies the date of sale as the date by which both parties have signed the contract, which was then typed in as ‘01/02/2017’. The contract identifies the name of the vendor’s solicitors, Barry Fried Solicitors, and the purchaser’s solicitors, The Conveyancing Place. The segment of the contract which identifies the land by reference to its title details was not completed (presumably because the plan of subdivision had not been registered), whilst the property address notes that the subject matter of the sale was 337 Geelong Road, Footscray, which appears to correlate to the street frontage of lot 1, and otherwise seems to reference lot 1 on the plan of subdivision. The price is listed as $1.2 million (not $2 million), payable as to a deposit of $200,000 by ‘01/02/2017’, of which $200,000 is said to have been paid, leaving a balance payable at settlement of $1 million. The settlement date is listed as 1 July 2020, a little over three years after the date identified as the date of sale.
This written contract is inconsistent with the oral Footscray Contract in a myriad of ways; price, deposit, balance due, date of sale and date of settlement. The reference to the date of sale being the date of execution is consistent with the parties not being bound before execution, which is inconsistent with the claim now pressed.
John’s affidavit sworn 5 July 2023 was made about two weeks after Daniel’s affidavit sworn 23 June 2023. In John’s affidavit, he deposes to the following in relation to the written contract:
59In around 2017, I had gone to the Law Institute of Victoria and purchased a standard form of contract. I populated the standard form of contract with details in relation to my purchase of the Footscray Property. I provided that contract in draft form to Danny, and [asked] that he go to Mr Fried and finalise the contract so that we could execute it.
60In 2017, I attended solicitors with Danny (see below) such that we could prepare and execute a contract for me to purchase half the interest in the Footscray property for $2 million.
61I subsequently attended upon Danny in my lawyers office, being Barry Fried in Chapel Street Windsor. We met with Mr Fried, my late mother, Danny and Mandy at Mr Fried’s office Windsor. The contract had been prepared. The meeting occurred in around mid to late 2017. At the meeting I said that I was in a position to sign. Danny said that Mandy would not sign. He said that she was not in a position to sign. Mandy said that she did not want to sign. I asked Danny what was going on. He said that he would take care of this. Mandy has an acquired brain injury and has always had some degree of animosity towards me. I accepted at the time that Danny would sort this out.
At no stage in John’s affidavit is there any suggestion that the copy of the contract that had been exhibited to Daniel’s affidavit was inaccurate or in some way different to the contract provided to Daniel.
At the hearing of the application, counsel for John advised from the Bar table his instructions to the effect that the contract which had been exhibited to Daniel’s affidavit was not in fact the contract provided by John to Daniel. He said that John no longer had a copy of the contract.
A number of other matters merit specific mention. First, in the statement of claim, the sale agreement is alleged to have been entered into between John as purchaser and Daniel and Amanda as vendors of the Footscray Property, with the relevant discussions alleged to have occurred at the Croatian Club in Footscray in July 2015 between John, Daniel, Amanda and their mother. In John’s affidavit, he refers to a conversation which occurred prior to the conversation at the Croatian Club, where he describes a conversation with his mother to similar effect in which he offered $2 million to his mother for the front half of the Footscray Property (the Footscray Property being, according to John, in fact his mother’s property, notwithstanding that it was registered in the name of Daniel and Amanda) and that he agreed to pay $800,000 immediately to his mother which she could use to acquire a property to live in, and that he would then pay her the balance of $1.2 million once the property was up and running as a backpackers. This conversation is at odds with the statement of claim which proceeds on the basis that the $1.2 million is be paid to Daniel and Amanda.
Secondly, in John’s affidavit, he exhibits an email which he sent to Mr Fried and Daniel relating to the purchase of the Braybrook Property in which he says ‘the property will be purchased in the names Norman Andrew Cumming and Dianna Johanna Cumming’ and subsequently an email sent to Mr Fried, once again copied to Daniel on 1 September 2015, that he (John) was buying half of his mother’s property in Footscray ‘and this is part of the process’. About six weeks later, on 19 October 2015, John emailed Daniel with the subject line ‘Balance’, in which he advises that he had spent $715,852.53, which left $84,147.47 remaining in respect of a total of $800,000. In broad terms, these emails provide support for an interpretation of the Footscray Contract as one which involved the payment of the deposit of $800,000 as being effected in some way by the purchase of a property for their mother, albeit one that was to be registered for some unexplained reason in the names of Norman and Dianna.
Thirdly, notwithstanding the purchase of the Braybrook Property for John and Daniel’s mother and the registration of that property in the name of two other siblings, when the Braybrook Property was sold in April 2020, it was John and Ritz Bitz who received the proceeds of sale. Although the statement of claim seeks an order for specific performance which, in effect, requires lot 1 to be transferred to John upon payment by John of $1.2 million to Daniel and Amanda, in John’s affidavit he accepts that ‘as part of the relief, [he] will also need to pay over the ‘deposit’ from the sale of the Braybrook Property’. Implicitly, this recognises that it is Daniel and Amanda who are entitled to the $2 million, which is not the same as part of the $2 million, namely the $800,000 ‘deposit’, being paid to their mother to buy the Braybrook Property and is inconsistent with John’s ultimate receipt of the proceeds of its sale. On the case that John now seeks to advance, it is Daniel and Amanda, not John (or his mother’s estate), who are entitled to the $800,000.
Fourthly, it does not appear to be in dispute that the task of procuring the registration of the plan of subdivision with respect to the Footscray Property was to be a task for which John was responsible, not Daniel and Amanda. Thus, it was the putative purchaser who had the responsibility of procuring the registration of the plan, not the vendor, which is usually the case. So much follows from the plea in paragraph 56(d) of the statement of claim, which is admitted, and from John’s affidavit in which he deposes that ‘I would organise the plan of subdivision’, and that John has ‘spent in excess of approximately $100,000 in relation to the above tasks including drafting the plans and permits in relation to the subdivision and the backpackers’. Relevantly, John also addresses the question of who would pay for the costs of organising the plan of subdivision, saying that the costs would be split. The question of the costs of obtaining the certification and registration of the plan of subdivision is also addressed in an email sent from John to Daniel dated 14 February 2022, where John emailed Daniel asking him whether he was unwilling to meet or commit to paper Daniel’s obligations with ‘Mum’s shop’.[8] In his email, he references three columns, which include Barkly Street development costs. Barkly Street is one of the street frontages of the Footscray Property. In his affidavit, John deposes that in early 2016, he, Daniel and their mother, among others, agreed to Daniel’s request to change the proposed two lot subdivision to a three lot subdivision, but only on the basis that John would bear one third of the associated costs, with Daniel and Amanda bearing the remaining two thirds. Neither an agreement to share the costs 50/50 on the basis of a contemplated two lot subdivision, nor an agreement to split the costs one third to John, two thirds to Daniel and Amanda, is adverted to in the statement of claim. To the extent to which the statement of claim does address the question of the costs of obtaining the registration of the plan of subdivision, the most logical reading of the pleading is that John was to bear the costs.
[8]John referred to the Footscray Property as ‘Mum’s shop’.
Even if I were to assess the question of a prima facie case by reference to the alleged admissions made in the defence, there are significant impediments to the establishment of a legally binding contract in the form of the Footscray Contract.
John relies on an oral contract between family members which fails sufficiently, arguably at all, to take account of the fact that the sale is of a conditional nature dependent upon the registration of a plan of subdivision which in turn requires, as a preliminary step, certification by council. The oral contract as alleged is entirely unclear as to when the price is to be paid, including whether it is conditional on registration of the plan of subdivision as it must be, and in any event as to when the balance is to be paid.
The statement of claim refers to the provision of a written contract, but John is unable to produce one, and the only form of written contract in evidence is quite inconsistent with the oral contract as alleged and indeed the parties becoming legally bound before its execution. Whilst a different position may emerge at trial, John had ample opportunity to address the written contract in his evidence, including because it was referred to in his statement of claim and Daniel’s affidavit exhibits what purports to be a copy. As noted above, John’s subsequent affidavit did not say that the written contract exhibited by Daniel was not the contract prepared by John and given to Daniel. In those circumstances, I cannot attribute any weight to his instructions conveyed from the Bar table to the effect that the written contract, inconsistent with the oral contract, was not that proffered by John to Daniel.
The position in relation to the deposit is most unclear; the pleading in the statement of claim is a little ambiguous. The plea that John would pay a deposit of $800,000 (implicitly to the vendors Daniel and Amanda) suggests that the payment was to be made to them as would the relief which John now accepts he would be entitled to at final hearing. On the other hand, the plea in paragraph 57(c), which is to the effect that the $800,000 should be paid in kind by John purchasing a property for John and Daniel’s mother, is suggestive of the $800,000 being paid in effect to their mother, which is consistent with the version of events in John’s affidavit which seems to suggest that in truth the beneficial owner of the Footscray Property was their mother, not Daniel and Amanda. Whatever interpretation is to be put on the alleged deposit term, it is difficult to see how John could have paid the $800,000 deposit, whether to his mother because she was the true owner of the Footscray Property, or to Daniel and Amanda, by being used to buy a house for John and Daniel’s mother (which presumably meant that Daniel and Amanda did not have to do so), but still somehow received the proceeds of sale from the Braybrook Property.
Whilst a fuller position may be revealed at trial, on the basis of the pleadings and evidence as it stands, at this stage, there is an ambiguous pleading of an oral contract for the sale of land comprising part of the land in an unregistered plan of subdivision made between family members, albeit with some allegations admitted, which is contradicted by a written contract of sale later purportedly provided by John to Daniel and Amanda. The oral contract was entered into some seven years prior to the Caveat being lodged. The plan of subdivision for which John, on any view of matters, was responsible for procuring certification and registration has not been registered. The ‘deposit’ of $800,000 was not paid by John to Daniel and Amanda, nor indeed to their mother. A lesser sum which is related in some way to the deposit payment of $800,000 was used by John to acquire the Braybrook Property which was lived in by their mother but which was later sold, with the proceeds of sale being taken by John and Ritz Bitz.
Prima facie case - specific performance of the contract
Nor is the question of the prima facie case confined to whether there is a binding sale agreement for lot 1. John must also establish that he has a prima facie case with respect to an order for specific performance of the Footscray Contract which, on analysis, must proceed on the basis that its subject matter is a lot in a plan of subdivision which remains unregistered, some 8 years after the entering into of the alleged contract.
As noted above, contracts for the sale of lots in unregistered plans of subdivision are amenable to orders for specific performance because there will ordinarily be an implied term that requires the vendor to do all such things as are reasonably necessary to procure the registration of the plan of subdivision. That is not this case; John’s pleaded case recognises that the task of procuring the registration of the plan of subdivision was a burden assumed by him under the terms of the Footscray Contract that he sues upon.
Even if I were to accept for the purposes of this application that there was a variation to the Footscray Contract (albeit unpleaded) to in effect change the proposed two lot subdivision to a three lot subdivision with a consequential amendment that the costs of procuring the registration of the plan of subdivision would be borne as to one third by John and two thirds by Daniel and Amanda,[9] there is considerable uncertainty as to the scope of the costs that would be required to be met by that shared obligation and associated uncertainty as to the nature and extent of the tasks that would need to be carried out in order to bring about the certification of the plan and subsequently its registration.
[9]Notwithstanding that there is no term to such effect pleaded.
In Daniel’s affidavit (and in the defence), he refers to the fact that John alleges in the statement of claim that on 23 August 2016 the council advised that subject to requirements principally concerning fire safety, it would approve the plan of subdivision for lodgement. As noted above, this is admitted and the plea in the defence is supplemented by a further allegation that upon the issuance of the requisite fire report to John in 2019, John decided not to proceed with the purchase.[10]
[10]See above [44].
At the hearing of the application, Daniel and Amanda tendered a fire engineering report issued in March 2019 which was apparently obtained by John. The report is lengthy and identifies a range of measures which have to be implemented. The report identifies works that would have to be effected before the council is prepared to certify the plan of subdivision and hence facilitate its registration. Moreover, as noted at the outset, in 2022 and now 2023, there has been a further deterioration in the condition of the Footscray Property such that an Emergency Order has now been placed on the building by the council. At the hearing, it appeared to be accepted that further building works would have to be effected so as to deal with those issues, as well as those that were identified in the fire engineering report, before the plan of subdivision is to be certified by council.
Thus, the necessary steps that require completion before council certifies the plan and hence registration can take place, include the carrying out of building and related works of some complexity, which have not been identified, at some indeterminate and potentially large cost. On John’s case, these are to be met by John on the one hand (as to one third) and Daniel and Amanda as to the remaining two thirds.
John’s claim therefore for specific performance of the contract of sale, viz the conveyance of lot 1, will require as a necessary and antecedent step a series of further orders for the performance of such works and payment for them. Whilst John’s submission has force that there is no difficulty in the Court supervising a contract the performance of which requires costs to be met in agreed proportions, in this case the costs relate to, at least in part, performance of building works of uncertain scope. A building agreement is an agreement described in Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies as one which requires continual supervision in respect of which a court is reluctant to grant orders for specific performance.[11] The learned authors refer to the relevant conditions which would have to be satisfied before a court of equity may compel the performance of such a contract as being those identified by Romer LJ in Wolverhampton Corporation v Emmons:[12]
It has, I think, for some time been held that, in order to bring himself within that exception, a plaintiff must establish three things. The first is that the building work, of which he seeks to enforce the performance, is defined by the contract; that is to say, that the particulars of the work are so far definitely ascertained that the court can sufficiently see what is the exact nature of the work of which it is asked to order the performance. The second is that the plaintiff has a substantial interest in having the contract performed, which is of such a nature that he cannot adequately be compensated for breach of the contract by damages. The third is that the defendant has by the contract obtained possession of land on which the work is contracted to be done.
[11]JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrine & Remedies (LexisNexis Butterworths, 5th ed, 2015) 663 [20-080].
[12][1901] 1 KB 515, 524–5.
As matters presently stand, neither the nature of the building work, much less that this work has been defined by the contract in respect of which specific performance is sought, has not been established.
John must also establish that there is a prima facie case that he is ready, willing and able to perform the obligations imposed on him by the Footscray Contract. Whilst I accept that there was no need for John to tender performance before action, given the denial by Daniel and Amanda, apart from John’s formulaic deposition that he is ready, willing and able to perform, the evidence falls well short of establishing a prima facie case of such capacity.
Even assuming in John’s favour, that the fact that he has not paid a deposit in the traditional sense is not itself a disentitling breach of contract, in his affidavit of 5 July 2023, John recognises that he could only pay the ‘deposit’ of $800,000 following realisation by him of some unidentified real assets. In addition to paying the $800,000 ‘deposit’, John will also need to find an additional $1.2 million, as well as meeting, on his case, one third of the costs that are likely to be incurred in connection with all works necessary to obtain certification, then registration of the plan of subdivision. John’s evidence does not condescend to any identification of those costs or their amount. In Daniel’s affidavit sworn 13 July 2023, he estimates the costs of attending to the matters specified in the fire engineering report as between $200,000 to $300,000, with the estimated costs associated with the works the subject of the Emergency Order as being in the vicinity of $400,000. If those estimates are correct, John’s share of the costs and expenses that will need to be incurred in order to obtain certification of the plan of subdivision and hence its registration, are in excess of $200,000.
In response to a submission as to the inadequacy of John (and Ritz Bitz’s) undertaking as to damages, offered as a part answer to the application for removal of the Caveat, John was granted leave to file and serve a further affidavit as to his financial position and that of Ritz Bitz. In his affidavit sworn 10 July 2023, John deposes to combined assets of approximately $1 million held by John and Ritz Bitz. The value of those assets includes the value of a 50% interest in a trust known as the LaTrobe Valley Hotel Unit Trust (the ‘Hotel Unit Trust’), the trustee of which is Cuttervale, which owns the Morwell Property. John ascribes a value to this interest of $500,000. This is strongly contested by Daniel and Amanda, who own the remaining 50% interest. In Daniel’s affidavit sworn 13 July 2023, he assesses the value of a 50% interest as effectively nil.
Putting to one side the question as to the adequacy of the undertaking as to damages, even if the values ascribed to the interest in the Hotel Unit Trust are as asserted by John, which I doubt for reasons explained more fully below, the evidence shows that John lacks the capacity to complete the obligations imposed on him by the Footscray Contract, absent him obtaining substantial borrowings from a putative unidentified lender or equity from a coventurer. His evidence does not address the likelihood of either occurring and generally falls well short of establishing a prima facie case of being able to meet his obligations under the Footscray Contract.
Given the problematic nature of the alleged oral Footscray Contract, the fact that a Court would likely have to supervise potentially significant building works which have not been identified, much less delineated by the Footscray Contract and where John has failed to establish a prima facie case that he has the ability to discharge the obligations imposed on him by the Footscray Contract, John has not established a prima facie case at a sufficient level of certainty to justify the maintenance of the Caveat. Accordingly, the Caveat should be removed. Whilst that means that it is not necessary to consider the question of the balance of convenience, for completion, I shall do so.
Balance of convenience
The necessary balancing exercise requires a comparison of the comparative risk of injustice between allowing the application for removal of the Caveat which will facilitate settlement of the Talevski Contract but deny John the ability to obtain the final relief he seeks at trial against the prejudice to Daniel and Amanda as vendor and Mr Talevski as the purchaser under the Talevski Contract if the Caveat remains preventing settlement of the Talevski Contract. The balancing exercise is, of course, affected by my conclusions with respect to the prima facie case.
Ordinarily, such a circumstance would weigh in favour of the maintenance of the Caveat, given that contracts for the sale of land are customarily the subject for orders for specific performance because land is of a unique character such that damages are not an adequate remedy. Provided the caveator has a prima facie case and that the interest by the caveat has priority over any relevantly competing interest, the balance of convenience will ordinarily be in favour of the caveat remaining in place.
In addition to the concerns I have in relation to John’s prima facie case, there are additional factors present which are relevant to the balance of convenience.
First, I have concerns about the adequacy of the undertaking as to damages offered by Ritz Bitz and John. The insufficiency of an inadequate undertaking as to damages is a powerful discretionary factor against the grant of an interlocutory injunction.[13] As Gibbs J stated in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd:[14]
The giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined.
[13]Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570, 575 (Hodgson CJ in Eq).
[14]Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249, 311 (Gibbs J).
In that respect, the resources of the party offering the injunction must be sufficient and available to meet any damages awarded as a result or security might be required.[15]
[15]Bensons Funds Management Pty Ltd v Body in Balance Chiropractic Pty Ltd [2015] VSC 280, [30] (Croft J).
If John fails in his action, there is a very real possibility that Daniel and Amanda will suffer significant losses by reason of their inability to settle the Talevski Contract, which will in all probability expose them to a claim for return of the deposit of $300,000 and potentially a further claim for damages.
As noted above, John’s affidavit sworn 10 July 2023 deposes to total assets on behalf of himself and Ritz Bitz of approximately $1 million.[16] This figure is made up of shares held by John in publicly listed companies of approximately $240,000, a property owned by Ritz Bitz in North Melbourne valued at approximately $260,000 and the value of Ritz Bitz’s 50% interest in the Hotel Unit Trust of which Cuttervale is trustee, the value of which is estimated as $500,000. In John’s affidavit, he estimates the value of the Morwell Property as approximately $2 million and the secured debt as approximately $1 million, which gives rise to net assets of $1 million, with $500,000 being the value of a 50% interest.
[16]See above [76].
Whilst Ritz Bitz’s interest in the Hotel Unit Trust is admitted, and the defence generally is somewhat unclear, its essential gist is that the 50% interest in the Hotel Unit Trust was provided on the basis that the costs and expenses of acquiring and then operating the hotel business at the Morwell Property were to be met equally, which did not occur and instead were met overwhelmingly by Daniel and Amanda. If that is so, and if the contributions by Daniel and Amanda were made by loan to Cuttervale as asserted in the defence, then the net assets of the Hotel Unit Trust must reflect that liability. John’s estimate of the value of his interest in the Hotel Unit Trust ignores this.
In Daniel’s affidavit sworn 13 July 2023, he verifies that he, Amanda and a company owned by them are creditors of the Hotel Unit Trust as to approximately $290,000 and there are additional liabilities of the Hotel Unit Trust in respect of council and water rates of a little under $35,000. According to Daniel, the secured debt owed to Westpac Bank is $1,135,671.71 and the property has been on the market for over eight years, with the highest offer received being $1.8 million. Daniel has produced bank statements and a balance sheet to verify his estimates, which generally have a degree of cogency that John’s evidence lacks. In the circumstances, there is every basis to conclude that the plaintiffs’ asset position is overstated as a consequence and may further deteriorate in any event, given that the plaintiffs will have to fund this proceeding in the meantime.
Secondly, the consequence of the Caveat remaining in place is that the condition of the Footscray Property is likely to further deteriorate and/or Daniel and Amanda will have to finance rectification works in order to deal with the Building Order and the Emergency Order or face prosecution. Daniel deposes to a lack of available resources to deal with those matters and it is tolerably clear that part of the motivation for entering into the Talevski Contract is that those costs will be met by Mr Talevski. Given that Daniel and Amanda do hold other property assets, there is a possibility that some of these assets will have to be sold if the Talevski Contract falls over because the Caveat remains in place, so that the rectification works can be effected. Any losses or costs so incurred would likely fall within the ambit of the undertaking as to damages which further exposes its inadequacy, along with the separate but related inconvenience to Daniel and Amanda.
Thirdly, Mr Talevski’s interests as the purchaser of the Footscray Property will also be effected. There is evidence that Mr Talevski intends to develop the property and lease it to other interested parties. Both Mr Talevski and the interested parties will be denied the benefit of the property whilst the proceeding remains on foot. The fact that Mr Talevski was aware of the Caveat is relevant to the question of his notice of the prior asserted interest, but does not negate the prejudice he will suffer if he is deprived of the property by reason of the Caveat in circumstances where the Court may later reject John’s claim.
Fourthly, John’s interest in pursuing the purchase of the Footscray Property is now based in part on his ‘emotional’ connection to the Footscray Property as well as his belief that the value of lot 1 is significantly in excess of the price payable under the Footscray Contract of $2 million. He apparently no longer wishes to pursue the backpacker business. Notwithstanding the emotional connection with the property, it does not appear to have been sufficient to have resulted in his pursuit of this claim with any degree of alacrity, given that the Footscray Contract was allegedly entered into in July 2015 but proceedings were not issued by John until December 2022. Further, if John’s assessment that lot 1 is worth substantially more than the $2 million is vindicated at trial, it will sound in damages.
The above considerations provide further support for the removal of the Caveat.
Amendment of the defence
The defendants also apply for leave to file and serve an amended defence in the form of that exhibited to Daniel’s affidavit of 23 June 2023 (the ‘Proposed Amended Defence’). The most contentious of the amendments are those that relate to paragraphs 52 and 56, as they involve the withdrawal of certain admissions.
The legal principles concerning applications to amend pleadings are well-established.[17] Whether an amendment should be permitted is a matter of discretion to be exercised according to an assessment of where justice lies.[18]
[17]Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd (No 3) [2022] VSC 283, [22]–[31] (Connock J).
[18]Gregorich v Khouri [2020] VSC 5, [6] (Nichols J) (‘Gregorich’); Northern Health v Kuipers [2015] VSCA 172, [33] (Kyrou and McLeish JJA) (‘Northern Health’).
The Court must have regard to the relevant provisions of the Civil Procedure Act 2010 (Vic),[19] and case management considerations inform the Court of the grant and refusal of an application to amend.[20]
[19]Civil Procedure Act 2010 (Vic) ss 7–9; see Northern Health (n 18) [22]–[24] (Kyrou and McLeish JJA).
[20]Gregorich (n 18) [8] (Nichols J); Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 212 [94]–[95] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
As to amendments having the effect of withdrawing an admission, a party may only withdraw a pleaded admission (or any other matter operating to the benefit of another party) with the consent of that party or leave of the Court.[21]
[21]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 25.02(5); see Divcon (Aust) Pty Ltd v Devine Shipping Pty Ltd [1996] 2 VR 79, 80 (Beach J).
The specific principles concerning amendments which have the effect of withdrawing admissions were recently summarised by Nichols J in Gregorich v Khouri (a case where leave to withdraw admissions was refused):[22]
[10]… an explanation is ordinarily called for in recognition of the fact that the making of an admission is regarded as a serious step for a party to take – its effect being to remove the admitted fact from the arena of controversy between the parties. Thus it has been said that a party will not be permitted to withdraw an admission in a pleading ‘without good cause’.
[11]That is a more particular emanation of the principle that generally speaking, where a discretion is sought to be exercised in favour of one party and to the disadvantage of the other, an explanation will be required. An explanation is required in order to permit the court to see that the application is brought in good faith and to weigh the circumstances against the effects of an amendment and the objectives of the relevant rule. … French CJ [has] said that one consideration in the exercise of an interlocutory discretion is the potential loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification.
[12]It has been often said in the context of applications to withdraw admissions, that the explanation proffered should be based on evidence of a ‘solid and substantial character’. However, what is adequate will depend upon the circumstances of the particular case.
[13]Finally, it is now understood … that parties must be given a fair trial and a sufficient opportunity to identify the issues they seek to agitate, but according justice in an application to amend is not to be equated with a requirement to afford a party an unlimited opportunity to amend its case.
[22]Gregorich (n 18) [10]–[13] (Nichols J) (citations omitted).
In order to understand the significance of the proposed amendments, it is necessary to set out the relevant allegations in the statement of claim as well as the corresponding paragraph in the Proposed Amended Defence. Those parts of the pleadings which are not relevant to the amendment application are not set out. As is customary, the Proposed Amended Defence is prepared in such a way as to make clear the proposed changes from the defence.
In the below extracts, the relevant paragraph in the statement of claim is set out first followed by the corresponding paragraph in the Proposed Amended Defence.[23]
[23]Note that these pleading extracts have been slightly edited for clarity only.
Paragraph 52
52On or about July 2015, John as purchaser and Daniel and Amanda as vendors agreed to sell to John part of the Footscray Property later known as lot 1 on plan of subdivision PS747606V for $2 million on vendors terms.
PARTICULARS
The Footscray Contract is oral and contained in discussions as between John, Daniel, Amanda and Mrs Cumming (their mother) at the Croatian Club in Footscray in July 2015 by words to the effect alleged.
The Footscray Contract was also to be implied in fact, and the plaintiffs refer to and repeat the matters alleged at paragraph 58 hereof.
52 They deny
admitthe allegations in paragraph 52 and say further that:(a)in or around July 2015 John offered to purchase lot 1 on a proposed plan of subdivision for $2 million on terms including that:
(i)John would arrange, pay for and organise the lodgement of a plan of subdivision (the ‘condition precedent’);
(ii)John would pay a deposit of $800,000 to Amanda and Daniel so that Amanda and Daniel could purchase a place in which their mother could live;
(iii)the balance of the purchase price would be paid within 12 months of entering into a contract.
(c)the condition precedent was never fulfilled (the plan of subdivision having been rejected by the council for want of a fire safety plan) and no contract was ever formed; and
(d)otherwise say that the agreement as pleaded fails for want of compliance with s 126 of the Instruments Act.
Paragraph 56
56 There were terms of the Footscray Contract that:
(a)the purchase price with respect to the lot later known as lot 1 would be $2 million;
(b)there would be a large deposit representing 40% of the purchase price, namely $800,000, which would be paid by John providing a property for his mother to live in (she then residing at the Footscray Property);
(c)the balance of the purchase price of $1.2 million would be paid on terms, with John to develop a functioning backpackers at lot 1 and pay the $1.2 million 12 months after the establishment of the backpackers; and
(d)John would be responsible for obtaining planning permits and a plan of subdivision with respect to the Footscray Property, such that lot 1 could be sold to him as purchaser, and the balance of the lots be sold as necessary by Daniel and Amanda.
56 They refer to paragraph 56 and:
(a)say that no contract was ever formed and otherwise refer to and repeat the contents of paragraph 51 above;
(b)
admitdeny the allegations in subparagraph 56(a) and say further that John agreed to pay a deposit of $800,000 in cash to Daniel and Amanda so that Daniel and Amanda could purchase a property in which their mother could reside;
(c) they admit the allegations in subparagraph 56(b);
(d)they do not admit the allegations in subparagraph 56(c), and say John was at all material times aware that the terms stipulated a 12 month period in which he was required to pay the remaining $1.2m for lot 1 of the Footscray Property … subject to the subdivision being approved. No agreement was made between Daniel and Amanda of the one part and John of the other party regarding the establishment of a backpackers to finalise John’s purchase of lot 1, that was not a matter relevant to Daniel and Amanda;
(e) they admit the allegations in subparagraph 56(d).
Paragraph 57
57On or about July 2015 and thereafter through their conduct alleged at paragraph 59 hereof, each of Daniel and Amanda represented and warranted that:
(a)They would sell part of the Footscray Property which later became known as lot 1 on Plan of Subdivision PS747606V for $2 million;
(b)John should procure a plan of subdivision and planning permits so that lot 1 could be used by John as a backpackers; and
(c)part of the purchase price being $800,000 should be paid in kind by John purchasing a property for John and Daniel’s mother such that she would have a place to live (their mother at the time residing at the Footscray Property) and John should do this as soon as possible and prior to the title for lot 1 being transferred,
(collectively ‘the Representations’).
57They
do not admitdeny the allegations in paragraph 57 and further say that John’s intention to use lot 1 as a backpackers was not part of the agreement between Daniel and Amanda of the one part and John of the other part.
Paragraph 58
58 In reliance upon the Representations:
(a)on 17 August 2015, John acquired a property at 34 Crothers Street, Braybrook in the State of Victoria … for his mother; and
(b)John incurred costs and expenses in anticipation of the sale of lot 1 to him, including:
(i) the costs associated with a plan of subdivision; and
(ii)the costs associated with the planning permits for the proposed backpackers.
PARTICULARS
In relation to paragraph 58(a), title in the Braybrook Property was placed in Dianna Concilia (nee Cumming) and Norman Cumming’s name (being siblings of John and Daniel).
58 They refer to paragraph 58 and say:
(a)John purchased the Braybrook Property for $665,000, that is to say less than the agreed deposit price of $800,000 (which in any event was to be paid in cash to Daniel and Amanda). John subsequently used the Braybrook Property for security for Ritz Bitz to purchase a hotel in Wodonga and has since sold the Braybrook Property and applied the proceeds to his own use;
(b)they do not admit the allegations in sub-paragraph 58(b) and say further any costs and expenses incurred by John were consequent upon John fulfilling the condition precedent
the agreement to the effect he would be responsible for the costs and expenses incurred for the planning and subdivision of the Footscray Property over the agreed 12 month period.
In Mr Andreou’s affidavit of 13 June 2023, which refers to the proposed amendments to the pleading, he deposes that he briefed counsel to draw the defence and counterclaim and that counsel then retained did not meet in conference with Daniel and Amanda, but instead relied upon instructions provided to them in a paper brief prepared by the solicitor (over which he was instructed to maintain privilege).[24] Daniel deposes that the admissions were made in error and did not accord with his instructions. He otherwise verifies Mr Andreou’s affidavit.
[24]No argument was advanced that the nature of the application gave rise to an implied waiver of legal professional privilege.
Mr Andreou deposes that he scanned the defence but did not review it in detail and did not have time to read the defence and cross-reference it with the allegations made in the statement of claim. He deposes that he provided the defence to Daniel and Amanda for their comment. Among other things, he notes that his clients were not aware of the fact that an oral agreement is unenforceable due to ‘want [of] compliance with section 126 of the Instruments Act’ and further deposes that his clients agree that there were discussions regarding the potential subdivision of the Footscray Property but that there was a condition precedent, namely the registration of a plan of subdivision so that the lot was capable of being transferred. Mr Andreou deposes that it appears to be common ground that John was responsible for the registration of the plan and that no plan has been registered. He then deposes (in effect, submits) the consequence of the non-registration of the plan is that the condition precedent was never fulfilled and no contract oral or otherwise was ever formed.
In respect of the deposit of $800,000, Mr Andreou deposes that his clients agree that John offered to pay an $800,000 deposit (which was) to allow Daniel and Amanda to purchase a property in which Daniel’s mother could reside. He deposes to the fact that ‘to the extent that the defence contains an admission that the plaintiff was to purchase a property for the mother (to be treated as a deposit on the Footscray Property) that admission was made in error … instructions provided to [counsel] were to the effect that no deposit was ever paid’.
The plaintiffs understandably draw attention to the writ being filed on 19 December 2022 which allowed for more than enough time for the defendants to provide proper instructions for the defence, which was not filed until 3 March 2023.
They also refer to a letter sent by Mr Andreou dated 13 December 2022 which was sent in response to the letter from John’s solicitor dated 20 October 2022 which set out the asserted interest pursuant to the Footscray Contract. The plaintiffs submit that the letter of 13 December 2022 is consistent with the admissions made by Daniel and Amanda and therefore is contrary to the position now advanced that the relevant admissions were contrary to instructions.
The relevant letter reads in part as follows:
We write to you in part by responding to your letter dated 20 October 2022.
On our instructions and observations on the available material, the purchase of 34 Crothers Street, Braybrook (Braybrook) was achieved by John’s payment of $800,000 which represented part of or by way of a deposit (Deposit) of the agreed price of $2,000,000 for John to acquire one-third of 337-349 Barkly Street, Footscray. On 10 November 2015, Norman Cumming and Dianna Concilia were registered as proprietors each as to one of a total of two equal undivided shares as tenants in common. Norman and Dianna are John and Daniel’s siblings.
On 16 January 2016 a mortgage was registered on title to Braybrook in favour of Deemcon Pty Ltd and Zeema Nominees Pty Ltd (Mortgage AM480815U). We are instructed that the funds secured pursuant to the Mortgage was for the use and benefit of John to purchase a hotel in Wodonga. In late 2019, John sold the hotel in Wodonga and used the sale proceeds to discharge the Mortgage on 9 January 2020.
In about February 2020, Braybrook was sold and settlement took place on 29 April 2020. According to the financial settlement statement issues by PEXA, $349,694.07 was paid to Ritz Bitz Pty Ltd (Ritz Bitz) and $349,694.07 was paid to Dianna Concilia. On our instructions, at the request of John, Dianna paid the entire amount of $349,694.07 to Ritz Bitz. We are also instructed John received from the selling agent the balance of the deposit.
…
It appears John or Ritz Bitz has retained the Deposit since the sale and settlement of Braybrook.
Any application to withdraw an admission warrants careful scrutiny. It is most unsatisfactory for parties to admit allegations in a defence and shortly thereafter seek leave to withdraw admissions on the basis that inadequate attention was given at the time to the making of the admission.
Nevertheless, in the circumstances of this case, I am satisfied that the interests of justice favour the grant of leave.
The claim advanced by John rests on an oral contract allegedly entered into some eight years ago between siblings for part of land which as at the time of the making of the alleged oral contract had not been the subject of any plan of subdivision much less a registered plan. On any view, the alleged deposit term was unusual both as to its size, and as to the fact that the deposit was to be immediately released of sorts and was to be used for a particular purpose.
There are aspects of the existing statement of claim and the defence which are ambiguous and lack clarity. The same observation applies to the letter dated 13 December 2022.
The ambiguity with paragraph 52 of the statement of claim has been noted above. The statement of claim refers to the lodgement of the plan of subdivision. The prayer for relief proceeds on the basis that registration is necessary before the transfer of lot 1 can occur and the defence already refers to the absence of approval by council of the plan of subdivision as a bar to any obligation to transfer. In those circumstances, the consequence of the withdrawal of the admission relating to paragraph 52 is less significant that it might otherwise be the case (save for that part relating to the deposit). The difference between the parties appears to be not so much a dispute as to what was said but that which follows from the discussions, particularly in the context of the subject matter being part of land which was to be later subdivided. The dispute as now crystallised is one that largely relates to whether an oral contract in those terms is legally binding and, if so, whether it can be enforced. The question of enforcement was already in issue and the legally binding nature is for the most part a question of law. The question of enforcement is also sought to be expanded by the proposed reliance on s 126 of the Instruments Act. This largely involves a question of law, and the plaintiffs’ existing pleading already addresses, in part, questions of part performance as an answer to reliance on the statute.
The withdrawal of the admissions relating to the term for payment of the deposit which are contained in paragraph 52(a)(ii) and 56(b) raise more significant issues.
The better (but not the only) interpretation of paragraph 56(b) of the statement of claim is that the deposit term of the Footscray Contract was one to the effect that the payment of the large deposit of $800,000 would be effected in some way in kind by the purchase of a property for John and Daniel’s mother. Even on that interpretation however, the term is unclear; its most natural interpretation is that it would be bought for their mother and placed in her name. The reference in the particulars to paragraph 58 of the statement of claim to the title being placed in the name of two other siblings is not explained and is not readily reconcilable to any part of the Footscray Contract, however interpreted. It is also irreconcilable with the case that John now presses, which is that Daniel and Amanda are entitled to receive the entire $2 million. John’s recognition of an obligation in those terms implicitly accepts that he received the benefit of the sales proceeds from the sale of the Braybrook Property, which is the allegation that Daniel and Amanda seek to introduce via the proposed paragraph 58(a). In any case, an arrangement where John is required to pay $2 million to Daniel and Amanda is arguably more consistent with the deposit term that Daniel and Amanda now seek to press, which is that John was to pay $800,000 to them so that they could purchase a home (presumably in their names) in which their mother could reside.
Mr Andreou’s letter of 13 December 2022 has to be read in that context. This letter is ambiguous as well. It is certainly possible to construe the letter as conveying the receipt of instructions by Mr Andreou to the effect that he had received instructions that payment of the deposit was in fact achieved by John’s payment of $800,000 used to purchase the Braybrook Property. Another interpretation of the letter is that this part referenced Mr Andreou’s observations on the available material, which included the assertion made by John’s solicitor that the deposit had been paid by way of the purchase of the Braybrook Property, which Mr Andreou was attempting to point out was difficult to reconcile with his instructions that John had used the property as security for borrowings by Ritz Bitz and had obtained the proceeds of sale when the property was sold.
Given the vagaries that attach to the alleged oral contract, its subject matter and necessarily conditional nature and the ambiguity in the statement of claim, evidence would have been required to be led by the plaintiffs in any event. Further, the ambiguities in the statement of claim and the equivalent lack of clarity in the defence makes it easier to understand how the erroneous admissions found their way into the defence and were not picked up in a timely manner.
Overall, the interests of justice point to leave being granted to file and serve the amended defence and necessarily to withdraw certain admissions.
Conclusion
Orders will be made for the removal of the Caveat. Daniel and Amanda will be given leave to file and serve an amended defence, which will include leave to withdraw the admissions to paragraph 52 and 56.
I will hear the parties as to the form of orders and as to costs. I also encourage the plaintiffs to reflect on the current form of the statement of claim and the defendants on the proposed form of the amended defence.
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