Consolidated Credit Network (NSW) Pty Ltd v Zuck 1 Pty Ltd

1507/04 - CONSOLIDATED CREDIT NETWORK (NSW) PTY LTD v ZUCK 1 PTY LTD JUDGMENT 1 HIS HONOUR: These are proceedings to extend a caveat lodged by the plaintiff over the title of the defendant to some land at Campsie. The proceedings were heard between 2pm and 5pm yesterday and at the end of the hearing I indicated my view and said that I would give reasons later. I think it is more satisfactory to the parties that I do it now, even though I have not had an opportunity to consolidate my thoughts. 2 The plaintiff operates a rather unique business, so far as I am aware. It trades as trustee of a trading trust. It acquires residential properties and residential development land then markets the completed units through a network of estate agents and alliances that it deals with. It earns income for the trust by making a commission. If the present transaction is anything to go by, that commission is the difference between the price which it pays the registered proprietor of the land in a contract for purchase (I use that term loosely) and the total of the moneys received from the on-sale of the units in due course. 3 It would seem that the defendant, a company which appears to be owned and operated by Mr and Mrs Vukmirica, was developing land in Campsie and there is some flavour that they were running into some problems. 4 One Annie Teo, a real estate agent, came into the picture and after several conversations there was an arrangement made between Mr Winkler senior, Mr Winkler junior, the Vukmiricas and Miss Teo that the defendant would pay the plaintiff almost seven million dollars for the land. It seems to have been contemplated that the defendant would continue with the development. In due course this would result in, I think, 24 units and one cottage, which would be on-sold. 5 It would not seem that either party was represented by any lawyer when documents, namely a letter of intent and a letter of offer, were signed by the various individuals about 24 July 2003. I use those words because it may be at the final hearing, if this case goes that far, there will be some issue of fact as to whether the various persons who appended their signature to the documents did so in their own personal capacity or as the authorised signatory for one of the corporations. 6 The letter of offer is not a familiar document to me, but it would appear that it is a standard document of the plaintiff. The document commences by saying that "The parties have agreed to the following terms and conditions"; the parties being the plaintiff and the defendant. 7 The first clause says that "The purchaser", namely the plaintiff: "hereby agrees to purchase from the vendor, namely the defendant, the property at Campsie." 8 The second clause says what the price is. 9 The letter then notes that the defendant is not yet the registered proprietor of the land, but should be by 31 October 2003. There are then terms dealing with when a display unit will be constructed and we then get a series of rather strange clauses, commencing with clause 11. Clauses 11 and 12 and 13 read as follows: "11. The purchaser hereby warrants that they will on sell the proposed eight (8) townhouses, sixteen (16) units and the cottage and they further warrant that all Contracts for Sale will be unconditionally exchanged by the 29th February 2004 or by the date of notification that the Strata Plan has been registered which ever is the latter. In the event there are delays in completion to the refurbishment or registration of the Strata Plan then the purchaser's compliance date will be adjusted accordingly. 12. The vendor and purchaser hereby agree that a Put and Call Option is to be entered into and a $25,000 deposit bond is to be paid, to be paid as a good faith deposit by CCN upon signing the Put and Call Option. Said $25,000 bond will be returned to CCN after 4 units are unconditionally exchanged with a 10% deposit. 13. Settlement of the Contract for Sale is to be within six (6) weeks from the date of exchange of the Contract for Sale or within twenty one (21) days from the date of notification of a Strata Plan being registered, whichever is the latter." 10 Clause 16 then provides: "The letter of intent from CCN dated 24 July 2003 is attached hereto and forms part of this Letter of Offer." 11 The Letter of Intent is addressed to Annie Teo and starts off "Dear Annie". The letter contains the following phrases: "I confirm Consolidated Credit Network (NSW) Pty Ltd (CCN) is prepared to purchase the above 8 townhouses, 16 units and the cottage under the following terms and conditions."

There are then a series of about a dozen bullet points and the letter proceeds: "If your clients wish to sell their project in one block to CCN, kindly have them sign a copy of this letter to confirm their acceptance of the above terms and fax me a copy of the sign acceptance ... ." 12 Michael Vukmirica has signed it under the words "Agreed to above", as has one Tony Nguyen. Why is not too clear, as it would not appear he was a proprietor of the land or a shareholder in the defendant company. 13 There was then correspondence between the solicitors. It is an inference that the judge at the trial may draw that the solicitor for the plaintiff attempted to insert conditions into the Put and Call Option, which had not previously been discussed. Whether that be so or not, the solicitors could not agree on the Put and Call Option and it was never signed. 14 In January 2004 the plaintiff lodged caveat AA339798 against the property. The caveat said that: "The caveator claims an equitable interest in the properties (described) being a claim for specific performance of an agreement to sell the property to the caveator between the registered proprietor Zuck 1 Pty Ltd and the caveator entered into on or about 24th July 2003."

It then continued: "On 24 July 2003 the registered proprietor to the various properties covered by this caveat entered into an agreement for the sale of the various properties to the caveator. The caveator is seeking specific performance of that agreement." 15 The caveat was lodged, I think, about 16 January 2004 or shortly thereafter. 16 On 17 February 2004 the plaintiff filed a statement of claim. The statement of claim, with great respect to those who drafted it, is an unusual document. The principal prayers for final relief are that there be a declaration that the agreement on the Letter of Offer and the Letter of Intent constitute a valid enforceable contract to sell the land, and an order for specific performance. However, earlier on, the pleader says that from 15 August 2003 the defendant has refused to execute a Put and Call Option pursuant to the terms of the agreement to purchase the properties. However, no relief, such as was granted in Niesmann v Collingridge (1921) 29 CLR 177 is sought to compel the entry into a Put and Call Option. 17 The transaction is strange in that it would appear on one version of the documentation that the plaintiff was never ever to purchase the property, but was to be some sort of conduit so that the defendant would be compelled to sign a transfer by direction to the ultimate purchaser after the on-sale, and that the only interest that would flow to the plaintiff would be the commission. Indeed, when one looks at the correspondence between the solicitors leading up to the stymie on the Put and Call Option that appears very clearly. 18 If that were the arrangement between the parties, then it would seem to me more probable than not that that arrangement is not one which gives the plaintiff an interest in land to support a caveat. It is rather in the same position of a person who has an interest, for instance, in the proceeds of land when sold, rather than a person who has an interest in the land itself; see eg Shepherd v Houston [1927] SASR 144. 19 However, there is other evidence to suggest that the plaintiff is a real purchaser and may have a specifically enforceable contract. The material to date does not convince me on the balance of probabilities that that is so, but it does seem to me that there is sufficient to show an arguable case that that is so. 20 Section 74K of the Real Property Act 1900 confers power on the court to extend a caveat if the caveat has, or may have, substance. There was quoted to me my decision in Jensen v Giugni (1994) 6 BPR 13,667, to justify the proposition that there is a very slight onus on the caveator to show an arguable case. The proposition is, I think, correct, but Jensen v Giugni is not an authority I would cite for the proposition. 21 One has to consider all the circumstances of a case when making a decision as to whether a caveat may have substance under s 74K. There will be many situations where the application is made at a time when the majority of the facts have not yet been resolved. In such a situation the court may, if it is only considering an extension for a little while, accept very little material before it holds the status quo. However, the present case is not in that situation. 22 There were read to me about ten affidavits from the various parties and although a formal defence has not yet been filed, the parameters of the issues between the parties are fairly well mapped out and basic facts have also come to light. Under those circumstances the court has more material than usual on which it can judge whether the caveator's claim may have substance. 23 As I have said, I think that, on the test, the caveat may have substance because it is arguable that this is a contract for the sale of land and that normally would lead to an order for specific performance. 24 I have gleaned from the submissions of Mr Dodson for the defendant that there will be a whole host of matters put by way of defence. First of all, that there is no interest in land created by the documents. Secondly, that on their proper construction there is no formal contract because the document was only a provisional document between the parties and falls the wrong side of the line for the plaintiff of the case of Masters v Cameron (1954) 91 CLR 353. 25 Thirdly, there is evidence that Mr and Mrs Vukmirica entered into the arrangement without any legal assistance and not knowing what they were signing, so that either of the non est factum defences may be available to them, or there may be an equitable defence that it would be unconscionable, when the plaintiff knew about this, for it to be given specific performance, or even damages. 26 Fourthly, there is a question as to whether the documents were ever signed in a way so as to bind the defendant company. Fifthly is a question as to whether the entry into the Put and Call Option was such that it fails for uncertainty because the terms of the Put and Call agreement were never made plain. 27 Sixthly, there may be a defence that there has not been a proper compliance with s 54A of the Conveyancing Act and the question of delay was also raised. 28 Many of those defences can only be dealt with on a final hearing, as they will involve questions of fact, but it does seem to me that there is at least an arguable case. 29 However, when one looks at the balance of convenience one has to consider both sides. The plaintiff needs to have its right to purchase, if that be its right, protected, but, on the other hand, the defendant needs to have the strata plan registered and to be protected against damages for delay, because it is paying, as is clear to both sides, some $20,000 per month in interest while the delay goes on. 30 The caveat as framed is too wide in that, in my view, it operates even to stop a strata plan being registered. The caveat, if it is to be extended, should be modified to allow that plan to be registered, as it is in everyone's interest that it be registered. 31 I also consider that in view of the inaccuracy of s 74P of the Real Property Act, there must be an undertaking as to damages. As I have said, the plaintiff is a trustee company and, as such, apart from the right of the trustee to be indemnified by the beneficiaries of the trust (and there is not much evidence as to who they are, or as to their means), it has no assets at all. 32 I was offered an undertaking by two other companies in the plaintiff's group Ocean Heritage Pty Ltd and F M W Investments Pty Ltd, to join in the undertaking as to damages. The court does not accept undertakings as to damages from non parties, but if persons who claim no relief are joined in the proceedings, in order to give the undertaking as to damages, that is acceptable (see Select Personnel Pty Ltd v Morgan & Banks Pty Ltd (1988) 12 IPR 167, 172). 33 However, there is not much evidence as to whether these companies do have any assets of their own beneficially. There is some evidence to show that lending institutions are prepared to advance them moneys, but whether this is because of directors' guarantees, or otherwise, I do not know. 34 Accordingly, at this stage it seems to me that the only way I can keep the balance of convenience is by ordering a bank guarantee. The amount of that guarantee is to be $30,000 which will cover one month's interest, plus some buffer against there being a sale at a loss because of the delay. 35 I have fixed that sum on the basis that the case will be determined some time in early April. If that is not the case, then I would consider that it would be appropriate to increase the guarantee by $30,000 per month until the case is heard. In order to accommodate that, I should extend the caveat until further order, but give the defendant liberty to move under s 74MA of the Real Property Act, on or after a day about a month's hence, to lift the caveat and, as at presently advised, I would lift the caveat, unless the bank guarantee was increased. 36 However, it is better to make directions for the ongoing hearing of the matter and let whoever is the judge who hears the next round of these proceedings make whatever order is appropriate at that time. 37 I should note that the caveat was already extended by Windeyer J until yesterday and I extended it overnight because I needed to consider the form of order and these reasons. 38 However, I adhere to what I said in McCosker v Lovett (1995) 7 BPR 14,507, that once the caveat is extended then it is necessary for the lapsing process to be recommenced, and it is really not necessary to make further orders of extension. That is why ordinarily these days the court extends the caveat until further order and takes an undertaking to the court from the plaintiff that it will remove the caveat if the court is of the view that the caveat should no longer be in force. Presumably because of the haste in which this matter was dealt with the ordinary process was not followed. 39 As I said, I made observations as to the result of the case last evening and I am glad to say that counsel have prepared short minutes which reflect those orders and indeed improve upon them. 40 Accordingly, I make the orders in accordance with the short minutes, which are to carry out my orders, rather than being consent orders. Those short minutes include directions, and I stand the matter over to the Registrar's list on 6 April 2004. 41 Exhibits DX04 and DX05 may be returned. The balance are to remain.

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