TW Hedley (Investments) Pty Ltd v Richardson Plant Hire Pty Ltd

[2005] QSC 99

SUPREME COURT OF QUEENSLAND

CITATION:

TW Hedley (Investments) Pty Ltd v Richardson Plant Hire Pty Ltd & Anor [2005] QSC 099

PARTIES:

TW HEDLEY (INVESTMENTS) PTY LTD (ACN 010 566 711)
(applicant)
v
RICHARDSON PLANT HIRE PTY LTD (ACN 010 855 553)
(first respondent)
JOHN STANLEY RICHARDSON
(second respondent)

FILE NO/S:

SC No 149 of 2005

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Cairns

DELIVERED ON:

15 April 2005

DELIVERED AT:

Cairns

HEARING DATE:

6 April 2005

JUDGE:

Jones J

ORDER:

1. Pursuant to s 127 Land Title Act, I order that the caveat lodged by the respondent over land described as Lot 2 on SP144124, County of Nares, Parish of Smithfield be removed to permit the registration of the memorandum of transfer by the registered proprietors to TW Hedley (Investments) Pty Ltd and any other documents incidental to the completion of said transfer.

2. I adjourn for further argument the question of costs.

3. I give liberty to apply upon one party giving the other two business days notice.

CATCHWORDS:

CONTRACTS – OFFER AND ACCEPTANCE – where respondents claim legally binding contract arose as a result of correspondence exchanged between applicant and respondent – whether document constituted offer – whether document constituted acceptance

EQUITY – whether express or constructive trust arose as a result of correspondence exchanged between applicant and respondent

LAND TITLES UNDER THE TORRENS SYSTEM – CAVEATS AGAINST DEALINGS – whether respondents possess caveatable interest in subject land

Land Title Act 1994 (Qld)

Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342
Knight v Knight (1840) 49 ER 58
Morice v Bishop of Durham (1804) 32 ER 656
Reynolds v Atherton (1922) 127 LT 189

COUNSEL:

Mr A Philp SC for the applicant
Mr M Jonsson for the respondents

SOLICITORS:

Williams Graham Carman for the applicant
MacDonnells for the respondents

Introduction

1. This is an application pursuant to s 127 Land Title Act 1994 (Qld) (“the Act”) by TW Hedley (Investments) Pty Ltd for the removal of a caveat lodged over land properly described as Lot 2 on SP144124, County of Nares, Parish of Smithfield.

1. The registered proprietors of this land are Terence Warren, John Warren and Maxwell Warren (“the vendors”).[1]  On or about 17 February 2003, the vendors granted an option to purchase the property to the applicant.  That option was exercised on 2 February 2005.  The vendors executed a contract of sale over the land.  The completion date for this contract was 4 April 2005.  However completion was impossible due to the existence of a caveat over the land.

   [1] Affidavit Terence Warren, sworn 5 April 2005.

1. The caveat was to be lodged on 18 March 2005 by John Richardson and Richardson Plant Hire Pty Ltd. It was lodged pursuant to s 122(1)(a) of the Land Title Act, as the respondents claimed an entitlement to an equitable estate in fee simple. The caveat did not meet the requirements of s 121(2) of the Act because it did not state the address of the registered owner with the consequence that the Registrar did not give written notice to the registered owners as required by s 123.

1. The respondents claim that they are assignees of the option to purchase the land pursuant to an agreement in November 2004 made between them on the one hand and the applicant on the other.  In the alternative they claim they are beneficial owners of the option under an express or constructive trust that arose as a result of their negotiations with the applicant, and as such have a caveatable interest over the land.  The applicant argues that no agreement or trust exists or ever existed between it and the respondents.

The November 2004 dealings

1. The respondents’ claim to an interest in the land is based on dealings they had with the applicant in November 2004.  It is note contended that the applicant had a sufficient equity in the land to sustain a caveat.  But the respondents contend that by reason of the dealings, they have a derivative proprietary claim against the registered proprietors, allowing them by action to enforce the option.  Those dealings are documented in an affidavit of Alexander Huelin, filed in the Registry on 5 April 2005.  Relevant correspondence is annexed to that affidavit.[2] 

   [2] Ex AMH1 to affidavit Alexander Huelin, sworn 5 April 2005

1. Examination of the correspondence reveals that John Richardson (“the second respondent”) was interested in purchasing the option to purchase the land off the applicant.  Correspondence passed between the offices of the second respondent’s and the applicant’s solicitors.  Eventually in January 2005 negotiations appear to have broken down.

1. The respondents now claim that the correspondence gave rise to a legally enforceable contract of sale, or alternatively a trust in which the applicant held the option on trust for the respondents.  It is necessary for the respondents to identify a triable issue and for the Court to determine whether the balance of convenience favours the removal or the maintenance of the caveat.

Did the November 2004 dealings give rise to a contract between applicant and respondents?

1. The respondents argue that on the terms of facsimile letters exchanged between them and the applicant on 12 November 2004, 29 November 2004, 1 December 2004 and 5 January 2005, a contract arose between them and the applicant.  They argue particularly that the facsimile of 12 November 2004 constituted an offer from the applicant to the respondents to sell the option, while the facsimile of 23 November 2004 constituted acceptance of the offer.  The applicant disagrees, submitting that no contract exists or could exist between it and the respondents for sale of the option.

1. Crucial to the determination of this case is whether the respective facsimiles constituted an offer and an acceptance or whether they were merely pre-contractual negotiations.

The “offer”

1. An extract of the facsimile of 12 November 2004 from the applicant’s solicitors to the respondents’ solicitors sets out the relevant terms as follows:-

“Further to our meeting I confirm that it is my understanding that your client…is interested in purchasing land which TW Hedley…has an option over for a total of $9 million.  The purchase price is to be paid:-
1. $4.5 million on completion
2. The balance to be paid by five equal instalments of $900,0000 [sic] payable at six monthly intervals commencing six months after the completion date.
As indicated to you, the payment of the balance purchase price raises some interesting issues and after discussions with our client the following scenario is proposed:

·     A new company is established wholly owned by our client (or another entity of our client’s),

·     The option is assigned to the new company (for the option fee),

…

·     The constitution of the company would need to provide that for so long as our client is a shareholder in the company, the company could not mortgage its assets or borrow monies other than for the purpose of:-

o   Developing the land; or

o   Raising funds to acquire our client’s shares.

We note that you are going to discuss these matters with your client to see whether this proposal can be taken further.”[3]

[3] Ex AMH1 to affidavit Alexander Michael Huelin sworn 5 April 2005

1. This document in its terms has the character of a “proposal” and is very general in its scope.  While some essential terms have been proposed – such as the purchase price and mode of payment – there remains uncertainty about other essential terms. For example, the very identity of the offeree is not certain: the document proposes the creation of a “new company”, to which the option will be assigned.  In my view this facsimile represents pre-contractual negotiation and is not an offer capable of acceptance.  The words “whether this proposal can be taken further” suggest that the point has not yet been reached whereby the applicant intended to be bound by the terms expressed.

The “acceptance” 

1. Even if the facsimile of 12 November 2004 could be construed as an offer capable of acceptance, I am satisfied that the reply from the respondents’ solicitors of 29 November 2004 does not have the effect of an acceptance.  That reply relevantly states:

We now have had preliminary discussions with our client company concerning the proposal and we advise that our client company is in basic agreement, however is having to seek advice regarding the taxation implications of the proposal that you have put forward regarding a new company.  In the meantime, could you please let us know:-
1. The proposed settlement date of the transaction.
2.  We understand that your client holds an option to purchase, could you please advise the date by which that has to be exercised.
3. When your client company will have the approval in relation to the land.

1. Several key points can be discerned from this document.  At this stage the respondent is in “basic agreement” but needs to seek advice in relation to parts of the offer.  This fact alone indicates the document cannot constitute an acceptance.  Furthermore, if the facsimile of 12 November 2004 were an offer, then the offer was to sell the option to a “the new company” which was to be wholly owned by the applicant (and/or another entity of the applicant).  It is well settled that an offer can only be accepted by the person to whom it is addressed: Reynolds v Atherton.[4]  On its face the “offer” to assign the option was directed at “the new company” so prima facie only the “new company” can accept it – not the respondents.

   [4] (1922) 127 LT 189

1. Mr Jonsson of counsel for the respondents argues that the correspondence in conjunction with other circumstances gives rise to a number of possibilities.  These include the possibility that either of the respondents are acting in his or its own right or as agent disclosed or undisclosed for the other.  There is also the possibility of the respondents being personally bound once the intention of the parties has been objectively determined.

1. Whilst there is a compelling argument that the facsimile letters exchanged between the applicant and respondents did not create a legally binding contract between the applicant and respondents, it cannot be said there is no triable issue.

Did the November 2004 dealings give rise to a trust?

1. In the alternative, the respondents argue that the documents exchanged between the parties created an express or constructive trust, in which the applicant held the option on trust for the respondents.  As such, counsel for the respondents argues each respondent (as beneficiary) has a directly enforceable right against the vendors.  This is because the vendors represent a third party dealing with the subject of the trust in circumstances where the applicant (as trustee) is unwilling to protect the beneficiary’s interests.

Express Trust

1. An express trust can be created in two ways: by transfer of property coupled with an intention to make the trustee the beneficial owner of that property, or by a declaration of trust, where by the settlor declares him/herself to hold property on trust for a beneficiary.[5]  An express trust must fulfil the three certainties of intention, subject matter and object.[6]

   [5] See Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 per Dixon J

   [6]Knight v Knight (1840) 49 ER 58

1. There is no express declaration of trust in the facsimile of 12 November 2004, and it is difficult to infer an intention to create a trust in favour of the respondents in the circumstances.  The relevant part of the facsimile states: 

after discussions with our client the following scenario is proposed:
· A new company is established wholly owned by our client (or another entity of our client’s),
· The option is assigned to the new company (for the option fee),…[7]

[7] Ex AMH1 to affidavit of Alexander Michael Huelin, sworn 5 April 2005

1. It is not necessary to finally resolve the question of intention as there is clearly no certainty as to the object of the trust.  If one examines the fax as a document purporting to create a trust, it seems the lack of certainty as to the beneficiary is fatal. A trust must be in favour of a definite beneficiary or beneficiaries: Morice v Bishop of Durham.[8] The expressed beneficiary of the alleged trust did not exist when this document was created.  Unless there is a basis for arguing an interpretation that the respondents were the intended beneficiaries I find it difficult to see on the material before me how this facsimile can be held to have created an express trust. 

   [8] (1804) 32 ER 656

Constructive Trust

1. In the alternative, counsel for the respondents submits that a constructive trust has arisen out of the applicant’s assumption of responsibility under the contract, or out of the fiduciary relationship that exists between the parties as co-promoters of the company to be formed, or out of the fiduciary relationship that exists between the parties as joint venturers.

1. I have already expressed the view that prima facie no contract was ever formed between the applicant and respondents.  The other circumstances alleged by the respondents involve there being a fiduciary relationship between the applicant and respondents, due to their being co-promoters of a company not yet formed or as being joint venturers.

1. The decision of the High Court in Hospital Products Ltd v United States Surgical Corporation[9] deals with the question of importing fiduciary obligations into commercial transactions.  Mason J states the principle at 99:

“The classical illustrations of the fiduciary relationship are those in which the fiduciary is under a duty to act not in his own interests or solely in his own interests but in the interests of another or jointly in the interests of another and himself, e.g. a trustee and a partner…It is that obligation which is the foundation of the fiduciary relationship, even if it is subject to qualifications including the qualification that in some respects the fiduciary is entitled to act by reference to his own interests.  The fiduciary duty must then accommodate itself to the relationship between the parties created by their contractual arrangements.

[9] (1984) 156 CLR 41

1. On the other hand, where parties deal at arms length in a commercial transaction where no special reliance or trust has been placed by one in the other, or no special vulnerability exists, there is no justification to impose fiduciary duties upon one of the parties: Hospital Products at 70 per Gibbs CJ.[10]  Prima facie this is the case here:  there is nothing to suggest the respondents placed any special reliance or trust in the applicant; rather they were parties dealing at arms length in a commercial transaction.

   [10] See also Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342

1. Mr Jonsson on behalf of the respondents argues that in the circumstances, the correspondence allows for a finding of an unperformed contract and the applicant’s assumption of a responsibility as a co-promoter of a company to be formed.  Doubtless of any view one might have, however, on the material before me it cannot be said that there is not an issue to be tried on fuller appreciation of the circumstances.

Conclusion and Orders

1. In the above reasons I have identified what I regard are significant difficulties for the respondents in making out a case that they have an interest in the land.  In doing so I have probably gone further than was strictly necessary to identify grounds on which the caveat ought to be examined.  I have done this in deference to the detailed arguments raised by counsel for both parties.  If there is any basis for the respondents’ claim it is an issue which exists discretely between the respondents and the applicant.  The vendors have a right to deal with their land and they wish to complete the sale to the applicant.  There is no disadvantage to the respondents in allowing the sale to proceed and for the applicant to become the registered proprietor.  Such further action as the respondents may be advised to pursue can be taken against the applicant in the ordinary course.

1. I make orders as follows:-

1.) Pursuant to s 127 Land Title Act, I order that the caveat lodged by the respondent over land described as Lot 2 on SP144124, County of Nares, Parish of Smithfield be removed to permit the registration of the memorandum of transfer by the registered proprietor to TW Hedley (Investments) Pty Ltd and any other documents incidental to the completion of said transfer.

2.)    I adjourn for further argument the question of costs.

3.)    I give liberty to apply upon giving to the other party two business days notice.