Wilson v Pinci [No 2]
[2007] WASC 224
•21 SEPTEMBER 2007
WILSON -v- PINCI [No 2] [2007] WASC 224
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 224 | |
| Case No: | CIV:1827/2004 | 25-27 JULY, 13-14 AUGUST, 4 SEPTEMBER 2007 | |
| Coram: | JENKINS J | 21/09/07 | |
| 32 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's claim upheld in part | ||
| B | |||
| PDF Version |
| Parties: | ROBERT BRIAN WILSON MARC VICTOR PINCI KIM MAREE PINCI |
Catchwords: | Contracts General contract principles Identification of parties and the terms of the contract Repudiation Termination Remedies |
Legislation: | Residential Tenancies Act 1987 (WA), s 5(2), s 74, s 74(1) Supreme Court Act 1935 (WA), s 32 |
Case References: | Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Gurfinkel v Bentley (1966) 116 CLR 98 Heyman v Dawins Ltd [1942] AC 356 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
MARC VICTOR PINCI
First Defendant
KIM MAREE PINCI
Second Defendant
Catchwords:
Contracts - General contract principles - Identification of parties and the terms of the contract - Repudiation - Termination - Remedies
Legislation:
Residential Tenancies Act 1987 (WA), s 5(2), s 74, s 74(1)
Supreme Court Act 1935 (WA), s 32
Result:
Plaintiff's claim upheld in part
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr T O Coyle
First Defendant : In person
Second Defendant : In person
Solicitors:
Plaintiff : Lavan Legal
First Defendant : In person
Second Defendant : In person
Case(s) referred to in judgment(s):
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Gurfinkel v Bentley (1966) 116 CLR 98
Heyman v Dawins Ltd [1942] AC 356
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
(Page 3)
1 JENKINS J: In this action the plaintiff, Robert Brian Wilson (Mr Wilson), seeks declarations against the defendants, Marc Victor Pinci and Kim Maree Pinci (respectively, Mr Pinci and Mrs Pinci), that an agreement between the parties has been terminated and that Mr and Mrs Pinci do not have a right to occupy the property in which they live. Mr Wilson also seeks an order for delivery up of the same property and, against Mrs Pinci only, seeks a monetary judgment in respect to sums which he says are outstanding under the agreement.
2 In January 2003, Mr Pinci became a bankrupt. For this reason the plaintiff does not seek a monetary judgment against Mr Pinci in respect to the period prior to his bankruptcy. The plaintiff seeks an order for damages to be assessed in relation to Mr and Mrs Pinci's use and occupation of the property as regards Mrs Pinci from 2 August 2002 onwards and as regards Mr Pinci from the date of his bankruptcy, being 29 January 2003, onwards.
The pleadings
3 Mr Wilson, by his statement of claim, pleads that on 2 June 2002 the parties entered into an oral agreement by which:
1. The parties agreed to enter into a contract for the sale of the defendants' property situated at 18 Petrel Close Armadale, being Lot 35 on Certificate of Title Vol 2048 Folio 313 (the property) to Mr Wilson, for the sum of $148,000;
2. The plaintiff agreed to obtain a bank loan of $250,000, repayment instalments of which were to be calculated on the basis of the Bank's usual terms for variable interest only loans (the bank loan);
3. The plaintiff was to use the monies advanced under the bank loan to purchase the property, to pay all costs associated therewith and to pay off the defendants' debts.
4. The plaintiff was to lease the property to the defendants for a period of three months from the date of settlement;
5. The defendants were to make repayments of instalments payable under the bank loan and all outgoings incurred in respect to the property;
6. Within three months of settlement of the contract for the sale of the property to the plaintiff, the parties were to
- enter in to a contract for the reconveyance of the property to the defendants for $148,000, conditional on all monies owing by the plaintiff under the bank loan being cleared;
- 7. The defendants were to pay all costs associated with the reconveyance; and
8. At settlement the defendants were to pay to the plaintiff the amount of any shortfall between the repurchase price and $250,000 (the oral agreement).
- Mr Wilson further pleads that:
1. The parties completed steps 1 - 3 of the oral agreement with settlement occurring on or about 1 August 2002. The defendants, who were in possession of the property prior to settlement continued to reside in the property after settlement;
2. Pursuant to the oral agreement the plaintiff paid $148,000 for the property, $16,128.21 in costs associated with the purchase and made various payments to the defendants' creditors in the amount of $95,974.44;
3. In or about August 2002 the defendants paid $1,200 to the plaintiff and in July 2003 paid $1,500 but thereafter failed to either meet the instalments under the bank loan;
4. In February 2003 the plaintiff refinanced the bank loan;
5. On or about 10 May 2004 the plaintiff served the defendants with a notice of default specifying their default as breaches of the oral agreement by failing to pay the instalments under the bank loan and failing to enter into a contract for the repurchase of the property (the default notice). The defendants failed to remedy the defaults;
6. By notice dated 24 May 2004 the plaintiff terminated the oral agreement because of the defendants' failure to remedy the defaults (the termination notice);
7. In the alternative, the plaintiff elected to terminate the oral agreement upon service of the writ in these proceedings on 28 June 2004;
8. The defendants remain in possession of the property; and
9. By reason of the defendants' default the plaintiff is entitled to judgment against the defendants, as summarised previously.
(Page 5)
4 Portions of the defendants' defence are not easy to reconcile with other parts of the defence. In turn, the defence is not consistent with other formulations of the defence contained in the defendants' affidavits and oral and written submissions. A number of these inconsistencies are due to the defendants being self represented and not legally trained. However, some of the inconsistencies in Mr Pinci's material, in particular, I believe arise from his wish not to acknowledge the strength of the plaintiff's claim and his desire to defeat it using which ever version of the facts sounds best at the time. In the following summary I attempt to distil the essence of the defence.
5 The defendants deny that there was an oral agreement as alleged by the plaintiff or at all. In respect to the claim against Mrs Pinci, they say that she was not a party to any agreement with the plaintiff, except that she agreed to the sale of the property to him. Mrs Pinci does not allege that she was subject to undue influence to execute that contract or that she did not understand the effect of the contract which she signed.
6 In respect to the claim against Mr Pinci they say that the plaintiff offered to purchase the property to prevent Mr and Mrs Pinci from being evicted by the then mortgagee. They say that the plaintiff wished to invest in Mr Pinci's company, M V P Clear Pty Ltd (MVP) and that Mr Wilson offered to borrow further monies to repay some of MVP's creditors. They say that it was agreed that the plaintiff would purchase the property for $148,000, which was considerably less than its market value, that when MVP had sufficient funds the defendants would repurchase the property at the same price and the defendants would pay all costs associated with the 'transaction'.
7 They say that Mr Pinci has made 'many' offers to repurchase the property.
8 The defendants deny that they were obliged to make repayments under the bank loan and say that MVP was to make the payments if it had the capacity to do so. They agree that they were to pay the outgoings on the property and say that the only reason why they have not done so is because the plaintiff's wife has withheld bills from them.
9 The defendants allege that the plaintiff purchased shares in MVP with the balance of the $250,000 bank loan. They admit that the balance was expended to various entities as alleged by the plaintiff, but deny that the vast majority of the balance went to repay MVP's creditors.
(Page 6)
10 As to the payments of $1,200 and $1,500, the defendants say that they were made by Mr Pinci on behalf of MVP.
11 The defendants do not deny remaining in possession of the property after it was transferred to the plaintiff but say that there was never a lease or any other agreement between the parties in respect to their occupation of the property.
12 The defendants assert that the plaintiff refinanced the bank loan so that he could purchase the property where his factory was located.
13 The defendants admit to receiving the default notice. There is no admission in defence that they received the notice of termination.
14 The defendants seek an order permitting them to repurchase the property. The defendants deny that the plaintiff is entitled to any relief.
Issues between the parties
15 The issues between the parties revolve around the existence and terms of the oral agreement. I must decide whether there was an oral agreement. If so, I must decide who were the parties to it and what were its terms. Once those issues have been determined I will deal with the appropriate remedies.
Witnesses
16 The plaintiff gave evidence and called his wife, Mrs Phillipa Leslie Wilson, and his daughter, Ms Fiona Leigh Wilson, to give evidence. The plaintiff and each of his witnesses are people of good character. They each gave their evidence in a credible manner, although the evidence of Mrs Wilson and, to a lesser extent, that of Ms Wilson was tainted by their contempt for Mr Pinci. That contempt was apparent in the manner and tone in which they gave their evidence. I am satisfied that it did not affect the truth and reliability of the important parts of their evidence.
17 The defendants gave evidence and also called David Hemmings, a former worker at MVP, to give evidence. The defendants and their witness are also people of good character. Mrs Pinci gave her evidence in a straightforward and credible manner. Mr Pinci's evidence was hard to follow at times because it was not always rational or consistent, as I will demonstrate later in these reasons. These inconsistencies result in me placing less weight on his evidence. Mr Pinci was also keen to present what he regards as all the relevant facts, including the 30% of the facts which he says are in dispute. However, some of the matters he regards as
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- being important are not and his preoccupation with them distracted him from the essential issues. I am of the view that he concentrated on peripheral issues because he knows, although he is reluctant to acknowledge, even to himself, that he has a weak defence in respect to the central issues. His case suffers as a result. For example, he was at pains to present evidence to show that MVP manufactured quality products and that Mr Wilson believed that they were quality products. He also was keen to present evidence to show that he and others, including the plaintiff, worked hard to sell MVP's products and that MVP failed to sell the products because of forces beyond its control. However, these issues were never in dispute between the parties.
Facts
18 I am satisfied on the balance of probabilities by the evidence of the witnesses and by the documentary evidence of the following matters.
19 The plaintiff has at all relevant times carried on his own business as a cabinetmaker. In early 2002 Mr Pinci was the Director and Secretary of MVP which manufactured cleaning products and, in particular, car cleaning products. He was also a shareholder of MVP but was not the majority shareholder. Mr Pinci worked full time in MVP. Mr and Mrs Pinci were, and continue to be, a married couple with a number of children. Mrs Pinci was at all relevant times a homemaker. Mrs Pinci did not hold a position in MVP and was not a shareholder of the company.
20 In February 2002 Mr Wilson and Mr Pinci met. The details as to how they met are unimportant. Mr Pinci demonstrated some of MVP's products to Mr Wilson and he was impressed by them. Mr Pinci told him how his factory had blown up, he had creditors to pay and he was trying to get the MVP business off the ground. Mr Pinci told Mr Wilson he could become an investor in MVP. He said that if Mr Wilson paid off his creditors he would give him 50,000 shares in MVP. Even at this early stage in their relationship there was an unhappy failure on the part of both men to distinguish between MVP and Mr Pinci. Whilst this discussion was about investing in MVP, I accept that neither party thought that the debts to be repaid would only be MVP's debts. Mr Wilson said that he would have to discuss the proposal with his wife and he suggested that Mr Pinci demonstrate MVP's products to her.
21 Within the next week, Mr Pinci went to Mr Wilson's home and demonstrated the products to Mr and Mrs Wilson. Other meetings followed.
(Page 8)
22 In March 2002, Mr Pinci asked Mr Wilson if he could lend him $14,000 to assist him to repay creditors and help him to get orders for MVP'S products. Mr Wilson offered to invest in MVP. Mr Pinci agreed to give him 50,000 shares or 2.5% of the company for $14,000. I accept that Mr Pinci thought that the shares were worth a lot more than that but that he was prepared to sell them for that price because he was grateful to Mr Wilson for his help. Mr Wilson was prepared to, and did, invest this money in MVP knowing that he could lose it if MVP's financial position did not improve.
23 On 14 March 2002, Mr and Mr Wilson attended on Mr Pinci's accountant and signed applications for the issue of shares to give effect to this agreement. The share certificates were left with the accountant, who is now deceased. Mr and Mrs Wilson were never registered as shareholders in MVP. The reason for this is unclear. Mr Pinci says that he relied upon his accountant to do the necessary work to register Mr and Mrs Wilson as shareholders and that it came as a surprise to him to discover, much later, that that did not occur. There is insufficient evidence to enable me to conclude that the failure to issue the shares was as a result of a deliberate attempt by Mr Pinci to defraud the Wilsons.
24 Throughout March, April and May Mr Wilson assisted Mr Pinci and MVP. In early May, Mr Pinci offered to provide Mr Wilson with a further 150,000 shares in MVP. Again, the Wilsons went to Mr Pinci's accountant and signed share certificates. Again, they were not registered as shareholders.
25 During this time Mr Pinci also told Mr Wilson more about his financial problems. He had difficulties on two fronts. First, the National Australia Bank (NAB) were threatening to repossess the property, which was registered in both defendants' names. This was because the defendants could not make afford to make the repayments on their home loan with the NAB. The property was the defendants' and their children's home. Secondly, MVP was in financial difficulty and was unable to pay its debts. Mr Pinci had a genuine belief that MVP would soon obtain contracts for the supply of its cleaning products which would enable MVP to clear its debts and make a profit. These hoped for contracts had not come to fruition and, thus, neither MVP nor Mr Pinci had an income.
26 In May 2002, Mr Pinci and Mr Wilson had a number of conversations, the result of which were that the parties orally agreed that Mr Wilson would borrow $250,000 from his bank. Mr Wilson and Mr Pinci agreed that $148,000 of the bank loan would be used to purchase
(Page 9)
- the property and the balance would be used to pay Mr Pinci's and MVP's debts. Mr Pinci was to make the repayments under the bank loan and pay all outgoings in respect to the house.
27 There is a dispute between the parties as to whether it was Mr Wilson who suggested this arrangement or whether Mr Wilson offered to enter into the arrangement. I make no finding in this respect as I do not believe that it essential to the determination of the issues between the parties.
28 Mr Wilson says that it was further agreed that within three months of the purchase of the property, Mr Pinci would repurchase the property from Mr Wilson for $148,000, repay the balance of the $250,000 and, in the meantime, the defendants and their family could continue to occupy the property. He says that this was the agreement reached over a number of conversations. In particular, he testified that in mid to late May 2002 he and Mr Pinci had the following conversation:
[Mr Pinci] said: 'Can you help me out?'
I said: 'How much do you owe?'
He said: 'I owe the bank $17,000 in arrears but I will have to pay them out. Then I would need to pay the creditors. I would need $200,000 to $250,000 to clear it all. I wouldn't need it for long, I've got some really big deals coming up. I've got a big overseas buyer lined up and Marlows is about to place a big order for my products. I just need a couple of months. As soon as that happens I can pay you back.'
I said: 'When could you pay it back?'
He said: 'Three months, tops'.
29 Mr Wilson also said that on at least one occasion he and Mr Pinci had a conversation to the following effect:
[Mr Pinci] said: 'I need somewhere to live. We have to stay there.'
I said: 'Yes, OK.'
He said: When I pay you back you have to give me the house back'.
I said: 'Is three months enough?'
He said: 'When, this deal comes through I can buy it back straight away. I won't even need three months.'
(Page 10)
- I said: 'You buy the house back in three months when you pay me back the rest.'
He said: 'Yes'.
30 Finally, Mr Wilson says that on the last occasion they discussed it they were in Mr Wilson's factory and they said words to the following effect:
I said: 'I'll get the loan for $250,000. You and Kim sell me your house for $148,000. I'll use the loan to buy the house and pay the fees. You can have the rest of the money to pay your creditors.'
He said: 'I stay in the house and you will sell it back to me and Kim in three months.'
I said: 'You have to make the payments under the loan instead of rent and you have to pay all the bills for the house.'
He said: 'I don't think we'll need to pay rent. I should have the money before then to get the house back.'
I said: 'So in three months after we buy the house, you will pay me back and buy your house back.'
He said: 'Yeah, Kim and I will buy the house for what we sold it to you for.'
I said: 'If you pay everything you owe me, then I will sell you the house back for what I paid. You have to pay all of your own fees to buy it back.'
He said: 'Yeah, this deal with MVP Clear will give me the money to pay.'
31 Mr Pinci denies that there was such an agreement. He says that the agreement was that when MVP was making money, he would repurchase the property but that he did not have to repay the balance of the bank at the same time. He also says that it was agreed that the bank loan repayments would be made out of MVP's income, if it had any. Otherwise, Mr Wilson was to meet the repayments of the bank loan. He says that Mr Wilson was aware that he could lose the $250,000 if MVP did not make sufficient profit to repay it.
32 At times Mr Pinci appeared to suggest that the loan of $250,000, or at least the balance that was left after the purchase price of the property was deducted from it, was an investment in MVP for which Mr Wilson was to receive the 150,000 shares in MVP; it was in effect the purchase price for the shares. However his evidence and statements on this issue are inconsistent.
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33 For example, in his defence he says that there was an offer to purchase the property. He then says that the plaintiff wanted to be an investor in MVP and offered to borrow extra money so that he, Mr Pinci, could 'get some of [MVP's] creditor's off his back. He says that when MVP had enough funds, Mr and Mrs Pinci could repurchase the property. He says that 'remainder of the monies were taken up in the shares which the plaintiff had purchased' (defence [1] and [1.7]).
34 During cross-examination Mr Pinci was asked about [1.7] of his defence:
So what you're saying there is that the 250,000 minus 148 was in fact taken up in the shares? That's what you're saying there, isn't it?---Yes. The remainder of the 250,000 that was paid for the debts and whatnot was taken up in the shares, correct, is what I was saying.
Just to stop you there: I understand you to mean by that that the price for the shares was, in effect, the difference between the 250 and the 148. Is that what you're saying?---What I was saying by that was that the shares that were gifted, right, were taken up in the remainder of the debt hold [sic] that was paid and on the fruition of the dealings with the contracts - Marlows and whatnot - that remainder would be paid back to the Wilsons and they would still attain the shares that they were given, yes. That's always been my evidence.
So putting it another way around, the whole of the $250,000 was repayable; it's just that the 148 related to the purchase and repurchase of the property and the balance was repayable as a balance. Is that correct?---That's correct. It was repayable by the dealings of MVP Clear (ts 451-452).
- A few questions later Mr Pinci gave the following evidence:
The shares were a gift, though, weren't they? In other words, no money was paid for them?---The second lot of shares were gifted (ts 453).
(Page 12)
36 In a response to the default notice, Mr Pinci wrote that Mr Wilson wanted to be an investor in MVP and offered to borrow extra money to get 'some of my creditors off my back'. He says it was also agreed that Mr Wilson would purchase the property. He says '[s]o he as an investor had security in his investment as well as piece of mind'.
37 There are significant inconsistencies between the defence, Mr Pinci's affidavit and his oral and written evidence. I do not feel that that I can rely on any one of the different statements made by Mr Pinci about the nature of the agreement with Mr Wilson. From this material, I am not satisfied that the defendants have proven that any part of the $250,000 was in payment for the second parcel of shares, was an investment in MVP or even that the shares were offered by Pinci and agreed by Mr Wilson to be taken as security for the bank loan.
38 I accept that Mr Wilson offered to lend the money to Mr Pinci and that Mr Pinci was very grateful to him for having done so. In appreciation, Mr Pinci 'gifted' Mr and Mrs Wilson the second parcel of 150,000 shares. Mr Pinci may well have felt that he was giving something in return to Mr Wilson but the shares were not an integral part of the agreement. The parties had agreed the terms of the oral agreement irrespective of any transfer of a second parcel of shares.
39 In addition to the evidence of Mr Wilson and Mr Pinci, I heard from David Hemmings a person who helped Mr Pinci with the production of MVP's products. He was not present when Mr Wilson and Mr Pinci negotiated the terms of the oral agreement. However, sometime after that in 2002 he was at MVP's factory and was present when Mr Pinci and Mr Wilson were having a meeting. He said that Mr Pinci said that Mr Wilson was 'coming on board' MVP and was going to invest $250,000 in MVP; $150,000 to be used to pay off Mr Pinci's house and the balance to be injected in MVP. He did not recall Mr Wilson saying anything in response.
40 Mr Pinci asks me to accept that Mr Wilson's failure to refute Mr Pinci's assertions during this occasion means that he admitted the truth of what he, Mr Pinci said. It is unnecessary for me to concern myself with the law of implied admissions because even if I assume that the conversation occurred, I am not prepared to accept that Mr Pinci's assertions were intended to be a recitation of the terms of the agreement between him and Mr Wilson. Over the course of the hearing and on a number of occasions I read or listened to Mr Pinci's articulation of the nature of the agreement or agreements between him and Mr Wilson. In
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- nearly every instance the articulation has been different. For example, on some occasions he said that the $250,000 was a loan to him which MVP had to repay, on other occasions it was an investment in MVP and on others it was a loan to MVP; and these are not the only scenarios Mr Pinci has asserted.
41 Mr Hemmings makes the point that there was no mention of interest or of a repayment date. This does not surprise me as, first, there was no interest rate set because the loan was to be repaid within three months and secondly, it was not to be expected that Mr Hemmings, a person who was assisting with production would be told of all the details of the arrangement between Mr Wilson and Mr Pinci.
42 Lastly, I take into account that it has never been Mr Pinci's case that the whole $250,000 was an investment in MVP with an on loan of $148,000 to Mr and Mrs Pinci. It seems, therefore, highly unlikely that if Mr Pinci said what Mr Hemmings said he said that either he or Mr Wilson thought of it as a recitation of the precise terms of the oral agreement. I think it much more likely that if it was said, it was said in the general sense that Mr Wilson was providing $250,000 to help keep Mr Pinci and MVP afloat.
43 I am of the view that the agreement as to the property was as asserted by Mr Wilson. Mr Pinci was confident that MVP was going to succeed in the near future. He strikes me as the sort of person who would have acted as if that was a certainty. Thus, he would have been working on the assumption that within a short period of time he would be in a position to repurchase the property, pay back the balance of the $250,000 and, in the meantime that he would have sufficient funds to make the bank loan repayments. I am also of the view that if Mr Wilson had believed that the oral agreement was for an indefinite period he would not have entered into it without a formal written agreement or at the very least a written agreement as to the payment of rent and interest.
44 However, I accept that as events unfolded, time was not of the essence in respect to performance of the terms of the oral agreement. The oral agreement remained on foot and capable of performance well after the three months elapsed.
45 Another area of dispute between Mr Wilson and Mr Pinci is whether the defendants were at liberty to repurchase the property for $148,000 after three months and to repay the balance of the $250,000 when MVP was in a financial position to do so.
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46 Mr Wilson says that the agreement was that all monies were to be repaid after three months. This was to be effected by the defendants repurchasing the property for $148,000 and by the defendants paying him the difference between the repurchase price and the balance of the bank loan. He says that it was never agreed that the defendants could simply repurchase the house and leave the remainder of the bank loan unpaid. He relies upon the same series of conversations referred to above to prove this fact.
47 Mr Pinci on the other hand interprets the conversations between the parties as creating separate agreements which were capable of separate performance. Thus, he says that one agreement was that the defendants would repurchase the property for $148,000, with another agreement governing repayments of the balance of the bank loan. That agreement being that it could be repaid by MVP when it was in the financial position to do so.
48 In my view there was only one oral agreement, with various terms which were to be performed at different times. As a matter of commonsense it seems to me that the agreement was that all monies were to be repaid after three months. If the agreement was as Mr Pinci suggests, Mr Wilson would not have agreed to go to the bother of purchasing the property only to agree to relinquish it even though $100,000 of the bank loan may remain unpaid. It seems to me to be so unlikely that Mr Wilson would do that, that I reject it as a possibility.
49 I am prepared to accept that the parties did not expressly address the issue as to whether Mr Pinci could part perform the oral agreement by repurchasing the home. However, as I accept Mr Wilson's evidence that the only conversations between the parties were on the basis that all monies would be repaid after three months, I do not accept that a reasonable person in Mr Pinci's position would have contemplated that it had been agreed that there could be part performance of the oral agreement in the manner suggested by Mr Pinci.
50 I can understand why, at a later time, Mr Pinci offered to part perform the oral agreement by repurchasing the property. Mr Pinci may well have been able to find another party prepared to accept the property as security for a loan in the sum of $148,000. Whereas it would have been very difficult for Mr Pinci to find another person who was prepared to advance sufficient money to repurchase the property and repay Mr Wilson in full, on the security of the property. However, the reality of Mr Pinci's financial situation, no matter how difficult it was and is, does
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- not persuade me that such part performance was a term of the oral agreement.
51 Mr Pinci made the point that the default notice and the termination notice, both served on him in 2004, said that it was a term of the oral agreement that Mr Pinci would repurchase the property for its market value. The defendants also assert that when discussions were had between Mr Wilson and Mr Pinci after three months had elapsed from the sale of the house to Mr Wilson and the advance of the monies, Mr Wilson said that the defendants had agreed to repurchase the property for market value. Although this is not the agreement pleaded by the plaintiff, it is a factor to take into account when deciding whether to believe Mr Wilson's evidence about the terms of the agreement.
52 Mr Wilson testified that he gave instructions to his solicitors at the time the notices were prepared but he did not recall telling them that the oral agreement was that the defendants had to repurchase the property for market value or reading the notices before they were sent. At a different point in his evidence, he denied ever having claimed that the defendants had agreed to pay him market value for the property. Despite these denials, I am not prepared to find that the plaintiff never said to Mr Pinci that he had to repurchase the property for market value, especially in the context of discussions between he and Mr Pinci where Mr Pinci was trying to get Mr Wilson to agree that the defendants could simply repurchase the property without repaying the difference between the $148,000 and $250,000. In that context, it would not surprise me if Mr Wilson attempted to obtain repayment of as much of the $250,000 as possible by getting Mr Pinci to repurchase the property for its then market value. Neither does the possibility of such discussions cause me to disbelieve Mr Wilson on other issues.
53 It is also in dispute as to whether the balance of the loan was made to one of the defendants, to both of the defendants and/or to MVP. I will deal with this issue later in my reasons.
54 It was part of the agreement that the balance of $250,000 was to be used to pay Mr Pinci's and MVP's debts. However, there was no express agreement as to which particular debts were to be paid.
55 Mr Wilson applied for a loan of $250,000 and Bankwest agreed to lend him this amount.
56 On 19 June 2002 the parties entered into a standard form REIWA contract for the sale of land by offer and acceptance for the sale of the
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- property to Mr Wilson for $148,000. The contract was signed by both defendants. This was the first time Mr Wilson had met Mrs Pinci. At the time the contract was signed, Mrs Pinci was visibly upset and there was no discussion between Mr Wilson and Mrs Pinci about the details of the oral agreement. Earlier, Mr Pinci had told Mrs Pinci about some aspects of the oral agreement. She voluntarily signed the contract and, later, the transfer, because Mr Pinci told her that they could not afford to make the repayments on the NAB home loan which was secured by a first mortgage on the property. She believed, quite reasonably, that without Mr Wilson's assistance they would have to leave the property. Secondly, Mr Pinci told her that Mr Wilson was purchasing the property on conditions that would allow she and Mr Pinci to subsequently repurchase the property from Mr Wilson. She did not know the full details of that arrangement. Mrs Pinci did not discuss the arrangement with Mr Wilson at any later time.
57 There is no reference in the contract for the sale of the property to the other aspects of the oral agreement between the parties. It states that the full purchase price was to be paid within 14 days of acceptance (ie by about 4 July 2002). The contract was conditional upon Bankwest agreeing to provide finance of $148,000 by 10 July 2002. These clauses do not appear to be consistent. In fact, settlement occurred on 1 August 2002. On that date Bankwest provided $153,142.66 being the purchase price of $148,000, stamp duty of $3,906, settlement fees of $448.10 and miscellaneous rate adjustments and other disbursements of $788.56. The settlement statement says that the sum of $1,124.44 was due to Mr Wilson on settlement. The reason for this is not clear to me.
58 In mid to late June 2002 Mrs Wilson started paying MVP and Mr Pinci's creditors. Other than one payment which was made on an unknown date in June direct to MVP in the sum of $39,000, the first payment made to MVP or one of its creditors was made on 12 June 2002 and the last on 10 October 2002. These payments, including the $39,000, totalled $89,189.99. Other than one payment which was made on an unknown date in repayment of an ANZ bank loan in the sum of $1,065.61, the first payment made to Mr Pinci or one of the defendants' creditors was made on 11 July 2002 and the last on 5 August 2002. These payments, including the $1,065.61, totalled $7,784.54. The total of the amounts paid to the defendants' and MVP's debtors was $96,974.53. These amounts are not disputed by the defendants.
59 Clearly, many of these payments could not have been paid directly from the bank loan because they were made before Bankwest advanced
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- any funds. I accept that they were made after the oral agreement was made on the basis that Mr Wilson would on loan the balance of $250,000 after the purchase of the property had been deducted from that sum and this would equate to the $250,000 which he ultimately borrowed from Bankwest.
60 One of the payments made to meet personal expenses was a visa card debt in the name of the Mrs Pinci and another was a private health fund account which, although it was in the name of the name of Mr Pinci, was probably for family health insurance. Other than those payments, there is no evidence before me that Mrs Pinci received any direct personal benefit from the payments.
61 The plaintiff admits that the defendants paid the first repayment under the bank loan of approximately $1,200 at the end of August 2002. There is no evidence before me as to how this was paid; that is, by cash or cheque and if by cheque from whose account.
62 Around this time Mr Pinci and Mr Wilson went on a business trip to Hawaii to meet potential customers for MVP's products. Mr Pinci's airfare and expenses were paid out of the $250,000. There were discussions between Mr Pinci and Mr Wilson about Mr Wilson investing in MVP's future overseas ventures but these plans came to nought.
63 Neither the defendants nor MVP made the second instalment which was due under the bank loan at the end of September. Around this time another person whom Mr Wilson had known for a long time, Mr Jimmy Stevenson, expressed some interest in becoming involved with MVP. Mr Wilson told him that the products were excellent and that Mr Pinci required an injection of capital to assist in marketing them. Throughout 2003, Mr Stevenson continued to be involved with MVP.
64 At the end of 2002 Mr Pinci anticipated that Marlows, a national retailer, was going to place a big order for cleaning products. A trial of MVP's products in Marlow's retail stores was successful. However, at around the same time the Marlow's stores were sold and the new owner did not pursue the order. Without any other significant customers, MVP and Mr Pinci remained in financial difficulties.
65 The plaintiff had numerous telephone conversations with Mr Pinci about his failure to make the repayments under the bank loan. Mr Pinci said he could not afford to make the repayments and he was waiting for funds to come through so he could do so. I accept that neither of the defendants nor MVP had the funds to make the repayments. That fact, of
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- course, does not negate the obligation of any party who had agreed to make such payments.
66 According to the plaintiff the defendants were obliged to repurchase the property by 1 December 2002. This did not occur. Mr Pinci says that on many occasions he offered to repurchase the property or offered to have someone else repurchase the property for $148,000, without repaying the balance of the $250,000. Mr Wilson, in Mr Pinci's view, unreasonably refused these offers.
67 Mr Wilson agreed that one such offer was made and says that he refused it because it was not in accordance with the agreement that the property would be repurchased and the balance of the $250,000 would be repaid within three months. He told Mr Pinci that the proposal would mean that he would be left with responsibility for the balance of the bank loan.
68 I accept that at least one such offer was made. It does not matter if more than one offer was made. I am of the opinion that the plaintiff was not bound to accept the offer. This is because the offer did not accord with the oral agreement entered into between the Mr Wilson and Mr Pinci. I also note that there is insufficient evidence before me to prove that Mr Pinci was capable of settling on such an offer.
69 In January 2003 Mr Pinci became a bankrupt. The plaintiff was not aware of the bankruptcy proceedings at that time. The defendants and their children continued to live in the property without paying rent. They continue to do so.
70 On 28 February 2003, in order to reduce the capital amount he owed to Bankwest, Mr Wilson refinanced his facilities with Bankwest and converted the bank loan to a principal and interest loan. Interest was variable and commenced at 6.07%. This was .2% less than the interest rate on the original bank loan in mid 2002. However, repayments increased to $1,600 per month to be paid fortnightly.
71 After Mr Wilson refinanced the loan, he advised Mr Pinci that he had done so. Mr Pinci did not, and still does not, agree to the refinancing. At the commencement of the trial his position appeared to be that Mr Wilson refinanced the loan because of other business losses. However, he did not persist in this line after he was given access to Mr Wilson's tax returns.
72 I heard conflicting evidence about whether Mr Wilson demanded that Mr Pinci repurchase the property and repay the balance of the
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- $250,000. On the basis of that evidence, I accept that initially Mr Wilson did not place much pressure on Mr Pinci to perform these terms of the oral agreement. However, after the bank loan was refinanced he did so and over time his demands increased in strength. There were telephone conversations between the two men in which Mr Wilson made strong demands. Mr Pinci's response was to either offer to repurchase the property only or to say that neither he nor MVP could afford to repay the money or make the repayments under the bank loan.
73 In about July 2003, Mr Wilson went to MVP's factory and said that he would have to sell the property if Mr Pinci did not start to make repayments. Mr Pinci gave him a cheque for $1,500. Again, it is unclear to me whose account the cheque was drawn on.
74 Towards the end of 2003, Mr Stevenson introduced another potential investor to Mr Pinci and Mr Wilson. His name is Mr William Shire. Mr Shire met with Mr Pinci, Mr Wilson and Mr Stevenson on a number of occasions. He was told, in the presence of Mr Wilson, that Mr Wilson was involved with or part of MVP but not in what capacity. In January 2004 Mr Shire decided not to invest in MVP because of potential conflict between his business partner and Mr Pinci.
75 Mr Pinci says that it is inconsistent with Mr Wilson's claim that he or MVP had defaulted on the oral agreement that he introduced Mr Stevenson and via him, Mr Shire, to Mr Pinci and told neither of them that Mr Pinci and MVP were in default under the oral agreement and in a poor financial position. The affidavit of Mr Shire, which was tendered by consent, does not say what Mr Shire knew about MVP's debts. He understood that MVP required a cash injection from him of approximately $200,000, in addition to any money Mr Stevenson planned to invest. There is no evidence from Mr Stevenson. However, in cross-examination Mr Wilson acknowledged that he told Mr Stevenson that MVP's products were excellent and that Mr Pinci needed a cash injection. He denied telling Mr Stevenson that Mr Pinci was 'okay' or that he should invest with MVP. He said that as far as he knew Mr Stevenson was aware that Mr Pinci owed $250,000 to Mr Wilson. He agreed that he had not told Mr Shire about the debt and did not have an explanation as to why he had not done so.
76 It is not incredible that Mr Wilson continued to be involved in MVP and to encourage potential investors after he claimed that Mr Pinci defaulted under the oral agreement. He believed in MVP's products and, even at the point Mr Stevenson became involved with MVP, he was
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- hoping that MVP would succeed. As for Mr Shire, he and Mr Wilson did not know each other very well. It would not surprise me if neither Mr Pinci nor Mr Wilson highlighted Mr Pinci's financial problems at the time Mr Shire was considering investing in MVP.
77 In December 2003 Mr Wilson attempted to get Mr Pinci to enter into a formal lease agreement for the property. However, Mr Pinci did not agree to the rent Mr Wilson requested and no written lease was entered into between the parties.
78 In January 2004 an application was lodged by an unrelated party to wind up MVP. On an unknown date after that MVP was deregistered.
79 In or about April 2004 Mr Wilson served the default notice on the defendants. It alleged that Mr Pinci was in default under the agreement and required him to remedy the default within 14 days of the notice by paying the arrears of loan repayments; an overdue water consumption charge and making a written offer to repurchase the property for market value. It advised that if Mr Pinci failed to remedy his default Mr Wilson would exercise his rights to, amongst other things, commence legal proceedings to recover from Mr Pinci the amounts owed under the oral agreement, take possession of the property and claim costs and interest.
80 Neither of the defendants remedied the alleged defaults as demanded. I do not accept that there was an obligation to remedy them in the manner asserted in the default notice, in that the defendants were never under an obligation to offer to repurchase the property at market value.
81 In or about May 2004, Mr Wilson served a termination notice on the defendants dated 24 May 2004. It made the same allegations and demands as contained in the default notice and asserted that Mr Pinci remained in default. It advised that Mr Wilson elected to exercise his rights at law to, amongst other things, take possession of the property, commence legal proceedings against Mr Pinci for the amounts owed and costs associated therewith. The notice advised that if Mr and Mrs Pinci did not vacate the property within 14 days legal proceedings would commence for possession of the property. Neither Mr nor Mrs Pinci complied with the termination notice.
82 In late 2006 Mr Wilson and his wife moved to a rural area. He restructured his debts in order to enable him to do so. The property is now mortgaged to both Bankwest and the Commonwealth Bank of Australia. The plaintiff remains the registered proprietor of the property.
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83 The defendants have not made any further repayments under the oral agreement or paid rent to the plaintiff. The plaintiff has paid the rates and taxes on the property. The plaintiff claims also to have paid all the water rates and water usage bills, although the defendants also claim to have paid some of the latter amounts.
84 The defendants tendered a letter from a licensed finance broker advising that it had obtained conditional finance to enable Mrs Pinci to have the property transferred into her name on condition that the maximum loan be $200,000, there be a satisfactory valuation of the property and there be lenders insurance approval.
Determination of the plaintiff's claim
85 The plaintiff says that he has terminated the oral agreement because of the defendants' breaches of its fundamental terms and is entitled to the relief he seeks.
A sale or mortgage?
86 One issue that has arisen between the parties is whether, under the oral agreement, the transfer of the property was not an absolute conveyance but was rather a mortgage security; that is whether the agreement was to loan $148,000 upon the security of the property. If this was the case then Mr and Mrs Pinci had a right to repay $148,000 and to demand a reconveyance of the property to them.
87 My consideration of the relevant law commences with the commentary in Sykes E I, Walker S, The Law of Securities (5th ed) 1993. The learned authors say:
The right to redeem after default is so fundamental that when equity is once of the opinion that the transaction is in substance a loan upon security, it will imply a right to redeem always. It follows that the parties will not effectively exclude this right merely by disguising the transaction, by 'dressing it up' to look like something else. The operative maxim, for equity is annoyingly fond of maxims that rarely express the full truth, is 'once a mortgage, always a mortgage'. The court will inquire into the real substance of the transaction to determine whether the agreement is bona fide and genuine or whether it is a mere cloak or screen for a mortgage transaction. To do this it will go behind the documents but such an excursion should not be so pursued as to ignore the legal effect of the documents. Thus in Salt v Marquess of Northampton the transaction was held to be of a security nature and to confer a right to redeem on the borrower's executors even though it purported to be merely an agreement by the lender to assign a life policy in the event of certain contingencies. On the other hand a genuine transaction which is not a mortgage will not
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- be regarded as such. Thus an absolute conveyance with an agreement for or an option of re-transfer on payment of a certain sum prima facie creates a mere right of re-purchase exercisable only on the terms allowed by the contract and gives no right of redemption unless it is proved that the transaction was in the nature of a mortgage in essence, the onus of proof resting on those who so assert (68 - 69).
88 In Gurfinkel v Bentley (1966) 116 CLR 98, Owen, Menzies and Windeyer JJ held that an agreement to sell a property with an option to the seller to repurchase was not a mortgage of the property. Windeyer J said:
'As regards their legal incidents, there is all the difference in the world between a mortgage and a sale with a right of repurchase. But if the transaction is completed by redemption or repurchase as the case may require there is no difference in the actual result.' Lord Macnaghten said that in Manchester, Sheffield and Lincolnshire Railway Company v North Central Wagon Company. He went on to say: 'In all these cases the question is what was the real intention of the parties? As Lord Cranworth observed in a case where the documents were of a more formal character, "The rule of law on this subject is one dictated by common sense; that prima facie an absolute conveyance, containing nothing to shew that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase"': Alderson v White.
It is not enough that Gurfinkel approached Panizza for financial assistance to get him out of his difficulties and that Panizza came to his rescue. 'A conditional sale is not a mortgage simply because both parties enter into the transaction in the confident expectation that the purchaser will take advantage of the condition, and that the final result will be the same as if they had agreed to reach that end by the road of mortgage': per Cave J in Beckett v Tower Assets Co. Gurfinkel did not exercise his option to repurchase in accordance with the condition stipulated in the agreement. Panizza has thus been able to obtain the property at much less than its true value, Gurfinkel (or his creditors, he being bankrupt) being the loser. But that does not mean that the transaction was not what the parties expressed it to be.
It has of course long been the law that parol evidence is admissible to shew that a conveyance, absolute in its terms, was intended by both parties to be by way of security only. That was perhaps more easily shewn in earlier times when, as Maitland has said, a mortgage deed was 'one long suppressio veri and suggestio falsi' than it is today, especially in the case of land held under the Torrens system. In 1750 Lord Hardwicke could say: 'There is indeed a distinction in the nature of the transaction, between a power of redeeming and of repurchasing, obtained by usage, which governs the sense of words. But it is well known that the court leans extremely against contracts of this kind, where the liberty of repurchasing
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- is made at the same time, concomitant with the grant, as it must be considered in this case; being part of the same transaction; the court going very unwillingly into that distinction, and endeavouring if possible to bring them to be cases of redemption': Longuet v Scawen.
But the law has moved on since then. The attitude of the Court of Chancery in the mid-eighteenth century does not I think justify a court in the mid-twentieth century endeavouring to find that a bargain is not as the parties expressed it. A court will now ordinarily take at their word persons who execute agreements for sale at a price with an option of repurchase within a stipulated time: Rowe v Oades.
Of course if it can be shewn by parol evidence that both parties to a document adopted the form they did as a disguise, then their true intent and not the form will prevail. Thus agreements that were in form sales have sometimes been held to be mortgages when the form of a sale had been adopted as a disguise: for example, in Douglas v Culverwell, the purported sale at a price which preceded the conveyance was - Turner LJ said 'contemplated merely as a device for securing to the defendant usurious interest' (that is, a rate of interest more than the law then allowed). Similarly in Williams v Owen, Lord Cottenham, holding that what had occurred was a sale with a proviso for repurchase and not a mortgage, distinguished the case of Baker v Wind, which had been relied upon because there, he said, 'it was proved that the parties had throughout treated the transaction as a mortgage and had made it assume the appearance of a purchase to deceive the creditors of the mortgagor' (113) - (115).
- Owen J, with whom Menzies J agreed, said:
It is of course evident that the plaintiff needed money and that a stage was reached when the defendant was prepared to make money available to him. One way of doing this would have been for the defendant to lend the money and take a mortgage to secure its repayment, in which event he would have taken the place of the existing first and second mortgagees. But the debt secured by such a mortgage would, in those circumstances, have been 5,000 pounds and, since the plaintiff had been unable to meet his obligations for a much lesser sum under the existing mortgages, this might well have seemed to the defendant to have been an unattractive proposition, more particularly since he knew that the plaintiff was then in default under two other mortgages, one on the Brown Street land, the other on the Welshpool land. An alternative method of making funds available to the plaintiff would have been for the defendant to agree to buy the land at a figure sufficient to enable the plaintiff to discharge the existing mortgages giving the plaintiff an option to repurchase the property at a figure which would show the defendant a profit of ten per cent on his outlay. It was this second alternative which found expression in the agreement of 18th October, and it seems to me, with all respect, that there is nothing in the case to justify the conclusion that the parties intended that
- what, on its face, was a transaction of sale with an option to repurchase was to operate as a mortgage to secure the repayment of a loan (122).
89 Applying these principles to the facts of this case, there is insufficient evidence to satisfy me that the parties used a sale of the property to disguise what was in fact a mortgage. The parties orally agreed that Mr Wilson would purchase the property and Mr and Mrs Pinci would have a right to repurchase it in three months as long as the whole of the $250,000 was repaid. Mr Pinci told Mrs Pinci that Mr Wilson was going to purchase the house and that they could repurchase it at a later date. She did not ask whether, and was not told that, other conditions had to be performed before that right to repurchase could be invoked.
90 The parties partly performed that part of the oral agreement by entering into the written contract for the sale of the property. In my opinion the oral agreement was, as Mr Wilson and Mr Pinci articulated to each other and to Mrs Pinci, an absolute sale with an agreement that Mr and Mrs Pinci could repurchase for the sale price as long as the balance of the bank loan was repaid at the same time. This transaction did not give the defendants a right of redemption.
Identification of the parties to the oral agreement and their obligations to repurchase and/or repay
91 The plaintiff asserts that Mr Pinci and Mrs Pinci were parties to the oral agreement. Mrs Pinci denies that she was a party. It is possible to construe the defence as asserting that MVP, and neither Mr nor Mrs Pinci, was a party to the oral agreement. Mr Pinci says that MVP rather than he, undertook to repay the money that was used to pay MVP's debts.
92 The identification of parties to a contract, and its terms are to be ascertained determining what each person, said to be a party, by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 [40].
93 The plaintiff relies upon his evidence and that of his wife to the effect that Mr Pinci told them that he personally undertook to repurchase the house and to pay the balance of the $250,000. I have already quoted the relevant conversations upon which he relies. Additionally, Mrs Wilson says that she recalls Mr Wilson and Mr Pinci discussing Mr and
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- Mrs Pinci selling the property to Mr Wilson, Mr Wilson obtaining the bank loan and using the money to purchase the property and to pay Mr Pinci's creditors. She further recalls them discussing that Mr Pinci would repurchase the property and repay the balance of the $250,000 in three months.
94 Mr Pinci's case, in this, as in other respects is unclear and inconsistent. The defence asserts that Mrs Pinci was not a party to the contract, that Mr and Mrs Pinci were to repurchase the property and the costs associated with the sale and repurchase, and MVP was to repay the balance of the loan when it was able to do so.
95 In Mr Pinci's affidavit in opposition to the plaintiff's summary judgment application he says that Mr Wilson offered to help 'me out with my financial difficulties regarding my matrimonial home'. On the same occasion he says that Mr Wilson said he wanted to be part of MVP and that he was prepared to lose his investment.
96 In another paragraph of the affidavit he says that Mr Wilson offered to buy the property for the amount needed to pay out the mortgagee and to use the balance of a bank loan of $250,000 to pay the immediate debts of Mr Pinci and MVP. Mr Pinci then offered to transfer the second parcel of shares to Mr Wilson. He goes on to say that he and Mrs Pinci would be entitled to reacquire the property as soon as MVP was trading profitably and funds became available through MVP for he and Mrs Pinci to use. He said, 'In addition, MVP would pay back the interest cost Mr Wilson incurred on the $250,000 loan pending the said buy back'. He deposes that it was agreed that MVP would make the repayments from the income of MVP if there was sufficient income to do so 'but in any event such payments MVP could not make would be reimbursed by MVP in due course at the time of the said buy back'. He says that Mrs Pinci did not have any obligation to make any repayments to Mr Wilson.
97 In Mr Pinci's response to the default notice, he says that Mrs Pinci did not take an active part in any discussion between he and Mr Wilson and her only involvement was to sign the contract and transfer for the sale of the property. In his response Mr Pinci does not deny that he has an obligation to repurchase the property and repay the balance of the $250,000. He does dispute that there was any time period within which he had to do it.
98 During the trial I asked Mr Pinci who he said the advances were made to in respect to the $148,000 and he replied:
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- It's hard, because Marc Pinci is MVP Clear, so it was to get the bank off my back. So it was to me personally, MVP Clear - to Marc Pinci, MVP Clear, because I am MVP Clear, ma'am. Well, I was.
- In respect to the balance of the $250,000 he said:
Again it was loaned to the company, or to me, because I was the company, to pay the balance - to pay the debts off, which was done by Rob Wilson's wife. Correct?
His evidence was not more helpful than those submissions.
99 Mrs Pinci, in her affidavit in opposition to the plaintiff's summary judgment application, said:
I signed a transfer in or about June 2002 transferring the matrimonial into Mr Wilson's name, I did so on the basis of my husband advising me that he had entered into an agreement with Mr Wilson whereby we would in due course be entitled to re-acquire our matrimonial home from Mr Wilson, the specific terms of which I did not know.
100 Mrs Pinci said that her husband did not inform her of those specific terms. Later, in her affidavit, she said:
At no time did I discuss with Mr or Mrs Wilson the details of the arrangement that had been entered into between my husband and Mr Wilson whereby our matrimonial home would be transferred to Mr Wilson and we would have a right to re-acquire that property in due course.
I was informed by my husband and verily believe that a term of the arrangement for the transfer of our matrimonial home to Mr Wilson and our right to re-acquire that property from him in due course, was that Mr Wilson would pay out entirely the mortgage balance owing to the National Australia Bank at or about the date that we transferred our matrimonial home to Mr Wilson.
101 Mr Wilson's evidence did not contradict Mrs Pinci in these matters, except that he said that on the occasion Mrs Pinci signed the contract he told her 'Look, it'll all be over in three months and you'll have your house back'.
102 In Mrs Pinci's oral evidence she said that Mr Pinci did not tell her a lot about MVP and she does not recall much of the detail of any discussions she did have with Mr Pinci about the agreement between he and Mr Wilson.
103 I accept Mrs Pinci's evidence that she was not involved in any negotiations between Mr Wilson and Mr Pinci which led to the oral
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- agreement. I find that after the oral agreement was entered into and before she signed the sale contract she was told by her husband of some of the detail of it, principally relating to the sale of the property to Mr Wilson and the right to repurchase it. I find that she then agreed to sign the contract and transfer because Mr Pinci told her that it was, in effect, the only way the family would be able to stay in the property and because she understood that they had a right to repurchase it.
104 The only means by which Mrs Pinci could be found to be a party to the oral agreement with obligations under it, is if Mr Pinci was acting as her agent at the time the oral agreement was entered into or if she later ratified it.
105 Mr Wilson's counsel made much in submissions of Mrs Pinci's acknowledgement that she could have been told more about the details of the oral agreement than she presently recalls. However, there is nothing in the evidence that persuades me that she agreed to the terms at the time that they were agreed to. She may well have been told by her husband of some of the terms after he had agreed to them.
106 Mr Wilson submits that Mr Pinci was held out as Mrs Pinci's agent. I disagree. During negotiations between Mr and Mrs Pinci, Mrs Pinci was simply absent. I do not accept that a reasonable person in Mr Wilson's position would assume by her absence and Mr Pinci's assertion that he would sell the property to Mr Wilson that Mrs Pinci held Mr Pinci out as her agent in respect to negotiating all the terms of the oral agreement. Mr Pinci could not create an agency simply by holding himself out as an agent. However, I am not satisfied that he did so. The evidence fails to persuade that Mr Pinci made any representation to Mr Wilson that Mrs Pinci would borrow the balance of the $250,000 after the sale of the property or that she undertook to repay it. The lack of such allegations in the default notice admit as much.
107 Mr Wilson submits that when Mrs Wilson signed the contract and transfer she ratified the terms of the oral agreement and agreed to be bound by them, including the obligation to repay the whole of the $250,000.
108 I agree that by signing the contract and transfer, Mrs Pinci ratified that part of the oral agreement by which it was agreed that such a sale would take place for a price of $148,000 with an option to repurchase. In respect to the sale of the property she has no better rights of repurchase than Mr Pinci. However, I do not accept that by such action she ratified
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- any so called acceptance by Mr Pinci on her behalf of an obligation to repay the whole $250,000 within three months. First, I do not accept that a reasonable person in Mr Wilson's position would have believed that Mr Pinci represented that Mrs Pinci accepted such an obligation. Secondly, even if he did, I do not accept that simply by signing the contract and transfer Mrs Pinci ratified all the other terms of the oral agreement. Certainly, after taking those steps it was not open for her to say that she had not agreed to the sale of the property, but taking those steps did not include ratification of other terms of the oral agreement which were unknown to her.
109 These comments apply equally to the submission that Mrs Pinci is estopped by her actions or inactions from denying that Mr Pinci was her agent. Mrs Pinci did not say or do anything or omit to say or do anything prior to the making of the oral agreement which could have led a reasonable person in Mr Wilson's position to understand that Mr Pinci was her agent, except perhaps in regard to the sale of the property. After the making of the oral agreement, all she did was sign the contract and transfer. These actions estop her from denying that she ratified that part of the oral agreement by which Mr and Mrs Pinci agreed to sell the property. Nothing more.
110 Therefore, I find that Mrs Pinci is not a party to or bound by that part of the oral agreement relating to the making of the repayment, borrowing the balance of the $250,000 or the agreement to repay it.
111 Next, I turn to the question of whether Mr Pinci was a party to the whole of the oral agreement. I do not have any doubt that a reasonable person in Mr Wilson's position would have understood that Mr Pinci accepted Mr Wilson's offer to lend the balance of the $250,000 to him to be used to pay off his and MVP's debts on condition that in three months time, or such further time as Mr Wilson permitted, he would repay the balance, at the same time as he and Mrs Pinci repurchased the property.
112 In their discussions, neither Mr Wilson nor Mr Pinci properly distinguished between Mr Pinci and MVP. What is clear to me is that Mr Pinci told Mr Wilson that he would borrow and repay the money. That may well have been in the context of MVP becoming profitable and Mr Pinci obtaining the necessary funds from MVP to make the repayments but it was still Mr Pinci's representation that he personally undertook the obligations under the oral agreement.
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113 Thus, I find that Mr Pinci was a party to the oral agreement and agreed that he and Mrs Pinci would sell the property to Mr Wilson for $148,000. Further, he would borrow the balance of the $250,000 from Mr Wilson. He also agreed that at the expiration of three months he and Mrs Pinci would repurchase the property and he would repay the balance of the $250,000. In the meantime he would make the repayments of the bank loan.
Defendants' occupation of the property after sale
114 The plaintiff submits that upon service of the termination notice the defendants were either:
(a) Tenants at sufferance (liable to pay for 'use and occupation', but not rent); or
(b) Tenants at will.
115 He submits it does not matter which legal interpretation is placed on the situation and he is entitled to the order he seeks.
116 The defendants' case seems to be that there is and has never been a lease of the property between the parties. Admittedly, this position has not been based on any sophisticated legal reasoning.
117 Despite the defendants' pleaded case being that there was no tenancy agreement, it appears to me there is an issue as to whether, after the sale of the property, the defendants occupied the property pursuant to a residential tenancy agreement, as defined in the Residential Tenancy Act 1987 (WA). If so, the plaintiff's purported termination of the tenancy would not have been effective because it did not comply with the provisions of the Act. Further, it would be necessary for me to determine whether I had power under the Act to terminate the tenancy.
118 I have decided that the agreement between the parties enabling the defendants to remain in occupation of the property was not a residential tenancy agreement. The reason for this is that the Act s 5(2) states that the Act does not apply to any residential tenancy agreement where the tenant is a party to an agreement for the sale and purchase of the premises. It seems that this exemption is applicable to this case.
119 If I am wrong in this respect and the defendants remained in occupation pursuant to a residential tenancy agreement, I am of the opinion that, pursuant to the Act s 74 I may terminate the agreement and make an order for possession of the property. The Act s 74(1) states:
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- (1) A competent court may, upon application by the owner under an agreement, terminate the agreement, if it is satisfied that the owner would, in the circumstances of the case, suffer undue hardship if he were required to terminate the agreement under any other provision of this Act.
120 A competent court, as defined by the Act, includes the Supreme Court, where, as in this case, the claim is over $10,000. I am satisfied that, given the history of the matter and the fact that a full hearing has taken place in this court, the plaintiff would suffer undue hardship if he was now required to apply to terminate the tenancy under the provisions of the Act.
Termination of the oral agreement
121 I find that in April 2004 Mr Wilson made time of the essence in respect to performance of the oral agreement. By the termination notice served in May 2004 Mr Wilson validly elected to terminate the oral agreement. Mr and Mrs Pinci had failed to repurchase the property. Mr Pinci was in breach of the oral agreement by his failure to make the repayments under the bank loan and of his obligation to repay the balance of $250,000.
122 Contrary to what was stated in the notices Mr and Mrs Pinci were not under an obligation to repurchase the property at market value. After consideration of the relevance of this error, I have decided that it does not affect the validity of those two documents. The error was not such as to mislead either Mr or Mrs Pinci into believing that some other agreement was being referred to in those documents. Mr and Mrs Pinci's only attempt to rectify the defaults was to offer to repurchase the property. However, this attempt did not satisfy the terms of the oral agreement or remedy the defaults. They did not tender any money to the plaintiff. Even if they had been able to obtain the finance to enable them to repurchase the property, the defendants would still have been in default of fundamental terms of the oral agreement. That is, they were unable and unwilling to perform fundamental terms of the oral agreement.
Relief to which the plaintiff is entitled
123 The oral agreement having been validly terminated by Mr Wilson, he is 'absolved from future performance of his obligations under the contract' and may succeed in an action for damages against the other party: Heyman v Dawins Ltd [1942] AC 356, 399.
(Page 31)
124 Mr Wilson is entitled to a declaration that on 26 May 2004 upon receipt by the defendants of the termination notice the oral agreement was terminated.
125 Mr Wilson is also entitled to a declaration that upon termination of the oral agreement the rights and obligations of the plaintiff and the defendants in respect of the purchase by the defendants of the property ceased.
126 Next, Mr Wilson seeks a declaration that at the same time the defendants no longer had any right to occupy the property whether under the oral agreement or otherwise. This is coupled with a request for an order for delivery up of the property to the plaintiff. In his written submission, the plaintiff submitted that I should make an order for vacant possession to be given to the plaintiff within 28 days. The plaintiff is entitled to such orders.
127 I am of the opinion, however, that Mr Wilson is not entitled to orders against Mrs Pinci requiring her to repay the balance of the $250,000 or damages in a similar amount.
128 The plaintiff also seeks an order for damages to be assessed in relation to the defendants' use and occupation of the property as regards the second named defendant from 2 August 2002 onwards and as regards the first named defendant from the date of his bankruptcy, being 29 January 2003.
129 It is trite to say that the injured party in contract is awarded damages on the basis that they are to be placed in the same situation as if the contract had been performed: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 503.
130 It follows that any benefits which the plaintiff has received as a consequence of the breach have to be accounted for when determining the damages, if any, to which the plaintiff is entitled.
131 This appears to me to be relevant because as a consequence of the defendants' failure to perform the contract the plaintiff will retain ownership of the property. If the contract had been performed within three months or such longer time as agreed between the parties the plaintiff would not have retained such benefit.
(Page 32)
132 Whilst Mr Wilson is entitled to an order that damages be assessed this benefit must be offset against the losses that he has suffered as a consequence of the defendants' breach of the oral agreement.
133 There is, however, an issue as to whether Mr Wilson is entitled to such an order against Mrs Pinci as well as Mr Pinci. Mrs Pinci failed to comply with the terms of the oral agreement for the repurchase of the property because her ability to do so was dependant upon Mr Pinci performing the balance of the obligations under the oral agreement. As he failed to perform those obligations, it was impossible for her to repurchase the property. In these circumstances it does not seem to me that Mrs Pinci's failure to repurchase the property renders her liable to pay damages to the plaintiff. The order for assessment of damages should be made against Mr Pinci only.
134 Mr Wilson also seeks an order that Mrs Pinci indemnify him in respect to his liability to Bankwest in relation to the repayment of $102,000 under the bank loan. For the reasons given above, Mr Wilson is not entitled to such an indemnity.
135 The plaintiff is entitled to interest on any damages awarded pursuant to the Supreme Court Act (WA) s 32.
136 I will hear the parties as to final orders.
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