Watson v Watson

[2021] NSWSC 229

Supreme Court

New South Wales

Medium Neutral Citation:

Watson v Watson [2021] NSWSC 229

Hearing dates:

5 March 2021; 10 March 2021

Date of orders:

10 March 2021

Decision date:

10 March 2021

Jurisdiction:

Equity

Before:

Darke J

Decision:

Summons dismissed with costs.

Catchwords:

CONTRACTS – formation – intention to make binding agreement – whether agreement merely preliminary – deed provided regime for parties to value property and exchange and settle contracts for the sale of land – whether deed constituted a binding agreement – held that deed was immediately binding on the parties

EQUITABLE REMEDIES – specific performance – deed containing agreed procedure to facilitate transfer of an interest in property – parties failed to take steps to commence agreed procedure – plaintiff held to have failed to carry out essential obligations under agreement – plaintiff was not shown to be at all relevant times ready, willing and able to perform his obligations – orders for specific performance refused

Cases Cited:

Allen v Carbone (1975) 132 CLR 528

Mehmet v Benson (1965) 113 CLR 295

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

Spencer v Commonwealth (1907) 5 CLR 418

Category:

Principal judgment

Parties:

John Hamilton Watson (Plaintiff)
Alan William Watson (Defendant)

Representation:

Counsel:
Mr D M Flaherty (Plaintiff)
Mr A M B Cornish (Defendant)

Solicitors:
Grahams Solicitors (Plaintiff)
David Hunter Law (Defendant)

File Number(s):

2020/319316

Publication restriction:

None

Judgment – ex tempore

1. By a Summons filed on 9 November 2020, the plaintiff, John Watson, seeks orders in the nature of specific performance of an agreement with respect to the sale of a one-half interest in a dairy farm property in Edenville. The agreement is contained in a Deed of Family Arrangement dated 3 May 2016, entered into by the plaintiff and various family members, including the defendant, Alan Watson.

2. The plaintiff and the defendant are brothers. They hold the various parcels of land that comprise the dairy farm as tenants-in-common in equal shares. The property was a gift to the brothers pursuant to the will of their late father, who died on 25 February 2015. The agreement with respect to the sale is contained within cl 6 of the Deed of Family Arrangement, which provides:

6.   Alan has agreed to sell to John Alan’s one half interest in the dairy farm, being all of [sic] property contained at 25 Edenville Road, Edenville being land in Lot 40 in Deposited Plan 6034, Lot 43 in Deposited Plan 6034, Lot 48 of Section A in Deposited Plan 6043 and Lot 1 in Deposited Plan 256970, formerly known as Vol. 2981 Fol. 151, Vol. 12054 Fol. 152, Vol. 3040 Fol. 160 and Vol. 15072 Fol. 113, pursuant to the terms of the will of the deceased as follows:

(a)   For such sum as one half of the market valuation determined as agreed by Alan and John and if no agreement can be reached then as determined by a registered valuer appointed jointly by Alan and John. Such costs of valuation fees will be met equally by Alan and John;

(b)   If either Alan or John is not satisfied with the valuation then either party can at their own cost within 14 days obtain a second valuation and the value will be determined by averaging the two valuations;

(c)   If the other party who did not requisition the second valuation is not satisfied with the second valuation that party can obtain a third valuation at their cost within 14 days and the value will be determined by averaging the three valuations;

(d)   Contracts for sale of land shall be exchanged with[in] 6 weeks of the purchase price being agreed or determined by valuation;

(e)   Settlement of the contracts for sale shall take place within six (6) weeks;

(f)   Included in the sale as improvements/fixtures will be milking equipment, cattle yards and silos but excluded [sic] the Water Access licence.

3. The brothers were not the owners of the dairy farm property at the time the Deed was entered into. The defendant submitted that as their father’s estate was unadministered at that time, neither brother as a beneficiary had a proprietary interest in the property, and thus the agreement referred to in cl 6 of the Deed should be regarded as being in the nature of a preliminary or non‑binding agreement. Another argument to similar effect was also raised, which I will deal with later.

4. I would not construe cl 6 in the manner contended for by the defendant. In my view, it is an agreement contained in a deed, and in any event for valuable consideration, with respect to the sale of future property entered into in the expectation that the brothers would in due course become its owners.

5. There was evidence that probate was granted to the brothers in respect of their father’s estate on 30 June 2016 but there is no evidence of what, if any, steps were taken thereafter to transmit the title to the property into their names as executors. However, there is evidence that the brothers became registered as proprietors, as tenants in common in equal shares, on 4 June 2019.

6. The plaintiff contends that in July 2018 he and the defendant engaged a valuer, Mr Tony Andrews of Eastpoint Valuations, to undertake a valuation of the dairy farm. The plaintiff deposed that he and the defendant each paid half of the cost of the valuation. The evidence establishes that the cost was in fact shared equally by the parties. However, the documents in evidence, including letters dated 17 July 2018 from the plaintiff’s solicitor to the valuer and from the plaintiff’s solicitor to the defendant’s solicitor, suggest that Mr Andrews was formally engaged by the plaintiff only, not the plaintiff and the defendant jointly, as envisaged by cl 6(a) of the Deed. I note further that the defendant adduced evidence to the effect that he did not agree to the valuation being conducted in the manner proposed, as a single property rather than as individual lots. A further question thus arose as to whether the valuation that was later obtained was a “market valuation” as required by cl 6(a) (see Spencer v Commonwealth (1907) 5 CLR 418).

7. Mr Andrews himself gave evidence about the circumstances in which he came to value the property in 2018, including evidence of some communications with the defendant’s solicitor. However, there is no evidence that he actually received any instructions from the defendant or his solicitor to proceed to carry out the valuation of the dairy farm property in 2018. I should add that the language on the front page of the valuation itself suggests that the instructions came only from the plaintiff. Accordingly, accepting that the defendant or his solicitor had knowledge of Mr Andrews’ engagement, it is difficult to regard the valuation as one undertaken by a valuer appointed jointly by the brothers so as to comply with cl 6(a).

8. In any event, Mr Andrews provided an estimate of value of $1,475,000 as at 6 August 2018. This estimate was given on the basis of regarding the property as a whole, not as separate titles or having regard to any potential subdivision entitlements. Half of the valuation amount as determined by Mr Andrews was thus $737,500. There is no evidence that the defendant, being dissatisfied with the valuation, obtained a second valuation as provided for in cl 6(b) of the Deed. In these circumstances, and assuming for the moment that Mr Andrews’ valuation was a jointly obtained market valuation for the purposes of cl 6(a), the purchase price for the defendant’s half interest in the property would have been determined by the valuation to be $737,500.

9. By cl 6(d) of the Deed, contracts for the sale are required to be exchanged within six weeks of the determination of the purchase price. Clause 6(d) uses the words “with six weeks” but this is an obvious error; “within six weeks” was plainly intended. Contracts for sale were not exchanged within six weeks of Mr Andrews’ valuation, or indeed at any later time.

10. The plaintiff deposed that at that time he could not afford to pay $737,500 to the defendant. The plaintiff instead offered to pay $600,000 for the defendant’s interest in the property. This offer was made by way of a letter from the plaintiff’s solicitor dated 26 October 2018 (exhibit 1). The offer was rejected by way of a letter from the defendant’s solicitor dated 30 January 2019 (exhibit 2). The plaintiff made further offers to the defendant in April 2019 and in July 2020 but these offers were not accepted.

11. In July 2020 Mr Andrews provided a further valuation of the dairy farm to the plaintiff. He assessed the value to be $1,750,000 as at 7 July 2020. This valuation does not appear to have been made on the joint instructions of the parties. The plaintiff alone commissioned this valuation. I do not accept the plaintiff’s submission that Mr Andrews’ earlier appointment should be taken to have continued, such that his appointment in July 2020 should be held to have been a joint appointment.

12. The plaintiff says that he is ready, willing and able to pay half of $1,750,000 ($875,000) to the defendant for his interest in the property, within six weeks of the exchange of contracts. The plaintiff seeks orders in the nature of specific performance including, it seems, orders to compel entry into a contract for sale at that price.

13. The first issue to consider is whether, as the defendant submitted, cl 6 of the Deed gave rise to a merely preliminary agreement falling short of a binding contract (see Allen v Carbone (1975) 132 CLR 528 at 533). This is the other argument the defendant raised, which I referred to earlier in these reasons.

14. It is true that cl 6 does not itself amount to an enforceable agreement for the sale of land; rather it sets out an agreed procedure that was envisaged to culminate in the exchange of contracts for sale, presumably utilising the standard form with the prescribed documents attached, with settlement of the contract to occur six weeks later. However, I do not think that the promises contained within cl 6 of the solemnly executed Deed can be described as a mere preliminary agreement which did not itself constitute a binding contract. In my opinion a binding and enforceable agreement came into existence between the plaintiff and the defendant on the terms of cl 6. Viewed objectively, the parties intended to be immediately bound by the terms of cl 6 even if the subject property was not then owned by the parties. As I have said, there was an agreement in respect of future property, which the parties expected, with good reason, to become owned by them.

15. Nevertheless, for the following reasons I do not think that the plaintiff is entitled in the current circumstances to orders for specific performance, including any orders to compel entry into a contract at a particular price. Although I have not accepted the defendant’s contention that cl 6 of the Deed did not give rise to a binding agreement, it seems to me that the parties, and relevantly the plaintiff, have not carried out their essential obligations under the agreement.

16. Clause 6 of the Deed sets out an agreed procedure to facilitate the transfer of the defendant’s interest in the dairy farm to the plaintiff. Its terms provide for the taking of various steps, some of which require the co-operation of the parties. The joint appointment of a valuer and the exchange of contracts within the time period stipulated in cl 6(d) are examples of steps that require co-operation. Terms requiring such co-operation would be implied into the agreement (see Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607). The existence of the time periods stipulated in cll 6 (d) and 6(e) suggests to me that the parties would not be obliged to commence the agreed procedure until they become owners of the property, and thus were in a position to enter into a binding contract for sale, which was required to be settled within a six week period. As already mentioned, the parties became registered as proprietors on 4 June 2019. However, since that time neither party has taken any steps to commence the agreed procedure by seeking the co-operation of the other party to join in an appointment of a valuer to undertake the requisite valuation.

17. It is not necessary to decide whether the valuation provided by Mr Andrews in August 2018 constituted a valuation that satisfied cl 6(a) of the Deed. Even if that valuation was regarded as having satisfied cl 6(a), the parties thereafter failed to take any steps towards the bringing into existence of a contract for sale (at the price determined by the valuation) within the six week period stipulated by cl 6(d), or indeed at any time. The plaintiff, who was not in a position to enter into such a contract or settle such a contract, sought instead to bring about a sale in another way.

18. In my opinion the parties, relevantly the plaintiff, have failed to perform their essential obligations under the agreement over a substantial period of time.

19. It might have been suggested that the contract has come to an end through mutual abandonment; it is not necessary to express any view on that matter, which was not raised by either party. Neither is it necessary to decide whether the plaintiff’s conduct in 2018, after the valuation was received, amounted to a repudiation of the contract. The defendant did not suggest that any repudiation by the plaintiff was accepted so as to bring the contract to an end, but submitted that the conduct was such as to amount to a disowning of the contract that would disentitle the plaintiff to relief in the nature of specific performance. It is sufficient in my view to conclude that the plaintiff has failed to show that he was at all relevant times ready, willing and able to perform his essential obligations under the contract (see Mehmet v Benson (1965) 113 CLR 295 at 307-8). I will add that it is not to the point that the plaintiff is now in a position to complete a contract to acquire the defendant’s share in the property for $875,000.

20. In these circumstances it would not be appropriate to make orders in the nature of specific performance at the suit of the plaintiff. Accordingly the plaintiff’s application must be dismissed. The Court will order:

1. That the Summons be dismissed.

2. That the plaintiff pay the defendant’s costs of the proceedings.

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Decision last updated: 12 March 2021