Bull v Cooldawinda Pty Ltd

Supreme Court of NSW|2024-08-01|Before: Rees J

These proceedings

The executor commenced these proceedings by summons on 21 June 2024. The executor sought an order approving the sale of the property under r 54.3(4)(a) of the Uniform Civil Procedure Rules 2005 (NSW). Meek J made orders for short service. His Honour noted that, whilst the executor had not joined Cooldawinda as a defendant, an issue may arise on the return of the summons as to whether the company would seek to intervene in the proceedings.
On 24 June 2024, Cooldawinda filed a notice of appearance and also lodged a caveat on the property. On 25 June 2024, Cooldawinda was joined as a defendant to the proceedings. On Mr Rio giving the usual undertaking as to damages as a director of the company, Meek J made an order restraining the executor from taking steps to exchange contracts or otherwise dispose of the farm.
The matter was stood over to the Expedition List on 28 June 2024, when I expedited the matter and listed it for final hearing commencing 29 July 2024. The urgency was attributable to the executor's concern that the Estate may become liable to pay capital gains tax on the sale of the farm, where completion of any sale was unlikely to occur before 2 August 2024, being the second anniversary of the father's death. I directed Cooldawinda to provide the executor with a written undertaking to the Court by Mr Rio, acknowledging that he was bound to pay any compensation order made by the Court in these proceedings. On that basis, the interim injunction continued. Mr Rio provided a written undertaking to the Court on 5 July 2024. The hearing proceeded as listed.

Part performance

If I am wrong about this, then it is necessary to deal briefly with the defendant's alternative argument that it was entitled to buy the farm under an oral contract given acts of part performance. Contracts for the sale of land must be in writing: ss 23C(1), 54A, Conveyancing Act 1919 (NSW). The particulars of part-performance comprised incorporating the company, establishing the unit trust, paying the deposit, signing the contract for sale and delivering it to the executor's solicitors.
The defendant submitted that it did not fall foul of s 54A(1), where the agreement was in writing signed, albeit not exchanged. Further, the defendant had partly performed the contract by establishing itself and the unit trust as a special purpose vehicle to purchase the farm. Mr Robb told the executor that he intended to purchase the farm by this structure and was in the process of setting it up. (I have not accepted this). On 3 June 2024, when it is said that the executor agreed to sell to the farm for $4.5 million (I have not accepted this), the executor said the agent needed to know the details of the corporate entity that was purchasing the property. The defendant paid a deposit. Mr Rio executed the contract and delivered it to the executor's solicitor. Performance of these acts was said to be unintelligible in the absence of a binding promise made by the executor to Mr Robb to sell the farm to Cooldawinda.
In Regent v Millett (1976) 133 CLR 679, Gibbs J observed that the doctrine of part performance rests on the following principle, at 682: "… when one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money."
Acts of part performance must be unequivocally referable to the agreement, "performance which alone and without the aid of words of promise is unintelligible or at least extraordinary unless as an incident of ownership, assured, if not existing": Pipikos v Trayans (2018) 265 CLR 522 at [53] (Keifel CJ, Bell, Gageler and Keane JJ).
I struggle with the suggestion that bringing oneself into existence the day before entry into an alleged oral contract is itself an act of part-performance of that contract. Nor can the establishment of special purpose vehicles to effect a transaction be regarded as unequivocally referable to the contract but, rather, to Mr Rio's choice of structure by which to acquire the farm. Payment of a deposit alone is not to be treated as an act of part performance, but is a factor that can be added to other factors to a court to find part performance: Ciavarella v Polimeni [2008] NSWSC 234 at [121]-[122] (Young CJ in Eq); Phung v Phung [2019] NSWSC 117 at [71] (Darke J). None of the particularised acts of part performance add up to anything more than an unsuccessful attempt by an interested purchaser to acquire a property but ultimately failing to do so by reason of the inability to proffer an acceptable guarantor when requested to do so, and before the executor decided to proceed with a higher offer from another purchaser. There are no factors which compel equity to assist the defendant in this case.

Proprietary estoppel

Further and in the alternative, the defendant sought a declaration that the executor holds the farm on constructive trust for Cooldawinda, together with an order under s 71 of the Trustee Act 1925 (NSW) vesting the fee simple estate in Cooldawinda absolutely. By reason of the executor's representations and conduct, Cooldawinda was said to have assumed and had the legitimate expectation that the executor would sell it the farm. The executor was said to have induced Cooldawinda to adopt that assumption. The company acted or abstained from acting, in reliance of that assumption in taking the steps that it did, where it was said that the executor knew and intended that the company would so act. The company's actions, or failure to act, would occasion detriment if its assumption was not fulfilled where the executor now alleges that he was not bound to sell the farm to the company. This was said to be unconscionable such that the executor is estopped from doing so. In the circumstances, the executor was said to hold his interest in the farm on constructive trust for the defendant absolutely.
The executor submitted that to the extent that any representation alleged may be found by the Court, such representation was made to Mr Robb and not to the defendant. The executor had no knowledge who the defendant was and believed it to be an entity of which Mr Robb was director, until provision of the first signed contract to his solicitor. The defendant had not clearly articulated its alleged reliance on the alleged representations. Nor was there any relevant detriment, where the deposit was refundable. The costs incurred in incorporating the company was not incurred by an inducement of the executor; there was no requirement that the farm be purchased by a company as trustee for a unit trust. This structure was Mr Rio's choice. Further, the defendant knew or ought to have known from the solicitors' correspondence that there was no binding contract until exchange.
The defendant relied on Mr Robb's failed attempt to acquire the farm via the Deed of Family Arrangement as extended by the executor, including selling his own farm and some cattle; and Mr Robb's further efforts to acquire the farm on the executor's representation that he could have the farm for $4.15 million. In reliance on the executor's representation, Mr Robb initiated the arrangement with Mr Rio to establish Cooldawinda and the Cooldawinda Unit Trust. Also in reliance on the executor's representation, Mr Rio engaged Mr Yeo and Mr Elliot in respect of the proposed purchase and accompanying structure. On the executor's representation that they had a deal at $4.5 million, Mr Rio outlaid $22,810 in accountancy, staffing and legal costs in incorporating Cooldawinda and the Cooldawinda Unit Trust and paid a $450,000 deposit. He signed the contract and guarantee. The executor "without a justifiable basis" refused to accept the contract with Mr Robb as guarantor and obtained a higher offer. Mr Robb, Mr Rio and Cooldawinda changed their position on the promise made to them that the farm would be theirs. Substantial sums were expended in the establishment of Cooldawinda and the unit trust. A large deposit was paid to the executor; it has not been refunded. That sum could have been deployed elsewhere. Departure by the executor from the expectation encouraged in Cooldawinda would be unconscionable such as to warrant the intervention of equity. The defendant submitted that the fact that the representations were made to Mr Robb from December 2023 on posed no difficulty to the defendant relying on the representations: Cramaso LLP v Ogilvie-Grant [2014] 2 All ER 270 at [25]-[26] (per Lord Reed SCJ).
Estoppel by encouragement "comes into existence when an owner of property has encouraged another to alter [their] position in the expectation of obtaining a proprietary interest and [they], in reliance on the expectation created and encouraged by the property owner, ha[ve] changed [their] position to their detriment. If these matters are established equity may compel the owner to give effect to that expectation in whole or in part": Delaforce v Simpson-Cook [2010] NSWCA 84 at [21] (per Handley AJA).
There are three main elements, being an assurance, reliance and detriment. As Walker LJ observed in Gillett v Holt [2001] Ch 210, these elements cannot be treated as "watertight compartments" and often overlap, "the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round": at 225. As Walker LJ also observed in Jennings v Rice [2002] EWCA Civ 159, "The cases show a wide range of variation in … the quality of the assurances which give rise to the claimant's expectations and the extent of the claimant's detrimental reliance on the assurances. The doctrine applies only if these elements, in combination, make it unconscionable for the person giving the assurances … to go back on them": at [44].
Looking at each element in turn, the assurance which engenders the expectation of the party asserting the estoppel must possess some level of clarity: Wantagong Farms Pty Ltd as Trustee for the Bulle Family Trust v Bulle [2015] NSWSC 1603 at [63]. Ball J there relied on the formulation of Hoffman LJ in Walton v Walton (Court of Appeal of England and Wales, 14 April 1994, unreported), "The promise must be unambiguous and must appear to have been intended to be taken seriously. Taken in its context, it must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made": Wantagong at [63].
As to reliance, the question is twofold: did the plaintiff in fact rely on the representations, and would the plaintiff have acted differently if the promises had not been made: Wantagong at [83]. Put another way, the extent to which it is unconscionable for the representor to seek to resile from the position expressed in their assurances to the plaintiff may be gauged by reflecting on the plaintiff's likely response if the representator had advised at the outset that they would depart from the representation: Sidhu v Van Dyke (2014) 251 CLR 505 at [77] (per French CJ, Kiefel, Bell and Keane JJ). The promises relied upon do not have to be the sole inducement for the reliance; it is sufficient if they are an inducement: Gillett v Holt at 226; Sidhu at 526.
As to detriment, the question is whether the plaintiff would have been better off if they had not relied on the representation: Wantagong at [90]. The relevant detriment is not the loss flowing from non-fulfilment of the promise but whether departure from the promise would be unconscionable in all the circumstances. The required detriment must be substantial, which depends on whether it would be unjust or inequitable to allow the assurance to be disregarded: Wantagong at [68]-[69]. For example, in Wantagong the plaintiff stood to benefit in ways not anticipated when his parents made representations concerning a proprietary interest in the family farm. Ball J held that it was not unconscionable to permit the parents to depart from the representations, as otherwise the plaintiff "would be benefitted at the expense of his siblings in a way that was neither anticipated nor intended when his parents sought to achieve a just distribution of assets that they had accumulated": at [93].
As to the assurances, the defendant relied on a number of matters which were personal to Mr Robb and had nothing to do with the defendant, including Mr Robb's failed efforts to buy the farm under the Deed of Family Arrangement. Mr Robb accepted that he understood that the deed was essentially at an end. I do not consider that any representation made by the executor in that deed had any continuing effect when it came to sell the farm under the expressions of interest process.
The second assurance said to have been made by the executor has not been established: see [15]-[17]. Nor am I satisfied that the third assurance, said to have been made by the executor on 31 May 2024, was made. According to Mr Robb, the executor said the best offer on the property was $4.2 million but he was expecting more offers over the weekend which would likely take the price to $4.4 million. Mr Bull denied this; the only information he had at the time was that offers would be made, but not the amount of the offers. I prefer the executor's evidence. Nor have I accepted that Mr Robb told the executor at this time of the unit trust structure: see [37]. Nor have I accepted the fourth assurance, said to have been given by the executor on 3 June 2024: see [27]-[29]. Nor do I consider that any assurance can be considered to have been made by the executor from the fact that the agent attended on Mr Robb at the farm to procure his signature on the contract.
I accept that, if a pre-contractual representation is made to a person, it may continue to be actionable by the corporate entity which that person brings into existence to enter into the contract in reliance on that representation: Cramaso LLP v Ogilvie-Grant [2014] 2 All ER 270 at [25]-[26]. But Cramaso is a long way from this case, where any assurances given by the executor to Mr Robb were personal to him, as the father's son, and any corporate vehicle that he may use to acquire the farm. Whilst the executor (and siblings) were amenable to selling the farm to Mr Robb if he could raise the funds to match the highest offer made, where Mr Robb was a beneficiary of the Estate and a member of the Robb family, there is no suggestion that any preferential treatment would have been conferred on a company in which Mr Robb had no interest or role. I repeat what I have said at [36]. I am not satisfied that the assurances were made at all, nor satisfied that any assurances were made to the defendant.
If I am wrong about this, then did the defendant in fact rely on the executor's assurances and would it have acted differently if those assurances were not made? Whether Mr Robb relied on assurances said to be contained in the Deed of Family Arrangement in selling his assets and attempting to raise finance is, with respect, irrelevant. So too is Mr Robb's introduction to Mr Rio, Mr Rio's engagement of Mr Yeo and Mr Elliot and their discussion about the appropriate structure to use to buy the farm. These actions were entirely consistent with an effort to buy the farm but none are obviously referable to any assurance that, if Mr Robb matched the best offer, then the executor would sell the farm to him. The same can be said of Mr Rio's payment of the deposit of $450,000. Accepting that Mr Robb was keen to buy the farm if at all possible, and that Mr Rio wanted to invest in the farm, I am not satisfied that they would have done anything differently if the executor had made no assurances.
As to detriment, Mr Rio said he incurred costs in respect of the inspection of the farm, conveyancing, setting up the company and unit trust and investigating the potential development of the farm. Some $15,000 had been paid to Mr Elliott, $5,390 to his accountant and $2,420 to Mr Yeo. The defendant disclaimed the notion that its detriment was the loss of bargain, in being able to acquire the farm for less than the third party was prepared to pay.
No details were given as to precisely when these costs were incurred, nor why. It is not possible to say whether, in incurring these expenses, Mr Rio did so in reliance of any particular assurance said to have been made by the executor. As far as can be told, these costs were entrepreneurial expenses, outlaid in the hope of securing the farm at an attractive price. Those efforts have come to naught. But I am not satisfied that any detriment is loss flowing from non-fulfillment of any assurances given by the executor, nor substantial, nor would it be unconscionable in the circumstances to let any loss fall where it lies.

Damages

Alternatively, damages are sought for breach of contract. There was no contract. This fails.

Orders

For these reasons I make the following orders: 1. Declare that the plaintiff is not bound to sell the land situated at and known as 136 Kennedy's Lane, Ewingsdale in the State of New South Wales being the land contained within Folio Identifier 2/746096 ("the farm") to the defendant or any entity or party related to the defendant. 2. Declare that the plaintiff is at liberty to exchange a Contract for the sale and purchase of the farm with an arm's length purchaser who makes the highest unqualified offer. 3. Pursuant to s 74J of the Real Property Act 1900 (NSW), order the Registrar-General to remove caveat No. 2605683835 (being dealing AU179442) lodged on the title of the farm by the defendant. 4. Dismiss the statement of cross-claim filed on 5 July 2024. 5. Order the defendant to pay the plaintiff's costs of the proceedings. 6. Grant liberty to the plaintiff to apply on two days' notice in the event that he seeks a special costs order, a gross lump sum or compensation from the defendant or Robert Rio in accordance with the usual undertaking as to damages given to the Court on 25 June 2024 and / or 5 July 2024. 7. Parties to notify any errors or omissions within seven days.

Amendments 22 August 2024 - [8], [10], [11], [18]: amended to "the wife"; [96], [100], [101], [102]: minor typographical amendments; [15]: "Joseph" deleted; [24]: "front page" amended to "draft contract"; [44] last line: "Mr Rob" amended to "Mr Bull"; [109]: sentence structure amended [115]: wording in brackets inserted DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 August 2024

Conveyancing Act 1919(NSW)ss 23C(1), 54A

gong Farms Pty Ltd as Trustee for the Bulle Family Trust v Bulle [2015] NSWSC 1603 Category: Principal judgment Parties: Steven Bull as executor for the Estate of Barry Robb (Plaintiff) Cooldawinda Pty Ltd as Trustee for the Cooldawinda Unit Trust (Cooldawinda) (Defendant) Representation: Counsel: L Sewell (Plaintiff) T Messer / T Maybury (Defendant)

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (25)

Cited By (1)