Roberts v Eckert
[2016] SASC 197
•20 December 2016
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ROBERTS v ECKERT
[2016] SASC 197
Judgment of The Honourable Justice Hinton
20 December 2016
REAL PROPERTY - GENERAL PRINCIPLES - EJECTMENT - STANDING - GENERALLY
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - BY NOTICE TO QUIT - GENERALLY
EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - CONSTRUCTIVE TRUSTS - UNCONSCIONABLE CONDUCT
REAL PROPERTY - GENERAL PRINCIPLES - EJECTMENT - DEFENCES - IN EQUITY
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION - SURROUNDING CIRCUMSTANCES
The plaintiff is the registered proprietor in fee simple of a farm which is located at Langhorne Creek.
The plaintiff became the registered proprietor upon purchasing the farm from Rabobank. Rabobank sold the farm in its capacity as mortgagee in possession, orders having been made granting Rabobank possession in 2008. The defendant was then the mortgagor. The defendant has remained in possession of the farm and has continued to farm it.
The plaintiff contends that the defendant occupies the farm pursuant to a lease executed by him and the defendant upon the plaintiff purchasing the farm, but since March 2015 the defendant has occupied the farm as a trespasser.
The defendant, by counterclaim, denies that the lease was the basis of his occupation of the farm and seeks a declaration that the plaintiff holds the land on trust. He contends that there was an agreement whereby the plaintiff agreed to purchase the farm for the defendant upon the defendant agreeing to indemnify him for all costs related to the running of the farm and servicing the loan, and that the defendant would have the opportunity to repurchase the farm in the future at fair-market value.
The plaintiff served a notice of re-entry and re-possession upon the defendant. The plaintiff contends that the defendant has breached the lease by falling into arrears in rental payments. The defendant failed to deliver up the farm. The defendant has twice harvested grapes on the farm after being served the notice of re-entry. The plaintiff seeks an order for the delivery up of possession of the farm and damages for trespass and for the conversion of the grapes.
Whether the lease is of valid force and effect. Whether the lease was validly terminated. Whether the plaintiff holds the land on trust. Whether the defendant is liable for damages for trespass to the land. Whether the defendant is liable for damages for conversion.
Held:
1. The plaintiff did not hold the land on trust for the defendant. The counterclaim is dismissed.
2. The lease was validly terminated one month from the date of service of the statement of claim.
3. The defendant is liable for damages for trespass from the date of the termination of the lease.
4. The defendant is liable for damages for any conversion of the grapes from the date of the termination of the lease.
Landlord and Tenant Act 1936 (SA) s 9, s 10, s 11, s 12; Law of Property Act 1936 (SA) s 26; Real Property Act 1886 (SA) s 119, s 192, s 195; Sale of Goods Act 1895 (SA) s A2, referred to.
Austin v Keele (1987) 10 NSWLR 283; Baumgartner v Baumgartner (1987) 164 CLR 137; Carter v Brine [2015] SASC 204; Gissing v Gissing [1971] AC 886; Giumelli v Giumelli (1999) 196 CLR 101; Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641; Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326; Muschinski v Dodds (1985) 160 CLR 583; Tynte (1986) Ltd v The Commissioner of Stamps (1995) 65 SASR 188, applied.
Azzopardi v The Queen (2001) 205 CLR 50; Bahr v Nicolay [No 2] (1988) 164 CLR 604; Banner Homes Plc v Luff Developments Ltd [2000] Ch 372; Bannister v Bannister [1948] 2 All ER 133; Beatty v Guggenheim Exploration Co (1919) 122 NE 378; Blatch v Archer (1774) 1 Cowp 63; Brandi v Mingot (1976) 12 ALR 551; Carruthers v Manning [2001] NSWSC 1130; Commonwealth v Verywayen (1990) 170 CLR 394; Evans v Roberts (1826) 108 ER 309; Grant v Edwards [1986] Ch 638; Green v Green (1989) 17 NSWLR 343; Jones v Dunkel (1959) 101 CLR 298; Lloyd’s Bank Plc v Rossett [1991] 1 AC 107; McCormick v Grogan (1869) LR 4 HL 82; Mills v Brooker [1919] 1 KB 555; Mulgrave v Ogden (1590) 78 ER 47; O’Donnell v Reichard [1975] VR 916; Paragon Finance Plc v D B Thakerar & Co [1999] 1 All ER 400; Parij v Parij (1997) 72 SASR 153; Parsons v McBain (2001) 109 FCR 120; Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562; Public Trustee v Smith [2008] NSWSC 397; Rochefoucauld v Boustead [1897] 1 Ch 196; RPS v The Queen (2000) 199 CLR 620; Russo v Aiello (2003) 215 CLR 643; Saunders (Inspector of Taxes) v Pilcher [1949] 2 All ER 1097; Sidhu v Van Dyke (2014) 251 CLR 505; Sivritas v Sivritas (2008) 23 VR 349; Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 BPR 18,563; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Warren v Nut Farms of Australia Pty Ltd [1981] WAR 134; Weissensteiner v The Queen (1993) 178 CLR 217; Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685; World by Nite Pty Ltd v Michael (2004) 1 Qd R 338; Pallant v Morgan [1953] 1 Ch 43; Symmons Plains Pastoral Holding Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284; Moonta Corporation v Rodgers (1980) 26 SASR 143 , considered.
ROBERTS v ECKERT
[2016] SASC 197Civil
HINTON J.
Introduction
Paul Roberts, the plaintiff, is the registered proprietor in fee simple of the whole of the land comprised and described in the following Certificates of Title:[1]
·Register Book volume 6065, Folio 205
·Register Book volume 6065, Folio 207
·Register Book volume 6065, Folio 208
·Register Book volume 6065, Folio 209
·Register Book volume 6065, Folio 210 and
·Register Book volume 6088, Folio 676.
[1] Exhibits P9 and P29.
The land subject of these titles is located at Langhorne Creek and in combination comprises one contiguous parcel of approximately 185.19 hectares. It is farming land used mainly for viticulture and broadacre cropping and has been farmed by the defendant, Christopher Eckert, since 1979. Hereafter the land comprised of the six titles identified above is referred to as Eckert farm or the farm.
Mr Roberts purchased Eckert farm on 31 August 2010 from Rabobank Australia Ltd (Rabobank) for $595,000.[2] Rabobank sold the land in its capacity as mortgagee in possession, orders having been made by this Court granting Rabobank possession of five of the six titles in August 2008, and the sixth in October 2008.[3] The mortgagor of the five titles was Christopher Eckert. The sixth had been provided as security to Rabobank for money lent to Mr Eckert by his father, Henry John Eckert.
[2] Exhibit P20.
[3] Exhibits P5-P7.
Despite Mr Roberts purchasing Eckert farm in 2010, Mr Eckert has remained in possession of the property and continued to farm it. Mr Roberts contends that initially this occurred pursuant to a lease first executed by him and Mr Eckert in late August 2010, but since March 2015 Mr Eckert has occupied the farm as a trespasser. Mr Eckert denies this. Mr Eckert contends that whilst there was a lease, it was never put into effect and was not the basis upon which he has remained in possession of the land since Mr Roberts became the registered titleholder.
Mr Roberts claims that Mr Eckert has breached the lease, has failed to meet the requirements of a notice to remedy the breach, and has failed to deliver up possession of the farm to him despite Mr Roberts having served a notice of re-entry and re-possession upon Mr Eckert. Further, as a trespasser Mr Eckert has twice harvested the grapes grown in the vineyard on the farm thereby converting the same. Consequently, Mr Roberts has instituted these proceedings seeking an order pursuant to Part 17 of the Real Property Act 1886 (SA) (RPA) for the delivery up by Mr Eckert of possession of Eckert farm to him as the registered proprietor in addition to damages for trespass and the conversion of any grapes picked.
Mr Eckert says that in 2010 he was experiencing financial difficulties that resulted in Rabobank obtaining court orders permitting it to take possession of the farm. However, to avoid him losing the farm Mr Roberts agreed to purchase it as part of an arrangement whereby, provided that Mr Eckert indemnified Mr Roberts for all costs relating to the running of the farm and the servicing of the loan necessary to purchase it, Mr Eckert would have the opportunity to repurchase the farm in the future at a fair-market value.
Consequently, Mr Eckert, by counterclaim, seeks a declaration that Mr Roberts holds the land on trust. That trust, he contends, continues whilst Mr Eckert indemnifies Mr Roberts for all expenses incurred in respect of the farm of which Mr Eckert has notice, and only vests upon Mr Roberts giving notice of his intention to sell the farm, or, upon Mr Eckert giving notice of his intention to purchase the farm. If the former occurs, Mr Roberts may only sell the farm after he first offers it for sale to Mr Eckert at a fair-market value and Mr Eckert either, refuses to purchase it, or, is unable to do so. Alternately, if Mr Eckert gives notice of an intention to buy the farm, Mr Roberts must sell the farm to him at a fair-market value.
Mr Roberts denies any such agreement or arrangement was made.
I would dismiss the counterclaim and grant the relief sought by Mr Roberts under the RPA. I would also hold that Mr Eckert is liable for damages for trespass and for the conversion of those grapes harvested after one month from the date of service of the Statement of Claim filed in this Court on 5 August 2015.
Background
The following is not disputed and I find established on the balance of probabilities.
Paul Roberts is 37 years old. He has been a farmer since 2003-2004. He has his own 150 acre block on Nine Mile Road, Milang (Nine Mile farm) which he bought in 1999 with the assistance of his mother. He bought the Nine Mile farm from his parents upon his parents’ marriage ending. That property is used for cropping and sheep. There is no residence on the property, but Mr Roberts has installed a shed that has power.
Mr Roberts does not work the Nine Mile farm exclusively. Since 2004, with the exception of two periods where he spent time in the United Kingdom, he has also worked for Steven and Dianne Maidment. Since his return from the United Kingdom in late 2008 he has worked fulltime for Mr Maidment.
Before turning to farming, Mr Roberts worked in a hardware store in Strathalbyn. It was whilst he worked in that store in 2004 that he met Mr Eckert who was a customer. He had also come across Mr Eckert as a consequence of doing some grape harvesting work for Mr Eckert with his brother, Brenton Roberts, who was a grape harvester contractor.
Christopher Eckert is 56 years old and has been married for 28 years to Elizabeth. Mr and Mrs Eckert have two children, a daughter, Rebecca, and a son, Russell.
Mr Roberts met Mr Eckert’s daughter, Rebecca, in 2008 when she was working at the travel agency that assisted him in arranging his travel to the United Kingdom. They soon commenced a relationship that led to them buying a house in Mount Barker together in 2009 and ultimately marrying on 18 February 2012. Unfortunately the marriage did not last and Mr Roberts and Rebecca Eckert separated in April 2014. They are not on good terms and are currently embroiled in property division proceedings in the Federal Circuit Court.
As mentioned, Mr Eckert lives on Eckert farm and has done so since 1984.[4] The residence on the farm is located on Certificate of Title Volume 6065 Folio 210.[5] A vineyard of approximately 29.3 hectares is located on Certificate of Title Volume 6065 Folio 210 and Certificate of Title Volume 6065 Folio 207.[6] The balance of the land, that subject of Certificate of Title Volume 6065 Folio 209, Certificate of Title Volume 6065 Folio 208, Certificate of Title Volume 6065 Folio 205 and Certificate of Title Volume 6088 Folio 676, is used for cropping and sheep.[7] The land has a number of improvements including the residence to which I have referred, a machinery shed, barn, wool shed, irrigation shed and dam.[8]
[4] T296.
[5] Exhibit P2; T297.
[6] Exhibit P2 and P14; T298.
[7] Exhibit P2; T298.
[8] Exhibit P14; Statement of Claim.
In 2001 Mr Eckert first sought financial assistance from Rabobank.[9] In August 2006 arrangements with Rabobank were revisited. At that time Mr Eckert was granted a loan limit/credit facility of $1,615,000.[10] The security provided for the credit facility included all six titles comprising Eckert farm.[11] Mr Eckert was the registered proprietor of five of six of those titles. Mr Eckert’s father, Henry John Eckert, was the registered proprietor of the sixth title. Henry John Eckert provided a guarantee to Rabobank limited to the sixth title as part of the security arrangements accepted by the bank upon granting his son the credit facility to which I have referred.
[9] T299.
[10] Exhibit P3.
[11] Exhibit P3.
Repayments on the credit facility were to be made twice yearly, on 31 December and 30 June.[12]
[12] Exhibit P3.
By 2008 Mr Eckert had fallen significantly into arrears with Rabobank. On 18 March 2008 Rabobank served a notice of breach and intention to exercise a power of sale on Mr Eckert in addition to serving a notice of demand for $424,808.96 on Henry John Eckert in his capacity as guarantor. The default was not remedied. The bank issued a further notice on 4 April 2008. Ultimately Rabobank instituted proceedings in this Court against Mr Eckert and his father, seeking orders for the delivery up of possession of the land subject of the six titles comprising Eckert farm in addition to other land that had been provided as security for the credit facility.[13]
[13] Exhibit P4.
Henry John Eckert died on 21 June 2008.
An order for possession was made on 20 August 2008 against Mr Eckert in respect of the five titles of Eckert farm of which he was the registered proprietor. That order required that Mr Eckert deliver up possession of the land within 28 days of service of the order.[14]
[14] Exhibit P5.
By order dated 24 October 2008 this Court ordered the executors of Henry John Eckert’s estate, Christopher Eckert and his brother Richard Eckert, within 28 days of service of the order, to deliver up to Rabobank possession of the land subject of the one title of Eckert farm of which Henry John Eckert was the registered proprietor and which he had as guarantor provided as security for the credit facility extended to his son.[15]
[15] Exhibit P7; T299.
Despite the orders for possession, Mr Eckert remained in occupation and continued to farm the land.[16] He did not finally resolve all issues concerning his indebtedness to Rabobank until 2013.[17]
[16] T299-300.
[17] T320; Exhibit P73.
All attempts on the part of Rabobank to find a purchaser for Eckert farm in the period between the obtaining of orders for possession in 2008 and the purchase of Eckert farm by Mr Roberts in August 2010, proved unsuccessful.
On 19 July 2010 Mr Roberts and Rabobank executed a contract for the sale and purchase of Eckert farm.[18] The purchase price was $595,000. The purchase was conditioned upon finance being obtained. A deposit of $20,000 was paid to Elders Real Estate on 26 July 2010 by a personal cheque, drawn on Mr Roberts’ National Australia Bank Everyday Account.[19] Finance provided to Mr Roberts by the National Australia Bank (NAB) was approved on 6 August 2010.[20] The loan documents were executed on 18 August 2010[21] and the loan was drawn down on 31 August 2010,[22] being the date upon which settlement occurred.
[18] Exhibit P20.
[19] Exhibits P22 and P23.
[20] Exhibit P24.
[21] Exhibit P24.
[22] Exhibit P27.
The bank prepared three cheques for settlement – one in the sum of $574,959.98 in favour of Rabobank, a second in the sum of $31,138.00 in favour of the Chris Rodgers Trust Account and a third in favour of Finlaysons Trust Account in the sum of $2,938.19.[23]
[23] Exhibit P28.
Chris Rodgers is the registered conveyancer who acted for Mr Roberts. Finlaysons were the solicitors acting for Rabobank. The settlement statement prepared by Mr Rodgers revealed that on transfer stamp duty of $26,555.00 was payable in addition to a fee for the registration of transfer of $3,901.00.[24] The conveyancer’s fee was $660.00 inclusive of GST. Adjustments to account for rates, the emergency services levy and the phylloxera levy paid for a period post settlement were also payable.
[24] Exhibit P26.
In order to fund the purchase of Eckert farm, Mr Roberts borrowed $630,000 from NAB. The loan was an interest only loan with repayments to be made at six monthly intervals. Bank documents reveal that NAB understood the purchase to be as an investment and that:[25]
Mr Roberts will lease the property back to the vendors for $5,750 per month which will meet interest costs. Roberts intension it to realign of boundaries and sell of 5 individual, 10 to 20 acre blocks for approx $140k each (as advised by Raine & Horne) to reduce and eventually clear the debt (sic).
[25] Exhibit P17.
Around the same time Mr Roberts and Mr Eckert executed a Memorandum of Lease (the lease).
The lease was tendered and received as Exhibit P30. It was not registered under the RPA.[26] The lease commenced on 31 August 2010 and expired on 30 August 2011. Mr Roberts could not recall the date upon which he signed the lease, but recalled that it was prior to the settlement of the property. He signed the lease in front of a solicitor who worked in the offices of Alan Oxenham, a solicitor in Strathalbyn. Mr Eckert signed the lease, witnessed by Mr Maidment, in Mr Roberts’ presence in Mr Roberts’ shed on Nine Mile farm.[27]
[26] Real Property Act 1885 (SA) s 119 provides that a lease for one year need not be registered.
[27] T86.
Clause 1.17 of the lease provided that the purpose for which the land may be used by the lessee, Mr Eckert, was for broadacre farming and viticulture.
Under clause 4.1 the lessee was required to pay an annual rental of $63,000.00 plus GST. The rental was payable in monthly instalments of $5,250.00 plus GST, that is, $5,775.00 per month in advance.
Clause 4.2 of the lease provided for the rental to be adjusted on the first day of the renewal period if the right of renewal, to which reference is made below, was exercised. Clause 4.3 of the lease provided the mechanism for the determination of the market rental of the land.
Clause 10 of the lease provided for default and consequential remedies. It defined “events of default” and “default” as the failure by the lessee to pay the rental specified in the lease and the failure by the lessee to pay any other sum payable by the lessee under the lease, or to observe or perform any other covenant, condition or agreement on its part, or to be observed or performed pursuant to the lease for a period of 14 days after written notice specifying such failure and requesting that it be remedied has been given to the lessee by the lessor, unless the lessor agrees in writing to an extension of time prior to its expiration.
Clause 10.2 provided that whenever any event of default referred to in clause 10.1 occurred and was subsisting the lessor could re-enter the premises or any part of it and repossess the same.
Clause 11.1 of the lease provided for the giving of notices under the lease and provided that any notice or demand that is required or permitted to be given or served by either the lessor or the lessee shall be deemed properly given if served personally upon the party to whom the notice is addressed at the address given in the lease of that party. It also required that all notices shall be given in writing, and, if posted shall be deemed to have been given on the fifth day after mailing inclusive of the day of mailing.
Clause 1.16 of the lease provided for its renewal for one further year in accordance with part 3 of the lease by the lessee giving written notice to the lessor not earlier than four months and not later than three months before the end of the term or the extended period of the term. The term ended on 30 August 2011.[28]
[28] Exhibit P30, clauses 1.11 and 3.1.
Mr Eckert has never paid rent on a monthly basis, despite the terms of the lease. Rather he would pay amounts twice yearly in time for Mr Roberts to meet his mortgage obligations with NAB.
At the conclusion of the term within the meaning of the lease Mr Eckert did not seek the renewal of the lease under clause 1.16. In such circumstances clause 3.2 was enlivened. It provided:
3.2 Holding Over
In the event of the Lessee continuing in occupation of the premises after the expiration of the term or any renewal thereof without any demand for possession having been made by the Lessor the premises shall be held by the Lessee under a tenancy determinable at any time upon one (1) calendar month’s notice being given by either party to the other at the same rent and subject to the same terms and conditions as are herein contained so far as they can be applied to a monthly tenancy.
The table produced below contains the details of payments Mr Roberts received from Mr Eckert.
Payments by Mr Eckert Date Amount Method Reference 22 July 2010 $28,875.00 Payment by cheque drawn on NAB Account in the name of RJ & DS Eckert Farm Management Account, payment being drawn from such account on the 22 July 2010 and paid into Mr Roberts’ NAB Everyday Account on the same day. Exhibits D1, P31, P40
30 December 2010 $15,417.96 Payment by Viterra Ltd deposited into NAB Account in the name of Mr Roberts as the proceeds of sale of grain etc. provided by Mr Eckert (albeit from Rohrlach Farm) to the said Viterra Ltd. Exhibits D1, P37, T220-1 11 January 2011 $12,428.92 Payment by Viterra Ltd deposited into NAB Account in the name of Mr Roberts (albeit from the Rohrlach Farm) as the proceeds of sale of grain etc. provided by Mr Eckert to the said Viterra Ltd. Exhibit D1, T220-1 21 February 2011 $15,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 21 February 2011 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits P31, P40, D1 1 August 2011 $29,040.66 Payment by cheque drawn on NAB Account in the name of RJ & DS Eckert, payment being drawn from such account on the 1 August 2011 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits P31, P40, D1 23 August 2011 $7,650.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 23 August 2011 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits P31, P40, D1 17 February 2012 $32,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 17 February 2012 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits P31, P40, D1 18 May 2012 $750.00 Payment received from Mr Taylor (GST excluded) – silage. Exhibits P31, P41 T224 May 2012 $1,364.00 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. Exhibit P31, T223 May 2012 $909.00 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. T223 June 2012 $909.09 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. Exhibit P31 9 July 2012 $32,000.00 Payment by cheque drawn on NAB Account in the name of Elizabeth Marion Eckert, payment being drawn from such account on the 9 July 2012 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits D1, P31, P40 August 2012 $909.09 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. Exhibit P31 September 2012 $909.09 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. Exhibit P31 October 2012 $419.64 Payment received from Mr Stan Schofield of Paris Creek (GST excluded) – silage. Exhibit P31 7 February 2013 $13,817.44 Payment from Glencore (GST included). Exhibit P38 14 February 2013 $8,155.06 Payment from Agfarm (GST excluded). Exhibit P38 3 March 2013 $5,420.97 Payment from Teopfer (GST included). Exhibit P38 14 March 2013 $8,759.75 Payment from Agfarm (GST excluded). Exhibit P38 22 July 2013 $30,000.00 Payment by cheque drawn on NAB Account in the name of Elizabeth Marion Eckert, payment being drawn from such account on the 22 July 2013 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibits D1, P40 27 March 2014 $45,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 27 March 2014 and paid into NAB Account in the name of Mr Roberts on the same day and as part of a total deposit of $45,000.00. Exhibit D1 17 September 2014 $15,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 17 September 2014 and paid into NAB Account in the name of Mr Roberts on the same day and as part of a total deposit of $45,000.00. Exhibit D1 17 September 2014 $30,000.00 Payment by cheque drawn on NAB Account in the name of Elizabeth Marion Eckert, payment being drawn from such account on the 17 September 2014 and paid into NAB Account in the name of Mr Roberts on the same day and as part of a total deposit of $45,000.00. Exhibit D1 3 March 2015 $38,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 3 March 2015 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibit D1 25 March 2015 $7,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 25 March 2015 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibit D1 21 September 2015 $45,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 21 September 2015 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibit D1 29 March 2016 $45,000.00 Payment by cheque drawn on NAB Account in the name of CM Eckert, payment being drawn from such account on the 25 March 2015 and paid into NAB Account in the name of Mr Roberts on the same day. Exhibit D1 Total $469,735.61
As mentioned, in 2014 Mr Roberts’ marriage broke down.
After the breakdown of his marriage to Rebecca Eckert, Mr Roberts, through his solicitors, engaged in settlement negotiations with Rebecca. Initially during this period his relationship with Mr and Mrs Eckert remained on good terms but it too soon broke down.[29]
[29] T147; T162.
On 7 November 2014 Mr Roberts issued an invoice to Mr Eckert in the sum of $11,550.00 for rent due for the months of October and November 2014 “as per agreed Lease”.[30] Prior to this Mr Roberts had never invoiced Mr Eckert for rent. The invoice stated, “TERMS 14 DAYS FROM INVOICE DATE”. Mr Eckert did not pay this invoice.
[30] Exhibit P51.
On 6 January 2015 Mr Roberts issued a second invoice to Mr Eckert.[31] This invoice was in the sum of $23,100.00 and was for rent due for October 2014 - January 2015. Again the invoice stated, “TERMS 14 DAYS FROM INVOICE DATE”. Again Mr Eckert did not pay.
[31] Exhibit P51.
On 17 January 2015 Mr Roberts issued a third invoice to Mr Eckert.[32] This invoice was in the sum of $28,875.00 and was for rent due for the period October 2014 - February 2015. Once again the invoice stated, “TERMS 14 DAYS FROM INVOICE DATE” and once again Mr Eckert did not pay.
[32] Exhibit P51.
On 28 January 2015 Mr Roberts, by his solicitor Mr Oxenham, forwarded to Mr Eckert by ordinary pre-paid post, and purportedly in accordance with clause 11.1 of the lease, a letter enclosing a written notice dated 28 January 2015 that was entitled “Notice to Remedy Breach.”[33] It gave notice to Mr Eckert that Mr Roberts required him to pay the sum of $23,100.00, being the rent payable for the period 1 October 2014 to 31 January 2015. It made demand for the payment of the outstanding rental on or before 5.00 pm on the day that was 14 days from the date of the service of the notice. The notice also advised that if payment was not made within the time stipulated, that Mr Roberts may exercise his power of re-entry and termination of the lease and such other power or powers as may be available to him at law.
[33] Exhibit P52.
The purported breach was not remedied.
On 2 March 2015 Mr Roberts went to Eckert farm in possession of a Notice of Re-Entry and Re-Taking of Possession.[34] He personally served this notice on Mr Eckert. A copy of the Notice was also sent by registered post to Mr Eckert by Mr Roberts’ solicitors undercover of a letter dated 4 March 2015.[35]
[34] Exhibit P53.
[35] Exhibit P54.
On 3 March 2015 $38,000 was deposited into Mr Roberts’ NAB everyday account by Mr Eckert.[36]
[36] Exhibit D1.
On 28 May 2015 Mr Roberts instituted these proceedings.
Mr Eckert has remained and remains on Eckert farm.
The counterclaim
a. Introduction
It is convenient at this juncture to deal with the counterclaim. Mr Eckert contends that the basis of his occupation of Eckert farm was not the lease executed in August 2010. Rather it was an agreement reached over the course of a series of conversations between himself and Mr Roberts with others on occasion being present. That agreement pre-dated the purchase of the farm and, it is contended, colours all dealings with the farm by Mr Roberts.
In his Fourth Defence and Counterclaim the agreement was pleaded as follows:
11. In the course of that and several subsequent conversations as particularised hereunder the defendant agreed with the plaintiff (‘the Agreement’) as follows:
11.1that the plaintiff would approach the land agent acting for Rabobank and offer to purchase the land;
11.2that the plaintiff would obtain a mortgage loan from the National Australia Bank (“NAB”) in order to purchase the land;
11.3that the defendant would pay all mortgage payments due by the defendant (sic) to NAB, under the intended mortgage and would pay all outgoings in connection with the land such as rates and water charges;
11.4that once the subject land was purchased the plaintiff could use such land together with his own land to apply for and obtain consent to subdivide his own land contained in Certificate of Title Register Book Volume 5943 Folio 787;
11.5that part of the subject land (being Allotments 5 & 7 Langhorne Creek Road and sections 3579 and 3340 and being the northernmost part of the subject land) would be subdivided so as to create inter a new allotment with a separate title to be sold as a residence, with the proceeds of such sale to reduce the indebtedness to the National Australia Bank under the said mortgage.
Particulars of Conversations giving rise to the Agreement
Time and Place
Persons Present
Result of Discussions
Approximately May 2010 at house on subject land Plaintiff, Defendant, Elizabeth Eckert, Rebecca Eckert Defendant raising with plaintiff the possibility that plaintiff and Rebecca Eckert buy the subject land for a reasonable sum with the defendant to farm the land until it could be repurchased by him, with the plaintiff (sic) to meet all costs associated with any such proposal. Matter left on the basis that plaintiff and Rebecca Eckert would think about it About a week or two later at house on subject land Plaintiff, Defendant, Elizabeth Eckert, Rebecca Eckert Plaintiff and Rebecca Eckert advising defendant that plaintiff had been to the National Bank at Strathalbyn, that he had inquired about a loan to finance the purchase, that the Bank was prepared to lend the money but for the fact that he did not have enough income to fully service the loan, and that he would purchase the land. The plaintiff then suggested that he purchase the land but that the defendant and Elizabeth Eckert would help service the loan for which they would be entitled only to occupy the land during their lifetime. The proposal was not accepted During daylight hours at some unknown day in about June 2010 at the farm of Mr Stephen Maidment (sic) Plaintiff and defendant Plaintiff and defendant agreed to explore further possible arrangement with plaintiff to buy the land in his own name to enable the defendant to continue to farm and repurchase land in due course; defendant to carry all costs; plaintiff to use land to apply for subdivision of his own land; plaintiff to approach the land agent and offer to buy the land; defendant to confer with the bank manager at the Strathalbyn Branch of the National Australia Bank and discuss finance concerning the purchase During daylight hours at some unknown day in about June 2010 Strathalbyn Branch of the National Australia Bank, Strathalbyn Plaintiff, defendant, Mr David Stanton A discussion as to the proposal occurred and an application for finance was commenced to be drawn for the plaintiff to complete; understanding reached between all parties that part of the subject land would be subdivided and sold off to reduce the debt principal; that an application would be made by the plaintiff in conjunction with the subject land to subdivide land he already owned so as to reduce his separate debt to the bank; that the defendant was to continue to farm the land in order to service the loan; the defendant was to enter into a lease to assure the bank that he would continue to farm the land.
These conversations, Mr Eckert contends, gave rise to an agreement that had the consequence that in equity Mr Roberts holds the farm as trustee for the benefit of Mr Eckert either upon the basis that a constructive trust exists or pursuant to a resulting trust.
b. Constructive trust
Mr Eckert seeks the intervention of equity to impose a constructive trust binding Mr Roberts as the registered titleholder of Eckert farm. His contention is that here there is a constructive trust in existence analogous to that found in Pallant v Morgan.[37] Pallant v Morgan was a case where prior to the acquisition of title in land by one party, the parties agreed that one would purchase the property for the benefit of both, with the consequence that the second party stayed out of the market. Subsequently the first party and titleholder declined to subdivide the property and convey a portion to the second party. The analogy was conceded to be imperfect. The essential submission however was that there was a pre-existing agreement governing the purchase of Eckert farm which Mr Roberts now seeks to abandon with the consequence that Mr Eckert will sustain detriment as a result of his reliance upon the agreement. Such trusts are often referred to as common intention constructive trusts. This species of trust is different from a Muschinski v Dodds[38] constructive trust but will often arise in similar circumstances.[39]
[37] [1953] 1 Ch 43.
[38] (1985) 160 CLR 583.
[39] Sivritas v Sivritas (2008) 23 VR 349 at [134] (Kyrou J).
In Muschinski v Dodds, Deane J said: [40]
… In its basic form it [the constructive trust] was imposed, as a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights.
[40] (1985) 160 CLR 583 at 613; see also Baumgartner v Baumgartner (1987) 164 CLR 137 at 148 (Mason CJ, Wilson and Deane JJ).
To similar effect in Gissing v Gissing, Lord Diplock said:[41]
A resulting, implied or constructive trust – and it is unnecessary for present purposes to distinguish between these three classes of trust – is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.
(citations omitted).
[41] [1971] AC 886 at 905; See also, Banner Homes Plc v Luff Developments Ltd [2000] Ch 372; Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 615-6 (Mason CJ and Dawson J), 638 (Wilson and Toohey JJ), 654-5 (Brennan J); Bannister v Bannister [1948] 2 All ER 133 at 136 (Scott LJ); Beatty v Guggenheim Exploration Co (1919) 122 NE 378 at 380 (Cardozo J with whom Hiscock CJ, Chase, Collin and JJ agreed); Rochefoucauld v Boustead [1897] 1 Ch 196.
Put slightly differently, equity will intervene to ensure that the parties’ true intentions are not thwarted to the benefit of one where detriment is caused to the other by dint of his or her reliance upon those true intentions.[42] Relevant to this case, those true intentions are to be derived from the existence of an agreement, arrangement or understanding, which evidences the intention to create a trust prior to the vesting of the legal estate and which trust was intended to colour possession of the legal estate from the outset.[43] Thus, here the question is whether the circumstances in which Mr Roberts obtained title to Eckert farm bespeak an agreement, arrangement or understanding between Mr Roberts and Mr Eckert the effect of which would be subverted or undermined to Mr Eckert’s detriment if Mr Roberts were permitted to assert the common law rights attaching to his status as lessor and registered titleholder.
[42] McCormick v Grogan (1869) LR 4 HL 82; Rochefoucauld v Boustead [1897] 1 Ch 196. Such constructive trust is an institutional constructive trust; Parsons v McBain (2001) 109 FCR 120 at 125-6 (Black CJ, Kiefel and Finkelstein JJ).
[43] Paragon Finance Plc v D B Thakerar & Co [1999] 1 All ER 400 at 408-9 (Millet LJ).
As to the nature of the agreement, arrangement or understanding, in Gissing v Gissing Lord Diplock observed:[44]
As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct. It is in this sense that in the branch of English law relating to constructive, implied or resulting trusts effect is given to the inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words or conduct and not to any subjective intention or absence of intention which was not made manifest at the time of the transaction itself. It is for the court to determine what those inferences are.
[44] [1971] AC 886 at 906.
In this case any inference drawn as to the existence of an agreement, arrangement or understanding, must be referrable to the acquisition by Mr Roberts of Eckert farm. That does not mean that things said or done after title to Eckert farm was obtained by Mr Roberts are irrelevant. Evidentially such things may be indicative of the existence of the agreement, arrangement or understanding or otherwise.[45]
[45] Lloyd’s Bank Plc v Rossett [1991] 1 AC 107 at 132 (Lord Bridge of Harwich, with whom the other Law Lords agreed).
In Giumelli v Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ observed that the role of the court in declaring a constructive trust is to construe or interpret the circumstances and not to construct them: [46]
In submissions to this Court, the term "constructive trust" was used to identify the nature of the equitable remedy granted by the Full Court. Care is required in the use of the term "constructive" in this context. Professor Scott has pointed out:
"It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court 'constructs a trust'. The expression is, of course, absurd. The word 'constructive' is derived from the verb 'construe', not from the verb 'construct'. ... The court construes the circumstances in the sense that it explains or interprets them; it does not construct them."
The relief granted by the Full Court involved a trust that was "constructive" in that way. The Full Court so interpreted the circumstances as obliging the appellants, in good conscience, not to retain their beneficial interest in the whole of the Dwellingup property and as requiring them to answer the respondent's equity by bringing about a subdivision of the promised lot and conveying the title to it. The equity of the respondent was seen by the Full Court as sufficiently strong as not only to prevent the appellants from insisting upon their strict legal rights but also, in respect of the promised lot, to convey it to the respondent.
[46] (1999) 196 CLR 101 at [2].
I bear in mind the cautionary words of Professor Ong who in the fourth edition of his work, Trusts Law in Australia, said in relation to the species of constructive trust asserted in this case:[47]
It is of the first importance to recognise that in this species of constructive trust the common intention, common understanding, arrangement or agreement between the owner of the legal title and the claimant of the beneficial title is not enforced as an agreement between them, but it is enforced as the avoidance of the detriment which the beneficial claimant would otherwise suffer as a result of his reliance on the legal owner’s inducement to him, an inducement of which the agreement between the parties is merely probative. If the claimant has not been induced to act on the basis of the oral agreement, then the oral agreement, as a mere oral agreement, cannot be enforced for lack of written evidence.[48]
(emphasis in original; citations omitted).
[47] D S K Ong, Trusts Law in Australia, 4th ed, Federation Press, 2012 at 594-5.
[48] In this State, s 26(1) of the Law of Property Act 1936 (SA) prohibits the enforcement of an oral agreement said to establish a beneficial interest in land.
Thus as Professor Ong and the judgment of Lord Diplock in Gissing v Gissing quoted above make plain, it is not enough to establish the existence of an agreement, arrangement or understanding. Detriment must also be established. In this regard in Austin v Keele the Privy Council in an appeal from New South Wales said:[49]
Even if, however, it is accepted that these indicia can be prayed in aid as additional evidence of the common intention alleged, they carry the case no further. A trust does not come into being merely from a gratuitous intention to transfer or create a beneficial interest. There has first of all to be the additional ingredient of an intention or at least an expectation that the cestui que trust will act in a particular way, normally, though not necessarily exclusively, by making some contribution towards the cost of acquisition of the property in which the interest is intended to subsist. Moreover, Lord Diplock's formulation of the principle in Gissing v Gissing involves the further essential element that the trustee has so conducted himself that it will be inequitable to allow him to deny to the cestui que trust the beneficial interest which it is proved that he was intended to have. There has to be some conduct detrimental to the cestui que trust, even if only in the sense of an irrevocable change of legal position, which is referable to the common intention proved and undertaken on the footing of the grant of the beneficial interest claimed. Classically this takes the form of some contribution towards the purchase of the property, a feature which is entirely absent in the instant case. In fact there was not, from first to last, any evidence that Austin ever contributed a cent towards the cost of the properties.
[49] (1987) 10 NSWLR 283 at 291. See also, Grant v Edwards [1986] Ch 638 at 651 (Mustill LJ); Green v Green (1989) 17 NSWLR 343 at 355 (Gleeson CJ); Public Trustee v Smith [2008] NSWSC 397 at [99] (White J).
Detriment is not a matter of unfairness.[50] The relevant detriment is “that which would flow from the change of position if the assumption were deserted that led to it”.[51] The detriment may lie in an opportunity or right forsaken in reliance upon the agreement, arrangement or understanding, which justifies holding the legal titleholder to the agreement, arrangement or understanding, or, in some positive act or contribution toward the obtaining by the legal titleholder of the title done on the strength of the agreement, arrangement or understanding. Thus, equity will only intervene after entry into the agreement, arrangement or understanding where:[52]
… the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.
[50] Muschinski v Dodds (1985) 160 CLR 583 at 608 (Brennan J), 615-616 (Deane J).
[51] Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 at 674-5 (Dixon J); see also, Sidhu v Van Dyke (2014) 251 CLR 505 at 511 (French CJ, Kiefel, Bell and Keane JJ); Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 419 (Brennan J), at 404 (Mason CJ and Wilson J).
[52] Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 at 674-5 (Dixon J).
Hence in Muschinski v Dodds, Deane J said:[53]
Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.
[53] (1985) 160 CLR 583 at 620.
Here there are parallels with the principles that underpin proprietary estoppel.[54] Both proprietary estoppel and the device of the constructive trust seek to prevent the titleholder from insisting on his or her strict legal rights when it would be unconscionable to do so. In the proprietary estoppel context, the High Court in Sidhu v Van Dyke[55] indicated that the relevant question as to detriment may be stated in terms of asking what different course the claimant may have adopted had the agreement, arrangement or understanding not been made?[56] The answer will shed light on whether the legal titleholder is acting unconscionably in seeking to exercise his or her legal rights in relation to the property contrary to the agreement, arrangement or understanding. If it is established that the claimant would have been in no different position, it cannot be said that the relevant detriment will arise if equity does not prevent the titleholder from acting contrary to the agreement, arrangement or understanding.[57] It cannot be said that the titleholder is acting unconscionably. In this sense unconscionability becomes the guiding principle.[58] As to what amounts to unconscionable conduct in equity, in Commonwealth v Verwayen, Deane J, referring to Story’s Commentaries on Equity Jurisprudence and Thompson v Palmer,[59] considered the question of unconscionability to involve that which one party in conscience ought not to do as between the parties.[60] This requires the making of a judgment by the court after undertaking the ordinary process of legal reasoning.
[54] See D S K Ong, Trusts Law in Australia, 4th ed, Federation Press, 2012 at 593-4 and the authorities referred to therein.
[55] (2014) 251 CLR 505.
[56] Sidhu v Van Dyke (2014) 251 CLR 505 at [77] (French CJ, Kiefel, Bell and Keane JJ), [93] (Gageler J).
[57] Sidhu v Van Dyke (2014) 251 CLR 505 at [92] (Gageler J).
[58] Parij v Parij (1997) 72 SASR 153 at 161 (Debelle J), cited with approval in Carruthers v Manning [2001] NSWSC 1130 at [109] (Einstein J).
[59] (1933) 49 CLR 507.
[60] (1990) 170 CLR 394 at 441.
I turn to consider the evidence relevant to the question of the existence of an agreement, arrangement or understanding and the detriment that will flow should Mr Roberts not be kept to the terms of any agreement, arrangement or understanding. My recount of the evidence should be read against the background of the facts found at paragraphs [10] to [51] above.
c. Mr Eckert’s evidence
Approximately six months after Rabobank took possession of Eckert farm the bank advertised for expressions of interest from potential purchasers.[61] No expressions of interest were received to the knowledge of Mr Eckert. At this time he owed Rabobank a little over $2 million.[62]
[61] T300.
[62] T301.
On occasion the real estate agent appointed by the bank brought potential purchasers to the farm. From them, and from the agent, Mr Eckert learned that the offers being made were very low and unacceptable to the bank. It was as a consequence of this that Mr Eckert thought it might be possible for someone to buy the farm on his behalf.[63] That thinking ultimately led him to consider the possibility of Mr Roberts and his daughter buying the property in their names. Mr Eckert said he raised this with them at a family meeting or a family meal at his home in April or May 2010.[64] He said he thought it was an opportunity for Mr Roberts and his daughter to purchase the farm as it was going to sell cheap. He said it was after this that Mr Roberts went off and talked to the bank about the possibility of getting a loan.[65]
[63] T302.
[64] T302.
[65] T303.
Mr Eckert then gave his version of the conversation that in his evidence Mr Roberts had said occurred at the Nine Mile farm (the Nine Mile farm conversation). Mr Eckert thought that it took place at Mr Maidment’s property, but conceded he could be wrong. He agreed that the conversation did occur roughly in May 2010 and that the only people present were himself and Mr Roberts.[66]
[66] T304.
Mr Eckert said the conversation was about Mr Roberts buying the farm and holding it until such time as Mr Eckert had sorted out his difficulties with Rabobank whereupon he could assume responsibility for the loan that Mr Roberts would take out in order to purchase the farm.[67]
[67] T304.
Mr Eckert said he did not go to the Nine Mile farm specifically for the purpose of discussing the issue. He said he and Mr Roberts just happened to be working together on altering an air seeder and the conversation arose.[68] Mr Eckert said:[69]
A.The conversation really started from a conversation I had with Steven Maidment the day before, and I said how I was really wanting Paul Roberts to buy the property for me, so therefore he would get the benefit of a title sub-division, whatever you term it. Because if he didn't do it I'd have to go ahead with somebody else that I had teed up and I really wanted Paul and my daughter to get the benefit. Then he subsequently had a conversation with Mr Roberts -
Q.You'd better not tell us about your understanding of that conversation, but concentrate on the one you had with Mr Roberts.
A.Then the next day Mr Maidment informed me that he'd had a conversation with Mr Roberts and Mr Roberts understood now what I was wanting, and he was prepared to -
Q.Again you can't tell us what Mr Maidment told you, stay with your conversation with Mr Roberts.
A.Right. So consequently I had a conversation with Mr Roberts, I'm really not 100% sure what - could have been at his place, I thought it was at Maidment's but - but we had a conversation where Mr Roberts had agreed that he would go off to the bank and see about getting funding to buy the property with the intention that his advantage would be a title to sub-divide.
[68] T305.
[69] T305-6.
Subsequently Mr Eckert said:[70]
[70] T306-7.
Q.Was there any discussion concerning what would happen in the event that the proposal took off, of you continuing to farm the property.
A.Yes that was always the agreement.
Q.What discussions took place in regard to that.
A.Mr Roberts agreed that he would - if he purchased the property, we would continue to occupy it and farm it and eventually when we were able to, we would take over the loan.
Q.Was there any discussion at that time concerning who if anybody was to be responsible for costs associated with the proposal and the on-going maintenance of the property.
A.Yes.
Q.What were those discussions, who said what.
A.The discussions were that I would have to pay for all of the costs associated with the operation and funding of the loan.
Mr Eckert said he was agreeable to assuming responsibility for all costs associated with the operation of the farm and funding of the loan.[71]
[71] T307.
Mr Eckert said that the day after the conversation at Nine Mile farm he went and saw David Stanton of NAB in Strathalbyn. Subsequently he attended upon Mr Stanton a second time, this time in the company of Mr Roberts.[72] The topic for discussion at the second meeting, the joint meeting, at NAB was Mr Roberts’ ability to obtain finance to purchase Eckert farm. Mr Eckert said he was pretty sure that the requirement of obtaining a lease came up during this meeting. The conversation was not extensive but the fact that the bank would require a lease was discussed.[73]
[72] T307.
[73] T308.
Mr Eckert said that Mr Stanton was aware that Mr Eckert was to continue to operate the farm and by doing so supply the income necessary to meet the loan repayments.[74] There was also discussion during the meeting that the boundaries of the farm could be realigned and one block sold off to reduce the mortgage.[75] Further one title could be transferred across to the Nine Mile farm in order that it could be subdivided and a further block sold.[76]
[74] T309.
[75] T309.
[76] T309.
Mr Eckert’s evidence was that Mr Roberts then negotiated with the real estate agent on his own and ultimately purchased the property.[77]
[77] T310.
Mr Eckert’s understanding was that he was required to farm the land and make enough income to service the loan.[78]
[78] T311.
With respect to the subdivision and movement of titles Mr Eckert consulted Chris Rodgers, a conveyancer.[79] He could not precisely remember but thought that he met with Mr Rodgers sometime in 2011. Mr Roberts was with him.[80] They agreed that Mr Eckert would pay the costs of an application for the realignment of the boundaries on Eckert farm in order that a block could be sold off, while Mr Roberts would pay for the costs associated with the transfer of a title from Eckert farm to the Nine Mile farm and consequential realignment of the boundaries of the Nine Mile farm.[81] Mr Eckert confirmed that the agreement was that the proceeds of the sale of the newly created block on Eckert farm would go directly toward the reduction of the mortgage held over the farm.[82]
[79] T316.
[80] T316-7.
[81] T317.
[82] T317.
Prior to the breakdown of Mr Roberts’ marriage to Rebecca, Mr Eckert never received a demand from Mr Roberts that he pay rent on a monthly basis, and never received an invoice for a monthly instalment.[83]
[83] T318.
Exhibit P30, the August 2010 lease, was put before Mr Eckert. He recalled signing it in Mr Maidment’s shed.[84] He said that he and Paul Roberts knew that a lease had to be executed for the purposes of obtaining the loan.[85] He said Mr Roberts was the one who arranged for the lease to be drawn up by his solicitor. Once the lease was ready Mr Roberts telephoned Mr Eckert and informed him that the lease was prepared and asked him to come across to Mr Maidment’s place of work to sign it.[86]
[84] T318.
[85] T319.
[86] T319.
The lease refers to an annual rent of $63,000. Mr Eckert said that that was the amount necessary to satisfy the bank loan. Mr Roberts informed him that the upshot of the arrangement was that he would have to pay roughly $32,000 every six months.[87]
[87] T319.
In cross-examination Mr Eckert agreed that he knew that as of 31 August 2010 Mr Roberts became the registered proprietor of Eckert farm. He understood that Mr Roberts was therefore the legal owner.[88] That said, he did not regard Mr Roberts as being free to do what he liked with the farm in the future. He explained:[89]
[88] T336-7.
[89] T337.
Q.Why not.
A.Because we'd had an agreement when we'd first gone to purchase the land.
Q.He could do whatever he liked with the land in the future, subject only to the lease that he'd entered into, is that right.
A.No, he'd had a verbal agreement that we'd all worked out together.
Q.So did you regard him as holding the land for you.
A.In effect, yes.
Q.What do you mean 'in effect'.
A.Well the idea was at the time when the deal was done, Mr Roberts would purchase the property and when we were able to, we would take over the loan and re-purchase the property ourselves and Mr Roberts would take a title for his payment.
After a series of questions that teased out his understanding of what it meant to be a trustee, such understanding being gained largely from his role as the executor of his father’s estate, Mr Eckert repeated that he regarded Mr Roberts as holding the land for him[90] and repeated his denial that Mr Roberts could do with the land as he pleased. The following exchange occurred:[91]
[90] T337-8.
[91] T339.
Q.If you wanted him to, he had to transfer it to you, is that what you're saying.
A.That was the deal that we'd all worked out together as a family.
Q.So he didn't really own the land in your mind did he.
A.Yes he did because he had the title in his name.
Q.So you thought as the legal owner, he couldn't do with it was (sic) he wanted, as he wished. Is that right.
A.I suppose as the legal owner he has a right to do what he did, but I suppose as a family unit we didn't expect otherwise.
Q.Well did you think that he could sell the land at any time in the future if he needed or wanted to.
A.Yes I suppose he could.
Q.So if he needed to sell the land to a complete third party, he would be able to do so.
A.I suppose he would have been able to.
Q.So if somebody had come along and made a valuable offer for the land, Mr Roberts in your mind would have been free to accept that offer.
A.Not really. I think that as a family we'd already organised this as an agreement, verbal agreement so I'm saying that he wouldn't have.
Mr Eckert was then cross-examined about the realignment of boundaries on Eckert farm and the Nine Mile farm and the amendment or transfer of titles related to doing so.[92] Mr Eckert said that the deal was that one title would be used to create a block that would be sold with the proceeds applied to Mr Roberts’ home loan, whilst the other would be used to create a block that would be sold to reduce the debt on the mortgage on Eckert farm. He said they talked only ever of creating two fresh blocks that could be sold.[93]
[92] T340.
[93] T340-1.
His attention was drawn to the content of Exhibit P17 and where it said:[94]
Paul Roberts will lease the property back to the vendors for $5,750 per month, which will meet interest costs. Roberts intension it to realign of boundaries and sell of 5 individual, 10 to 20 acre blocks for approx $140k each (as advised by Raine & Horne) to reduce and eventually clear the debt (sic).
[94] T341.
He said this was news to him and that Mr Roberts must have put this to the bank himself.[95]
[95] T342.
Cross-examination then turned to events occurring after the breakdown of Mr Roberts’ and Rebecca’s marriage.
Mr Eckert became aware of offers made by Mr Roberts to sell the farm after his relationship with Rebecca broke down in April 2014. In July of that year Mr Roberts visited Eckert farm and offered to sell the property to Mr Eckert for $850,000 or thereabouts.[96] At this time Rebecca had been consulting with a lawyer herself about the division of the property of the marriage.
[96] T373.
Mr Eckert was also asked a series of questions revolving around a deed of family arrangement pursuant to which land in the estate of John Henry Eckert, which Mr Eckert stood to inherit, was to be transferred to his daughter Rebecca.[97] He said that deed was executed in September 2008.[98] John Henry Eckert’s property was, however, never transferred to Rebecca. Subsequently the land was transferred into Mr Eckert’s name. This occurred in October 2014, after Mr Eckert had resolved all issues with Rabobank.[99]
[97] T345.
[98] T345.
[99] T368-9; Exhibit P11.
Discussions with Mr Roberts surrounding the offer to sell the land in July 2014 occurred in the context of Mr Roberts and his former wife Rebecca being embroiled in property settlement proceedings in the Federal Circuit Court. That fact colours the transfer of the titles subject of the deed of arrangement to Mr Eckert. Mr Eckert explained this as occurring because his daughter no longer had an interest in the property and wished him to have it in order that he could raise funds necessary to purchase Eckert farm from Mr Roberts.[100] Mr Eckert carried this plan through as far as consulting NAB for finance. He was advised that he first needed to get his taxation affairs in order.[101]
[100] T369; T387-8.
[101] T390.
It was put to Mr Eckert that entertaining Mr Roberts’ offer to sell Eckert farm for $850,000 in mid-2014 demonstrated that he did not believe that Mr Roberts was holding the farm for him.[102] He denied this. He said he had always worked on the theory that the farm was held for him.[103] He was then asked, if the farm was being held for him why he would need to pay for it. He explained that as a consequence of the failure to transfer titles and realign blocks permitting subdivision and the sale of fresh blocks, Mr Roberts had not received any benefit from purchasing the property, hence he expected he would have to pay him something.[104]
[102] T394.
[103] T394.
[104] T394.
It was put to him that he knew he had to come up with $250,000 over and above the $600,000 mortgage because he did not believe that Mr Roberts was holding the land on trust for him.[105] He disagreed, repeating that he had to compensate Mr Roberts for the fact that he could not get a title transferred. He said he arrived at the figure of $200,000 to $250,000 because that was what Mr Roberts was thinking of selling a block freshly created out of the Nine Mile farm using a title from Eckert farm for.[106]
[105] T394-5.
[106] T395.
Mr Eckert conceded that he had never discussed with Mr Roberts compensation were the subdivision plan to fall through.[107] He said however that they were hoping to succeed upon applying to the council a second time.[108]
[107] T395.
[108] T396; see below at [145]-[146].
Mr Eckert was then cross-examined to show that as at 30 June 2010 he owed approximately $2.6 million to Rabobank and that, taking into account all his property and the property he stood to inherit from his father, he had no hope of clearing that debt.[109] The point that the counsel sought to make was that the likelihood of Mr Eckert being in a position to take over the loan on Eckert farm taken out by Mr Roberts with the NAB was fanciful.[110]
[109] T434-5.
[110] T435-6.
Mr Eckert said that he had a conversation prior to Mr Roberts purchasing Eckert farm in which he expressed to Mr Roberts a hope to buy the farm back within 12 months. In this regard he referred to the assistance he was obtaining from Dean Brown and the authorities regarding drought relief as the reason why he thought he may be able to do so.[111]
[111] T436.
Negotiations with Rabobank regarding settling Mr Eckert’s indebtedness did not commence until March 2011 and thereafter.[112] It was the case then that between May and August 2010 Mr Eckert did not know what position Rabobank would take were he to explore the possibility of effecting a settlement with them. Nonetheless, Mr Eckert said he was anticipating a positive outcome because of what he knew regarding resolutions negotiated for other farmers during the exceptional circumstances period.[113] The suggestion was made that settling with Rabobank as at the middle of 2010 was a pipe dream. Mr Eckert denied this on the basis that being in the exceptional circumstances period he hoped for a favourable outcome which would have meant the bank would not pursue him for his debt or would not bankrupt him.[114]
[112] T436.
[113] T436.
[114] T438.
Subsequently counsel returned to the content of the 2010 agreement between Mr Roberts and Mr Eckert. The following exchange occurred:[115]
[115] T463-6.
Q.So at all times from settlement of the property on 31 August 2010, you were of the view, you were of the opinion that Paul Roberts held that property on trust for you. Is that your evidence to the court.
A.I'm not really sure what the terms 'holds it on trust' entails. The agreement was that Paul was buying the property and at some stage we would buy it back, take over the loan and buy it back.
Q.At some stage you would buy it back.
A.Take over the loan, whatever was left of the loan.
Q.Are you saying that you had an agreement that you were simply entitled to have the legal title to the land back at any stage by simply taking over the mortgage liability as it might happen to be.
A.Sorry, say that again please?
Q.Are you saying that your arrangement with Paul Roberts was that at any time after he had acquired the land from Rabobank in August 2010 that you could require him to transfer the land from him to you if you simply took over the mortgage liability as at the time the land was transferred back to you. Is that what you are saying.
A.Sorry, I don't really understand what you're saying. Say it again please, I'll listen better.
Q.Yes, I'm probably not putting it well, but as I understand what you're saying, you said a few minutes ago, is that you had an arrangement with Paul Roberts whereby you could require him to transfer the land back to you at any point in the future. Is that right.
A.Yes.
Q.Legal title to the land from him, Paul Roberts, to you, Mr Eckert.
A.At some stage, yes.
Q.And at any time in the future.
A.When we were able to.
Q.So when you're able to.
A.Mm.
Q.And all you had to do was to take over whatever the amount was owing under the mortgage at that time, is that what you are saying the arrangement was.
A.Yes.
Q.So if you turned up and said to Mr Roberts 'I now wish to take over the mortgage of the land, I require you, Mr Roberts, to transfer the legal title of the land to me and I am now going to take over the mortgage', is that what you are saying your arrangement was.
A.We had an agreement that that would happen down the track.
Q.Was that the limit of it, is that all you had to do, take over the mortgage, or did you have to do something else.
A.No, Paul Roberts had to transfer title back to his place for payment.
Q.Were there any other terms in the arrangement.
A.I forget what I said - did I say we'd take over the loan.
Q.And I asked you were there any other terms of the arrangement.
A.Not that I can recall just at the top of my head at the minute.
Q.Take you time if you want to think back to what you say is the arrangement. I'm don't want to put you under pressure (sic).
A.The arrangement was when we were able to we would take over the loan and the property would come back to us down the track.
Q.And it was up to you to say when you were in that position.
A.It would've been a combination of events that happened to make that happen.
Q.What do you mean by that.
A.We would've had to have been finished with Rabobank, able to get funding, whatever.
Q.And the moment that you told Mr Roberts that you wanted the legal title to the property back, are you saying that he had to transfer it back to you, the legal title.
A.That was the original agreement that we would take over the loan.
Q.Anything else, as I have said before, any other terms.
A.I can't recall.
Q.When was this agreement struck.
A.In in the initial conversation with Mr Roberts.
Q.Where did that take place, this conversation.
A.At his shed or at a dinner table.
Q.You're not sure now.
A.Not, not 100% sure, but it was all discussed, it was all developed over a period of meetings.
Q.So this wasn't arrived at on any particular occasion.
A.It would have been but I can't tell you which explicit meeting it was we had. We had quite a few conversations in a fairly short period.
Q.So you can't tell the court because you don't remember. Is that what you're saying.
A.I can't remember the exact time, the exact meeting but I can remember discussing it.
Q.What did you say to Mr Roberts.
A.When we were able to we would take over the loan.
Q.Did you say anything else.
A.I can't recall.
Q.Did Mr Roberts say anything to you in response.
A.He was all in agreeance at this time.
Mr Eckert then repeated that his understanding was that at some time in the future when he was in a position to do so he would take over responsibility for the mortgage and Mr Roberts would transfer title to the farm to him.[116] In return Mr Roberts would have the benefit of being able to use one of the titles to the land subject of Eckert farm for the purposes of realigning the boundaries on Nine Mile farm thereby enabling him to sell off one block.[117] There was no discussion of what would occur in the event that any application for realignment and the transfer of titles was rejected.[118] It was assumed that they could make it happen. The following exchange then occurred:[119]
[116] T466.
[117] T466-7.
[118] T467.
[119] T468-9.
Q.But at the time that you say that you entered into this arrangement with Mr Roberts in 2010 you didn't in your own mind think that it was meant to be legally binding as between you and him did you.
A.What would be legally binding, sorry?
Q.The agreement you've described to the court a few minutes ago.
A.We just assumed that it would be - amongst everybody that it would be a system of trust.
Q.I'm asking you about your belief. You didn't have a belief that the arrangement you'd entered into with Mr Roberts was intended by you to be legally binding on Mr Roberts.
A.I never dreamt that it wouldn't be done so I never even gave it consideration.
Q.You were approaching this arrangement that you've described as being simply an agreement within a family.
A.Yes.
Q.You would just trust each other to perform your arrangement as family members might.
A.Yes.
Q.Without intending there to be any legal consequences if one side or other didn't perform the agreement. Was that your intention.
A.Yes.
Q.So you simply hoped that Mr Roberts would act in the way that you had discussed with him.
A.Yes.
Q.That you weren't of the view in entering into this arrangement that he was legally obliged to do so.
A.I suppose when you put it that way that's right.
Q.Because you weren't thinking of this in terms of a legally binding arrangement you weren't concerned to deal with all of the details that you might need to do so if there was a contract for example between the parties.
A.Yes, that's right.
Q.So it wasn't a matter of concern to you to work out what would happen if for example the division of the land that had been talked about on the Nine Mile and the Eckert farm couldn't take place for one reason or another.
A.No, we never discussed it.
Q.Because you didn't intend for the arrangement to be legally binding between yourself and Mr Roberts.
A.Never even gave it a thought.
Mr Eckert was cross-examined about the negotiations engaged in during 2011 with Rabobank. Those negotiations involved him having to provide statutory declarations in which he listed his then current assets and liabilities.[120] A statutory declaration made by Mr Eckert for these purposes was admitted as Exhibit P72.[121] No mention is made in Exhibit P72 of any interest held by Mr Eckert in Eckert farm. Counsel put to him that that is because he did not believe that Mr Roberts held Eckert farm on trust for him.[122] He answered; “[i]t was in Paul’s name. I didn’t realise that it had to be mentioned.”[123]
[120] T451.
[121] T496.
[122] T495.
[123] T496.
Cross-examination then returned to Mr Eckert’s meetings and conversations with Mr Stanton. Mr Eckert said he first saw Mr Stanton at NAB alone before returning a day or two later with Mr Roberts.[124] He said that during his first meeting with Mr Stanton he told him of the plans that he and Mr Roberts had worked out for the purchase of Eckert farm.[125] As part of that meeting he indicated that whilst Mr Roberts would be taking out the loan Mr Eckert would be paying all the costs associated with the mortgage.[126] He said he would have told Mr Stanton of the nature of the arrangement, namely, that Mr Roberts was to purchase the property and when the Eckert’s were able to, they would buy it back.[127] In the meantime they would pay all costs. In his answer he used the words, “buy it back”.[128] Counsel pounced on this and Mr Eckert quickly corrected himself, saying that he meant that they would be taking over the loan.[129]
[124] T503.
[125] T503.
[126] T504.
[127] T504-5.
[128] T505.
[129] T505.
Mr Eckert asserted that the very reason for meeting Mr Stanton on his own was to inform him of the nature of the arrangement that he and Mr Roberts had arrived at.[130] He conceded that at that time it was important for him to remain on the farm and to retain the farm.[131]
[130] T506.
[131] T507.
Mr Eckert met Mr Stanton on his own the day after the meeting in Mr Roberts’ shed on Nine Mile farm.[132] In the joint meeting with Mr Stanton that followed a day or two later Mr Eckert and Mr Roberts explained how Mr Roberts was going to buy the property and how the loan was to be serviced. It was also repeated that the Eckerts would subsequently try to buy the place or take over the loan.[133] During this meeting Mr Stanton was also advised that Mr Roberts would take a title to Nine Mile farm in order to subdivide it and sell the fresh block. Further that Mr Eckert would also realign the boundaries on Eckert farm in order that he could sell a block and reduce Mr Roberts’ indebtedness under the mortgage was also discussed.[134]
[132] T509.
[133] T510.
[134] T510.
Mr Eckert said that the idea of realignment and subdivision was first raised with Mr Stanton in the joint meeting.[135] He said he did not tell Mr Stanton of this during the first meeting because it was a brief meeting and they did not get very far in their discussions.[136]
[135] T510.
[136] T511.
As to the lease he said he thought it was raised in the second meeting. In this regard he was asked what was said. He gave the following evidence:[137]
[137] T513-4.
Q.What was said on the topic of the lease at the second meeting.
A.Just that the bank would require a lease to ensure that the funds would be there to pay off the loan.
Q.Did that come as a surprise to you that Mr Stanton said that.
A.No, it was - I just took it as being a requirement of the bank, so it wasn't any real drama.
Q.Wasn't a matter of any concern to you to give a lease.
A.No. Not really.
Q.You understood what a lease was.
A.I'd never been in one before but it was - to me it was just a requirement of the bank and served no other purpose other than the bank needed it.
In the course of the discussion with Mr Stanton about the necessity of a lease Mr Eckert did not recall any mention being made of a lease performing a protective function for Mr Roberts in the event that he bought the land and the loan could not be serviced. He conceded that it could have been mentioned.[138]
[138] T515.
Mr Eckert agreed with counsel that a lease is a legal document and has a legal effect but added that that was of no concern to him at the time.[139] He signed the lease he said because that was what the bank wanted and was necessary in order for the loan to be obtained.[140] He did not read the lease. The lease was not, he said, a sham and would have some legal effect but what did not concern him.[141] He emphasised that it was just a tool that they needed in order to get a loan from the bank. He paid no attention to its detail.[142] He said:[143]
[139] T516.
[140] T516.
[141] T517.
[142] T517-8.
[143] T518.
Q.You understood that the price for you of the bank being prepared to lend the money to Mr Roberts was that you would have to in turn enter a lease with Mr Roberts.
A.Yes, that was it.
Q.You understood that Mr Roberts had a document that was legally enforceable.
A.I didn't really bother to look at it at the time but I suppose that's a thing that's come out since but at the time it was just purely there just as a tool for the bank to loan us the money, or loan Paul the money.
Q.But at the time you signed the lease, you intended that it have effect.
A.No. We never intended it to have any effect at all, it was just a requirement of the bank, that's why the lease was never adhered to, it was -
Q.Are you saying it was a pretend document, is it.
A.No, I'm not saying it was a pretend document but it was never adhered, it was just a lease that was never honoured or whatever you say, I just had to pay the money to the bank, or to Paul to pay to the bank.
Q.Would you agree that you understood that one of the reasons why the bank suggested that Mr Roberts enter into a lease with you was for Mr Roberts' own protection against you.
A.No. I can see that that they have advised him of that but for me it was just purely what we needed to do to get the loan, or Paul to get the loan.
Subsequently in cross-examination Mr Eckert reported that Mr Roberts had seen the bank about purchasing Eckert farm sometime before he first went to speak to Mr Stanton.[144] He said at that time they didn’t go ahead with the idea having discussed it over dinner because Paul wanted to keep ownership of the property for himself.[145] He was cross examined as follows:[146]
Q.What do you mean buying the property himself, to do what with it.
A.Paul Roberts was going to buy the property and he said we could stay there and live there as long as we liked, as long as we had to help pay off the loan, and we didn't agree with that because there was no point for us doing that. If we were never going to have any ownership of anything ever again in our life, why would we bother doing that?
Q.So what was different the second time around that you say there were some discussions between you and Mr Roberts.
A.Well, the difference was, in the meantime, I had gone off and found other people that were prepared to help me buy the farm and we discussed cutting titles off for payment for them and so then when I went and saw Mr Roberts the second time –
[144] T521.
[145] T522.
[146] T522-3.
Clause 3.2 obliged Mr Eckert to pay rent by monthly instalment in advance. As mentioned prior to November 2014, Mr Eckert paid the rent every six months in time for Mr Roberts to meet his six monthly mortgage payments. This was done with the agreement of Mr Roberts. In his evidence Mr Roberts said:[412]
[412] T85-6.
Q.Now the lease was prepared in a way that provided for an annual rental of $63,000 payable by monthly instalments in advance of $5,250 plus GST. Did you send Mr Eckert invoices after entering into the lease and the lease commencing on 31 August 2010 for those monthly amounts.
A.No, I did not.
Q.Did you have any discussion with Mr Eckert as to whether or not monthly invoices would be sent.
A.No, we never recall actually discussing that.
Q.Was there a reason why you didn't discuss that with him.
A.The reason was we were family. I was more than happy for him to pay me when he was able to generate the income and when my - to coincide when my payments were due to the bank to give him more time to generate income as his cash flow and financial situation was poor.
Q.Under your arrangement with the bank under its letter of offer to you of 6 August 2010 was that interest only loan or were you repaying principal.
A.That was interest only loan.
Q.How frequently did interest have to be paid.
A.Biannually, every six months.
…
Q.Did you inform Mr Eckert that interest was payable by you to the bank at six-monthly intervals on that loan.
A.Yes, I did.
Q.Did you speak to him on the topic of him making payments at intervals which would enable you to make those interest payments.
A.Yes, I did.
Q.What did he indicate to you that he would do.
A.He would pay me within the timeframe that I required to have the money in my bank so I could then pay the mortgage repayments that were directly debited or should be interest only interest repayments at that time directly debited from my account by the bank.
Mr Roberts explained that NAB gave him the option of paying the lease monthly, six monthly or yearly. He chose six monthly because that was better having regard to the cash flow realities of farming.[413] He said Mr Eckert was happy with this.[414] That said, the due date for interest payments on the loan did not coincide with harvest times,[415] but Mr Roberts was aware that Mr Eckert would have more money at certain times of the year.[416]
[413] T257; T260.
[414] T257.
[415] T257-60.
[416] T258.
Mr Eckert said he asked Mr Stanton that the repayments on the loan be six monthly to suit his cash flow.[417]
[417] T315.
There was no dispute that prior to the issue of the invoices Mr Eckert had paid what was necessary in time for Mr Roberts to meet his mortgage commitments.[418]
[418] T264.
Attached to the Notice to Remedy Breach was a schedule.[419] The schedule set out the details of the four outstanding instalments of rent totalling $23,100.00 inclusive of GST.
[419] Exhibit P52.
On the assumption that he was required to pay rent on a monthly basis upon the service of the invoices, Mr Eckert contends that he was not in arrears as of 2 March 2015. I do not accept this.
Between the commencement of the lease on 31 August 2010 and the date of termination, being 2 March 2015, Mr Eckert was required to pay 55 monthly payments of $5,250.00 per month plus GST (i.e. $5,775.00 inclusive of GST) totalling $317,625.00 (inclusive of GST). There is no dispute that the amounts contained in the table reproduced above were paid by Mr Eckert to Mr Roberts or received by Mr Roberts on behalf of or to the credit of Mr Eckert. The lease having purportedly been terminated on 2 March 2015 for non-payment of rent, payments made after that date must be deducted. On Mr Robert’s case, up until 2 March 2015, he had received $335,062.62 from Mr Eckert.
Mr Eckert’s counsel said his client had paid Mr Roberts $334,735.61 the difference being some figures used were GST exclusive and he included an additional payment of $909.00 for silage made by Mr Schofield. No agreed position was reached as to whether GST should or should not be included and no submissions were made on the issue. In the end it is unnecessary to decide as, as will be seen, the variance is immaterial to the result.
Mr Eckert conceded that from that total the following payments totalling $44,591.25 had to be deducted:
·Tractor/sprayer: $38,431.25[420]
·Windrowing of canola on the leased property of Mr Rohrlach: $1,540.00[421]
·Windrowing of canola on the leased property of Mr Rohrlach: $4,620.00[422]
[420] Exhibit P31. As to the $38,431.25, Mr Eckert had a John Deere tractor and vineyard sprayer. In 2010 they were repossessed by Rabobank. Mr Eckert asked Mr Roberts to buy the tractor and sprayer back for him; T98. Mr Roberts agreed to do so. He paid $38,431.25 for the tractor and sprayer; Exhibit P31; T98-101. Once it was paid for, Mr Rohrlach picked up the equipment and it was delivered directly to Eckert farm; T126. Thereafter Mr Eckert used the equipment for his own purposes; T126. Mr Eckert gave the following evidence:
Q.And therefore you asked Mr Paul Roberts to buy it for you.
A.That's right.
Q.And what arrangement was there at that stage as to would own the tractor and sprayer.
A.The arrangement was that Mr Paul Roberts would buy the tractor, we would pay it off and we would use it. Ultimately since we've paid, ultimately it would have been ours. In the meantime Mr Rohrlach had a half share in it or more than half share.
On 30 December 2010 Viterra Ltd deposited $15,417.96 into Mr Roberts’ NAB account; Exhibits P33 and P37; T220-1. Mr Roberts gave evidence that the payment was organised by Mr Eckert through his friend, Mr Rohrlach, who was harvesting canola at the time, to have canola delivered to the Viterra grain system. Using Mr Roberts’ NGR card at the time of delivery, they sold it as a cash price on delivery, which meant that the payment was automatically credited to Mr Roberts’ account; T104-5. Mr Roberts said this was a means of Mr Eckert paying him for the purchase of the tractor; T107. A further payment was received from Viterra to Mr Roberts on 11 January 2011 for $12,428.92; Exhibit P35. Mr Roberts gave evidence that this was also for the purchase of the tractor; T107. These two payments total $27,846.88, leaving $10,584.37 outstanding for the payment of the tractor. On 21 February 2011 Mr Eckert paid $15,000.00 to Mr Roberts by cheque; Exhibit P36. Mr Roberts gave evidence that this was for the balance of the tractor; T110. That evidence was not challenged. In my opinion Mr Eckert was right to concede that the payments related to the tractor and sprayer cannot be included in the rental payments that Mr Eckert owed Mr Roberts. Accordingly, on Mr Roberts’ case, Mr Eckert paid Mr Roberts a total of $296,631.37. This amount is further offset by the cost for the windrowing of canola totalling $6,160.00 that Mr Roberts organised for Mr Eckert. The total amount becomes is $290,471.37.
[421] Exhibit D1.
[422] Exhibit P42.
He also conceded that a further $9,036.28 had to be deducted from the amount paid to reflect payments made by Mr Roberts that Mr Eckert was responsible for.[423] I do not deduct these sums from the amounts paid. I do not do so because in cross-examination Mr Roberts said he made no claim to those amounts.[424]
[423] Rates and taxes - $7,709.15; Emergency Service Levy - $557.05; Road Rent - $78.08; Phylloxera Levy - $300.00; Stock Journal Adverts - $85.00; Beer Blacky - $307.00.
[424] T198; T200-1.
The amount actually paid in rent was then $335,062.62 less $44,591.25 or $290,471.37.
It follows that the amount paid by Mr Eckert during the period ending 2 March 2015 was $27,153.63 less than the amount which was payable under the lease for that same period (i.e. $317,625.00 payable in rent less the amount of $290,471.37).
Using counsel for Mr Eckert’s figures, the amount paid as at 2 March 2015 less the sums paid for the tractor and sprayer and for windrowing is $290,144.36 leaving a shortfall of $27,480.64.
Thus, an event of default within the meaning of clause 10 of the lease occurred.
I do not overlook the fact that focusing on the total amount of the arrears risks overlooking the fact that the event of default was in fact the non-payment of the monthly rental for the months of October 2014, November 2014, December, 2014 and January 2015.[425]
[425] Exhibit P52.
As mentioned the lease was prepared on the advice of Mr Stanton. The purpose of it was to formalise the intended relationship. Mr Eckert did not consider the lease to apply because he had never been required until November 2014 to pay rent by monthly instalments. However, Mr Eckert did not contend that the lease was a sham. He conceded it had legal consequences and he knew as much.[426] Both he and Mr Roberts gave evidence that they considered the lease necessary in order that finance be obtained from NAB.[427]
[426] T517.
[427] T252-3; T308; T319; T516; T518.
I have concluded that there is no basis upon which it can be concluded that Mr Roberts and Mr Eckert in executing the lease did not intend to be bound by it. Non-payment of monthly rental amounted to an event of default within the meaning of clause 10.1. That in turn triggered the right contained in clause 10.2. In my view, in accepting the rent at six monthly intervals, Mr Roberts waived the right contained in clause 10.2 as picked up by clause 3.2 to re-enter and re-possess the premises. I do not think his action may be taken as indicative that the lease no longer subsist.
Mr Eckert’s opinion as to the non-application of the lease was based simply on the fact that he had never been asked to pay rent monthly. However, as I have said, he did not contend that the lease was a sham, knew it would have legal consequences[428] and knew it was obtained so as to make sure that the rent would be paid.[429]
[428] T517.
[429] T252-3; T308; T319; T516; T518.
The parties’ conduct does not bespeak abandonment of the lease. Viewed objectively, the reason for the parties entering into the lease remained throughout. That reason primarily was to satisfy the bank that there was in place a mechanism whereby the lessor could guarantee the payment of the rent by the lessee.
Non-payment of the rent on a monthly basis amounted to a breach of clause 3.2. That had the consequence that clause 10.3 of the lease picked up by clause 3.2 was engaged. It provided:[430]
10.3In the event any covenant or provision contained in this Lease shall be breached by either party and thereafter waived by the other party such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach under this Lease.
[430] Exhibit P30.
The effect of clause 10.3 is that there can be no general waiver. Thus, with each month that passed from 31 August 2010 where no monthly instalment was made, a separate waiver of the right to re-enter and re-possess occurred. With the issue of the first invoice Mr Roberts purported to regularise matters.
In my view, the lease was validly terminated on 2 March 2015.
If I am wrong in this, Mr Roberts has nonetheless given one months’ notice of his intention to determine the tenancy. That notice was pleaded in his Statement of Claim which was filed on 5 August 2015.[431] Notice having been given, and one month since service having elapsed,[432] under the terms of the lease he is entitled to possession.
[431] See [29].
[432] Proof of service has not been effected. However, by his appearance it is plain Mr Eckert has been served.
c. Should relief be granted?
Mr Eckert contends that Mr Roberts is estopped from seeking an order that he deliver up vacant possession. His argument is founded upon the fact that previously Mr Roberts was happy to receive the rent at six month intervals. He contends it would be unconscionable for Mr Roberts to revert to the terms of the lease and insist upon him being ejected for failing to pay rent monthly. This argument can be shortly dealt with. First, irrespective of the arrangement, there is no evidence of any detriment. There is nothing to suggest that Mr Eckert had ordered his affairs in reliance upon the arrangement that rendered it unconscionable for Mr Roberts to seek to rely upon the terms of the lease. In such circumstances to grant relief would be to outflank the bargain reached between the parties and contained in the lease. Second, even if I were to conclude that an estoppel has been made out, the lease is nonetheless terminable upon one months’ notice being given. That, as I have said, has been done.
Complexity is introduced into this case by the fact that Mr Roberts seeks an order under s 195 RPA on the basis of default in the payment of rent and alternately due to the lease being terminated.
The power contained in s 195 RPA is discretionary. The proviso contained in s 195 RPA could be considered to reflect the longstanding approach of equity which would generally refuse relief if the lessee has made good the arrears and all costs and expenses associated with the action taken for the recovery of the rent. In this regard in Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd McLelland CJ in Eq said:[433]
…The general principles on which an application for relief against forfeiture is dealt with may be briefly stated as follows. The court treats a power to forfeit a lease for non-payment of rent as a security for the rent and, generally speaking, on payment of any outstanding rent the court will grant relief against any such forfeiture on such conditions as it may consider appropriate in the particular circumstances, which usually involve payment of the lessor’s costs and expenses. Although relief against forfeiture is a discretionary remedy, the burden of establishing that a forfeiture for non-payment of rent should not be relieved against, where all arrears of rent have been paid and where no interests of third parties have intervened, is a very heavy burden and normally involves demonstrating that by reason of the conduct of the lessee or for some other reason, the grant of relief against the forfeiture would be inequitable (see generally Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562, Steiper v Deviot Pty Ltd (1977) 2 BPR 9602, Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635, Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 and Cicinave v Jasco Pty Ltd (1989) 5 BPR 11,139).
In the present case there has been a long history of untimely payment of rent, but it must be said that the delays in payment could not be described as having been particularly gross. One can understand the frustration of a lessor where payments of monthly rent are almost invariably delayed for periods of at least two or three weeks, as in most cases here, but that is not the sort of default which would normally lead to a refusal of relief against forfeiture.
[433] (1995) 7 BPR 14,326 at 14,329; Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562; Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685 at [23] (Campbell J).
The proviso contained in s 195 RPA permits a summary approach by this Court in those cases to which it relates. It does not have the effect of abstracting from the discretion granted power to grant relief if less than all rent due and all costs incurred by the lessor have been paid. Further, the power conferred by s 195 RPA does not implicitly abrogate the powers available to this Court in the exercise of its equitable jurisdiction more generally.[434]
[434] Symmons Plains Pastoral Holding Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 at 289-90 (Zeeman J).
It has been held that the test where default has been made good is one of unconscionability.[435] In determining whether it would unconscionable to forfeit the lease on the lessor’s application, the gravity of the conduct engaged in by the lessee and its impact upon the lessor will be a significant factor as will the landlord’s need for the protection of termination.
[435] World by Nite Pty Ltd v Michael (2004) 1 Qd R 338; Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 BPR 18,563 at [26]-[28] (Barrett J).
Since 2 March 2015 Mr Eckert has continued to pay the rent at six monthly intervals. On 3 March 2015 he paid $38,000.00, on 21 September 2015 $45,000.00, and on 29 March 2016, $45,000.00.[436] No explanation has been given as to why the last two payments were $45,000.00. I understood Mr Roberts to have renegotiated his loan with NAB so that it returned to being an interest only loan late in 2014.
[436] Exhibit D1.
The $38,000 paid on 2 March 2015 cleared the arrears in rent for October through to February and included rent in advance for March 2015. In fact Mr Eckert would have been in credit to the tune of $3,490.00 on April’s rent. However, he again went into arrears in April and remained in arrears until September when he paid $45,000. For some time thereafter he would have been in credit but would have again gone into arrears until the March 2016 payment whereupon for a period he would have been in credit.
Mr Roberts gave evidence that he issued the invoices in the wake of the breakdown of his relationship with Mr and Mrs Eckert. He said:[437]
Q.There came a point in 2014 when you commenced to send invoices to Mr Eckert for rent payable under the lease. How and why did that occur.
A.The reason that occurred is our relationship had completely broken down. I was told that the last time I spoke to Mr Eckert and his wife that I was never ever to contact them again and I was completely concerned, really concerned that - yeah, that no further rent would be paid. Rebecca was being uncooperative with matrimonial division and settlement there, so nothing was happening on that side. I felt the only way that I could be secure in making further repayments that I needed to pay on the property was to send a monthly invoice and I reverted that back to the only thing that I had in writing between myself and Mr Eckert was the lease, as any other contact I had between from purchasing it to the time of the relationship breaking down, where everything was done verbally and that worked perfectly fine while we had a relationship but when the relationship broke down, I had no option, I felt to send monthly invoices. And I assume now, and realise now, and am thankful now that I was advised to get a lease and not just do it without a lease because, you know, at the time I couldn't perceive this happening but obviously it did.
[437] T162-3.
Mr Roberts gave evidence that he thought the NAB loan was converted to principal and interest in late 2013 with the first increased payment due in March 2014. He told the Court that he paid the principal component of the repayments twice before arranging with the bank for the loan to revert to an interest only loan.[438] Mr Stanton’s evidence was to the same effect, as was Mr Eckert’s.[439] Mr Eckert’s attitude was that he would just have to meet the increased liability, and he did.[440] In fact, as I have indicated, he has continued to pay the increased amount as at the close of his case.
[438] T166-7.
[439] T564; T566; T326.
[440] T326; T538.
In the circumstances, I conclude that the lease performed the function of a guarantee for the rent. Both Mr Eckert and Mr Roberts have indicated as much.[441] As indicated in the passage from the transcript reproduced above, Mr Roberts’ concern has been with ensuring that he receives the rent so that he could discharge his mortgage obligations. He claims no other detriment or concern warranting forfeiture as of 2 March 2015. The default in the rent as at 2 March 2015 was made good. I appreciate that soon thereafter Mr Eckert was again in default.
[441] T163; T515; T519; T538.
These proceedings were issued on 28 May 2015. There is an interesting question as to whether the acceptance of the rent paid on 3 March 2015 and its usage constituted a waiver of the then current default.[442] Mr Roberts indicated it had been paid voluntarily. By that I take him to mean as a consequence of Mr Eckert’s unilateral decision.[443] Nonetheless, Mr Eckert did not contend that waiver had occurred and I have not heard Mr Roberts in response. Putting to one side the question of termination under clause 3.2, had I been asked to exercise the power contained in s 195 RPA at a time one month from the date of service of the Statement of Claim, I would have refused to order ejectment and instead granted relief from forfeiture. I appreciate that Mr Eckert has not applied for relief from forfeiture. But he has in defence of Mr Roberts’ action submitted that had he applied for relief from forfeiture it would have been granted. I do not think he is barred from seeking relief from forfeiture because he has done so in defence of an action instituted under s 192 RPA as opposed to as part of a substantive application. Here I bear in mind the breadth of the power vested in the Court by s 195 RPA. In my view, an entitlement to relief from forfeiture may in a given case be a factor relevant to the exercise of the discretion conferred.
[442] See Megarry and Wade, The Law of Real Property, 3rd ed, Stevens, 1966 at 663. Acceptance and usage of the payments on 21 September 2015 and 29 March 2016 may be treated differently as they occurred after the institution of these proceedings; Civil Service Co-Operative Society Ltd v McGrigor’s Trustee [1923] 2 Ch 347.
[443] T170; T186; T214.
As at one month from the date of service of the Statement of Claim, all arrears would have soon been cleared, Mr Eckert would have been in credit, and Mr Roberts would have been in a position to satisfy the next mortgage instalment. No detriment has been identified as having been suffered by Mr Roberts and the ultimate purpose in the issue of the invoices and of the lease would have been achieved. Thus, termination was not on the evidence before me necessary to protect Mr Roberts. In such circumstances, in my view, as at that point in time it would have been appropriate to decline to exercise the power contained in s 195 RPA and to grant relief from forfeiture. It would also have been appropriate to make ancillary orders that would have the consequence of regularising the relationship between Mr Roberts and Mr Eckert so that it accord with the lease. However, because the lease has now been validly brought to an end under clause 3.2 in any event, and in those circumstances, it is appropriate to grant the relief sought under s 195 RPA. I will hear the parties as to the terms of the order I should make.
Trespass
Mr Roberts seeks damages for trespass. It is necessary to identify when Mr Eckert became a trespasser. As I would have granted relief from forfeiture up to the date one month from the date of service of the Statement of Claim, Mr Eckert did not become a trespasser until that date. I so hold.
Conversion
Upon becoming the registered titleholder to Eckert farm Mr Roberts became the owner of the vineyard on Certificate of Title Volume 6065 Folio 210 and Certificate of Title Volume 6065 Folio 207.[444] In Tynte (1986) Ltd v The Commissioner of Stamps, Perry J held that grapevines were, like nut and fruit trees, fructus naturales, in which case they were “part of the land and are neither stock nor chattels.”[445] Thus ownership in the vines passed to Mr Roberts with title to the land.
[444] Exhibit P2 and P14; T298; Exhibit P14; Voumard and Wikrama, The Law Relating to the Sale of Land in Victoria, 3rd ed, Law Book Co, 1978 at 54-5.
[445] (1995) 65 SASR 188 at 192. See also Saunders (Inspector of Taxes) v Pilcher [1949] 2 All ER 1097; Warren v Nut Farms of Australia Pty Ltd [1981] WAR 134; Voumard and Wikrama, The Law Relating to the Sale of Land in Victoria, 3rd ed, Law Book Co, 1978 at 54-5; Megarry and Wade, The Law of Real Property, 3rd ed, Stevens, 1966 at 556.
During the life of the lease Mr Eckert was entitled to the quiet enjoyment of the land including the vines and grapes.
I have concluded that the lease was terminated at the conclusion of one month from the date of service of the Statement of Claim. Thereafter Mr Eckert has remained in possession of the farm as a trespasser. From that point in time upon picking the grapes they were reduced to a chattel.[446] Mr Roberts had as from that point in time the immediate right to the possession of such chattel.[447] Thus the picking and sale by Mr Eckert of the grapes after that point in time are actions contrary to the immediate right of possession of Mr Roberts. There can be no doubt that in picking and selling the grapes after one month from the date of service of the Statement of Claim that Mr Eckert has asserted title over the grapes and deprived Mr Roberts of the same. The picking and sale of any grapes after that point in time constitutes the conversion of the grapes.[448] I so hold.
[446] Voumard and Wikrama, The Law Relating to the Sale of Land in Victoria, 3rd ed, Law Book Co, 1978 at 54-5; Sale of Goods Act 1895 (SA) s A2.
[447] Evans v Roberts (1826) 108 ER 309.
[448] Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 229 (Dixon J); Mills v Brooker [1919] 1 KB 555; Mulgrave v Ogden (1590) 78 ER 475.
Conclusion and orders
For the reasons I have given, I order:
1.The counterclaim is dismissed.
2.The lease was validly terminated one month from the date of service of the Statement of Claim.
3.I uphold the claim for possession of the land and action for ejectment.
4.The defendant is liable for damages for trespass to the land as from the date of the termination of the lease being one month from the date of service of the Statement of Claim.
5.The defendant is liable for damages for any conversion of the grapes grown on the vines on the land after the date of termination of the lease being one month from the date of service of the Statement of Claim.
6.I remit all questions relating to the quantum of damages to a Master of this Court.
7.I will hear counsel as to the form of my final orders and as to the question of when vacant possession should be provided. I will also hear counsel as to the question of costs.
7
20
1