Siracusa v Siracusa
[2022] ACTSC 94
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Siracusa v Siracusa |
Citation: | [2022] ACTSC 94 |
Hearing Date: | 25 March 2022 |
DecisionDate: | 3 May 2022 |
Before: | Kennett J |
Decision: | The Amended Originating Application is dismissed |
Catchwords: | CIVIL LAW – CONTRACTS – Remedies – consideration of the availability of specific performance – where agreement imposes some obligations that are not of an executory character – consideration of whether specific performance can be ordered in respect of part of the agreement |
Legislation Cited: | Corporations Act 2001 (Cth) |
Cases Cited: | Brett v East India and London Shipping Company (1864) 71 ER 520 Bridge Wholesale Acceptance Corp (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Wolverhampton and Walsall Railway Co v London and North-Western Railway Co (1873) LR 16 Eq 433 |
Texts Cited: | David Wright, Principles of the Australian Law of Remedies (Thomson Reuters, 2020) ICF Spry, The Principles of Equitable Remedies (Lawbook Co, 9th ed, 2014) LexisNexis, Halsbury’s Laws of Australia (online at 27 April 2022) |
Parties: | Mark Anthony Siracusa ( Plaintiff) Michael Brendan Siracusa ( First Defendant) Joy Chi Lok Chan (Second Defendant) Morris Legal Group Pty Limited (Third Defendant) |
Representation: | Counsel B Buckland ( Plaintiff) J Willlson ( First and Second Defendants) No Appearance (Third Defendant) |
| Solicitors Westbourne Legal ( Plaintiff) Pryor Tzannes & Wallis Solicitors ( First and Second Defendants) McInnes Wilson Lawyers (Third Defendant) | |
File Number: | SC 479 of 2021 |
KENNETT J:
Introduction
The plaintiff and the first defendant are brothers. The second defendant is the partner of the first defendant. In about 2004, the plaintiff and the first defendant started conducting business together. By early 2021, they and the second defendant held extensive interests together, some in their own names and others through corporate entities. Through a corporate entity, they operated a business known as the Brema Group, which was involved in demolition and earthworks. Their joint interests in real property included:
(a)two properties in Downer, held by the plaintiff and first defendant as joint tenants (the Downer properties);
(b)a property at Michelago, New South Wales, held by the plaintiff and the first defendant as tenants in common (the Michelago property);
(c)significant interests held by their respective family trusts in a company (Allan Street Nominees Pty Limited) which was developing a property at Curtin (the Curtin property); and
(d)a property at Mugga Lane, Symonston (the Mugga Lane property), owned by a corporate entity whose shareholders and directors were the plaintiff and the first and second defendants.
Early in 2021 a dispute arose between the plaintiff and the first defendant, which they were not able to resolve. On 26 July 2021, the plaintiff and the first and second defendants attended a mediation at which they were represented by solicitors. The mediation resulted in agreement as to the division of their various assets, which is reflected in a deed executed by the parties and dated 26 July 2021 (the settlement deed).
The settlement deed contains 49 clauses. It attempts to erect a comprehensive regime for the division of the various assets held by the plaintiff and first and second defendants and the unravelling of their joint business activities. While many of its clauses show the benefit of legal expertise having been brought to bear on them, others are expressed in quite a compressed way. More generally, the settlement deed indicates that it was drafted quickly. It is structured as if clauses were added as people thought of them, rather than different topics being dealt with in separate parts of the deed. Some of the deadlines envisaged for completion of important tasks have proved to be ambitious.
The first four clauses of the settlement deed list properties and entities which the respective parties were to “retain”. It was common ground between the parties that this was a shorthand way of providing that these properties and entities, hitherto owned jointly, would be transferred into the full ownership of one party or another. Relevantly to the present dispute:
(a)the Downer properties were to be transferred to the plaintiff (cl 3);
(b)the Michelago property was to be transferred to the first defendant, and he was to receive it unencumbered (cl 2);
(c)the entity that held the Mugga Lane property was to be transferred to the joint ownership of the first and second defendants (cl 1); and
(d)the Curtin property (or more precisely the interests that the two brothers held in Allan Street Nominees Pty Limited) was to be transferred to the plaintiff (cl 3).
These dispositions of property were subject to particular obligations contained in other clauses.
(a)As to the Downer properties, cl 13 of the settlement deed provided as follows:
Within 21 days of the date of this Deed Brendan is to sign all transfers for the properties listed in clause 3.
(b)As to the Mugga Lane property, cl 9 required the plaintiff to pay down the balance of the mortgage to $700,000 (plus an amount to be determined in accordance with cl 40), and then required the first defendant to take all action necessary to have the plaintiff removed from further obligations under the mortgage. The plaintiff was to sign all necessary transfer documents in relation to this property “within 21 days of the date of this Deed”.
(c)There was also a general provision in cl 26, as follows:
Mark, Brendan and Joy shall do all things necessary to complete the legal agreement for the transfer of the companies, properties, assets, et cetera within seven days of receiving each such legally settled document.
No express provision was made expanding on the reference in cl 1 to the Mugga Lane property being “unencumbered”. Argument proceeded on the basis that it was the intention of the parties that the plaintiff would pay the balance of any loans secured by that property. It can be observed that that did not necessarily need to be done before the plaintiff’s interest in the company that held the property was transferred, but that his obligation under cl 1 would not be completed until the property was in the hands of the first and second defendants and was unencumbered by any financial obligations.
The settlement deed also dealt with several other issues. It provided for the transfer of interests in several corporate entities associated with the Brema Group to the plaintiff (and for the first defendant to resign as a director of those companies). It provided for the Brema Group’s operations to be moved out of the Mugga Lane property by 31 December 2021; for arrangements in the meantime relating to access to parts of that property; and for a tenancy agreement to be signed in relation to parts of the property used for the Bremer Group’s operations. It provided for the future ownership of plant, equipment and vehicles associated with the business operations, as well as a number of specific chattels located at the various properties. It provided for the transfer of intellectual property rights. It provided for the transfer of bank accounts and a post office box, and for how the completion of tax returns for the 2020–2021 financial year was to be approached. It provided for a partnership known as the MA Siracusa and MB Siracusa partnership to be dissolved “on completion of all the property transfers and/or sales”. It contained a range of other promises, some of which are mentioned below.
The evidence does not show, in a comprehensive way, which of the many obligations created by the settlement deed have been carried out and which have not. However, the division of property has not proceeded according to the timetable agreed by the parties. The first defendant gave evidence at a general level that there were “a number of outstanding tasks, items and assets yet to be dealt with” and expressed a fear that, if granted the relief he sought, the plaintiff would “continue to fail to perform his other duties under the settlement deed”. In his evidence in reply, the plaintiff agreed that several tasks needed to be undertaken in addition to the property transfers which he seeks in these proceedings to have performed. He listed these as follows:
a. The payment of the loan and the subsequent transfer to the First Defendant of [the Michelago property], owned jointly by me and the First Defendant.
b.The part-payment of the loan for [the Mugga Lane property] and the subsequent transfer of shares I and MAS Family Holdings Pty Ltd… as trustee for the MAS family trust, hold in the JBM Investment Unit Trust … which owns the Mugga Lane property.
c.The Defendants are required to obtain valuations of the Michelago Property and the Mugga Lane Property.
d.On 12 August 2021, [the plaintiff’s solicitors] emailed a letter to [the defendants’ solicitors] … requesting a number of items be returned. …
e.The Defendants have requested that I sign a tenancy agreement for the period 26 July 2021 to 31 August 2021. I am content to do so but a completed agreement has not been provided.
f.The completion of the financials for the 2021 financial year. This is being actioned by the jointly engaged accountant for all the entities listed in the Settlement Deed. I am advised that the draft financial statements were provided to the First Defendant and Second Defendant by the accountant by email on 25 October 2021 and to [the defendants’ solicitors] via email on 22 January 2022.
This summary was not presented as a joint position. There are probably differences of view between the plaintiff and the first and second defendants as to what still remains to be done in order to carry out the terms of the settlement deed and who is responsible for the various delays. The following significant points seem to be clear.
(a)The Downer properties have not been transferred to the plaintiff. Draft transfer forms were sent to the solicitors for the first and second defendants on 5 October 2021. On 18 November 2021, the defendants’ solicitors responded noting errors in the title and land details in those documents. On 22 November 2021, the plaintiff’s solicitors acknowledged those corrections and asked what else the defendants considered needed to be done in order to effect the transfers.
(b)The transfer of the Michelago property to the first defendant and the discharge of the loan secured by that property have not been completed. The plaintiff signed a transfer document for that property, which was emailed to the first and second defendants on 1 December 2021. It has apparently not been signed by them and lodged.
(c)The transfer of shares in the entity which holds the Mugga Lane property, and the paying down of the loan secured by the property, have also not been completed. A share transfer document was also signed by the plaintiff and emailed to the first defendant on 1 December 2021.
(d)The plaintiff’s delay in discharging or paying down the loans that relate to the Michelago and Mugga Lane properties is connected to limitations on the finance available to him. The evidence does not allow any comprehensive assessment of his financial position, and thus the degree of difficulty he might face in raising the funds necessary to carry out these obligations. However, there is in evidence an email from his bank confirming that the necessary finance has been approved but that the bank requires, among other things, signed transfer documents for the Downer properties and the Michelago property. Clearly enough, obtaining full ownership of the Downer properties would put the plaintiff in a much better position to obtain finance.
(e)The plaintiff has not signed a tenancy agreement for the Mugga Lane property (which he has in any event now ceased to occupy). As noted above, his evidence is that he is content to do so, but a completed form of agreement has not been provided to him.
(f)The Curtin property has been sold. This was not provided for in the terms of the settlement deed or any express amendment to it, although contracts had been exchanged a few days before the deed was executed. The plaintiff understood that he would be entitled in due course to receive the first defendant’s share of the sale proceeds as well as his own. The defendants did not argue to the contrary. Payment to the plaintiff of the first defendant’s share of the proceeds has not occurred. The third defendant, which is a legal practice acting for the vendors of the property, was instructed by the first defendant to retain his share of the sale proceeds in its trust account. According to an email dated 30 September 2021 from the third defendant to the plaintiff, this was on the basis that “there remains a dispute between [the first defendant] and [the plaintiff] concerning [the] settlement deed”. Following the commencement of these proceedings there was some correspondence between the parties concerning the sale proceeds of the Curtin property. My attention was directed to a signed authority, sent by the first defendant to the third defendant on 22 February 2022, authorising transfer of the first defendant’s share of the proceeds of sale to a specified bank account. However, the evidence does not show whose bank account this was. It appears, in any event, to be common ground that the first defendant’s share of the sale proceeds remains in the third defendant’s trust account.
(g)There is a dispute between the plaintiff and the first and second defendants, which does not form part of these proceedings, in relation to the preparation of financial accounts for various of the entities that were previously in their joint control. That dispute has led to proceedings being commenced in this Court under the Corporations Act 2001 (Cth). The first defendant alleges that he, through his solicitors, has issued a direction pursuant to s 293 to the companies that presumably comprise the Brema Group to provide various financial reports to shareholders. Each company has failed to comply with the direction. The relief sought is that the Court direct that the companies provide to their respective shareholders complete and audited financial reports and directors' reports for the 2020–21 financial year and the period 1–26 July 2021.
This case
By his Originating Application filed on 18 November 2021, the plaintiff sought the following relief:
1.Declare that the written agreement entered into between the Plaintiff, the First Defendant and Ms Joy Chi Lok Chan on 26 July 2021 (the Settlement Deed) is valid and enforceable.
2.Direct the First Defendant to sign the transfers for the real properties known as [the Downer properties] and provide the originals to the Plaintiff within seven days of the date of these orders.
3.Direct the First Defendant to sign the mortgage discharges for the Downer Properties, and provide the originals to the Plaintiff within seven days of the date of these orders.
4.Direct Morris Legal Group Pty Limited to transfer the balance of the funds held by it in trust relating to the sale of [the Curtin property] … being 37.5% of the net sale proceeds retained on behalf of the defendant, within seven days of the date of these orders, into [Plaintiff’s bank details].
5.The First Defendant pay the Plaintiff’s costs of an incidental to this application on an indemnity basis.
The third defendant filed a notice submitting to any orders of the Court, save as to costs.
On the morning of the hearing, the plaintiff and the first and second defendants held some discussions which to some extent narrowed the issues between them. Without objection from the defendants, the plaintiff relied at the hearing on a revised set of proposed orders. This was reflected more formally in an Amended Originating Application filed on 30 March 2022. As amended, the orders sought by the plaintiff were as follows:
1.The First Defendant to sign and deliver to the Plaintiff the transfer and loan discharge documents for [the Downer properties] within 7 days.
2.The First Defendant to sign and deliver to the Plaintiff the transfer for [the Michelago property] within 7 days.
3.The Third Defendant is directed to pay the monies held in its trust account on account of part of the sale proceeds of [the Curtin property] against the loan for [the Mugga Lane property], being [bank details], within 7 days.
4.The Plaintiff undertakes, upon completion of the matters required in Orders 1 to 3 above, to pay out the whole of the loan over [the Michelago property] within 30 days of the completion of whichever of those matters is completed last.
5.The Plaintiff undertakes, upon competition of the matters required in Orders 1 to 3 above, to pay down the loan over [the Mugga Lane property] as required by the Settlement Deed dated 26 July 2021 within 30 days of completion of whichever of those matters is completed last.
6.The First and Second Defendants pay the Plaintiff’s costs of the originating application dated 17 November 2021 on an indemnity basis.
Prayer 3 in the Amended Originating Application was, as described by counsel for the plaintiff, in effect a compromise. The plaintiff maintained that he was entitled absolutely to the first defendant’s share of the sale proceeds from the Curtin property; however, he was prepared to accept an outcome in which funds went directly towards satisfying his obligations under the settlement deed to pay down the loan on the Mugga Lane property. The first and second defendants consented to that proposed order. However, counsel for the plaintiff also said that his client would not seek this order if he was unsuccessful in obtaining the relief sought by prayers 1 and 2. In that event, he would press for the order contained in prayer 4 of the original Originating Application.
Prayers 4 and 5 in the Amended Originating Application take the form of undertakings proffered by the plaintiff, which the Court would ordinarily simply note rather than state in the form of a mandatory order. Counsel for the plaintiff indicated that his client would not give these undertakings otherwise than as a condition for obtaining the relief sought in prayers 1 and 2. Thus, these prayers are central.
Prayers 1 and 2 were described in submissions as an application for specific performance of the first and second defendants’ obligations under the settlement deed. I have approached them on that basis, noting that, although the proposed orders might also be described as mandatory injunctions, the Court would generally not grant an injunction to enforce contractual rights in a case where specific performance of those rights had been refused.[1]
Prayers 1 and 2: transfers of property
Essential prerequisites
[1] Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 501.
Specific performance is an equitable remedy, available where a contract has been breached and the ordinary common law remedy of damages is inadequate. Specific performance in the strict sense is available only to enforce an “executory” contract[2] (that is, a contract which requires specific things to be done “in order to put the parties in the position relative to each other in which by preliminary agreement they were intended to be placed”),[3] although similar relief (essentially injunctive in form) may be available to require adherence to the legal regime put in place by an “executed” contract.
Prayer 2: The Michelago property
[2] JC Williamson Ltd v Lukey (1931) 45 CLR 282, 297 (Dixon J) (‘Lukey’).
[3] Wolverhampton and Walsall Railway Co v London and North-Western Railway Co (1873) LR 16 Eq 433, 439 (Lord Selborne LC).
Stating these basic preconditions for an order of specific performance is sufficient to indicate why an order of that character would not be made to facilitate the transfer of the Michelago property. The provisions in the settlement deed for the transfer of that property (cls 2, 26) operate only for the benefit of the first and second defendants. No obligation is imposed on them either to accept the transfer of the property or to facilitate it. It may be that, as a practical matter, the failure to complete that transfer is an impediment to the plaintiff’s bank advancing necessary funds to him. However, that is not something that arises out of any particular obligation under the settlement deed. There is no basis upon which the Court could order the defendants to sign and lodge the transfer document.
Prayer 1: the Downer properties
Three of the basic preconditions are satisfied in relation to the Downer properties. The fourth is more complicated.
First, there is no real dispute that the settlement deed is binding as a contract between the plaintiff and the first and second defendants. The document describes itself as a deed; it was signed by each of the parties and witnessed by their solicitors; it contains mutual promises which plainly amount to valuable consideration; and it describes itself in cl 42 as a legally binding document.
Secondly, it is tolerably clear that the contractual obligations of the first defendant include transferring his interests in the Downer properties to the plaintiff, including completing the documents needed for the transfer to be effective. Further, that obligation has crystallised.
Clause 13 of the settlement deed (set out above) requires the first defendant to sign the relevant transfer documents within 21 days of the date of the deed. This is one of the ambitious time frames in the settlement deed referred to above: obtaining valuations of the properties, drafting transfer documents and having them executed within 21 days would have been a tall order. As things turned out, compliance with the deadline in cl 13 was not possible because the first defendant was not provided with draft transfer documents within the specified time. However, I would not read the contract as excusing performance with the obligation in those circumstances. Clause 13 needs to be read with cl 26 (also set out above), which requires the first defendant to do “all things necessary” to complete the transfers within seven days of receiving “legally settled documents”. In that light, there is force in the submission advanced for the plaintiff that the reference to 21 days in cl 13 is to be understood as designating the earliest time at which the plaintiff was entitled to insist on the transfer. The exact relationship between the timeframes set out in the two clauses does not need to be determined for present purposes. If the draft transfers provided to the first defendant’s solicitors on 5 October 2021 constituted “legally settled documents”, it was necessary for him to execute them within seven days. Alternatively, if the documents became “legally settled” at the time when the plaintiff’s solicitors accepted the corrections suggested by the first defendant’s solicitors (on 22 November 2021), it was necessary for the first defendant to execute the documents within seven days of that date.
It was submitted for the first and second defendants that cl 26 of the settlement deed had not been triggered in relation to the Downer properties, because the terms of the relevant transfer documents had not been agreed between the parties and they were therefore not “legally settled documents” within the meaning of the clause. There are two difficulties with that submission. First, there is considerable incongruity in a construction of cl 26 in which a document needs to be “settled” (in the sense of “agreed”) at the moment a party receives it. Agreement to the contents of a document would normally entail having some time to read and consider it. The natural reading of the phrase (bearing in mind that the clause envisages a document that is “settled” at the time it is provided by one party to the other) is that it refers to a document settled by a lawyer. That reading also accords with the nature of the settlement deed and the types of document likely to be the subject of obligations under cl 26. A document seeking to effect a transfer of real property or shares will at least normally be in a standard form, with little if any need for its terms to be negotiated.
The possible exception to this last proposition is that a transfer of land requires the consideration for the transfer to be set out as a dollar figure; and, where money does not actually change hands, an appropriate figure must be inserted based on a valuation of the land. A valuation is necessary for stamp duty purposes and might conceivably be a matter for discussion. However, that consideration is not sufficient to justify a departure from the natural meaning of the words of the settlement deed. At least if the figure that has been inserted by a solicitor in a draft transfer document was arrived at in good faith, based on some probative indication of the true value of the land, the document is to be regarded as “legally settled” in the relevant sense. Here, the dollar values inserted in the draft transfer documents provided on 5 October 2021 were taken directly from reports which the plaintiff’s solicitors had obtained from a firm of valuers the previous month.
The second difficulty with the defendants’ submission is that, even if their construction of cl 26 is correct, there is no evidence of any substantive dispute or disagreement about the contents of the draft transfer documents until very recently. The first defendant, as noted above, made no response at all to the draft transfer documents for a period of about six weeks. His solicitors then noted some errors in the drafts, requiring corrections which the solicitors for the plaintiff agreed to. There is no evidence that any disagreement about the terms of the documents existed at that stage. The documents should not be regarded as having failed to become “legally settled” merely because the first defendant did not expressly say that he accepted them. On the morning of the hearing an affidavit was filed on behalf of the first and second defendants, annexing valuation reports on the Downer properties which they had obtained in February 2022. Those reports propose different (lower) valuations for the two properties from those which the plaintiff’s solicitors had taken from the earlier reports. However, this does not amount to evidence that there was any material disagreement between the parties in October or November 2021 as to the terms of the transfer documents (let alone any ongoing negotiations between their lawyers at that time).
For these reasons, the obligation of the first defendant to sign and return the transfer documents for the Downer properties had crystallised at least by late November 2021. He is in breach of that obligation.
Thirdly, damages have commonly been held not to be an adequate remedy for failure by a vendor to complete a contract for the disposition of an interest in land[4] on the footing that each parcel of land is unique, even in cases where the land is being acquired in effect as stock-in-trade. The settlement deed in the present case has that character in so far as it applies to the Downer properties, even if it also has several other aspects.
[4] See, eg, Dougan v Ley (1946) 71 CLR 142, 150.
Fourthly, the settlement deed is properly characterised as an executory contract. It requires specific things to be done by the parties (including the transfer of various real and personal property, resignation from directorships and execution of certain further agreements) in order to put into place the adjustment of rights that the parties agreed upon. Insofar as the settlement deed requires transfer of the Downer properties to the plaintiff, it is an executory contract; and an order requiring completion of that transfer by the first defendant would come within the narrower concept of specific performance.
However, the settlement deed also imposes many obligations which are not of that character. An example is the obligations of the plaintiff to pay down the loans secured by the Michelago and Mugga Lane properties: these are obligations to pay sums of money to the benefit of the defendants, which arise directly as a consequence of the execution of the settlement deed. The settlement deed also creates, by its own force, other obligations to do or refrain from doing particular things. Obligations are imposed on the plaintiff not to enter the Michelago property (and to return keys associated with it), not to interfere with the operation of certain entities, only to enter a certain part of the Mugga Lane property marked on a map, not to commence legal proceedings and not to interfere with livestock. Meanwhile, the first defendant is subject to obligations to keep his personal property within a certain part of the Mugga Lane property, to move his property out of the Brema Group compound, not to engage with employees of the entities being transferred to the plaintiff, not to interfere with the operation of those entities, not to enter the area being rented by the plaintiff, and not to incur further expenses in relation to the companies that were being retained by the plaintiff. There are also clauses requiring each party to pay their own stamp duty, capital gains tax and legal fees, and requiring all parties to cooperate in the lodging of tax returns for the Brema Group. Some of these provisions require specific acts which may have been completed; others create ongoing obligations, put in place by the settlement deed of its own force (and characteristic of an “executed” contract), rather than duties to perform acts that are needed to put in place a new regime of rights. Some or all of them might conceivably be the subject of injunctive relief, and thus of “specific performance” in the broader and looser sense in which that term is used. However, they are not things required to be done before the transaction is complete. They are not amenable to specific performance in the narrower sense.
Whether this mixed character of the settlement deed creates a barrier to the relief sought is addressed under the next heading.
Specific performance of part of a contract
There is authority in case law and commentaries for the proposition that, at least in its stricter sense, specific performance will only be ordered where the court can give specific performance of the contract as a whole; and if that cannot be done, the court will not interfere to compel specific performance of part of a contract. The proposition so stated seems to be traced back to the statement of a “rule” to this effect by Lord Esher MR in Ryan v Mutual Tontine Westminster Chambers Association (Ryan)[5] (although older cases can be found that are at least consistent with such a rule).[6] One leading Australian textbook points out that Ryan actually concerned an executed contract (the contract required the employment of a porter to perform certain functions, and a person had been appointed to that role), so that it was not truly a case about specific performance in the strict sense; and, although the correctness of the decision can be accepted, there is no universal “rule” demanding an all-or-nothing approach to enforcement of the rights created by an executed contract.[7] However, the proposition has been repeated in Australian cases and commentaries as one that applies to specific performance of executory contracts (such as the settlement deed here), although I have not discovered an Australian case in which it forms part of the ratio.[8]
[5] [1893] 1 Ch 116 at 125.
[6] South Wales Railway Company v Wythes (1854) 43 ER 1112; Ogden v Fossick (1862) 45 ER 1249; Brett v East India and London Shipping Company (1864) 71 ER 520.
[7] J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis, 5th ed, 2015) [20-135].
[8] Lukey (n 2) 297 (Dixon J), 314 (McTiernan J); Bridge Wholesale Acceptance Corp (Australia) Ltd v Burnard (1992) 27 NSWLR 415, 423-424 (Clarke JA); Heydon, Leeming and Turner (n 7) [20-130]; LexisNexis, Halsbury’s Laws of Australia (online at 27 April 2022) Contract, ‘Situations in which specific performance in contract will be available’ [110-11850]; David Wright, Principles of the Australian Law of Remedies (Thomson Reuters, 2020) 374.
An exception to this proposition arises where a part of the contract is severable from the remainder. Another way of putting that concept is that specific performance may lie to enforce part of an overall agreement if it can be said to be not one contract but several contracts in one document.[9] Counsel for the plaintiff sought to rely on that exception, pointing out that the obligation sought to be enforced is not contingent on performance of any other obligation under the contract (or vice versa). That would arguably be consistent with the rule as stated by one commentator, who suggests that specific performance of “particular term” of a contract may be available if other terms, not specifically enforceable, are “independent” of that term.[10] however, of the two authorities cited, one concerned two separate contracts (and involved no claim for specific performance),[11] while the other concerned different parts of a contract which the parties, by their drafting, had made “severable”.[12] Here, the disparate obligations of the parties to the settlement deed plainly form parts of an entire agreement and must be taken to have been arrived at as part of the quid pro quo for each other. It is quite different from, for example, a document providing for the transfer of several parcels of land with the price of each parcel and its time for payment separately specified. It would not be appropriate to seek to characterise different aspects of the settlement deed as “independent” of each other in circumstances where the deed is the product of complex negotiations intended to untangle a set of interconnected business relationships.
[9] Heydon, Leeming and Turner (n 7) [20-130].
[10] ICF Spry, The Principles of Equitable Remedies (Lawbook Co, 9th ed, 2014) 113, 116.
[11] Holliday v Lockwood [1917] 2 Ch 47.
[12] Wilkinson v Clements (1872) LR 8 Ch 96.
I have considered whether it could be said that, in so far as the settlement deed amounts to an executory contract, the obligations which the plaintiff seeks to enforce amount to all that needs to be done in order to complete its performance by the first and second defendants (here I put to one side prayer 3, which fastens upon what is now a simple obligation to pay a sum of money, and which also does not seek any relief against the first and second defendants). The difficulty with this argument is that there are other obligations of an executory character imposed on the first defendant by the settlement deed. One (to have the plaintiff removed from his obligations under the mortgage of the Mugga Lane property) has not yet crystallised; others are not the subject of evidence. The first defendant was (and potentially still is) required to sign “confidential information agreements”; to sign an agreement not to apply for further trade marks relating to the joint entities; to sign an “intellectual property agreement” for all entities; and to transfer trade marks and other intellectual property.
Further, the large number of other obligations referred to at [28] above (including, of course, some which remain to be performed by the plaintiff) cannot be ignored; and it would be contrary to principle to seek to divide the parties’ agreement into two parts on the basis of a technical distinction between promises. As a general principle, the remedy of specific performance is not available unless complete relief can be given;[13] and it will not lie where part of the contract is specifically enforceable and part is not. Statements to that effect in the cases and commentaries should, in my view, be understood as referring to the availability (or not) of specific performance in the strict sense, rather than including analogous relief. The reason why that is so can be found in the observation in Pakenham Upper Fruit Company Limited v Crosby[14] that, whereas the equity that gives rise to the remedy of specific performance (in the strict sense) is the need to place the parties in the relative legal positions contemplated by the contract, in the case of obligations under an executed agreement some other basis for the intervention of equity must be established appropriate to the actual legal relative situations of the parties at the time enforcement is sought.[15] Thus, even though a party might make a good case for specific performance of an obligation owed to him or her, if other obligations under the contract are not amenable to that specific form of relief it will not be safe to assume that a court of equity would enforce them in the event of non-compliance. The parties to whom those obligations are owed may be left to their remedies at law. Such an outcome infringes the principle of mutuality.[16]
[13] See, eg, Lukey (n 2) 297 (Dixon J).
[14] (1924) 35 CLR 386, cited in Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Ltd [2007] NSWCA 276, [62].
[15] See further Heydon, Leeming and Turner (n 7) [20-015].
[16] See, eg, Lukey (n 2) 298 (Dixon J).
The obligations referred to at [28] above are not enforceable by specific performance, at least in the strict sense of that term, and no party has sought to have them enforced. Indeed, the state of compliance with these other obligations is not addressed in the evidence with any specificity. Thus, many of the obligations of the parties under the settlement deed are prima facie enforceable only by common law remedies; there is no reason to assume that, if some or all of these obligations remain unperformed, the party to whom they are owed can obtain orders for their performance. To grant specific performance of such of the obligations as are amenable to that remedy—let alone specific performance of only one or two of those obligations, which is what is sought— would alter the character of the overall agreement and the way in which it balances the interests of the parties. That consideration calls for the rule stated in Ryan to be treated as standing in the way of an order of specific performance.
Conclusions
For the reasons set out above, the remedy of specific performance is not available to achieve what the plaintiff seeks in prayers 1 and 2. These proposed orders could perhaps also be characterised as mandatory injunctions. However, if that changes the analysis (and it is far from clear that it does), courts are rightly reluctant to grant a mandatory injunction that is tantamount to specific performance.
Prayer 3: the Curtin proceeds
As noted above, the plaintiff and the first defendant (through their respective family trusts) held interests in the company which was developing the Curtin property. Clause 3 listed that property among those which were to go to the plaintiff. This was a compressed form of drafting, in that the two brothers actually held interests through their family trusts in a company that in turn held an interest in the property. Further, contracts had already been exchanged for the sale of the property. As noted above, the understanding of the plaintiff was that in due course both his and the first defendant’s shares of the proceeds from the sale of the property would flow through to him.
The share of the proceeds representing the plaintiff’s interest has apparently been paid to him. He asserts that he is also entitled to receive the share of the proceeds representing the first defendant’s interest. That was not seriously disputed.
It was also noted above that the plaintiff did not wish to press for prayer 3 in the form in which it appears in the Amended Originating Application if he did not succeed on prayers 1 and 2. That is, his preparedness to make a commitment that the money be applied directly towards satisfying his obligations under the settlement deed was conditional on the Court ordering certain of the first defendant's obligations to be performed. If those orders were not made, the plaintiff wished to press for an order in the terms of prayer 4 of the original Originating Application. That order was consented to by the third defendant (in whose trust account the funds currently reside), but not by the first and second defendants. As I have declined to grant the relief in prayers 1 and 2, it is necessary to consider whether the relief sought in the original prayer 4 should be granted.
The third defendant acted for the vendors on the sale of the Curtin property. Its obligation was to distribute the proceeds of sale to or at the direction of the vendors, including Allan Street Nominees Pty Limited. I infer that that company gave a direction for its share of the sale proceeds to be paid to its shareholders in proportion to their respective interests. The plaintiff sought to have the third defendant pay the first defendant’s share to him. On the latter’s instructions, it has not acceded to that request but has held the money (approximately $450,000) in its trust account.
There is no relationship between the plaintiff and the third defendant, contractual or otherwise, that entitles him to an order requiring payment of these funds to him. Its duties are owed to its clients and to the first defendant, on whose behalf it now holds the funds. Should he direct the funds to be paid to the plaintiff, there is no reason to think that that direction would not be complied with.
The plaintiff, for his part, now has a right to be paid a sum of money by the first defendant. It may be doubted whether he has any equitable interest in a particular fund, rather than simply a claim in debt; but in any event, the person against whom he can enforce that right is the first defendant. It was not explained on what basis he could recover against the third defendant.
For these reasons I will not grant the relief sought against the third defendant.
Prayers 4 and 5
These prayers in effect ask the Court to note undertakings proffered by the plaintiff. In substance, the plaintiff undertook to complete the most significant aspects of his obligations under the settlement deed within 30 days (presumably in order to demonstrate that he was prepared to do equity, and willing and able to fulfil his side of the bargain). However, I was informed that these undertakings were also conditional upon success in obtaining the relief sought in prayers 1 and 2. Absent such success, the plaintiff would remain bound by the settlement deed, but was not prepared to take on the additional burden of undertakings to the Court. In the light of my conclusions above in relation to the other prayers for relief, prayers 4 and 5 do not need to be considered.
I note that the issues touched upon by these proposed undertakings would require consideration if my conclusion above as to the availability of specific performance were incorrect. The remedy of specific performance is discretionary, and the position of the plaintiff is a significant matter in deciding whether such relief should be granted. The general maxims that a person must come to equity with clean hands and that he or she who seeks equity must do equity both apply, so that it is difficult for a plaintiff to obtain specific performance without demonstrating both the willingness and the ability to carry out at least his or her essential obligations under the contract.[17] Had these questions been reached, I would not have been persuaded that the undertakings were sufficient to ground relief in the terms of prayers 1 and 2. The sheer number of obligations imposed on various parties by the settlement deed, and their disparate character, are relevant at the level of discretion even if (contrary to my reasoning above) they do not render the remedy of specific performance unavailable. So too is the lack of mutuality that would arise if the plaintiff were granted specific performance of particular obligations of the defendants, while the defendants were prima facie left to their remedies at law in the event of non-compliance (or further non-compliance) by the plaintiff. Although performance of the most obviously significant obligations on the plaintiff’s side would be secured by the proposed undertakings, I would not have been prepared to grant specific performance without a much more detailed account of the state of compliance with the other provisions of the settlement deed.
Conclusion
[17] See Heydon, Leeming and Turner (n 7) [20-115]-[20-120].
The Amended Originating Application will be dismissed. There is no reason why costs should not follow the event.
| I certify that the preceding forty-five [45] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Kennett Associate: Date: |
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