Tredrea and Geller and Ors
[2016] FamCA 634
•5 August 2016
FAMILY COURT OF AUSTRALIA
| TREDREA & GELLER AND ORS | [2016] FamCA 634 |
| FAMILY LAW – ENFORCEMENT – where the applicant seeks enforcement of a term of an order for property settlement – where the respondents seek summary dismissal of the application – where the application involves farming land – where the applicant asserts she is entitled to an option to purchase – where the respondents considers the applicant has a pre-emptive right or a second right of refusal – where the respondents exercised their obligation to offer – where providing the applicant enters into an undertaking as to damages the application for summary dismissal is dismissed. |
| Family Law Act 1975 (Cth) s 117 |
Family Law Rules 2004 (Cth) r 10.12
| APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd [2010] NSWSC 1221 |
| APPLICANT: | Ms Tredrea |
| 1st RESPONDENT: | Ms Geller |
| 2nd RESPONDENT: | Ms Merritt |
| 3rd RESPONDENT: | Ms Johns |
| 4th RESPONDENT: | Mr Fuller |
| FILE NUMBER: | ADC | 2149 | of | 2016 |
| DATE DELIVERED: | 5 August 2016 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 4 July 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Litigant in Person |
| SOLICITOR FOR THE APPLICANT: |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Portway |
| SOLICITOR FOR THE 1ST RESPONDENT: | Heuzenroeders Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Portway |
| SOLICITOR FOR THE 2ND RESPONDENT: | Heuzenroeders Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Portway |
| SOLICITOR FOR THE 3RD RESPONDENT: | Heuzenroeders Lawyers |
| COUNSEL FOR THE 4TH RESPONDENT: | Mr Portway |
| SOLICITOR FOR THE 4TH RESPONDENT: | Heuzenroeders Lawyers |
Orders
That conditional upon the applicant entering into an undertaking as to damages within seven (7) days of the date of this order, order 1 of the Response filed 17 June 2016 is dismissed.
In the absence of the undertaking as to damages being given as provided for in order (1) hereof, the Application in a Case filed 14 June 2016 be dismissed.
That upon the filing of the undertaking as to damages, the application be placed in the list of cases awaiting trial NOTING that the Court may accommodate an early listing.
Costs in the cause.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tredrea & Geller and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 2149 of 2016
| Ms Tredrea |
Applicant
And
| Ms Geller And Ms Merritt And Ms Johns And Mr Fuller |
4th Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Application in a Case filed 14 June 2016, Ms Tredrea (“the applicant”) seeks enforcement of a term of an order for property settlement made in the Family Court of Australia on 10 April 1991 in action number AD 1897 of 1990.
By Response filed 17 June 2016 Ms Geller (“first respondent”), Ms Merritt (“second respondent”), Ms Johns (“third respondent”) and Mr Fuller (“fourth respondent”) (collectively “the respondents”) seek orders that the application be dismissed, or in the alternative that the applicant provide an undertaking in relation to damages. The effect of the response is to seek the summary dismissal of the enforcement application which if successful would conclude the proceedings.
LEGAL PRINCIPLES – SUMMARY DISMISSAL
Summary judgments are provided for in Part 10.3 of the Family Law Rules 2004 (Cth) and in particular r 10.12 provides as follows:-
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a)the court has no jurisdiction;
(b)the other party has no legal capacity to apply for the orders sought;
(c)it is frivolous, vexatious or an abuse of process; or
(d)there is no reasonable likelihood of success.
In Gitane & Velacruz (2007) FLC 93-309 the Full Court considered the determination of a trial judge in dismissing the husband’s s 79A application. The Full court allowed the husband’s appeal against the decision of the trial judge and by reference to the earlier decision of Bigg v Suzi (1998) FLC 92-799, considered that it could not be said that the husband’s case was “doomed to fail”.
The principles in respect of an application for summary dismissal were set out in Bigg v Suzi (supra) and were further restated in Pelerman v Pelerman (2000) FLC 93-037:-
46.The gravamen of the Appeal is that the trial Judge erred in the exercise of the discretionary power to summarily dismiss the Application. It is well established that the following principles apply as were recently reviewed and stated in Bigg v Suzie:
(a)The power for summary dismissal is a discretionary one.
(b)Relief is “rarely and sparingly provided.”
(c)The parties seeking summary dismissal must show that the application is “doomed to fail” or as has been otherwise described “that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.”
(d)A weak case or one that is unlikely to succeed is not “sufficient to warrant termination.”
(e)“If there is a serious legal question to be determined, it should ordinarily be determined at a trial.”
(f)“If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings.”
In Bretton & Bondai [2013] FamCAFC 168 at [59], Finn and Strickland JJ held at [59:-
Assuming, that a summary dismissal application was available to the mother in this case, the appropriate test would have been “no reasonable likelihood of success.” It must be acknowledged that his Honour did not, at least expressly, apply this test. Rather, he apparently applied the “doomed to fail” test referred to by Kirby J in Lindon. The tests are, of course, conceptually different.
DOCUMENTS RELIED UPON
The applicant relies upon the following documents:-
(1)Application in a Case filed 14 June 2016
(2)Affidavit in support filed 14 June 2016
The respondents rely upon the following documents:-
(1)Response filed 17 June 2016
(2)Affidavit of Mr Fuller filed 17 June 2016
(3)Affidavit of Ms Geller filed 17 June 2016
In addition, the Court was assisted by the respondent’s Outline of Submissions and List of Authorities.
BACKGROUND AND HISTORY
The applicant is the surviving partner and executor of the estate of Mr B Fuller who was the ex-husband of Ms Geller being the first respondent.
The husband and the first respondent were married in 1971 and separated on 3 February 1986. Upon the application of the husband, a divorce order was made on 12 April 1991.
On 10 April 1991, a consent order for property settlement was made by a Registrar of the Court. The orders provided that contemporaneously with the payment of a settlement sum of $85,000 by the husband to the wife, that she would transfer to the husband her interest in the former matrimonial home and land situate at C Town being the whole of the land comprised in Crown Lease Perpetual No. … Volume … Folio … and the whole of the land comprised and described in Certificate of Title Volume … Folio … and Crown Lease Perpetual No. … Volume … Folio …. Relevant to the application are the provisions of 1(d) of the order namely:-
That the husband and wife do hold in trust with no survivorship for the three infant children of the marriage, namely [Ms Merritt] born on … day of …, 1975, [Ms Johns] born on the … day of …, 1977 and [Mr Fuller] born on the … day of …, 1979 until such time as the youngest child shall have attained the age of 25 years the whole of the land comprised and described in Crown Lease Perpetual No. … Volume … Folio … to the intent that at such time as the said youngest child attains the age of 25 years the said land shall be transferred to the children as tenants in common in equal shares PROVIDED HOWEVER that should any child wish to sell such share such other child or children shall have first option to purchase same and in the event of such child or children failing to exercise such option the husband shall have the second option to purchase.
The three children named in the order are parties to the proceedings being the second, third and fourth respondents.
The fourth respondent turned 25 years in 2004 and by Memorandum of Transfer dated 21 December 2011 and pursuant to the order for settlement of property, the land referred to and now described in Certificate of Title Volume … Folio … was transferred by the husband and the first respondent to the second, third and fourth respondents as tenants in common.
The husband commenced cohabitation with the applicant in or about 1997. They have a child now aged eight years. The husband died in 2015. The applicant was named as the sole trustee and executor of the husband’s estate and obtained probate in respect of the estate on 3 February 2016.
The husband by his will dated 4 December 2014, gave the residue of his estate to his trustee to hold upon trust for his son D.
The husband made no provision for the second, third and fourth respondents.
The second, third and fourth respondents have decided to sell the subject land and following their rejection of what they consider to have been an inadequate offer made by the applicant to purchase the subject land following the property being offered on the open market, they have entered into a contract for the sale of the land in the sum of $175,000.
ISSUES IN DISPUTE
The applicant asserts that the husband’s estate now wants to purchase the land for $175,000. The second, third and fourth respondents refuse to sell the land to the estate and appear intent on proceeding with the current contract for sale. The fourth respondent contends that he and his siblings decided to sell the land and that they contacted the applicant and invited her to make an offer. It is his position that the applicant’s first offer was $75,000 which was then rejected. An agent was appointed and the applicant increased her offer to $90,000 and then to $110,000. The revised offer made by the applicant was not accepted by the second, third and fourth respondents.
As a result of the listing of the subject property on the open market, two arms-length offers were received in the sum of $165,000 and $175,000 respectively.
The second, third and fourth respondents allege that they advised the applicant of the offer of $175,000 and indicated that unless she was prepared to match that offer they intended to enter into a contract. The advice to the applicant was given on 19 April 2016.
In response to further communication, an email was received from the applicant’s father on 20 April 2016 which they say advised them that the applicant declined to meet the offer at that time.
The second, third and fourth respondents consider that they have given the applicant “a last right of refusal” even after having received the offer to purchase. They consider that they were under no obligation to do so, but considered that the applicant should be given all reasonable opportunity to acquire the land.
They considered that the applicant was no longer interested and they signed a contract with the purchasers on 29 April 2016. Shortly thereafter they were advised that the applicant had lodged a caveat over the subject land.
Instructions were given for the caveat to be warned and following the inaction of the applicant, the caveat was removed on 3 June 2016.
Settlement of the contract has been postponed pending the resolution of the proceedings.
The second, third and fourth respondents seek the dismissal of the application, or in the alternative, an undertaking as to damages that they consider are likely to be sustained by the delay in the settlement and any potential claim by the intended purchasers.
The applicant considers that the history as provided by the second, third and fourth respondents is “misleading and factually inaccurate”. She alleges that she and the respondents discussed the purchase of the subject property by the estate on 5 August 2015.
She asserts that notwithstanding that the equitable and then the legal interest in the subject property being transferred to the second, third and fourth respondents, the subject property had nonetheless been utilised by the applicant and the husband as an integral part of his and then the applicant’s farming operation. She alleges that the subject land is integral to the financial viability of the farm and by implication, it was well understood that the husband and then the estate, would be keen to retain the land.
The applicant does not consider that the subject land should be considered in isolation to the rest of the farm. She says that there was a dispute with the fourth respondent when he informed her that the subject land could be purchased for $200,000 notwithstanding that it had been valued by the real estate agent for between $110,000 to $120,000. The reason given for the “inflated” price was that there was some level of upset that their father had made no provision for them in respect of the farm. The applicant further contends that the fourth respondent considered a premium should be paid because the husband (and the estate) had the use of the property without the payment of any rental.
The applicant admits that in January 2010 she was prepared to increase her offer to $110,000 or alternatively, that upon the subject land being offered for sale, the applicant would match the price.
She was advised of the offer of $175,000 and asked for proof of the offer with the assertion that before the second, third and fourth respondents could sign a contract for sale to the purchasers, they were required to provide the signed contract with proof of deposit to the applicant before she considered she had any obligation to make a matching or counter-offer.
At some point the respondent’s solicitors forwarded proof of the offer to purchase the subject land to the applicant. After apparently being satisfied that the offer to purchase was genuine, the applicant on behalf of the estate made a counter-offer.
The essence of the applicant’s argument is set out in paragraph 12 of her affidavit of 1 July 2016:-
I believe the intent of the Family Law Court Order was that the estate of [Mr B Fuller] was not required to make an offer and only had to match the best proven offer on the block of land. I sent a copy of the Family Law Court Order, page 3 clause 1(d) to [the fourth respondent] by email (see annexure 1 of my affidavit filed on 10 June 2016). I also informed [the fourth respondent] that [the first respondent] would have the complete document.
INTERPRETATION OF ORDER
The argument on behalf of the respondents is set out in the respondent’s Outline of Submission.
To the extent that the applicant considers that the use of the word “option” in paragraph 1(d) of the order creates a legally binding option for her to purchase the land is rejected. It is argued that an option is a form of contract and requires “the grantor or vendor to sell the land to the grantee or purchaser upon the call option being exercised by the grantee”.
The respondent’s consider that the use of the word “option” conveys no more than a “mere offer”. As such, it is not enforceable.
By reference to the consideration of Gibbs J in Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at [71]-[72], the following features should be present for an option to exist:
(a)consideration;
(b)appropriate identification of the parties to the option;
(c)appropriate description of the subject matter of the option;
(d)the date by, or on, which the option must be exercised;
(e)a statement of the method of exercise of the option;
(f)the capacity of the parties to enter into the option; and
(g)the option should be drafted as either a conditional contract or an irrevocable contract.
Importantly it is argued that the correct interpretation of paragraph 1(d) is that it creates a pre-emptive right or a second right of refusal which is not an option. The pre-emptive right is a claim in personam and not a claim in rem. As a result the right is conferred on the husband, terminates on his death and is not transferrable to the estate. An option is an enforceable discretionary right (or choice) of one party to bring into effect a contract with another party by a unilateral act known as the exercise of the option: see Commissioner of Taxation v Guy (1996) 137 ALR 193 at [76].
The respondents argue that paragraph 1(d) of the order is not an option, primarily because no consideration was made. It is their position that the correct interpretation of the order is that it creates a pre-emptive right or a second right of refusal to purchase the property.
It seems likely that there may be some substance to this argument. There does not appear to be consideration for the grant of the option and it could not be said that the terms of the option are certain either as to price, subject matter, the exercise period and other essential terms.
A right of pre-emption confers a right or entitlement to purchase property before any other person.
The distinction between an option and a first right of refusal was explored by Street J in Mackay v Wilson (1947) 47 SR (NSW) 315 at [325]:-
Speaking generally, the giving of an option to purchase land prima facie implies that the giver of the option is to be taken as making a continuing offer to sell the land, which may at any moment be converted into a contract by the optionee notifying his acceptance of that offer. The agreement to give the option imposes a positive obligation on the prospective vendor to keep the offer open during the agreed period so that it remains available for acceptance by the optionee at any moment within that period. It has more than a mere contractual operation and confers upon the optionee an equitable interest in the land, the subject of the agreement… But an agreement to give ‘the first refusal’ or ‘a right of pre-emption’ confers no immediate right on the prospective purchaser. It imposes a negative obligation on the possible vendor requiring him to refrain from selling the land to any other person without giving to the holder of the right of first refusal the opportunity of purchasing in preference to any other buyer. It is not an offer and in itself it imposes no obligation on the owner of the land to sell the same. He may do so or not as he wishes. But if he does decide to sell, then the holder of the right of first refusal has the right to receive the first offer, which he also may accept or not as he wishes. The right is merely contractual and no equitable interest in the land is created by the agreement.
The respondents place significant weight on the proposition that the right (or option if the Court accepts that status) conferred on the husband terminated upon his death. This proposition was considered in Carter v Hyde (1923) 33 CLR 115. At [121] the High Court said:-
If the option is personal to the offeree, if, for instance, the agreement offered calls for the exercise of his personal skill or discretion, it can, of course, be accepted only during his lifetime and lapses on his death. Or it may be that the option, though not personal to the offeree, in the sense of calling for his personal services or qualifications, on its true construction expressly or by necessary implication requires acceptance by him personally. The benefit of such an option could not pass to the executors of the offeree because it must be accepted if at all by the offeree personally. But, if the option be not personal to the offeree and does not expressly or by necessary implication stipulate for acceptance by him personally or limit the time for the acceptance to his lifetime, I think the result of the authorities is that the benefit of the option is an ordinary assignable chose in action, which on the death of the offeree passes along with his other property to his personal representative.
Accordingly, consideration should properly be given to whether the right was intended to be assignable to the husband’s personal representative.
Pre-emptive rights may take various forms. A right of first refusal is a right to receive an offer before a corresponding offer can be made to anybody else: see Emmett v Kiely [1946] SASR 17. A right of last refusal is a right to match and defeat an offer made by someone else.
In the present case, the respondents argue that paragraph 1(d) of the order confers a pre-emptive right and that in any event the respondents have gone further and have given the applicant a right of last refusal. When given an opportunity to match the offer, it is argued that the applicant declined.
A pre-emptive clause gives the holder of the pre-emptive right a finite period to accept the offer. The holder of the right must take care to ensure that the acceptance is effective. If an effective acceptance is not delivered within the stipulated period of time the right may be lost: see APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd [2010] NSWSC 1221 at [21].
If the holder of a right of first refusal is offered the right to buy on certain terms and declines to exercise it, the right will generally be exhausted in the sense that the owner is free to sell to a third party of the same terms. However, if no third party is prepared to buy on those terms and the owner is forced to make a revised offer on terms which are more favourable to a buyer, the right of first refusal will revive, with the result that the new term must be offered first to the holder of the right: see White Property Developments Ltd v Richmond Growth Pty Ltd [1998] FCA 26. However, if a contract is entered into with a third party after the holder of the right of first refusal declines to exercise it, a subsequent variation of that contract, even one which makes the terms more favourable to the third party, will not revive the right of first refusal: see Octra Nominees Pty Ltd v Chipper [2007] FCAFC 92.
CONCLUSION
It would seem likely that paragraph 1(d) of the order created a pre-emptive right, not an option. The respondents exercised their obligation to offer. The terms of the offer were not certain in that they did not stipulate a price and only invited the applicant to make an offer. However, subsequently the respondents outlined the terms of their offer inviting the applicant to pay $175,000. The respondents argue that the applicant declined the offer and did not proceed to exercise her pre-emptive right which was thereafter exhausted and permitted the respondents to sell the land to a third party.
It must be said that there is much strength in the argument of the respondents. There is however on the applicant’s case a factual dispute. It must be remembered that what is being argued is not the final merits of the application, but rather, whether the application should be summarily dismissed. The test as considered by the Full Court in Bretton & Bondai (supra) is that there is “no reasonable chance of success”.
Where there is a factual dispute which may then impact upon a consideration of the relevant legal principles, it could not be said that the applicant has no reasonable chance of success. It may very well be that the applicant’s case is weak, but I do not consider that she should be denied the opportunity to be heard. There is a serious legal question to be determined and it may also be a relevant consideration that upon the applicant giving her claim further consideration, a more cogent and cohesive argument may be put.
As is apparent, whilst I do not consider that the applicant has no reasonable chance of success on the affidavit evidence as presented, her case is weak.
The respondents seek that the applicant give an undertaking as to damages if I decline their application for summary dismissal.
In family law cases the inability to give a worthwhile undertaking should not prevent an order being made in cases where otherwise all of the requirements for its making are made out. An undertaking as to damages is given in response to an anxiety entertained by the Court that otherwise its interlocutory order might lead to damages for which there could be no redress. The conditions to be attached to an undertaking are a matter for the discretionary judgment of the Court and should be moulded so as to fit the circumstances of the case at hand: see First Netcom Pty Ltd v Telstra Corporation Ltd (2000) 179 ALR 725.
In Luadaka & Luadaka (1998) FLC 92-830 the Full Court held that the purpose of an order for security “is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other”. Similarly, at paragraph [61] the Full Court noted that while it is not necessary to establish that there are special circumstances, “it is necessary to establish that there are justifying circumstances”.
The consideration of the relevant factors in respect of an order for security of costs or an undertaking as to damages are to be considered pursuant to s 117 of the Act.
I bring into account my consideration of the respective merits of the case on behalf of the applicant and the respondents and noting that no action was taken by the applicant to extend the time following the warning of the caveat by the respondent over the subject property, the respondents should have alerted the applicant to the possibility (in indeed probability) that they would pursue the sale of the subject land to a willing purchaser.
In the circumstances of this case, I consider it appropriate that providing the applicant enter into an undertaking as to damages, the application for summary dismissal of her application by the respondents should be dismissed.
I make orders as appear as the commencement of these reasons.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 5 August 2016.
Associate: P M Malone
Date: 5 August 2016
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