Steven Bailey v Woondella Pty Ltd - [2012] VSC 396

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. S CI 2009 of 10944

STEVEN BAILEY	Plaintiff
v
WOONDELLA PTY LTD ACN 004 681 387	Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 – 5 September 2012
DATE OF JUDGMENT:	20 September 2012
CASE MAY BE CITED AS:	Steven Bailey v Woondella Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VSC 396

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REAL PROPERTY – Mortgagor sold land to the plaintiff two days prior to mortgagee’s auction – Mortgagee unwilling to withdraw property from sale unless mortgage paid out in advance – Plaintiff attended mortgagee’s auction and was unsuccessful bidder – Property sold at auction and title eventually transferred to third party – Plaintiff sued under contract with mortgagor.

CONTRACT – Implied term – Performance conditional upon mortgagee withdrawing property from sale and co-operating in settlement of mortgagor’s contract with plaintiff.

CONTRACT – Mutual discharge and abandonment – Conduct of parties after failure of commercial purpose of contract – Neither party regarded contract as on foot

CONTRACT – Frustration – Failure of a commercial purpose of the contract – Contract became incapable of performance.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr W. F. Rimmer of counsel	Ponte Earl
For the Defendant	Mr R. E. Cook of counsel	Fong & Co

HIS HONOUR:

Introduction

The defendant, Woondella Pty Ltd, was the registered proprietor of Woondella Park at 1460 Sale-Maffra Road, Sale, Victoria. The land was a little over 19 hectares with a proposed plan of subdivision that, if approved, would yield 169 housing lots in addition to the retention of an old homestead on approximately .9 hectares. Woondella had owned the property since 1967.

The land was described in two certificates of title, Volume 10867 Folio 113 and 114. The directors of Woondella are Geoffrey Millar and Mary Gaywin Irvine. While not a director, John Robert Benjamin was an authorised representative of Woondella.

In around 2008, Woondella was pursuing redevelopment of the land. That would involve the preparation and registration of a Plan of Subdivision. I was told that Woondella had incurred substantial costs with the development proposal and had borrowed heavily from the mortgagee of the land, South Eastern Secured Investments Ltd, to meet those costs. The mortgage was registered on 31 January 2008.

By November 2009, Woondella was indebted to the mortgagee for more than $3 million. Woondella and the mortgagee were in dispute. There was a proceeding brought by the mortgagee against Woondella to recover the loans, and a proceeding brought by Longreach Family Living (Vic) Pty Ltd, an entity associated with Woondella, alleging a failure by the mortgagee to make further advances. The relationship was further complicated by the fact that receivers and managers had been appointed to the business of the mortgagee. The firm, Sullivan Braham Pty Ltd, Barristers & Solicitors of Sale, acted on behalf of the mortgagee.

In the months leading up to November 2009, Mr Benjamin, on behalf of Woondella, had been negotiating…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] VSC 396
Decision Date: 20 September 2012

CaseChat Overview and Summary

The case of Steven Bailey v Woondella Pty Ltd involved a dispute in the Federal Court of Australia. Steven Bailey, the plaintiff, had entered into a contract to purchase land from Woondella Pty Ltd, the defendant, which was subject to a mortgage. Two days before the scheduled auction of the property by the mortgagee, Woondella Pty Ltd sold the land to Bailey. The mortgagee, however, refused to withdraw the property from the auction unless the mortgage was paid off in advance. Despite attending the auction, Bailey was unsuccessful in his bid, and the property was eventually sold to a third party. Bailey subsequently brought an action against Woondella Pty Ltd, claiming that the contract with the mortgagor had been breached.

The legal issues before the court included whether there was an implied term in the contract that required the mortgagee to withdraw the property from the auction and cooperate in the settlement of the mortgagor’s contract with the plaintiff. Additionally, the court had to determine whether the contract had been mutually discharged or abandoned, given the failure of its commercial purpose, and whether the contract had been frustrated to the extent that it became incapable of performance.

The court found that there was an implied term in the contract that required the mortgagee to withdraw the property from the auction and cooperate with the mortgagor in settling the contract with Bailey. The court reasoned that the conduct of both parties post the failure of the commercial purpose of the contract indicated that neither party regarded the contract as still being in force. The court also found that the contract was frustrated due to the failure of its commercial purpose, making it incapable of performance. Consequently, the court held that Woondella Pty Ltd had breached the contract, and the plaintiff was entitled to damages.

The court ordered Woondella Pty Ltd to pay damages to Steven Bailey for the breach of contract. The amount of damages was to be determined at a later date. The court also noted that the terms of the contract and the actions of the parties played a crucial role in reaching its decision.

Orders