Amatruda v Chandler [2001] VSC 93

Supreme Court of Victoria|2001-04-10|Before: Byrne J

CONTRACT - sale of land - whether agreement entered into - execution of formal contract - intention of the parties.

At the request of the parties I announced on 4 April 2001 my decision that the application for removal of the caveats would be granted and orders to that effect were made. With their concurrence I told the parties that I would publish my reasons later. These are my reasons.

This proceeding was commenced by writ filed on 7 February 2001. In it the plaintiff, Brian John Amatruda seeks specific performance of three contracts said to have been made on 23 October 2000 with respect to his purchase of a number of units in a block of 26 flats situate at and known as 131 Glenhuntly Road, Elwood. The contracts, as pleaded in the amended statement of claim, are as follows:

(i) A contract of sale between Omni Property Group Pty Ltd ("Omni") as purchaser and the firstnamed defendant, John Rodney Chandler, as vendor for the sale and purchase of units 3, 4 and 5 for $83,000 each.

(ii) A contract of sale between Omni as purchaser and the secondnamed defendant, Niparay Investments Pty Ltd ("Niparay"), as vendor for the sale and purchase of units 1, 2, 6, 10, 12, 13, 14, 16 and 21 for $83,000 each.

(iii) A contract between Omni and Niparay whereby Niparay granted to Omni an option to purchase units 8, 9, 15, 17, 18, 19, 20, 22, 23, 24, 25 and 26 for $85,000 each, the option to be exercised within 180 days of the contracts referred to in (i) and (ii) above becoming unconditional.

The remaining units, units 7 and 11, were not included in these contracts since they were owned by another person or persons. It is alleged that, on 9 November 2000, each contract was varied by agreement so that Mr Amatruda, a director and major shareholder in Omni, became substituted as purchaser and optionee under the three contracts.

By contract note dated 2 December 2000 Mr Chandler and Niparay agreed to sell each of the units referred to in the three contracts to Tyrone Asa Diskin and/or nominee for $1,969,000 on terms which required settlement on 24 June 2001. By deed of nomination dated 7 December 2000 Mr Diskin nominated White Crest Developments Pty Ltd as purchaser of the units.

On 21 December 2000 Mr Amatruda caused to be lodged three caveats X227857X, X227855E and X227856B on the titles to the property the subject of the three contracts. The relevant details of these caveats are as follows:

The Caveator asserts an estate in fee simple in units 3, 4 and 5 "as purchaser under a contract of sale from John Rodney Chandler dated 21 October 2000".

The Caveator asserts an estate in fee simple in units 1, 2, 6, 10, 12, 13, 14, 16 and 21 "as purchaser under a contract of sale from Niparay Investments Pty Ltd dated 21 October 2000".

The Caveator asserts an equitable interest as grantee of an option to purchase an estate in fee simple in units 8, 9, 15, 17, 18, 19, 20, 22, 23, 24, 25 and 26 "as grantee of an option under an agreement to purchase an estate in fee simple from Niparay Investments Pty Ltd dated 21 October 2000".

The defendants as vendors seek in this application the removal of these caveats so as to enable the White Crest sale to go ahead. The application has some urgency because White Crest has, itself, entered into contracts to sell units 1, 2, 9, 15, 16, 19 20, 21, 23 and 26 and the settlement dates for these contracts are approaching. Unit 9 is due to settle on 5 April 2001 and five of the others on various dates in the same month.

The proceeding commenced, as I have mentioned, by an action brought by the substitute purchaser and optionee for specific performance of the three contracts. Having entered an appearance on 20 February 2001 the vendors by summons filed on 23 March 2001 returnable before the Master addressed to the plaintiff and to the Registrar of Titles, who is inappropriately described in it as a third party, seek removal of the three caveats and an injunction restraining the plaintiff from lodging further caveats or dealings on the titles. On 30 March 2001 Master Evans referred the matter to the Practice Court to be heard on 2 April 2001 where it came on for hearing before me. Apparently in response to concerns expressed by the Master, the defendants have filed a defence and counterclaim in which Mr Amatruda is described as the firstnamed defendant by counterclaim and the Registrar of Titles as the secondnamed defendant by counterclaim. The counterclaim seeks the orders sought in the summons, namely, the removal of the caveats and injunctive relief. The Registrar of Titles has by letter dated 30 March 2001 indicated, as is usual, that he does not intend to appear.

Counsel for the plaintiff at the outset drew attention to the fact that s. 90(3) of the Transfer of Land Act 1958 requires a registered proprietor, who seeks the removal of a caveat, to institute a proceeding for that purpose. At the time the summons was filed, no such proceeding was on foot. Notwithstanding that such applications ought be commenced by originating motion[1], it is not for that reason incurably bad as a consequence[2]. For the same reason the application should not be struck out because it is brought by counterclaim in the existing proceeding. To the extent that the summons anticipated the filing of the counterclaim I would, if it were necessary, permit the defendants to file a fresh summons and would abridge times to enable the merits of the application to be dealt with now.

Next, it is said on behalf of the plaintiff that, in truth, what is sought by the defendants as counterclaimants is summary judgment pursuant to Rule 22.08. As such, it was put that the application should be served not less than 14 days before the return date in the summons[3]. Again, no prejudice has been asserted or shown and no adjournment sought. I would not see short service as being fatal to the application being heard before me. Then, it was said that the applicants do not swear to a belief that there is no defence to the counterclaim[4]. In response to all of this, counsel for the defendants submitted that the application should be seen as one brought under s. 90(3) of the Transfer of Land Act. In such an application this requirement does not apply. In any event the deficiency, if it be a deficiency, was cured by the filing on 3 April of an affidavit by Mr Chandler swearing to a belief that there is no defence.

I approach this application on the basis that it is in truth an application by the defendant vendors for removal of the caveats pursuant to s. 90(3). This means that the onus, or risk of non-persuasion, lies on the caveator although, given the conclusions I have reached, nothing turns on this. Counsel for the plaintiff submitted that my task is to determine whether there is a serious question to be tried as to the existence of the interests in the property asserted in the caveats[5] and, if so, whether on the balance of convenience the status quo should be maintained pending trial[6]. This was not challenged and I am content to proceed on this basis. Since the three contracts relied upon by the caveator are wholly in writing I am able to determine this application, as I have done, on the basis that all conflicts of fact and all inferences from them are resolved in favour of the caveator.

I turn now to the substance of the application. Subject to one matter, no point was taken before me that the caveats are in form defective or that they misdescribe the interest, if any, which the caveator might have in the properties. Nor was anything said about the apparent disparity between the date of the contracts referred to in the caveats and that alleged in the statement of claim. This is not surprising because it was common ground that such entitlement as the caveator had to lodge the caveats sprang from a letter dated 21 October 2000 written by Luigi Francis Garita on the letterhead of Omni Property Group which was signed and returned by Mr Chandler on 23 October. The name "Omni Property Group" was "taken over" by Omni after it was incorporated on or about 7 September 2000. The one matter to which I have referred arises from the fact that the caveator, Mr Amatruda, is not a party to the contracts alleged to have been made on 23 October 2000 and, it was argued, had demonstrated no entitlement to lodge the caveats.

Negotiations to purchase the units had been conducted between the vendors' agent Wilson Pride, and Mr Amatruda since August 2000. On 30 September Omni issued an expression of interest to the agent. After some further negotiations Mr Chandler on behalf of the vendors made a counter-proposal on 2 October and this was followed by a further proposal from Omni on 13 October 2000. In the course of these negotiations Rigby Cooke, the solicitors for the vendors, produced two sets of draft contracts, the second of which comprises Exhibits BJA5, BJA6 and BJA7 to Mr Amatruda's affidavit of 30 March 2001. I shall refer to this second set of draft contracts simply as "the draft contracts". Although the terms of the draft contracts suggest otherwise, the uncontradicted evidence before me was that they pre-dated the letter of 21 October. The draft contracts deal with all of the 24 units the subject of the caveats except units 1, 5 and 16. In each of the draft contracts the contracting purchaser is described as "Brian John Amatruda and/or nominee" and a s. 32 statement is attached.

The letter of 21 October upon whose terms this application depends refers to the draft contracts and makes modifications to them. I shall set out the letter in full. It is addressed to Mr John Chandler and Niparay Investments Pty Ltd, care of Mr Rob Watson of Wilson Price. Omitting formal parts the letter is as follows:

"Dear John, RE: PURCHASE OF 24 APARTMENTS AT 131 GLENHUNTLY ROAD, ELWOOD Following our inspection of the property and assessment of the works required to undertake the proposed refurbishment, I confirm our agreement to acquire the 24 apartments that are for sale at the above property. We have reviewed the contracts of sale that were prepared by Rigby Cooke and note that the basis of the contracts are agreed subject to the following amendments:- To the basic terms of the deal are as follows:- 1) Purchaser Omni Property Group Company and/or nominee 2) Apartments being Acquired To the apartments will be acquired as follows:- a) Apartment 1 and 16 will be acquired from Niparay Investments for a consideration of $83,000 each and will settle in 30 days. b) Apartments 3 and 4 will be acquired from John Chandler for a consideration of $83,000 each and will settle in 30 days. c) Apartments 12, 13, 14 and 2 will be acquired from Niparay Investments for a consideration of $83,000 each and will settle in 60 days. d) Apartment 5 will be acquired from John Chandler for a consideration of $83,000 each and will settle in 60 days. e) Apartments 6, 10 and 21 will be acquired from Niparay Investments for a consideration of $83,000 and will settle in 60 Days. f) To the balance of the apartments will be the subject of an option to purchase agreement which will be prepared and agreed by the solicitors for the vendor and purchasers and be executed at the time of exchange of the above contracts. Niparay Investments has agreed in principle to a direct settlement of contracts with Omni Group Purchasers subject to solicitors approval in order to minimise transfer costs. To the option agreement will be on identical terms and conditions to the contracts of sale, save and except that the consideration will be for $85,000 and that the option must be exercised within 180 days of the contracts referred to for apartments 1, 2, 3, 4, 5, 6, 10, 12, 13, 14, 16 and 21 becoming unconditional. 3) Price: As noted in clause 2 4) Special Conditions: This offer is made subject to the conditions and special condition listed in the draft contracts of sale save and except as follows:- a) Receipt and acceptance of a copy of the Body Corporate rules and any licences issued in favour of Lots 11 and 7. b) Amendments to the Condition relating to GST in accordance with the Correspondence received from Meerkin & Apel which states:- "the GST Clause be amended to contain a confirmation from the vendor that the property is used as a residence and that the property is sold as a going concern. Furthermore the purchaser may require in certain circumstances that the GST clause also allow for the purchase to be undertaken for GST purposes under the margin scheme" as agreed between the solicitors. c) The agreements and consents referred to in special conditions 16 and 17 of the contract must be altered to be on terms acceptable to the purchaser. This clause needs to specify that this condition is for the benefit of the purchaser. d) The Option agreement referred to in Special Condition 19 will be expanded to better reflect the terms and conditions of the option save and except that the terms will reflect a purchase consideration of $85,000 and the option must be exercised and settled within 180 days of the above contracts becoming unconditional. e) The consent of the mortgagee referred to in special condition 20 must be obtained prior to settlement. f) The contract is to contain a special condition pursuant to which the Vendor will allow the Purchaser and its consultants access to the units for the purposes of investigating whatever is required in connection with the proposed redevelopment. The Vendor is to assist the Purchaser in all ways reasonably required of it including the necessary applications and consents. g) The contract should require the Vendor to serve notice on the tenants at the request of the purchaser to provide vacant possession at settlement. h) Copies of all body corporate leases are required. i) Collateral Contracts Special Condition 13.b Special Condition 13.b should provide that neither party is required to settle on a contract unless the Collateral contract settles at the same time. Special Condition 13.b should state that the default by either of the vendors under the Contracts shall be deemed a default under the collateral contract. j) Individual Transfers The apportionment of the consideration in Special Condition 14 needs to be as follows:- Apartments 1, 2, 3, 4, 5, 6, 10, 12, 13, 14, 16 and 21 being $83,000. The balance of the apartments being $85,000. As we discussed the changes to the special conditions, I anticipate that these alterations are acceptable. Please countersign the footnote of this letter as your acceptance on the basic terms of the deal to enable the preparation of contracts and the commencement of final negotiations with the owners of Lots 11 and 7 while you are away. Rob Watson has been provided with a cheque for $55,000 and the balance of this deposit to $110,000 to be applied against the 12 initial contracts will be provided at exchange of the contracts. I look forward to completing paperwork for this project and look forward to seeing you after your break to formally sign up the paperwork. Should you have any queries, please do not hesitate to call. LOU GARITA PROJECT MANAGER"

The letter invites the vendors to "countersign the footnote of this letter as your acceptance on the basic terms of the deal to enable the preparation of contracts and the commencement of final negotiations with the owners of Lots 7 and 11 while you are away". Mr Chandler accepted this invitation and signed the following at the foot of the letter which was returned to Omni on or about 23 October.

"I John Chandler for and on behalf of myself and Niparay Investments Pty Ltd hereby agree to the terms and conditions listed in this correspondence and I acknowledge receipt of the initial deposit cheque tendered on behalf of the Purchasers, subject to final review by Tim Kelly of Rigby Cooke and confirmation that the interests of John Chandler and Niparay Investments Pty Ltd are not materially disadvantaged by the clause changes and the addition of a clause stipulating that the deposit moneys will be released to the vendor upon the contracts becoming unconditional. _______________________________________ John Chandler for and on behalf of himself and Niparay Investments Pty Ltd"

The words in italics were added in handwriting by Mr Chandler.

Stopping at this point I am unable to see in this document and in the three draft contracts to which it refers any concluded agreement to sell or to grant the options. I am of this view for a number of reasons. First, the terms of the option agreement had yet to be agreed and the agreement prepared. Since it is clear that the three contracts for all 26 units were interdependent, this brings down the contracts for the sale of the 12 units. Second, the terms of the draft contracts are not agreed to form the basis of the contracts having regard to paragraph 4 of the letter which contains 10 further requirements or modifications. Third, the signing of the "footnote" is said to be an acceptance only of the "basic terms". Fourth, the signed acceptance is much qualified, by a handwritten addition inserted by Mr Chandler. This qualification includes a requirement that Tim Kelly of Rigby Cooke conduct a final review of the document and provide a confirmation that the vendor's interests are not materially disadvantaged by the clause changes. I read this qualification as a strong indication that Mr Chandler at least did not wish to be bound immediately to any contract.

Fifth, it is clear that the parties contemplated that formal contracts of sale and a formal option agreement would be entered into. I accept that, in this State at least, it may not be possible to state as a general principle of law that in a sale of real estate there is a presumption that no binding agreement is intended unless and until formal agreements are executed[7]. Nevertheless, it is a consideration to which I have regard in determining whether, objectively speaking, the parties intended that, by Mr Chandler's signing and his returning of the 21 October letter, a binding contract or contracts was or were made. I have regard, too, to the fact that the two parties were experienced dealers in and developers of real property.

Much was made in argument of a fax sent on 21 October by Mr Chandler to the Bank of Melbourne. In this, he asserts that "I have entered into an agreement with Omni Property Group to sell 9 Niparay owned units in Elwood by mid-December and grant an option to purchase the balance within 180 days". A copy of this fax was received by Mr Garita about the same time. In a fax to his solicitor of the same day Mr Chandler encloses what he describes as "a letter of agreement entered with Omni Property Group". As I mentioned to counsel in argument, this cannot be determinative of the objective intent of the parties as expressed in the documents which comprise the agreement between them. It will be noted, too, that this fax was sent two days before the letter of 21 October was signed and returned, that is two days before the pleaded contract was entered into. It may be that the agreement here referred to is the agreement mentioned in the first paragraph of the letter and which is said to have been confirmed in the letter. In this regard, there is mention in some of the correspondence that there had been an agreement between Mr Chandler and Omni as to the price as early as 15 October 2000[8].

In any event, the conduct of the parties thereafter belies any such inference. On 27 October the purchaser's solicitors, Meerkin & Apel wrote to Rigby Cooke confirming that they act for "the prospective purchaser". They seek amendments and additions to the conditions contained in the letter of 21 October and enclose details of these. Rigby Cooke responded by two letters dated 30 October. In one of these they express a disagreement with Meerkin & Apel's proposed special condition 4(c) and 4(f) and advise that they will have to discuss "various matters" with their client. They conclude by speaking of the need to agree upon the conditions to enable contracts to be finalised.

Over the next week or so the solicitors exchanged suggestions for the contracts, until 9 November 2000 when Rigby Cooke sent a letter submitting a number of redrafted documents. These documents describe the purchaser and optionee as Brian John Amatruda and/or nominee and not "Omni Property Group Company and/or nominee" as mentioned in Omni's letter of 21 October.

The conduct of the parties after the letter of 21 October and its return is instructive for my present purposes. It shows two experienced businessmen and property developers working out the terms of their bargain. Each knew that formal contracts were to be prepared once a number of details had been settled. Each was prepared to modify the terms of the draft contracts without so much as an apology or excuse for departing from a previous agreement. In short, their conduct is that of parties negotiating an as yet unconcluded agreement rather than of parties bound by an existing contract merely working out the details.

In paragraph 28 of his affidavit sworn on 30 March 2001, Mr Amatruda speaks of a variation in respect of the two contracts of sale substituting him as purchaser in place of Omni. This is said to have been constituted by the letter of 9 November sent by Rigby Cooke and its enclosures to which I have referred. As I have mentioned, the enclosures certainly speak of the purchaser as Mr Amatruda and/or nominee and not Omni Property Group Company and/or nominee as appears in the letter of 21 October. But there is nothing before me to suggest whether this change was achieved by some agreement or whether it was by nomination by Omni or how otherwise it was done.

On or about 2 December 2000 without notice to Meerkin & Apel or their client, the vendors signed a contract note to sell the property to Mr Diskin and/or nominee. Although Mr Chandler in his affidavit of 30 March, paragraph 19, speaks of the agent having told Mr Garita that another buyer was expressing interest in the property, Mr Garita denies this. Mr Amatruda said he knew nothing of any other buyer until he was told at about 6.30 pm on 19 December that the property had already been sold to another. I will proceed on that basis.

On 19 December 2000 Meerkin & Apel wrote to Rigby Cooke stating that the purchaser no longer required the mortgagee's consent and deleting condition 19 from the contract. This condition required the vendor prior to settlement date to obtain the consent of any mortgagee to the option agreement. The letter continued that the vendors had approved the purchaser's plans for the development as required in special condition 20 and stated that, since all terms and conditions were agreed, they enclosed the formal contracts duly executed by the purchasers. It was submitted on behalf of Mr Amatruda that this letter cured the matters outstanding from paragraph 4 of the 21 October letter. Although this paragraph speaks of ten modifications to the draft contracts as special conditions, I do not see them as conditions precedent or conditions subsequent in a concluded agreement. The variety of matters listed under this paragraph are simply matters, some of which remain to be addressed, to be included in the formal contracts. They are not in any sense capable of being waived if they had not on 19 December been addressed and resolved. One such matter is the 180 day option exercise period which was the subject of correspondence from Meerkin & Apel as late as 6 December 2000 and which does not appear to have been resolved by 19 December.

I remind myself at this point that the contracts pleaded in the statement of claim are wholly in writing. They are contained in the letter of 21 October, the draft contracts and the Section 32 Statements contained in those documents. I am satisfied from these documents, having considered them in the context in which they were created, that there was no concluded agreement made by Omni and the vendors on 23 October when the letter of 21 October was signed by Mr Chandler and returned to Omni. There is no serious issue to be tried on this point.

Then, it is said, the vendors should nonetheless be treated as having bound themselves to an agreement by the doctrine of estoppel. There is, it must be accepted, conduct to detriment by the purchaser or the substituted purchaser. It or he has spent money in the development and in anticipation of becoming owner of the property. Mr Garita in paragraph 8 of his affidavit of 30 March 2001 says that this expense was incurred on the basis that he and Mr Amatruda had a belief that there was a contract to purchase and, as a result of Mr Chandler's assurances that agreement had been reached. Mr Amatruda in an affidavit sworn on 3 April says the same. I proceed on the basis therefore that there is a serious issue to be tried as to these assertions and that the plaintiff has incurred expense and performed acts on the understanding that a contract had been concluded at the time that the assurances were given on 21 October.

On that date the letter from Omni was sent to Mr Chandler and Niparay Investments. Notwithstanding my doubts on this point, I shall proceed on the basis that the agreement to which he referred in his faxes to his bank and to his solicitor must therefore be the agreement contained in the letter of 21 October. While it may be possible to speak in lay terms of this document as representing an agreement, I have concluded that in the eye of the law it is not a binding contract.

It is one thing to use the doctrine of estoppel to hold a party to a fact asserted or even to a legal position adopted and, on the faith of which, the other party has acted to detriment. It is entirely another to use it to create from an incomplete agreement a binding and finally concluded contract. Let it be assumed that the letter of 21 October is, by estoppel, taken to be an agreement between the parties. What is the period for exercise of the option under the agreement? Is it 180 days after the contracts become unconditional as suggested in paragraph 4(d) of the 21 October letter; or 180 days after the exchange of contracts as suggested in Meerkin & Apel's letter of 27 October; or 180 days after the execution of the option agreement as suggested in Meerkin & Apel's letter of 1 November and in the draft option agreement enclosed in that letter; or 180 days after 15 October as suggested in Rigby Cooke's letter of 9 November 2000. I mention this because it is known that this question was never settled between the solicitors. If the existence of a contract is to be determined as at the date of the representation which raised the estoppel, there were in the letter of 21 October a number of matters requiring further negotiation and agreement. In my opinion the doctrine of estoppel cannot cure the inadequacies of the document by deeming to be an agreement that which is clearly not an agreement.

It is, to my mind, clear beyond argument that the agreement or agreements relied upon to support the interests asserted in the caveats do not exist. The caveats must therefore be removed.

[5] Smith v Callegari (1988) V ConvR 63,855 at 63,859, per JD Phillips J.

[6] Australian Natives' Association Friendly Society v Peball Pty Ltd (1993) V ConvR 65,610 at 65,611, per Eames J.

[7] See Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155 at [28]- [29] per Mandie J and the cases referred to therein.

[8] See letter 9 November 2000 Exhibit JRC8.

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