Vlahos v Vlahos Pty Ltd
[2016] VCC 1250
•30 August 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-15-05034
| JAMES VLAHOS | Plaintiff |
| v | |
| VLAHOS PTY LTD and ANDREW VLAHOS | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1, 2 and 4 August 2016 | |
DATE OF JUDGMENT: | 30 August 2016 | |
CASE MAY BE CITED AS: | Vlahos v Vlahos Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1250 | |
REASONS FOR JUDGMENT
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Subject: PROPERTY – TRUSTS
Catchwords: PROPERTY – whether agreement to subdivide property required to be in writing – whether agreement part performed - whether minute of meeting of trustee constitutes agreement to subdivide and transfer property – whether entitled to specific performance of agreement
TRUSTS – resulting trusts – whether money paid to purchase price – whether plaintiff precluded by laches – whether entitled to transfer of an aliquot in proportion to contribution to purchase price
Legislation Cited: Instruments Act 1958 (Vic) s 126; Property Law Act 1958 (Vic) s 53(1)(a);
Cases Cited:Calverley v Green (1984) 155 CLR 242; Corin v Patton (1990) 169 CLR 540; Kingswood Estate Co Ltd v Anderson[1963] 2 QB 169; Maddison v Alderson(1883) 8 App Cas 467; Millett v Regent [1975] 1 NSWLR 62; Ogilvie v Ryan [1976] 2 NSWLR 504; Orr v Ford (1989) 167 CLR 316; Regent v Millett (1976) 133 CLR 679; Steadman v Steadman[1976] AC 536; Wakeham v MacKenzie[1968] 2 All ER 783
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Gronow | Klonis Kirby & Co Solicitors |
| For the Defendant | Mr M Bearman | DCA Lawyers |
HIS HONOUR:
Summary
1 In this case, the plaintiff (“James”) alleges that he is entitled to an interest or share in the property at 50 Puckle Street, Moonee Ponds (“the property”). James says that his claim arises in one or more of the following ways. Firstly, he says he contributed to the purchase price of the property and the payment of stamp duty in connection with the property and thereby attained an interest through a resulting or constructive trust. Secondly, he says that pursuant to an agreement made with his younger brother, Andrew Vlahos (“Andrew”), the brothers agreed to subdivide the property and recognise his equitable interest in it by transferring to him the upstairs residential unit plus one car parking space. Thirdly, James says the defendant (“Vlahos”) resolved to make an in specie distribution to him of part of the trust property over which it was trustee – namely the upstairs residential unit and a car space. The defendant trustee denies the claim.
Background
2 On 11 February 1981, the S Vlahos Family Trust (“the family trust”) was created by Deed. Vlahos, which was incorporated on 20 January 1981, was and remains trustee of the family trust. The original directors and shareholders were Stefhanos Vlahos and Niki Vlahos. They are the parents of James, who was born in Geelong in 1960, and Andrew, who was born in Melbourne in 1972. James and Andrew have a sister, Ourania.
3 Around June 1990, James and his father had discussions about purchasing the commercial property at 50 Puckle Street, Moonee Ponds through the family trust.
4 On 5 July 1990, James executed a contract of sale to purchase the property for $590,000, with a deposit of 10 per cent and settlement due in 30 days. Pursuant to the contract, the purchaser was James or his nominee.
5 On 9 July 1990, James nominated Vlahos as the purchaser of the property.
6 On 25 July 1990, James and his wife, Viki Vlahos, were appointed directors of Vlahos. James remains a director of Vlahos.
7 On 13 August 1990, a transfer of land was executed transferring the property from the vendor to Vlahos. The transfer was assessed to stamp duty in the sum of $31,600.
8 On 22 October 1990, the transfer of the property to Vlahos was registered.
9 On 4 December 1990, Viki Vlahos ceased to be a director of Vlahos.
10 In a document dated 23 September 1995, Stefhanos Vlahos set out in the Greek language a document which was not strictly a will, but represented his wishes regarding the disposition of the family’s assets (including those held by the family trust) after his death. In short, everything was to go to his wife, Niki, and to his children. His wife was to control everything during her lifetime. Stefhanos distributed the assets as follows: James was to receive five properties together with $30,000 cash; Andrew was also to receive five properties; Stefhanos asked that the brothers take care of their sister and meet her expenses from the income, presumably from the investment properties distributed to them.
11 On 29 April 2003, Stefhanos died. He was survived by his wife and children.
12 On 28 June 2008, Andrew became (and remains) a director of Vlahos.
13 On 14 January 2010, James sent an email to the family trust’s then accountant, Peter Grapsas (“Grapsas”) referring to the contribution which James had made to the original purchase of the property.
14 On 7 April 2010, Vlahos dispensed with the services of Grapsas as its accountant.
15 Around July 2010, Vlahos engaged Graham Joe (“Joe”) of GA Partners as its accountant.
16 On 21 November 2010, Niki Vlahos died.
17 Around late November or early December 2011, James and Andrew had a conversation in which they agreed that the property would be subdivided with the retail premises downstairs and a residential section upstairs. James was to become registered proprietor of the upstairs residential lot in recognition of his interest in the property. This arrangement was Andrew’s suggestion. The brothers asked Joe to draft the relevant minutes.
18 In December 2011, James engaged Szirom McGrath Co, subdivision and land surveyors, to commence working on the subdivision.
19 From around January 2012, James received the rent from the upstairs part of the property. Because he received the rent from the upstairs residence, it was agreed between the brothers that James should pay the outgoings in respect of that part of the property.
20 In about June 2015, Andrew refused to sign the transfer necessary to give effect to the subdivision of the property. He said that he had changed his mind about the subdivision.
21 On 21 October 2015, James issued these proceedings.
Issues
22 The main issues to be addressed in this case are:
(a) Did James contribute $102,060.70 plus $31,600 stamp duty towards the purchase of the property?
(b) If James did so contribute, did he become an owner in equity of an aliquot and undiminished interest in 22.57% of the property?
(c) Should Vlahos transfer the 22.57% interest to James, with the effect that they become tenants in common of the property?
(d) Is James precluded from obtaining equitable relief due to laches?
(e) Did James and Vlahos agree in about 2011 to subdivide the property into two sections whereby Vlahos would transfer the subdivided upstairs unit and car space to James in discharge of his alleged interest in the property?
(f) Was the agreement between James and Vlahos part performed?
(g) Is the Vlahos resolution constituted by the minute of meeting effective either to implement the agreement or distribute in specie the upstairs unit of the property plus a car space?
(h) Is James entitled to specific performance of the agreement of the Board resolution of Vlahos whereby the trustee must take the necessary steps to complete the subdivision?
(i) Is James entitled to damages or equitable compensation for breach of the agreement or breach of duty or trust by Vlahos’ refusal and failure to transfer the upstairs part of the property?
(j) Is James entitled to an order for payment of 22.57% of the nett rental of the whole of the property for six years before the proceedings began in October 2016 or for the annual rent referable to the upstairs section from the date of the minute of meeting or damages or equitable compensation for unpaid nett rental?
(a) Did James contribute $110,000 plus $31,600 stamp duty towards the purchase of the property?
23 In the further amended statement of claim dated July 2016, James alleged that he contributed $110,000 towards the purchase price of the property while also paying in October 1990 the stamp duty on the property totalling $31,600.[1]
[1]Paragraph 7 of the Further Amended Statement of Claim.
24 Vlahos, in its defence, did not admit that James made any of the payments he alleged. In its submissions, Vlahos accepted that by not admitting the contribution alleged by James, its intent was to put him to his proof to satisfy the court that he made the payments alleged.
25 In his evidence, James alleged that his father invested heavily in residential property. James said that he himself preferred commercial property and, around June 1990, suggested to his father that buying some commercial property was a good way to build the family’s assets. His father expressed some interest in the proposal but wanted to know how he could fund such a purchase and whether James was prepared to contribute to the purchase. James said that he was. At the time, James conducted his own legal practice as a solicitor. He agreed to contribute over $100,000.
26 James said that he located 50 Puckle Street, Moonee Ponds as a potential acquisition for his father. The Vlahos family lived in the Moonee Ponds area and so his father was aware that Puckle Street was a vibrant shopping strip.
27 James said he acted for the family on the purchase of the property. He made an initial offer of $575,000 but the vendor of the property rejected the offer. Later, James bought the property for $590,000 through the vendor’s agent, Fitzroys Pty Ltd. James signed the contract dated 5 July 1990 and named himself or a nominee as purchaser. The contract required a 30 day settlement.
28 Having explained in court the background to the purchase transaction, James gave evidence about the source and details of the contribution he made to the property.
29 First, he identified a bank cheque dated 18 July 1990 payable to his law firm Valos Black & Associates in the sum of $43,120.17. This represented the repayment to James of funds which he had placed on a term deposit with the Bank of Melbourne. James then identified these funds passing through the office trust ledger at his firm.
30 Secondly, James referred to an amount of $58,940.53 in the trust ledger in relation to the affairs of a client, Mr P Roche of Carlton, Victoria. The sum represented the payment of fees in connection with a number of matters in which James acted for Roche or interests associated with him.
31 These two substantial sums comprised the bulk of moneys used to provide a bank cheque as a contribution to the purchase of the property.
32 Thirdly, James produced a stub from an office account cheque book showing that he used $66,879.93 to buy a bank cheque. The bulk of the moneys used was the payment from Roche. In addition, James contributed further funds he had available so that the total amount used to purchase the bank cheque was $110,000.
33 Fourthly, James produced the Rule 26 Transit Register page which showed he received $8,402 on 13 August 1990 from the vendor as an adjustment for either an arrears of land tax or unpaid land tax in relation to the property. Because the moneys passed through the account, James said that he was obliged to keep a record of them. The documents in the court book included a land tax certificate under section 97 of the Act showing an assessment of land tax in the sum of $8,402.
34 Fifthly, James also put before the court copies of the trust account receipts in relation to the amounts of $43,120.17 and $58,940.53 on 18 and 19 July respectively. By examining the receipts for any specific period, one could see which amount of money was banked on particular days. One could reconcile the amounts by comparing the figures with the bank statements.
35 The figures about which James gave evidence were also supported by the reconciliation of trust balances as at 31 July and 31 August 1990, the cash payments journal for August 1990, and the transfer journal for the relevant part of August 1990.
36 Vlahos sought to query the reliability of the evidence given by James and his recollection of events by pointing to two documents in which James referred to his contribution as less than $110,000. In one case, he referred to the sum of $102,060.70 plus stamp duty and in the other, he mentioned “$102,060 towards the purchase price, $31,600 towards the stamp duty and registration”. Vlahos contended that James’ recollection was not good, and he was simply reconstructing the evidence from the documents which he now had available.
37 In cross-examination, James agreed that he knew the amount in issue was over $100,000 and between $102,000 - $120,000 but he could not recall the specific amount until he saw the source documents. One of the documents to which Vlahos took him was an email dated 14 January 2010 from James to Grapsas. James said that, at the time he sent the email to Grapsas, he was relying upon a working trust ledger which referred to the two major components of the contribution but not the additional fees which he had contributed to round up his commitment to $110,000. The problem arose because the working ledger was incomplete. James gave essentially the same explanation in relation to the other document in which he referred to the lower sum.
38 Vlahos did not put to James or contend in cross-examination or submissions that James was not telling the truth when giving evidence. Nor did Vlahos challenge the authenticity of the documents to which James referred or argue that they did not show what James claimed they established.
39 When reaching a decision on the evidence about the alleged contribution, the court is effectively confined to the oral evidence of James, and the documentary evidence. To a degree, the conclusion depends on an assessment of the credit of James as a witness.
40 James is and has been for many years a practising solicitor under the firm name Valos Black & Associates. While his occupation of itself is no guarantee that his evidence was truthful, it at least means that James should understand the significance of misleading the court and the potential consequences which might follow from a finding that the court could not rely upon his evidence or, worse still, that he lied to the court.
41 James presented in court as a very business-like person. He seemed cold, aloof and precise in his attention to the questions asked of him and the answers he gave. I accept his evidence about his role in relation to the purchase of the property, and, in particular, his contribution to the purchase. While I also agree with the criticism made by Vlahos that the state of affairs now alleged by James could have been better documented, I accept that in the Vlahos family, the parents, especially the father, dictated the path which the family would take and the children were expected to obey.
42 Having regard to James’ evidence about the contributions, the manner in which he gave his evidence, and his demeanour in court, I would probably have accepted his oral evidence in any event. However, the contemporaneous records which he produced, provided solid documentary support for his claims.
43 I am satisfied on the balance of probabilities that James contributed $110,000 towards the purchase of the property, and also paid the stamp duty of $31,600 levied on that purchase.
(b) If James did so contribute, did he become an owner in equity of an aliquot and undiminished interest in 22.57% of the property?
44 Having found that James contributed the money, the next point is whether James did so as a loan or as an equity contribution. Vlahos sought to cast doubt upon the nature of the funds contributed by James by referring to some of the accounts of the family trust for the years 2004 – 2009 in which Vlahos was said to owe James about $140,000. James agreed that the moneys which he contributed to the purchase price and payment of the stamp duty in connection with the property were the only moneys of substance which he ever paid in relation to the family trust.
45 Vlahos argued that because James was a director of the trustee and the financial accounts and tax returns showed the $140,000 as a loan, the court should conclude that any contribution by James was in fact a loan and not a contribution which could give rise to any equitable interest in the property.
46 I reject Vlahos’s submissions. First, the accounts were until 2010 prepared by Grapsas. The brothers agreed that the work done by Grapsas was deficient and the financial statements he produced were not readily understood and accepted as accurate.
47 Secondly, when Joe took over the accounts from Grapsas, he inherited the pre-existing problems. Joe confirmed that there were, in effect, aspects of the accounts which were incomprehensible. He sought clarification from the brothers regarding the most significant matters as they arose.
48 Thirdly, I accept that James had no involvement in the production of the accounts. Nor did he have knowledge of the details. Even if, as James conceded, on their face the accounts suggested that the money which he advanced was a loan to Vlahos, James said that the characterisation was wrong, and did not accurately reflect the arrangement made between himself and his parents.
49 While one might be critical of James regarding the performance of his duties as the director of a company, I nonetheless accept his evidence as to his state of knowledge and the basis on which he provided the monies for the purchase of the property. Whether or not he complied with his obligations under the corporations legislation, or other common law or equitable obligations as a director in respect of the accounts, is a separate issue. But, for present purposes, I do not consider it relevant and do not accept that the state of the financial statements means that I should reject his evidence.
50 Both parties agreed that the leading authority on the topic of resulting trusts was Calverley v Green.[2] In that case, a man (“Calverley”) and woman (“Green”) lived together for about ten years as if they were husband and wife. Initially they lived in a house owned by Calverley. Later they decided to move to another area. They found a suitable house, but Calverley had difficulty obtaining finance. He said to Green that the finance company required the purchase to be in their joint names. Calverley and Green then raised loan funds on the security of a mortgage under which they were both jointly and severally liable to make repayments. It was agreed between them that Calverley would make the repayments and he did so. When they purchased the house, Calverley paid the deposit out of his own funds. The parties were registered on title as joint tenants. They subsequently split up and Green brought an action in the Supreme Court of New South Wales seeking an order for the sale of the property and a distribution of the proceeds between them. Calverley cross-claimed for a declaration that Green held her interest in trust for him, and for an order that she transfer her interest to him.
[2](1984) 155 CLR 242.
51 At first instance Rath J dismissed the claim and ordered Green to execute a registrable transfer of her interest to Calverly on condition that he first procure her release and discharge from the mortgage. The Court of Appeal held that the parties were joint tenants in equity as well as in law. The High Court allowed the appeal and set aside the judgment of the Court of Appeal.
52 During the course of their judgment Mason and Brennan JJ said:[3]
“When two or more purchasers contribute to the purchase of property and the property is conveyed to them as joint tenants, the equitable presumption is that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contributions unless their contributions are equal…
This is the basic presumption, thought it may be displaced in appropriate cases by the presumption of advancement…”
[3]Ibid, pp. 258 – 9.
53 Gibbs CJ and Deane J made similar observations.[4]
[4]Ibid per Gibbs CJ at pp. 246-7, per Deane J at pp. 266-7.
54 There are situations in which equity will infer a presumption of advancement – that is, there are relationships such as between spouses or a parent and a child where equity infers that the benefit conferred has been provided by way of advancement with the result that the prima facie position is that the equitable interest is presumed to follow the legal estate.
55 Such a presumption would not apply here. The court could not properly infer that James intended to benefit the family trust by contributing to the purchase of the property while simultaneously surrendering any claim he might otherwise have arising from that contribution.
56 I am satisfied that, by reason of a resulting trust, James is entitled in equity to a 22.57% share of the property, and holds his interest as tenant in common with Vlahos.
(c) Should Vlahos transfer the 22.57% interest to James, with the effect that they become tenants in common of the property?
57 In view of the findings made, it follows that James is entitled to a transfer and holds the property as tenant in common with Vlahos.
(d)Is James precluded from obtaining equitable relief due to laches?
58 Vlahos submits that James did not act expeditiously in asserting his claim to an interest in the property. It says that to allow such a claim at this point would create difficulties. First, the tax returns lodged over the period that Vlahos has owned the property would be incorrect. Secondly, because there appear to be no financial records for Vlahos for a period of about 20 years, it would not be possible to determine the extent, if any, to which interests in the trust would be affected by such a change. Thirdly, James “has now claimed the benefit of a reduction in a liability to a loan account that does not exist on his own case”.[5]
[5]Defendants closing submissions paragraph 82.
59 Counsel for Vlahos did not argue the laches point forcefully. As he said,[6] it was not Vlahos’s strongest or most important point. Vlahos relied on the failure to act before 2010, acknowledging that James claimed his interest that year.
[6]T-165.
60 I reject Vlahos’s submissions on this point. In the first place, it must be remembered that after 2003, the two brothers effectively controlled Vlahos and the distributions of trust property were made equally between their respective families. Andrew raised no particular issue or concerns about the claim when James first raised it. It is only more recently, when the issue developed about the car space being attached to the residential premises on the property that Andrew had a change of mind and decided not to complete the agreed subdivision. If Andrew really had concerns about laches, I would have expected him to have raised them immediately. In the circumstances, I find that Andrew and Vlahos have no genuine concerns on the point. To the extent that the argument is raised, it seems to me that it has been done more as a debating point than a matter of substance.
61 Next, in circumstances where the family trust is a discretionary trust and the benefits are shared equally between the families of the two brothers, there is no significant and specific prejudice to any particular beneficiary. Orr v Ford[7] suggests that a beneficiary seeking equitable relief in connection with property in an express trust might be deprived by laches if there were prejudice to other beneficiaries such that it would be inequitable and unreasonable to grant the relief sought.[8]
[7](1989) 167 CLR 316.
[8]Orr v Ford (1989) 167 CLR 316 at 341-2.
62 Finally, there was no problem or strict need for recognition of James’s interest in the property until about 2013 when Andrew decided to change his mind and not proceed with completing the subdivision of the property as agreed with his brother. To that extent, after it became evident that there was a problem, there was no unreasonable delay.
63 I find that the doctrine of laches does not operate to deprive James of relief in equity.
(e) Did James and Vlahos agree in about 2011 to subdivide the property into two sections whereby Vlahos would transfer the subdivided upstairs unit and car space to James in discharge of his alleged interest in the property?
64 Andrew said that he found out about James’s claim to an interest in the property a few months before his mother died in October 2010. The brothers discussed the issue before and after the mother’s death. Andrew agreed that it was his idea to subdivide the property in order to resolve the claim which James made regarding his alleged interest in the property. Andrew agreed in cross-examination that he signed the Board resolution which dealt with this issue and he agreed to the subdivision proposal.
65 James said that he had discussions with Andrew about the alleged claim, and Andrew proposed the subdivision as a way of resolving the matter. James says that he instructed Joe, the new accountant for the family trust, about the agreement reached and asked him to draft a minute giving effect to the agreement. He says he relied on Joe to do this.
66 Joe is a certified practising accountant and one of two partners in the firm GA Partners. He said that he had acted as the accountant for Vlahos since about June 2010. He said he had a number of meetings with the brothers to discuss various issues relating to the family and the family trust and he prepared file notes of those meetings.
67 Joe agreed that he had prepared the minute of meeting of directors of Vlahos giving effect to the agreement reached between the two brothers who were at the time the directors of the trustee. He said he prepared the minute probably on instructions from James. Joe gave advice in relation to some accounting issues connected with the implementation of the subdivision.
68 Joe agreed that not all the advice he gave with respect to the subdivision had been acted upon. He said there was still no disposal made out of the trust. However, he said that the council had changed address details to recognise the upstairs residential area as 33 Puckle Lane, Moonee Ponds and James received the rent from the upstairs unit and paid the associated outgoings. The family trust received the rent from the downstairs premises and paid the applicable outgoings.
69 The minute of meeting Joe prepared is in the following terms:
“The directors resolved that the property at 50 Puckle Street which is owned by the company in its capacity as trustee of the S Vlahos Family Trust (“the Trust”) should be subdivided to separate the ground floor retail area from the residential area upstairs.
The directors also resolved that once the subdivision is complete, the upstairs residential area is to be transferred to Jim Vlahos or an entity that he nominates in specie by the trust.
Graham Joe from GA Partners has already advised that a valuation should be undertaken to provide a separate value for upstairs and downstairs areas of the property on the basis that the subdivision is approved. Form an accounting perspective, he has advised that the valuation of the upstairs area will be recorded as the ‘disposal price’ in the Trust’s financial accounts and tax return. As there will not be an actual payment of monies by Jim Vlahos or his nominee, this amount needs to be debited to the beneficiaries’ loan accounts.
It was resolved by the directors that this would be divided equally between the loan accounts of Jim Vlahos and Andrew Vlahos in the accounts of the Trust.
The cost of organising the subdivision and transfer, and any tax liability incurred by the trust will also be paid for by the Trust.”
70 The document records three important points:
· the property is to be subdivided so that the downstairs area is retail and the upstairs area is a residence;
· the residential area is to be transferred to James (or an entity he nominates) in specie by the trust;
· the trust will pay for the cost of organising the subdivision and transfer of land.
71 In my view, the brothers agreed in about 2011 to subdivide the property into two sections – the upstairs residential area would go to James and the trust would retain the downstairs retail area. At the time, there was no express agreement made about how the car spaces were to be allocated. There was no formal area specifically designed for car parking. Rather, there was an open concreted area at the rear of the commercial premises where there was sufficient space to park two cars. As a matter of fact, the space had been shared so that the person conducting the retail business in Puckle Street and the tenant of the upstairs area each had a car space.
72 From the evidence, it seems clear that the discussions which James and Andrew had did not specifically address the issue of the car spaces. James said that up until Andrew sent the email in February 2015 where he said that he had not consented to including a car space for the upstairs tenant as part of the subdivision, he had not spoken to Andrew about the car park. He said that he had not turned his mind to whether a car park was included in the subdivision. He was not aware that a car park had been included by the surveyors in the subdivision. James thought the council might require a car park for the residential premises.
73 Andrew agreed that the lease of the retail premises made express reference to a car space. He said that he and his father had renovated the upstairs area of the property in the 1990s. Thereafter, there had been separate tenants for the residential area and the retail area.
74 In short, the position is:
· there were separate tenants in each of the retail and residential parts of the property from the 1990s.
· each tenant had a car space as part of its lease.
· the brothers did not explicitly discuss whether the car space area would be included in the subdivision.
· after the subdivision documents were produced to Andrew, he complained because he said he had not agreed to transfer a car space with the upstairs area.
Thus, I find that the agreement between James and Vlahos to discharge the former’s claim to an interest in the property was that the trust would transfer the upstairs part of the property to James. The transfer agreement did not expressly include a car space. If the council required the trustee to include a car space with the upstairs section of the property as part of the subdivision, that was a separate issue. The terms of the lease between landlord and tenant might also affect whether and when the upstairs tenant could be deprived of the car space.
(f)Was the agreement between James and Vlahos part performed?
75 This issue presupposes that the agreement between James and Vlahos regarding the subdivision in the property was not recorded in writing in the way necessary to satisfy relevant statutory requirements. Where a person seeks to create or dispose of an interest in land in Victoria, some statutory provisions become relevant.
76 Section 126 of the Instruments Act 1958 (Vic) provides:
“(1)An action must not be brought to charge a person upon a special promise to answer for the debt, default or miscarriage of another person or upon a contract for the sale or other disposition in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.
(2)It is declared that the requirements of subsection (1) may be met in accordance with the Electronic Transactions (Victoria) Act2000.”
77 Section 53(1)(a) of the Property Law Act 1958 (Vic):
“(1)Subject to the provisions herein after contained with respect to the creation of interest in land by parol –
(a) no interest in land can be created or disposed of except by writing signed by the person or conveying the same or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law…
(2) This section shall not affect the creation or operation of resulting, implied or constructive trusts.”
78 The agreement between James and Vlahos plainly involved the disposition of an interest in land.
79 In order to satisfy section 126 of the Instruments Act1958 (Vic) there must be a memorandum or note of the agreement made signed by the party to be charged therewith. The note or memorandum does not have to be in any particular form but it needs to have enough information to make clear what the contract was about. It is enough that the note contains the material terms of the agreement. The recording of those terms must be accurate. If the note contains less or more than the parties agreed, it will not satisfy the statute.
80 Authority suggests that the minimum requirements to be included in the note or memorandum are the parties, the description of the subject matter of the contract and the consideration.[9] In this case, the subject matter is tolerably clear but there is a problem with the parties and the consideration. Although the evidence at trial was uncontested that the minute of meeting was that of Vlahos, the document itself referred incorrectly to Vlahos Holdings Pty Ltd, a different company.
[9]See Cheshire & Fifoot Law of Contract 10th Australian Ed para 16.35 and the cases cited therein.
81 Also, perhaps more importantly, there was no mention of the consideration. A reasonable observer reading the minute would not realise that the subdivision was taking place effectively as a means of settling James’s claim against the property owned by Vlahos. On the face of the minute, there was no reason for a person who knew nothing of the background facts to realise or infer that this was the reason for the settlement.
82 I find that the minute of meeting did not satisfy the requirements of the Statute of Frauds. Hence, the issue of part performance became relevant.
83 James contended that whether or not the requirement for writing was established, he should succeed through the operation of the doctrine of part performance. Although a plaintiff may be unable to claim damages for breach of a contract which falls foul of legislation based upon the Statute of Frauds, such plaintiff may still obtain from a court acting in its equitable jurisdiction, a decree of specific performance. The operation of the doctrine is designed to thwart unconscionable behaviour – for example, by preventing a defendant who allows a plaintiff to perform its obligations under an oral contract from avoiding performance of the defendant’s obligations on the basis that the contract does not satisfy the requirements of the Statute of Frauds.
84 In Australia, a leading authority on part performance is Regent v Millett.[10] There, in November 1969, Tomasz and Janina Regent bought a house for $4,500. They provided $1,000 in cash and borrowed $3,500 by way of mortgage. Between November 1969 – April 1970 the Regents agreed with Arnold and Helen Millett that, in consideration of the Milletts agreeing to pay off the mortgage, they could go into possession of the house and have it transferred to them when the mortgage was paid off. The contract was oral, and there was no note or memorandum within the applicable Statute of Frauds legislation.[11] The Milletts went into possession of the property in April 1970 and began paying off the mortgage in June. Because the house was in bad repair when the Milletts went into possession, they effected repairs to the value of about $5,000. The Milletts later sued the Regents for specific performance of the oral agreement. The trial judge held that by taking possession of the property, effecting repairs and making mortgage repayments, the Milletts had performed sufficient acts of part performance to warrant an order for specific performance in their favour. The Regents appealed unsuccessfully to the High Court. The High Court then dismissed a further appeal.
[10](1976) 133 CLR 679.
[11]Conveyancing Act 1919 (NSW), s 54A.
85 In delivering a judgment, in which each of the other judges agreed, Gibbs J said:[12]
“…the test suggested by the Earl of Selborne LC in that case, that the acts relied upon as part performance ‘must be unequivocally, and in their own nature, referable to some such agreement as that alleged’, has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged (see McBride v Sandland)”
[12]Ibid at 683.
86 James relies upon the following as acts of part performance:
(a) the Board resolution of Vlahos dated 8 December 2011;
(b) the valuation of the property in 2012;
(c) the preparation and lodgement of the plan of subdivision in 2012;
(d) James receiving the nett rental from the upstairs part of the property and paying the outgoing associated with that part of the property.
87 Each of these acts occurred after the formation of the alleged contract and not before. Apart from the making of the Board resolution of Vlahos, the other acts relied upon as part performance of the oral agreement were all required or permitted under the contract alleged.
88 What acts are sufficient to constitute part performance?
89 The position is typified by the comment of Gibbs J in Regent v Millett where he said that, in that case, the giving and taking of possession by itself was sufficient of part performance of the contract and it was therefore unnecessary to consider whether other acts relied upon would also, either alone or together, amount to part performance. As noted in Cheshire & Fifoot Law of Contract 10th Australian Edition:[13]
“So long as possession is taken after the agreement and not before, there is generally little difficulty in arguing for part performance.”
[13]Paragraph 16.64 and the cases cited therein.
90 Possession of the relevant part of the property is important. The change of possession of land has been described as “the act of part performance par excellence”.[14] While Vlahos argued that the subdivision process, the receipt of rent and the payment of outgoings were equivocal because they were consistent with the in specie distribution of trust property to James, it nonetheless remains the case that the originating cause for these actions was the undisputed agreement between James and Andrew.
[14]See Regent v Millett (1976) 133 CLR 679 per Gibbs J at 683.
91 However, as noted, the position is not always clear where possession could be attributed to some arrangement other than the contract alleged. For example, in Ogilvie v Ryan,[15] Ryan from 1939 occupied at a rent of £1 per week a cottage which backed onto a cinema in a country town. The cottage was owned by the company which owned and operated the cinema. Ryan lived there with her mother and worked as a cleaner at the cinema and later, at the house of the company’s managing director, Ogilvie. In 1955 Ogilvie, whose wife had died, commenced living in the cottage and paid board of £10 per week. In 1962 Ryan’s mother died. Thereafter, Ryan and Ogilvie continued to occupy the cottage, according to Ryan, as man and wife. In 1969, the company contracted to sell the cinema and cottage to developers. At this time, Ogilvie proposed that he buy a house and that Ryan live in it with him and continue to look after him for the rest of his life. He said that if Ryan did this, the house would be hers for as long as she lived. She said that they agreed on these terms. Ogilvie duly bought a house, and he and Ryan lived there from May 1970 – July 1972 when Ogilvie died. Ogilvie left a will in which Ryan was not mentioned.
[15][1976] 2 NSWLR 504.
92 The executor of Ogilvie’s estate issued proceedings to recover possession of the house from Ryan.
93 One argument Ryan relied upon to keep the house was the oral agreement with Ogilvie which, subject to equitable intervention, was unenforceable for lack of writing required by section 54A of the Conveyancing Act 1919 (NSW). Ryan relied on the doctrine of part performance, in particular:
· giving up her tenancy of the cottage after 30 years and at the age of about 63.
· moving to another house with the deceased and thereby exchanging her position as landlady in her own house, for the position of sharing a house where legal title rested with Ogilvie.
· continuing to perform services of housekeeping and nursing an old unwell man continually and without remuneration until he died.
· spending her own money on repairs and improvements to the house.
94 In the course of his judgment Holland J examined English cases on the point and noted that the test laid down in Maddison v Alderson[16] required that the acts must be unequivocally, and in their own nature, referable to some such agreement as that alleged. The judgment made reference to the Court of Appeal decision in Kingswood Estate Co Ltd v Anderson[17] and the decision of Stamp J in Wakeham v MacKenzie[18] where he adopted and applied as the true rule the proposition that the operation of acts of part performance required only that the acts in question be such as must be referred to some contract and may be referred to the alleged one; that they proved the existence of some contract and were consistent with the contract alleged. The House of Lords in Steadman v Steadman[19] reconsidered the doctrine of part performance and approved the decision in Kingswood Estate Co Ltd.[20] The court held that the alleged acts of part performance had to be considered in their surrounding circumstances and if they pointed on a balance of probabilities to some contract between the parties, and either showed the nature of, or were consistent with, the oral agreement alleged, then there was sufficient part performance of the agreement for the purpose of enforcing the contract.
[16](1883) 8 App Cas 467.
[17][1963] 2 QB 169.
[18][1968] 2 All ER 783.
[19][1976] AC 536.
[20][1963] 2 QB 169.
95 The High Court in Regent v Millett[21] said that it was not necessary to consider the questions raised by Steadman.[22] Holland J having examined various authorities, concluded that he had to follow the approach of the High Court and Glass JA in Millett v Regent,[23] namely, to ask whether the acts of part performance admitted of any other reasonable explanation except that the deceased agreed to transfer to the defendant an interest in the property.
[21](1976) 133 CLR 679.
[22][1976] AC 536.
[23]Millett v Regent [1975] 1 NSWLR 62.
96 In reviewing the cases to ascertain the meaning of “unequivocal” in the context, the trial judge seemed to follow the view of Glass JA in Millett v Regent[24] where he said that he could see no difference in describing the requirement as “acts consistent only with some such contract subsisting” or “acts not being reasonably explicable except upon the footing of some such agreement”. The trial judge quoted Glass JA in Millett where he said:[25]
“I propose to measure the sufficiency of the evidence by asking whether the acts of part performance admit of any other reasonable explanation except that the defendants agreed to transfer to the plaintiffs an interest in the premises”
[24]Ibid at 71.
[25]Ibid at 72.
97 In this case, Vlahos has an argument that the acts were not unequivocal because, if there were a distribution of trust property in accordance with the terms of the trustee’s minutes of meeting, then the actions of valuing the property, preparing the plan of subdivision, and then James receiving the rent from the trust property, would likely follow. That being so, the quality of the possession granted to James is ambiguous and not sufficiently unequivocal. The fact that the minute of meeting made no reference to the agreement giving rise to the subdivision of the property serves to underline the equivocal nature of the acts of part performance relied upon.
98 In the circumstances, I find that the acts of part performance relied upon are too equivocal to establish part performance of the agreement.
(g)Is the Vlahos resolution constituted by the minute of meeting effective either to implement the agreement or distribute in specie the upstairs unit of the property plus a car space?
99 I have found that the resolution constituted by the minute of meeting does not satisfy the requirements of the Statute of Frauds legislation. It is insufficient to implement the agreement made by the brothers.
100 The final basis upon which James relies to validate his claim is the in specie distribution of trust property. Clause 17 of the trust deed authorises and empowers Vlahos as trustee to distribute assets of the trust in specie to beneficiaries.
101 Vlahos argued that because:
(a) Vlahos had the power to distribute trust property in specie;
(b) the minute of meeting was expressed only as a power of appointment and made no reference to the agreement between the brothers, or the resolution of James’s claim to part of the property
James was therefore a volunteer who gave no consideration for the property distributed, and, until he received a signed transfer of land in registrable form, Vlahos could change its mind. Vlahos contended that a court of equity would not effect an imperfect gift to a volunteer.
102 The logic of Vlahos’s position might be correct if viewed in isolation but it is not clear to me that the mere failure to refer to the brothers’ agreement in the minute of meeting necessarily means that the court should ignore it. I consider this approach to be wholly unrealistic and at odds with the proven facts. As previously found, the evidence discloses that the only reason the minute of meeting came into being was to give effect to the agreement made by the brothers to satisfy James’s claim against the property. In my view, it is artificial in those circumstances to pretend that the minute of meeting can be sensibly considered while ignoring the context which caused its creation. As part of the agreement, James gave consideration by compromising and settling his claim against the property.
103 Because I consider that Vlahos has adopted an approach to the issue which is too simplistic because it ignores uncontested facts, I reject the submission that James is a volunteer and that this case is “on all fours” with the deed of gift in Corin v Patton.[26] As a result of the Board resolution by Vlahos, the property is to be subdivided and the upstairs residential area is to be transferred to James or an entity which he nominates. Because the terms of the resolution did not expressly address the matter and the agreement made between the brothers similarly did not address the matter, the distribution in favour of James does not include a car parking space.
(h)Is James entitled to specific performance of the agreement of the Board resolution of Vlahos whereby the trustee must take the necessary steps to complete the subdivision?
[26](1990) 169 CLR 540.
104 By virtue of the reasons already given, James is entitled to an order from the court requiring Vlahos to complete the subdivision.
(i)Is James entitled to damages or equitable compensation for breach of the agreement or breach of duty or trust by Vlahos’ refusal and failure to transfer the upstairs part of the property?
105 When Andrew made the agreement with James to settle the latter’s claim in relation to the property, he was effectively acting on behalf of the trustee. Because Andrew and James were both directors of Vlahos, if Andrew agreed to something, the trustee would be bound in circumstances where James also agreed. Insofar as Andrew then refused to honour the agreement and distribute the trust property in specie to James consistent with the terms of the agreement, Vlahos was in breach of its obligations. However, because James has received the rent from the upstairs part of the property since around January 2012, shortly after the making of the agreement with Andrew, and because James has not identified any other specific loss he suffered as a result of the failure to complete the subdivision, I find that there is no additional loss for which Vlahos is liable.
(j)Is James entitled to an order for payment of 22.57% of the nett rental of the whole of the property for six years before the proceedings began in October 2016 or for the annual rent referable to the upstairs section from the date of the minute of meeting or damages or equitable compensation for unpaid nett rental?
106 In determining the equitable relief to which James might be entitled, the court may consider all the circumstances of the case and the discretionary factors which might apply to affect that relief. The factors include such things as clean hands, delay, hardship and fairness.
107 James did not issue his writ until 21 October 2015. The brothers agreed to transfer the property in about November 2011 and the minute of meeting was dated 8 December 2011. It was common ground that James received the rent from, and paid the outgoings associated with, the upstairs part of the property from around January 2012. If James were to receive either 22.57% of the nett rent from the property, or all the rental from the upstairs section of the property, for a period of 6 years before October 2015, it would probably result in a re-examination and re-allocation of payments made to James and the other beneficiaries.
108 Because the trustee has already made the distribution for the years before October 2015, I consider that James should receive no more for the six years before that date than he has received already. James has in fact received the rental on the upstairs area since early 2012, so any adjustment will relate only to the period between then and October 2009. In circumstances where James delayed making his claim to the property and the trustee had exercised his power regarding the trust distributions for the earlier years, I consider that fairness requires James to receive no additional distribution or payment for the period before January 2012. To do so would risk possible hardship for the other beneficiaries and the trustee.
Conclusion
109 In summary I find that:
(a) James contributed $110,000 to the purchase price of the property and paid $31,600 stamp duty on the purchase;
(b) as a result of his contribution, James had an interest in equity amounting to 22.57% of the property. He is entitled under a resulting trust to hold that interest as tenant in common with Vlahos;
(c) James is not precluded by laches from obtaining equitable relief;
(d) James and Andrew agreed to subdivide the property in about November 2011. Pursuant to the agreement, James was to receive the upstairs area and Vlahos was to retain the retail area downstairs. The consideration from James was the settlement of his claimed interest in the property. The agreement made no reference to car spaces.
(e) the agreement between James and Andrew (on behalf of Vlahos as trustee) did not satisfy the Statute of Frauds legislation and was not made out by part performance.
(f) the Vlahos resolution constituted by the minute of meeting did not implement the agreement but did distribute in specie the upstairs part of the property to James.
Other matters
110 Given that James has effectively succeeded in his claim, he will need to make a decision about the orders he seeks. Plainly, he cannot insist upon the transfer the upstairs residential section of the property and also claim a 22.57% interest in the property.
111 I will hear the parties on the final form of orders and costs.
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