Brereton v Brereton

Judgment 1HIS HONOUR : The plaintiff and the defendant are brother and sister. They entered into a partnership for the acquisition of rural property known as Glen Garry at Brookfield, New South Wales. That partnership was dissolved on 3 October 2008. Although Glen Garry was a partnership asset, the plaintiff was the sole registered proprietor. 2On 12 May 2010, Bryson AJ recorded in reasons for judgment dealing with part of the partnership dispute that at that date the parties had done nothing, other than exchanging correspondence, to bring about a sale of Glen Garry. His Honour observed that conversion of the property into a recognisable amount of money would probably contribute considerably to clarity of thought on how partnership assets should be distributed. His Honour did not make orders for sale, but recommended that the parties consider for themselves whether there would be ways of bringing about a sale which would be less expensive than by appointment of a receiver or trustees for sale. 3Following a mediation, the parties reached an agreement recorded in a document signed by the parties and dated 27 September 2010. They agreed that the Glen Garry property would be sold at auction to be held by 8 November 2010, and that there be no reserve price. They also agreed that any party could bid for the property at the auction and they agreed on the appointment of Dillon & Sons Pty Ltd as the agent to conduct the sale. It was also agreed that the net proceeds of sale of the property should be paid into court. It was not a term of the agreement that a receiver be appointed or trustee for sale be appointed under s 66G of the Conveyancing Act 1919. Hence, the parties contemplated that the plaintiff would be the vendor, he being the registered proprietor, but that he was also at liberty to bid for the property at the auction. The defendant was also entitled to bid. 4The property was submitted for sale and an auction held on 4 November 2010. The defendant contends that the auction was conducted contrary to the requirements of s 66 of the Property, Stock and Business Agents Act 2002 and contrary to the requirements of reg 18 of the Property Stock and Business Agents Regulations. For the purposes of the present application that is not disputed. 5The defendant's evidence is that the auctioneer did not state that the property was held in co-ownership and did not state that bids might be made by a co-owner, or might be made to purchase the interest of a co-owner. 6Section 66 provides that at a sale by auction of rural land, the seller must not make a bid. That prohibition does not apply to a bid by a seller where the seller is a co-owner of the land and the bid was made to enable the seller to purchase the interest of another co-owner if conditions specified in s 66(6) are satisfied. These include a requirement that the conditions under which the auction is conducted must permit the making of bids by or on behalf of the seller to purchase the interest of another co-owner, and the auctioneer must have announced at the auction that such bids may be made. 7The defendant was present at the auction. It is her evidence that no such announcements were made and that no such conditions of the auction were specified. Nonetheless, a person on her behalf made an opening bid of $250,000. It is not clear that the auctioneer accepted the bid. He said: " That's a bit light on. " There was then bidding from the plaintiff and a third party. The plaintiff made an initial bid of $450,000. The bidding between the third party and the plaintiff continued until the property was ultimately knocked down to the plaintiff for $520,000. 8The defendant's case is that the contract for sale which had been provided to persons interested in purchasing the property provided for 35 days for completion, and that there was no advice at the auction that the time for completion would be any other period. The plaintiff signed a document, described as a contract, generally in the standard form, as both vendor and purchaser, for the sum of $520,000. 9The contract produced by him provides for a completion date of 120 days. The defendant says that she did not approve of that period as the time for completion and that if it were possible for the plaintiff to contract with himself when he contracted on behalf of the partnership, he would have needed her authority to substitute that period for completion from the period of 35 days. 10Subsequently, on 14 February 2011, the plaintiff entered into a contract for the sale of the same land to third parties, namely a Mr Stengle and a Ms Rowe. That contract provides for a 35-day period for completion. The plaintiff says that settlement of that contract is expected to occur on 4 March 2011. 11On 25 February 2011, the defendant filed a cross-summons. She seeks a declaration that: "[T] he purported sale on 4 November 2010 for the property known as 'Glengarry' ... Brookfield in the State of New South Wales and being the whole of the land comprised in folio identifier 2/239894 is void. " 12She seeks an order restraining the plaintiff from dealing with that property in any fashion, including by " the completion of the purported sale " until further order. On 25 February 2011, Gzell J made an interlocutory injunction restraining the plaintiff from dealing with the property in the terms sought in the cross-summons until 5.00pm today. Today, the defendant seeks an extension of that injunction until further order. 13The effect of the order sought, if made, would be to prevent the plaintiff from completing the purported sale of the property to himself and paying the proceeds into court, and would also prevent him from selling the land to the purchasers under the contract of 14 February 2011. 14Notwithstanding that those are the orders sought, ultimately at the hearing before me today, counsel for the defendant took the position that his client did not object to what is being called the first contract being completed by the payment of $520,000 into court, provided that that was done tomorrow. But his client did object to the plaintiff's being able to proceed with the second contract on the basis, it seems, that until the first sale was completed, the land should still be regarded as still a partnership asset and not able to be dealt with by the plaintiff. That was so, notwithstanding that the means by which the plaintiff would propose to complete the first sale, so that moneys could be paid into court, would be by completing the second. 15The defendant says that the first purported sale is a nullity. So far as I could follow counsel's submissions, that contention is put on three bases. First, that the plaintiff could not contract to sell to himself; secondly, that the contract was void for illegality by reason of the breaches of the requirements of s 66 of the Property Stock and Business Agents Act and 18 of the Property Stock and Business Agents Regulations and; thirdly, because the plaintiff had no authority to include as a term of any contract a time of 120 days for completion. 16No authority was cited to substantiate the contention that it is not possible, as a matter of law, for a trustee to buy trust property from himself. As the Glen Garry property is the partnership asset, the plaintiff must hold the legal title on trust for himself and the defendant as partners. 17It is at least seriously arguable that a person can act as vendor in one capacity and sell to himself or herself as purchaser in another capacity. A person can assure property to himself or herself ( Conveyancing Act , s 24.) 18In the time available I have not had the opportunity to reconsider for myself the cases in this area. It may be observed, however, that this first contention lies very ill in the mouth of the defendant. She agreed to the regime that the property would be put up for sale by the plaintiff as vendor and that he, as well as she, would be entitled to bid for the property. 19The second contention as to voidness for illegality raises the issue as to whether or not the contraventions of s 66 of the Property Stock and Business Agents Act and regulations (which are not disputed for the purposes of the present application) mean that a contract entered into following such contraventions is void. No submission was made by reference to authority as to why that should be so, or should necessarily be so. 20The purpose of the provision would appear to be to protect persons in the position of the underbidder. There is evidence that the underbidder subsequently became appraised of the fact he was bidding against the owner of the property. It is not he who complains about the conduct of the auction. 21In Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, Deane and Gummow JJ observed (at 551-552) that difficult questions can arise in relation to alleged illegality and the true operation of the statute. Their Honours observed that the authorities suggested that there are distinctions between an express statutory prohibition against the making of a contract that fastens upon some act which is essential to its formation, and a statutory prohibition not of the formation of a contract but on the doing of a particular act, so that an agreement to do such an act is impliedly prohibited. That would not be this case. Further, contracts may be affected by illegality " that are not directly contrary to the provisions of the statute ... but which are 'associated with or in furtherance of illegal purposes'. " 22There is also a question as to whether the penalty provided in the statute as the penalty for breach is exhaustive. 23These are difficult questions. They were not explored at all in the course of submissions. One can well understand that a purchaser who is induced to pay more than he or she would otherwise have done for a property where the auction was conducted in contravention of s 66 should be entitled to have the contract avoided. It is by no means clear that a contract would be void as a result of a contravention of the section. It is not easy to see why a purchaser in that position who wished to enforce the contract should be precluded from doing so. 24But in any event, it is not at all clear to me why the defendant is entitled to complain about the conduct of the auction. In so far as there was no announcement that the property was being sold by a co-owner who was entitled to bid as co-owner, the defendant sought to take advantage of the situation by making her own first bid at the auction. Indeed in subsequent correspondence, her solicitors contended that the contract, or the purported contract, from the plaintiff to himself was void and that as the underbidder was no longer interested in pursuing the purchase, the property should be sold to her for her original bid of $250,000. Understandably, that contention was not persisted in by her counsel today. 25The effect of the bidding that took place was to increase the price that ultimately the plaintiff agreed to pay; something which is for the defendant's benefit. That is to say, had s 66 been wholly complied with by the plaintiff not bidding, it would appear that the property would have been purchased by the underbidder, given that there was no reserve, at a price of not more than $450,000. The motivation for the attack by the defendant on the conduct of the auction is unclear. 26The third ground for attacking the illegality of the purported contract raises a question of fact, which is inappropriate to decide on the present application. I will assume that the plaintiff sought to substitute a period of 120 days for a period of 35 days as the time for completion, and had no authority from the defendant to do so. 27It does not seem to me that the consequence of that is that there was never a contract made. It would be certainly arguable that the plaintiff was required after 35 days to pay the purchase price of $520,000 (if the assumption I have made is established at the final hearing), but that does not warrant restraining the completion of the sale. Nor does it warrant a finding there that never was a contract. 28The matter would be appropriately dealt with on the taking of the partnership accounts. If the assumption I have made is established, the plaintiff presumably would be charged with interest for the additional period of 85 days. 29Whilst I accept that there are arguable questions as to the validity of the contract to be addressed at a final hearing, it does not appear to me that the defendant's case for the final relief sought in the cross-summons is particularly strong. But in any event, the balance of convenience does not warrant the orders sought. The parties wanted the property to be sold. They contemplated that either party could bid at an auction, and it is in the interests of both parties that the proceeds of sale be paid into court and the partnership accounts then be taken. 30Counsel for the defendant said, as I understood him, that there was concern that the plaintiff would not pay the proceeds of sale into court, because he would contend that the proceeds were received in respect of the second sale and he was under no obligation to pay into court the proceeds from the second sale. I do not understand that contention, if indeed it has been made by the plaintiff. It is sufficient to say that the defendant has not sought an order requiring the plaintiff to bring moneys into court. The plaintiff is under a contractual obligation to bring the proceeds of sale under the first contract into court. 31If the orders as sought were made, the plaintiff would not be able to complete his sale to the purchasers from him under the contract of 14 February 2011. He would be exposed to a claim for damages. Those purchasers would lose the benefit of the contract. Matters would remain in limbo with, presumably, the property still being regarded as a partnership asset and still awaiting sale. After the tortuous proceedings in relation to the winding-up of this partnership's affairs, that is not something that should be tolerated. 32The defendant cannot say that the sale, or the purported sale, from the plaintiff to himself on 4 November 2010 was at an undervalue. The parties expressly agreed that the property would be sold without reserve and the parties were able to bid as they did. Although there were complaints made in the defendant's affidavit as to the marketing of the property before auction, those complaints were not the basis on which the injunction against completion is sought, and they would not warrant any injunction. 33Accordingly, the balance of convenience does not favour the grant of an injunction. 34Were the position otherwise I would not be concerned as to the adequacy of the defendant's undertaking as to damages, given her interest in the partnership. But for the reasons I have given, I refuse to extend further the order made by Gzell J on 25 February 2011. [Counsel addressed on costs.] 35For the reasons I have given I do not consider this application ought to have been brought. I order that the defendant pay the plaintiff's costs of the application for interlocutory relief in respect of the cross-summons. I stand the proceedings over to the Registrar's list at 9.00am on Monday, 4 April 2011. The exhibits can be retained for the time being.