Tredrea and Geller and Ors (No 2)
[2016] FamCA 949
•9 November 2016
FAMILY COURT OF AUSTRALIA
| TREDREA & GELLER AND ORS (NO 2) | [2016] FamCA 949 |
| FAMILY LAW – ENFORCEMENT – where the applicant seeks enforcement of a term of an order for property settlement – where the respondents oppose the application – where the application involves farming land – where the applicant asserts she is entitled to an option to purchase – where consideration is given to the interpretation of the order – where the respondents are not bound by any purported option at the time of the transfer of the interest in the property to them – where the purchasers are bona fide purchasers without notice – where in any event the Court considers the order creates only a pre-emptive right and not an option – where the application is dismissed. |
| Family Law Act 1975 (Cth) Antonarkis & Delly (1976) FLC 90-063 | ||
| 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: | 9 November 2016 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 13, 14 and 16 September 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Applicant in Person |
| SOLICITOR FOR THE APPLICANT: |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Hemsley |
| SOLICITOR FOR THE 1ST RESPONDENT: | Heuzenroeder Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Hemsley |
| SOLICITOR FOR THE 2ND RESPONDENT: | Heuzenroeder Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Hemsley |
| SOLICITOR FOR THE 3RD RESPONDENT: | Heuzenroeder Lawyers | ||
| Mr Hemsley Heuzenroeder Lawyers |
Orders
That the Further Amended Application in a Case filed 29 August 2016 be dismissed.
That all proceedings be removed from the pending list of cases.
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 (No 2) 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 |
Respondents
REASONS FOR JUDGMENT
INTRODUCTION
By Further Amended Application in a Case filed 29 August 2016, Ms Tredrea (“the applicant”) seeks the enforcement of a term of an order for property settlement made in the Family Court of Australia on 10 April 1991 in Action No AD1897 of 1990 made between her now deceased husband Mr B Fuller and his former wife Ms A Fuller (“the order”). The respondents to the application are Ms Geller (formerly “Ms A Fuller”) (“the first respondent”) and the adult children of Mr B Fuller and Ms Geller namely Ms Merritt (“the second respondent”), Ms Johns (“the third respondent”) and Mr Fuller (“the fourth respondent”), (collectively “the respondents”).
These reasons should be read in conjunction with the reasons in Tredrea and Geller & Ors [2016] FamCA 634.
The respondents sought the summary dismissal of the application seeking enforcement of the order. Whilst I considered that the applicant’s case as presented in the interlocutory proceedings was not strong, I nonetheless dismissed the summary dismissal application on the basis that what was being argued was not the final merits of the application, but a consideration of the respondent’s position that the proceedings should be summarily dismissed.
The applicant was to be afforded a proper opportunity to place further evidence before the Court and to challenge the matters put forward on behalf of the respondents.
DOCUMENTS RELIED UPON
The applicant relies upon the following documents:-
(1)Further Amended Application in a Case filed 29 August 2016
(2)Affidavit in support filed 14 June 2016
(3)Trial Affidavit (including Outline of Argument) filed 31 August 2016
The respondents rely upon the following documents:-
(1)Response filed 17 June 2016
(2)Affidavit of Mr Fuller filed 5 September 2016
(3)Affidavit of Mr E filed 5 September 2016
(4)Outline of Case document tendered on behalf of the respondents.
On 29 April 2016 the respondents entered into a contract for the sale of the whole of the land comprised in Certificate of Title Volume … Folio … (“the property”) to Mr F and Ms F (“the purchasers”). The respondents appointed Mr E of G Real Estate H Town(“the agent”) to negotiate and effect the sale of the property.
Mr F gave evidence as part of the applicant’s case pursuant to a subpoena filed 6 September 2016.
CHRONOLOGY
10.4.1991
Date of orders for property settlement between Mr B Fuller and Ms Geller
…2015
Date of death of Mr B Fuller
5.8.2015
Respondents and applicant meet to discuss the property
April 2016
Respondents enter into a Sales Agency Agreement with agent
18.4.2016
Respondents receive formal offer to purchase the property for $165,000
19.4.2016
Agent receives a verbal offer from purchasers in the sum of $175,000
19.4.2016
Applicant invited by agent to make an offer
20.4.2016
Applicant is advised of an offer being made and is given the opportunity to respond
20.4.2016
Applicant’s father purports to act as the applicant’s agent and declines to match the highest offer received
29.4.2016
Respondents enter into a formal contract with the purchasers
29.4.2016
Caveat placed over the land by the applicant
12.5.2016
Addendum to contract entered into
18.5.2016
Applicant offers to purchase the property for $175,000
20.5.2016
Applicant’s offer is refused
ISSUES IN DISPUTE
The applicant argues that the respondents should transfer the property to the estate of Mr B Fuller for the sum of $175,000. She asserts that the property is integral to the existing farm which she manages for and on behalf of the estate and is integral to the financial viability of the existing farm enterprise.
Whilst initially doubting the veracity of the offer made by the purchasers, the applicant does not consider that she was obliged to make any offer until she had been shown a signed contract and proof of deposit thereby establishing the bona fides of the purported offer.
In her outline of argument, the applicant considerably expanded the issues in dispute. She considered that the “option” in clause 1(d) of the order is an option to purchase and is binding on the respondents.
The applicant further contends that if the Court does not accept her interpretation of clause 1(d), the consequence would be that the respondents hold the property on a “resulting trust” for their mother and the estate of their late father.
The reluctance or refusal of the respondents to consider a transfer of the property to the applicant on behalf of the estate is considered by her to be “misleading and deceptive conduct” and is an act of malice on their part.
An extension of the applicant’s argument is to focus upon the intention in the order that if the respondents determined at some point to sell the property, then the construct of the order and in particular the focus on the words “PROVIDED HOWEVER” supports the notion that the option was put in place for the protection of both the respondents and their father. The applicant considers that the order as drafted provides a positive obligation to enforce the intent of the order namely, that the property should be transferred to the estate. Further, if it was considered that the order provided for an incomplete agreement, then the applicant argues that a term may be implied into the contract in order “to give full effect to the presumed intentions of the contracting parties”.
The respondents accept that the deceased continued to use the land as part of the farming enterprise. He paid the rates and taxes in respect of the property, but did not make any contribution to the improvement of the land, nor did he make any payment for or on behalf of the beneficiaries during the period that the property was held on trust pending the youngest child turning 25 years on 27 July 2004.
The respondents also concede that there may have been informal agreements from time to time, but that consideration can be of no effect during the period that the deceased held the property on trust for the respondents.
It is further argued that the following part of clause 1(d), namely:-
…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.
is not within the jurisdiction of the Family Court. The respondent’s rely upon Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337.
If the Court determines that there is jurisdiction, then the respondents contend that a correct interpretation of clause 1(d) is that it creates a pre-emptive right or a second right of refusal but does not satisfied the features that should be present for an option to exist (see Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 per Gibbs J at 71-72). In any event the respondents argue that if the Court has jurisdiction the respondents have complied with the terms of any obligation imposed upon them given that the applicant was invited to make an offer and did so. Moreover, the respondents rely upon the representations of the applicant’s father as a disclosed agent releasing the respondents from any obligation. The applicant was invited to match the highest offer received, but she declined that invitation.
THE EVIDENCE
Mr F
Mr F attended pursuant to a subpoena issued by the applicant on 6 September 2016. He confirmed that he was the current purchaser of the property and agreed that on 19 April 2016 he signed a notice of offer to purchase the property for $175,000, with a deposit of $10,000. A settlement date was to be in May 2016 and the offer was subject to special terms and conditions namely that the contract of sale was to be subject to finance being approved. Consequent upon the acceptance of his offer, he and his wife entered into a contract for the purchase of the property on 22 April 2016 with the vendor confirming the contract by signature on 29 April 2016.
The contract provided for a settlement date on 20 May 2016 with a pre-condition of bank finance being approved to the sum of $150,000 on or before 11 May 2016.
Mr F confirmed that he became aware that there was a competing claim in respect of the property no earlier than 14 May 2016.
Under cross examination by the applicant, Mr F did not agree with the proposition that he had paid too much for the land. His evidence was that he was a local farmer and lived in close proximity to the property. His interest in acquiring the land was to add to his existing farming enterprise.
Whilst not purporting to have any expertise as a rural land valuer, Mr F considered that the land was appropriately priced and rejected any suggestion that he was in any way colluding with the agent or the respondents to push up the price.
Mr F apparently knew the land and given that there was nothing unusual about it did not consider the need for an inspection. He was unconcerned as to the existence of any potential encumbrance or right of way in respect of a pipe that traverses a corner of the property.
Mr F’s evidence was unremarkable and given honestly. There is no basis to conclude that he was part of a strategy to defeat the applicant’s claim or to frustrate any potential claim of the estate.
I consider that Mr F was an arms-length purchaser without prior notice of any assertion of claim or entitlement made by the applicant.
Ms Tredrea
The applicant relied upon her trial affidavit filed 31 August 2016 and with leave provided a more detailed history of the retention and management of the property. The thrust of her evidence was to reinforce her view that the deceased had been reluctant to agree to transfer the property to the respondents, but did so because he was not able to pay an increased settlement sum to his wife in the 1990 proceedings.
The applicant agreed that she had been in active discussion with the fourth respondent and alleges that he told her that whilst the property had been valued at $110,000 to $120,000, if she wished to purchase the property then the sale price was $200,000.
She had discussions with the respondents and she alleges that she discussed the provisions of the Family Court order with the agent.
For reasons not explained, the applicant apparently had a camera continuously operating in front of the property and either intentionally or otherwise was able to record any person that entered the property. For the purpose of the proceedings it was apparently relevant to the applicant that the camera footage did not reveal the agent attending the property with any prospective purchaser.
It is that observation of the applicant that in part is the basis for her suspicion that in some way the respondents, the agent and Mr F colluded or conspired together to circumvent the “option” in the order.
She confirmed that on 14 April 2016 her father had sent a letter to the agent warning him of the order and suggesting that potential purchasers should be advised of the option to purchase.
The involvement of the applicant’s father assumes significance. He was not called to give evidence by the applicant. The following email communication passed between the applicant’s father Mr I Tredrea and the agents:-
Dear [Ms J].
My daughter , [the applicant], is the sole trustee of the [Mr B Fuller] estate at [K Street, L Town] and as she is travelling this afternoon she asked me to advise you that there is a legal document giving right of first refusal to the trust on the sale of approx 300 acres at [K Street] which is presently listed with you
She was advised by telephone today by [the agent] that he has a verbal offer for the property close to asking price of $175,00 and intends to close the sale regardless of the restraint (above) she had previously advised him of by phone.
She has reminded the sellers by phone this afternoon and will confirm this by e-mail over the weekend.
I am not in the real estate business but I imagine the prudent course would be to make the buyer aware of the situation so that further complications can be avoided.
[The applicant] will be in touch with you Monday.
Sincerely [Mr I Tredrea]
The email was in response to a letter from the agent to the applicant advising her that he had received a conditional offer on the property with the proposed purchaser now known to be Mr and Ms F.
A further advice was provided by the agent to the applicant on 19 April 2016 advising that there were now two offers received on the property and that if she was interested she should submit an offer by close of business on Wednesday 20 April 2016.
The applicant’s father followed up his earlier correspondence with a further email to the fourth respondent on 20 April 2016 in the following terms:-
Dear [the fourth respondent],
[The applicant] has asked me to reply on her behalf and I really can’t see a problem from your side except that your father ([Mr B Fuller]) had first refusal on the sale of this land granted by the Family law court at the time of his divorce. Solicitors who acted for him at the time are of the opinion that this condition is now vested with the [Fuller] trust.
[The applicant] previously indicated that she would offer $110,000 for the section in question and you are well aware of this and so is [the agent]. As the council valuation is $70,000 the above figure by my calculation is 57% over this sum and not unreasonable or uncommercial and in these times should be enough.
As you claim to have a bids in hand at $175,000 and this is 150% over council valuation then you would be foolish not to accept the highest bid. All you have to do is to show proof of the offer to her or her nominated solicitor. Then you can accept the bid unless she elects to match it and in that case she exercises the right of the trust to first refusal and acquires the property. You can’t lose.
The question that exercises my mind is why [the agent] and you are repeatedly asking her to make an offer with a deadline when you already have the price you want in hand.
She is under no obligation to maintain her previous offer of $110,000 and may close it at any time or withdraw it.
It is not for me to direct you in any way but I think the sensible thing would be to show the genuine bid (with deposit in hand) you have to her or her law firm so that she can match it or decline.
There is no need for anything else and why complicate it.
[The applicant] is presently leasing better country to [Mr M] at $12 an acre – maybe this is a bit light now and should be nearer $15 – the lease value on the 330 acres in question is say $5,000 and bank interest on 175,000 at 9.5% overdraft rate would be over $16,000 and even at 8% would be $14,000 and this is $43 per acre – stony and poor yielding land –
Maybe I am missing something.
Regards [Mr I Tredrea].
A further email from Mr I Tredrea to the fourth respondent on 22 April 2016 records the following:-
Dear [Mr Fuller].
Your deadline on an offer from [Ms Tredrea] expired at the close of business yesterday and no news from your end at this time.
I am thinking that by this time you would have accepted the firm offers you have in hand and fixed a sale at $175,000.
Please confirm this and advise the sale conditions and date of settlement. I realise that there may be a cooling off period.
With this information in hand I can then advise her accordingly so that she can consider her next move.
rgds [Mr I Tredrea]
The applicant accepted that her father’s correspondence with the agent and the fourth respondent were conducted with her knowledge and authority.
Subsequent email communication on 27 April 2016 appears to confirm that the applicant did not accept the assertion of the respondent and the agent that offers of $175,000 existed. She considered they were the subject of a deception perpetrated by the respondents and/or the agents and on that basis Mr I Tredrea felt sufficiently confident to effectively withdraw from the negotiations by advising that “your deadline on an offer from [the applicant] expired at the close of business yesterday and no news from your end at this time.”
It is difficult to understand the conduct of the applicant in seeking to assert a right to purchase, being offered the opportunity to do so and then withdrawing from the negotiations by formal notice given by her father on 22 April 2016.
Under cross examination, the applicant conceded that when she initially entered into negotiations to purchase the property she did so not in her capacity as an executor of the estate but rather, in her own right.
Her conduct in that regard was inexplicable. Clearly, whatever strategy she may have attempted to engage, her actions, if successful would have been inconsistent with her asserted position as to the option. She could have had no regard to the option if she had been successful in purchasing the property.
She asserted that she would have then held the property on trust for the estate.
Paragraph 37 of her trial affidavit sets out the chronology of the applicant contacting the respondents to purchase the land. She confirmed that at no stage did she tell the respondents about the orders. Her first offer was $75,000, her second offer was $85,000 and she made subsequent offers up to $110,000.
It was put to the applicant that she intended to obtain the land cheaply. She agreed that the respondents were not initially aware of the option and only became so when she sent them a copy of the order on 15 April 2016.
She conceded that nothing prevented the husband during his lifetime from registering the order on the title, but he failed to do so.
At paragraph 26 of her trial affidavit the following allegation is made:-
[Mr B Fuller] trusted [Mr N] to complete the transfer and complete any other necessities to protect the interests of all parties concerned. He did not pay him to remove all of his rights and charge him for stamp duty that he was not required to pay. The question has to be asked, is. Was [Mr N] negligent or was he under instructions from the first respondent. The option to purchase can still be recorded with the Registrar at the land department but it now requires a court order to do so as it should have been done within six months of the transfer.
Mr N was not acting for the husband. The applicant’s allegations are scandalous.
Whilst the applicant denied that she made various offers, she did agree that upon meeting one of the respondents at a social engagement she arranged for a meeting to occur in order to discuss the purchase of the land. An offer of $90,000 was made and she insists that the respondents understood that she wanted to purchase the property in her own right.
The applicant conceded that her offer to purchase the property in her own right was part of a strategy. It seems that she considered the estate may only have one opportunity to purchase the property and by her purporting to be an arms-length purchaser she may have been able to negotiate a more advantageous purchase price for the estate.
Whatever the basis for the applicant’s actions, it could not be said that her dealings with the respondents were in any way transparent.
The respondents were not constrained in their dealings with the applicant because she did not tell them about the option. If she had then the respondents may have formed the view that they were initially not entitled to deal with a third party until and unless the estate had been given an opportunity to put in an offer.
In a conversation in January 2016 the applicant agreed that the fourth respondent told her that he had an appraisal for the property of $200,000.
The applicant had a clear expectation that the property could be purchased either by her or by the estate for an amount significantly less than the purported appraisal.
Notwithstanding the scepticism of the applicant and her father in respect of the various dealings with the property, she conceded that the respondent did have an appraisal in the sum of $200,000. She also conceded that the offer of the purchaser at $175,000 was also genuine.
The evidence supports the contention that at all times the respondents engaged with the applicant in an open and transparent fashion. There is no evidence of any misrepresentation by them.
The refusal of the applicant to accept the various representations by the respondents as to the value of the property was based on her own misguided scepticism at best or at worst born of a strategy to secure the property for the lowest possible price.
The applicant’s conduct in dealing with the respondents and the agent was to offer what she considered to be the lowest price possible.
At paragraph 52 of her trial affidavit the applicant complains that the notice sent to her on 19 April 2016 inviting an offer allowed insufficient time for the applicant to consider her options. Irrespective of the timing, the applicant had been alerted of the range of offers namely $165,000 to $175,000 and on 20 April 2016 was sent an email informing of her of two formal offers at $175,000.
Paragraph 54 of the trial affidavit provides a convenient summary of why the applicant rejected the invitation to submit an offer:-
The respondents did not say they would accept an offer of $175,000 and allow me to purchase the land. The email clearly says “submit your interest” All parties were well aware I wanted to buy. If I had matched the price of $175,000 I believe the offer would have been rejected and they had the choice of which offer they wanted to accept. There was nothing to say we will accept your offer or the highest offer. If I had made an offer I would have given up my right to buy the land. [The agent’s] letter on the 15 of April clearly explain this fact. I believed this was nothing but a trap to force me to give up my rights under the family law court order.
The applicant was demonstrably mistaken in her apprehension that the respondents had an intention to deal with her unfairly. There is no evidence to suggest that a trap was being set by the respondents, Mr F or the agent and there was certainly nothing to show that the respondents had adopted a strategy in order to force the estate to give up any right that it may have held under the Family Court order.
The applicant reluctantly conceded that she had been manifestly wrong in her apprehension of the respondents conduct and motives. Consistently with that concession, I have found that the respondents have dealt fairly with the applicant and had provided her with numerous opportunities to purchase the property either on her own account or by the estate for a price consistent with the market reality.
The applicant conceded that the content of the emails forwarded by her father to the agent and the respondents was consistent with her instructions. The necessary corollary of that concession is that she had an opportunity to make an offer to purchase the property but did not do so either because she was suspicious of the price or her strategy was to call their bluff.
The applicant was generally unimpressive in her evidence. She approached the proceedings with a sense of entitlement and a belief that there could or should be no other alternative than the transfer of the property to either her or the estate at a price of $175,000 which she now accepts albeit with great reluctance. Her evidence was coloured by her realisation that her initial deception in attempting to purchase the property on her own account, the deliberate non-disclosure of the terms of the Family Court order and her strategic prevarication directed to achieving a low purchase price may not ultimately be to the estate’s advantage.
Mr Fuller
The fourth respondent relied upon his evidence filed 5 September 2016. He agreed that at a meeting with the applicant they agreed to sell the property to her based upon a valuation of $200,000. I accept his evidence that a valuation to that amount was available, but that the respondents at that time were in no hurry to sell the block. The fourth respondent stated that from 2012 the respondents were generally aware of the provisions of paragraph 1(d) of the order and knew that if neither of the respondents or all of them wanted the property, then it was to be offered to the father.
The fourth respondent confirmed the contents of paragraph 11 of his trial affidavit namely, that the applicant made an initial offer to purchase the land for $75,000 about six weeks after the death of his father. It is his evidence that the applicant was advised that the offer was not acceptable and that the land had a considerably higher value. In the absence of a deal being struck between the applicant and the respondents, the applicant was advised that the property would be listed on the open market for sale.
It is his evidence that various offers made by the applicant up to an offer of $110,000 was rejected on the basis that it was too low.
Following the listing of the property various offers were received being $165,000 from Mr O and then $175,000 from the successful purchasers.
I accept that the offers from Mr O and the purchasers were genuine and that the highest and best offer namely that made by them was conveyed to the applicant with an invitation to match that offer.
To the extent that the fourth respondent rejects the applicant’s allegation that he and the other respondents intended to be duplicitous in their representations to the applicant, such a contention is not supported on the evidence. In any contest between the fourth respondent and the applicant, I accept his version of the events unless proven otherwise on the balance of probabilities.
The fourth respondent’s evidence is consistent with the evidence promoted by Mr F and the agent and the content of the email communication from the applicant’s father sent to the respondents.
The fourth respondent agreed that he received email communication from the agent on 15 April 2015 enclosing the email from the applicant’s father to the agent as set out in paragraph 33 of these reasons.
The fourth respondent then referred to annexure “ALF5” to his trial affidavit which is an email sent from the respondents to the applicant on 20 April 2016 in the following terms:-
Hi [the applicant],
This email is to inform you that we have 2 x formal offers on the table for our consideration which satisfies our asking price of $175K. This is now your opportunity to formally submit your interest to [the agent] via the ‘Letter of Offer’ you received on email from [the agent] of [G Real Estate]. You have until the close of business Thursday 21st of April 2016 to provide your offer so we can make a timely decision for all interested parties. We are acting in accordance with the legal advice we have sought to sell our block.
Kind regards
[The second, third and fourth respondents]
The fourth respondent’s evidence was that he considered the email forwarded to the applicant was clear in its terms and could only have been interpreted by the applicant as a proposal to conclude an agreement with her at $175,000.
Mr E
The agent was initially called pursuant to a subpoena issued by the applicant but later relied upon an affidavit filed on behalf of the respondent. It is difficult to understand the applicant’s assertion in respect of the agent. It appeared that she considered he had conspired with the respondents to artificially inflate the price of the property.
I accept his evidence that at no stage was that ever a feature of his involvement and that he acted in the proper discharge of his professional obligations.
He understood the intention of the respondents was to receive the best price reasonably available for the property, but confirmed that there was never any suggestion or instruction given to him inconsistent with the respondents intention to offer the property to the applicant if she was prepared to match the price offered by Mr F.
The agent considered that no offer was forthcoming from the applicant and on that basis he forward communication to the respondents and the purchasers that they should proceed to finalise the contractual arrangements.
The agent submitted the Form 1 vendor statement which then became Exhibit 4 in the proceedings. This document confirms that the vendor statement was signed by the parties on 2 May 2016 and disclosed the existence of the caveat placed on the property by the applicant on 27 April 2016 claiming “an equitable estate and interest in the fee simple in the land above described pursuant to an option to purchase the land pursuant to an order of the Family Court of Australia made 10 April 1991 in action number AD1897 of 1990”.
He drew up a contract for sale which was signed on 29 April 2016 and by later addendum the settlement date was extended to 18 June 2016.
Interpretation of the consent order
There was much focus by the applicant on the proper interpretation to be attached to the order relied upon by the application to create the obligation on the respondents to sell the property to the estate.
In Yunghanns v Yunghanns (1999) 24 Fam LR 400, the Full Court said at [143]:-
In the absence of any allegation of fraud or mistake or other vitiating circumstances in the formation, drafting or recording of the orders, extrinsic evidence is not admissible to contradict the plain words of the order, or to seek to establish the agreement between the parties which lay behind it…
In Hughes & Hughes [2013] FamCAFC 146 the Full Court considered the remarks of the Full Court of the Federal Court in Repatriation Commission v Nation (1995) 57 FCR 25 at [33]-[34]:-
If, as in the case of a “speaking” order… its true meaning is “immediately plain”, the terms of the order will speak for themselves. If this is not the case, the true meaning may be ascertained according to ordinary rules of construction… Under the ordinary rules of construction, evidence of surrounding circumstances is admissible to assist in the interpretation of an instrument if the language is ambiguous or susceptible of more than one meaning, but no admissible to contradict the language of the instrument when it has “a plain meaning”…
In considering whether it is appropriate as a matter of statutory construction to treat as redundant an order or part thereof, the Full Court of this Court said the following at [35]:-
However, it is not always possible to give meaning to every word: Brisbane City Council v the Attorney General for Queensland (1908) 5 CLR 695 at 720; Secretary, Department of Social Security v Rurak (1990) 99 ALR 17 at 28. When it becomes impossible to give meaning to every word, a construction “that produces the greatest harmony and the least inconsistency” is to be preferred: Attorney General v Silem (1863) 159 ER 178 at 217…
As considered in the earlier judgment, the plain and indeed only interpretation that could or should be made in respect of the order was that the respondents parents intended that their father should have a pre-emptive right in circumstances where any or all of the respondents wish to sell their interest in the property either in whole or in part.
I reject the applicant’s contention that in some way the order should be read down or be defined by the circumstances that she says motivated the deceased to agree the transfer of the property to the respondents as part of the property settlement agreement with his former wife.
Simply put, without there being any obligation on the respondents to transfer the property to their father, if they wish to sell then he would not be excluded from the process consistent with a pre-emptive right.
Are the respondents bound by the order if they were not parties to the property settlement proceedings?
It is well recognised that the Court is limited in its powers to make orders in respect of third parties.
Courts having jurisdiction under the Family Law Act 1975 (Cth) (“the Act”) can make orders which have an effect on a third party and in some circumstances may make orders directed against third parties. For example, by injunction on an interlocutory basis: see Sanders v Sanders (1967) 116 CLR 366; Antonarkis v Delly (1976) 10 ALR 251; R v Dovey; Ex Parte Ross (1979) 141 CLR 526.
Prior to the commencement of Part VIIIAA of the Act in 2004 the Court was constrained in its ability to alter the interests of third parties under s 79. The Court could, in limited circumstances, bind third parties under s 114.
The power of the Court to make orders and grant injunctions binding third parties was limited to orders and injunctions which did not deprive rights from, or impose duties on, third parties. The leading case is Ascot Investments (supra).
In Ascot Investments (supra) the appellant company by special leave appealed to the High Court against an order of the Full Court of the Family Court that the company and its directors register a transfer of shares from the husband to the wife. The husband and three adult children of the marriage were directors of the company. The directors of the company, through its memorandum of articles of association had the right to refuse to register any transfer of shares. No decision had been made whether or not to register the transfer of the shares to the wife.
The High Court held that although the Family Court may make an order or injunction which is directed to a third party or which will indirectly affect the position of a third party, such an order may not be made if its effect will be to deprive a third party of an existing right or to impose upon a third party a duty which that party would not otherwise be liable to perform. Gibbs J said that in the absence of clear and unambiguous words in the legislation, it was unreasonable to impute to Parliament an intention to extinguish the rights and enlarge the obligations of third parties.
Gibbs J set out two exceptions to this rule, namely where there might be a sham transactions used to evade obligations under the Act, and third party entities controlled by a party to the marriage ie. the alter-ego of a party to the marriage.
In R v Ross-Jones; Ex parte Green (1984) 156 CLR 185 Gibbs CJ with whom Mason J agreed said that the Family Court had no wider power to grant interlocutory injunctions than it has to grant permanent injunctions, and that no distinction can be drawn between the position of third parties who are strangers to the marriage and those who have some relationship or association with them: at 202.
Wilson and Dawson JJ approved of the statement by Gibbs J (as he then was) in Ascot Investments (supra) at 354-355:-
There is nothing in the words of the section that suggests that the Family Court is intended to have power to defeat or prejudice the rights, or nullify the powers, of third parties, or to require them to perform duties which they were not previously liable to perform. It is one thing to order a party to a marriage to do whatever is within his power to comply with an order of the court, even if what he does may have some effect on the position of third parties, but it is quite another to order third parties to do what they are not legally bound to do…
Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that that limits the rights of the party who owns it.
The respondents were children at the time of the Family Court order and could not be bound or obliged within the obligation purportedly created by the order.
The obligation was on the parties to the order to do all things necessary to transfer the property to the respondents.
That transfer took place with formality on 21 December 2011 as evidenced by the Memorandum of Transfer recording the transfer of the property from Mr B Fuller and Ms Geller (the parties to the order) to Ms Merritt, Mr Fuller and Ms Johns with the consideration being recorded by reference to the order made on 10 April 1991.
It would appear uncontroversial that at the time of the transfer, whilst the consideration referred to the order, the respondents had not been provided with a copy and were not aware of the option provision until sometime in 2012.
If the respondents were not bound then, when the interest was transferred to them did they accept the property subject to “condition” or “option”?
In South Australia the title of the registered proprietor of an estate or interest is subject to all estates, interests or encumbrances notified on the register. Section 69 of the Real Property Act1886 (SA) (“Real Property Act”) provides that “the title of every registered proprietor of land shall, subject to such encumbrances, liens, estates or interests as may be notified on the certificate of title of such land, be absolute and indefeasible, subject to a variety of qualifications”.
The decision of Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 is authority for the proposition that if an interest is noted on the register the registered proprietor (even the successors in title) is bound by it. In the more recent decision of Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 the High Court reiterated that the scheme of the Torrens system is that the register is to “provide third parties with the information necessary to comprehend the extent or state of the registered title to the land in question”. A third party inspecting the register should not have to look further for extrinsic material that might establish facts existing at the time of the interest’s creation. The High Court referred in passing to Bursill (supra) and did not express this agreement with the result. However, the High Court’s comments may be seen as an indicator that the nature and extent of the interests and encumbrances noted on the register should be gleaned only from a search of the register.
The Real Property Act contained a general saving provision setting out that the indefeasibility of the registered proprietor’s title is subject to a number of matters. Section 71 provides:-
Nothing in the two preceding sections contained shall be construed so as to affect any of the following rights or powers, that is to say-
(a)…the power of the Sherriff to sell the land of a judgment debtor under a writ of execution;
(b)…the power of the Court to order the sale of the land;
(c)…the right of the Official Receiver or of any trustee to land transmitted on the bankruptcy or statutory assignment of the registered proprietor;
(d)…the rights of a person with whom the registered proprietor of land has made a contract for the sale of the land, or in relation to any other matter affecting the land;
(e)…the rights of a cestui que trust where the registered proprietor is a trustee, whether the trustee shall be express, implied, or constructive;
(f)…the right of promoters of an undertaking to vest land in themselves by deed-poll pursuant to the Compulsory Acquisition of Land Act 1925 or any Act amending the same;
provided that no unregistered estate, interest, power, right, contract, or trust shall prevail against the title of a registered proprietor taking bona fide for valuable consideration, or of any person bona fide claiming through or under him.
It seems therefore that each of these matters is an exception to indefeasibility either under the overriding statute or the in personam exceptions.
The extent and limit of the in personam exception to indefeasibility has been analysed in a number of cases. The exception acknowledges that the concept of indefeasibility of title enshrined in the legislation does not affect the personal obligations of the registered proprietor: see Frazer v Walker [1967] 1 AC 569 at [585]. The exception means that a registered proprietor is subject to contracts he or she has entered into and also the trusts whether express or implied, over the property. In South Australia the exception is set out in s 71(d) and (e) of the Real Property Act. The title of the registered proprietor is subject to the rights of a person with whom the registered proprietor has a made a contract for the sale of the land or another dealing and the rights of a beneficiary where the registered proprietor is a trustee.
There are a variety of situations in which the in personam claim may be invoked. The High Court decision in Bahr v Nicolay(No 2) (1988) 164 CLR 604 makes clear that the in personam exception may arise where the registered proprietor purchases the property having acknowledged the existence of a prior unregistered interest of a right binding on the vendor having agreed whether expressly or by implication to take subject to that interest of right. In Bahr (supra) the Bahrs were the registered proprietors of the land in dispute and they agreed to sell to Nicolay. The contract of sale included an agreement by Nicolay to lease the property back to the Bahrs for three years and upon the expiration of the lease to enter into a contract to resell the land to the Bahrs. Nicolay became the registered proprietor and then sold the property to a third party. The third party knew of the agreement between Bah and Nicolay and, at Nicolay’s insistence, the contract for sale from Nicolay to the third party contained an express acknowledgment of it. After the third party became registered, their actions made it clear that they acknowledged the rights of the Bahrs. They wrote to the Bahrs acknowledging the third parties obligation to sell and had made offers to do this though the offers had lapsed. Subsequently, the third party sought to rely on their registered title to defeat the rights of the Bahrs. The evidence established that the third party had accepted the obligation and after registration had sought to extinguish it.
In deciding whether the title of the third parties was indefeasible, the High Court considered whether the fraud or the in personam exception was applicable. In the view of Wilson and Toohey JJ, the fact situation was such that the matter was more properly dealt with under the in personam exception. All of the justices considered that the third parties were subject to the rights of the Bahrs. In view of the High Court, the indefeasibility provisions did not protect a registered proprietor from his or her own actions where those actions have given rise to a personal equity in another.
In the present case the evidence supports a finding that the purchasers were bona fide purchasers without notice. When the contract was entered into on 29 April 2016 they were unaware of the claim but were subsequently given notice of the applicant’s claim by reference to the caveat lodged on the title and included in the vendor’s statement of interest.
At the time that the respondents received the legal and equitable interest in the property pursuant to the Memorandum of Transfer on 21 December 2011, they were not made aware of the terms of the Family Court order other than it being considered the consideration for the transfer.
I do not consider that the respondents were bound by any purported option at the time of the transfer of the interests in the property to them in 2011.
In any event, if I am wrong in my determination that the order did not bind the respondents and that if it did they were entitled to receive clear title to the property in circumstances where they were not given notice of the purported claim now asserted by the applicant, the evidence reinforces the view taken by me in the interlocutory proceedings namely, that clause 1(d) of the order created only a pre-emptive right and not an option. An opportunity was provided to the applicant and she declined that offer and did not proceed to exercise her pre-emptive right. At that point any right was exhausted and there was impediment to the respondents entering into a contract for the sale of the property to Mr F.
CONCLUSION
For these reasons I propose to dismiss the Further Amended Application in a Case filed 29 August 2016 thereby removing any impediment to a sale being concluded with the purchasers.
I make orders as appear at the commencement of these reasons for judgment.
I certify that the preceding one hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 9 November 2016.
Associate:
Date: 9 November 2016
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