Zollo Holdings (SA) Pty Ltd v Hogben - [2012] SADC 79

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
ZOLLO HOLDINGS (SA) PTY LTD v HOGBEN
[2012] SADC 79
Reasons for Decision of His Honour Judge Barrett
14 June 2012
CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER
The defendant applied to discharge a caveat over his land alleging that the plaintiff's purported agreement for sale and purchase was, inter alia, not reduced to writing and hence was plainly unenforceable.
Held: The plaintiff had demonstrated that there was a serious question to be determined that there was an enforceable contract for sale and purchase and the balance of convenience favoured the continuation of the caveat.
Real Property Act 1886 s 223LB, s 26; Law of Property Act 1936 s 26, referred to.
Stone and Anor v Leonardis and Ano [2011] SASC 153; ABC v O'Neill (2006) 227 CLR 56; [2006] HCA 46; Catanzariti v Lee [2005] SASC 419, considered.

ZOLLO HOLDINGS (SA) PTY LTD v HOGBEN
[2012] SADC 79

The parties are in dispute about the sale and purchase of a residential block of land at Greenacres owned by the defendant. The dispute will be the subject of a trial in this court which has not yet been set down for hearing. To protect its interest the plaintiff lodged a caveat over the land. When transferring part of the action to the District court from the Supreme Court, Judge Lunn extended the time for removal of the caveat to the conclusion of the trial in the matter. The plaintiff asserts that it is party to an enforceable agreement with the defendant for the purchase of the land and it has a caveatable interest.
The defendant denies that there is an enforceable contract for the sale and purchase of the land. The defendant denies that the plaintiff has a caveatable interest. He has signed a contract with a third party to sell his land and he submits that the caveat in favour of the plaintiff should be extinguished. The balance of convenience favours him. On 4 June 2012 be applied to have the Caveat removed.
Background
The dispute between the parties is longstanding. It goes back to 2003. In that year there were discussions between the parties about the sale and purchase of the land and a written contract for sale and purchase was executed. The plaintiff is a property developer who owns the block of land next door to the subject property which belongs to the defendant. The defendant lives in a house on the subject property. The plaintiff seeks to build units on its land and on the subject land.
The plaintiff asserts that the dealings and the dispute between the parties were the subject of District Court proceedings which were settled by an oral agreement on 26 July 2011. The plaintiff says that the settlement agreement was to the effect that the plaintiff would pay the defendant $70,000 for his interest in the land. In consideration of that sum the defendant would transfer the property to the plaintiff subject to several conditions, namely:
1.The defendant would obtain development approval to build five townhouses on his land at 123 Redwood Avenue, Greenacres as well as the defendant’s land next door at 125 Redwood Avenue. The settlement would be subject to development approval for the building of the townhouses.
2.One of the townhouses nearest the street frontage would become the sole property of the defendant after the issue of a strata title.
3.The defendant would pay for the cost of the construction of that townhouse.
4.The plaintiff would prepare plans for the total development on both properties; and
5.The plaintiff would accept the transfer of the balance of the land in consideration of settling its claim in the District Court proceedings. This is described by the plaintiff in its pleadings as “The Settlement Agreement”.
The Settlement Agreement was reached orally by the parties at a coffee shop in North Adelaide on 26 July 2011.
Just over a month later, on 23 August 2011, the parties met again. At that meeting the plaintiff produced plans for the proposed townhouse developments. The plaintiff says that the defendant indicated that he wished to build a townhouse numbered five on the plan. The defendant signed the copy of the plans and provided a handwritten letter to the plaintiff dated the same date saying;
Dear Dario, I have received the concept and approve them to send to council for their approval.
The letter is signed and dated by the defendant. The plaintiff claims that the agreement for sale and purchase was orally entered into by the parties at the coffee shop on 26 July 2011. He claims that the defendant’s handwritten letter of 23 August 2011, and the defendant’s signature on the development plan, combined with the evidence of the long history of the matter, amounts to an enforceable agreement for the sale a purchase of the land.
The defendant denies that there is a legally binding contract. The defendant says that the plaintiff therefore has no caveatable interest in the land and that his application to have the caveat removed should be granted. He asserts that the purported contract does not comply with s 223LB of the Real Property Act 1886 or s 26 of Law of Property Act 1936. The former section proscribes subdivision of land in certain circumstances and provides in sub-section 4 that a transaction entered into in contravention of the section is void. Section 26 of Law of Property Act reads as follows:
26—Contracts for sale of land to be in writing
(1) No action shall be brought upon any contract for the sale or other disposition of land or of any interest in land, unless an agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised.
(2) This section does not affect the law relating to part performance, or sale by the court.
The defendant asserts that the letter and the signed plan do not amount to a memorandum within the meaning of the s 26 of the Law of Property Act 1936. In the absence of an enforceable contract, the plaintiff has no caveatable interest.
The issues on the interlocutory
The defendant has executed a contract to sell his land to a third party. The parties to that contract executed it in May 2012. The contract is subject to the removal of the caveat. The date fixed for the settlement is 15 June 2012. The defendant filed his application to remove the caveat on 4 June 2012. He asserts that he has debts which necessitate his selling the property. The dispute between the plaintiff and the defendant will have to be determined in this court. The matter is not yet ready to be set down for trial. There is unlikely to be a trial this year.
The plaintiff asserts that the defendant is purporting to sell the land subject to the litigation. The defendant is purporting to sell to a third party the land he has already contracted to sell to the plaintiff. The issues for determination on the application are:
1.Whether there is a serious question to be tried concerning the existence of the asserted caveatable interest in the land; and
2.Whether the balance of convenience favours the continuation of the caveat (Stone & Anor v Leonardis & Anor [2011] SASC 153 per White J at [26]).
The plaintiff accepts that it bears the onus of establishing the two propositions. Those propositions, or enquiries, were articulated more fully by the High Court in ABC v O’Neill (2006) 227 CLR 57, [2006] HCA 46 which was cited by White J in Stone v Leonardis ibid at [25]. In respect of the first enquiry, Gummow and Hayne JJ (with whom Gleeson CJ and Crennan J agreed) said that the plaintiff must make out a prima facie case that it will be held entitled to the relief it seeks. That does not involve predicting that the plaintiff will probably succeed at trial, rather that it must ‘show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial’.
The plaintiff must also demonstrate that damages will not be an adequate remedy.
In respect of the second enquiry the plaintiff must demonstrate that the inconvenience or injury which it would be likely to suffer if the caveat was removed outweighs the inconvenience and injury to the defendant if it is not.
The serious question to be tried
The caveat is founded on the plaintiff’s assertion of an agreement for sale and purchase on 26 July 2011. The plaintiff says that on that day the parties met at a coffee shop and settled, once again, a District Court action between them. Part of that settlement involved an oral agreement for the sale and purchase of part of the defendant’s land upon which the plaintiff would build some townhouses. The consideration was $70,000. The defendant would retain part of his land upon which there would be built, at his expense, a townhouse for him to own and occupy. There was no memo or note produced on 26 July 2011. The parties met again at the same coffee shop on 23 August 2011. The plaintiff produced the plans he proposed to lodge with the council for planning approval. It was part of the oral agreement on 26 July that he would produce such plans. On 23 August he partly performed that contract by presenting those plans to the defendant. At the August meeting the defendant nominated the unit he wanted to have built in which he would own and occupy. He signed the plans. The plans did not identify the certificate of title, or the address of the proposed units. The plans made no reference to the parties or the consideration. They were just plans.
The defendant submits that the signatures on the plans and the short letter from the defendant approving the plans, indicates no more than what they say, that is, that the defendant approves of those plans being submitted to the council. The signature and the memo indicate nothing about sale and purchase. Even taken together they cannot meet the requirements of s 26 of the Law Property Act. While an agreement may be oral, it is unenforceable unless it is in writing, and the writing must include essential terms such as the parties, the property being transacted and the consideration (Catanzariti v Lee [2005] SASC 419 per Perry ACJ at [58]). As Perry ACJ made it clear, s 26(1) permits the enforcement of a contract if it is either a written contract or there is ‘a memorandum or note answering to the requirements laid down in the section’.
In that case Perry ACJ (with whom the other members of the Full Court agreed) held that a number of documents, taken together, identified the essential terms.[1]
[1] Paragraph [60]
In the present case the plaintiff acknowledges that the writings on 23 August do not identify the essential terms of the alleged oral contract. Mr Swan for the plaintiff admitted that those particulars can be deduced from what he described as ‘a suite of material’. He submits that it is not disputed that there was once in existence a written agreement between the parties for the sale and purchase of the subject land. The dispute is whether the agreement has been terminated by subsequent agreements by the parties, including the settlement (or settlements) of litigation between them. In particular, the plaintiff asserts that the oral agreement between the parties on 26 July 2011 was a settlement of litigation over the land. The suite of material may start with the original written agreement.
In his defence in earlier proceedings in this court the defendant himself asserted that the agreed purchase price for the land was $70,000. Further, the plaintiff submits that, far from contravening s 223LB of the Real Property Act, (the section dealing with the unlawful division of land) the agreement was made subject to the lawful division of the land.
I am persuaded that, in the pending litigation between the parties, there is a serious question to be determined concerning the existence of an agreement about the sale and purchase of the subject land. Despite the manifest insufficiency of the writings on 23 August 2011, I find that those writings, and other materials, may meet the requirements of s 26 of the Real Property Act. I find that there may be found by the trial judge a contract that complies with, or does not offend, s 223LB of the Real Property Act. I find that there is sufficient likelihood of such findings at trial to justify the preservation of the status quo.
Mr McCarthy submitted that the plaintiff could not justify any claim to specific performance of the contract. The plaintiff would be adequately compensated by damages. In my view that overlooks the fact that the plaintiff seeks to build townhouses on both the subject land and his own adjoining land. In those circumstances, damages may not be sufficient.
I turn to the second inquiry.
The balance of convenience
The defendant submits that the inconvenience and injury he is likely to suffer if the caveat is not removed outweighs the plaintiff’s likely inconvenience and injury if it is removed.
He points to the urgency inherent in the contract he has entered into with the third party. Settlement is fixed for 15 June 2012. The defendant concedes that the contract is expressly subject to the removal of the caveat, but there is nevertheless the risk that the contract will be defeated. He submits that he is under financial pressure. He is a coach driver receiving a modest annual income of $44,000. He has mortgages over the subject land and another property which amount to $240,000. He has a credit card debt of about $15,000. He needs to settle on the contract with the third party to realise the sum of $315,000 (the consideration for that contract). The plaintiff’s interests are protected by his present litigation. The defendant needs the proceeds of sale of his land to defend the current proceedings.
The plaintiff on the other hand has access to substantial assets, albeit that it is a trustee company.
The plaintiff acknowledges the financial pressure that the defendant claims, but submits that should not affect the balance of convenience. There is no suggestion of bank foreclosure. The defendant appears to have an interest in two properties. If the contract with the third party is defeated he will still have his property.
It must be said that these appear to be very protracted dealings between the parties and that there appear to have been protracted proceedings in this court. It is understandable that the defendant might wish to free himself of the dealings with the plaintiff and sell his property on what appears to be more advantageous terms. He would thus ease the financial pressure on him and he would better enable himself to defend these proceedings.
On the other hand the defendant is seeking to sell the very property the subject of the proceedings. While he would continue to suffer his financial pressures if the caveat is not lifted, it does not appear to me that he is presently in danger of losing his property.
I am persuaded that the balance of convenience favours the continuation of the caveat until the determination of the proceedings.
On 16 April 2012 his Honour Judge Lunn granted the plaintiff’s application that the time for removal of the caveat be extended until the determination or settlement of the District Court action, or by any other order of the court removing the caveat.
Undertaking as to damages
On 6 June 2012 Mr Swan on behalf of the plaintiff gave an undertaking as to damages. Mr McCarthy challenged the worth of the undertaking. He submitted that, despite the appearance of the plaintiff having access to reasonably substantial assets, the plaintiff is only a trustee company. It holds assets on behalf of beneficiaries, whose instructions may lead to the assets being transferred beyond the defendant’s reach.
I accept the adequacy of Mr Swan’s indication that his client, the trustee company, gives its undertaking in respect of the assets it is holding in respect of this matter. I regard that undertaking as sufficient.
Conclusion
For the reasons I have given I refuse the defendant’s application to remove the caveat.