Gurfinkel v Bentley Pty Ltd

Gurfinkel v Bentley Pty Ltd - [1966] HCA 75 - HCA 1966 case summary — Zoe

[25]

It is beyond question that oral evidence will be admitted to determine with what intention the parties entered into a writing which is a sale or a conveyance of land. This is not an exception to the rule that oral evidence will not be admitted to contradict or vary a writing into which the parties have reduced their entire agreement for the very question at issue is whether the parties have made the writing the expression of their whole agreement or of their mutual intention. Also, a sale or conveyance is a common means of providing security. Thus, the intention with which parties enter into the sale or conveyance becomes an issue to be resolved by evidence, whether oral or documentary. It cannot be resolved merely by resort to the conveyance for the mutual intention to use the document as security, if it exists, by hypothesis lies dehors that instrument. In reality, the respondents' counsel did not seek to controvert these propositions. The substance of what he submitted was that, from the evidence of the appellant Gurfinkel, it must necessarily be concluded that the option agreement containing the recital of a sale of the land represented the whole agreement of the parties in respect of the Dangan Street land, and that therefore that writing could not be contradicted or varied by parol. Having reached that point, he claimed that the appellant Gurfinkel had admitted that the arrangements with respect to the Welshpool land were identical with those made in connexion with the Dangan Street land, that is to say, to the same effect as the option agreement. He sought to support these submissions principally by reference to the following question and answer to and by the appellant Gurfinkel - referring to the presentation of the option agreement by the respondent Panizza's solicitor to him, the appellant Gurfinkel, for execution: "Did it seem to you to be what you wanted? - Yes, what the agreement was between Panizza and me." And an answer by the appellant Gurfinkel to the effect that the only difference between the arrangements relating to Dangan Street and those relating to the Welshpool land was that the former were reduced to writing whilst the latter were not.

[26]

But examination of the transcript of evidence shows, in my opinion, that these pieces of evidence will not bear the construction sought to be placed upon them by the respondents' counsel. There can be no question that the parties intended to execute the option agreement. But on any view of the evidence it did not represent their whole agreement. For one thing, it is quite clear that the respondent Panizza was not to do any building upon the land but that the appellant Gurfinkel was to do so with materials provided by him in addition to any he might purchase by the use of money to be provided by the respondent Panizza for the purchase of materials and the payment of labour in connexion with the completion of the building by the appellant Gurfinkel. It is clear that the parties agreed that the respondent Panizza should place the additional sum of £1,240 at the disposal of the appellant Gurfinkel for these purposes. But, these considerations apart, the answer given by the appellant Gurfinkel must, in my opinion, be understood as saying no more than that the option agreement did express the parties' arrangement for security: and of course it did. It is evident that Panizza refused to accept a mortgage in the usual form for the money he made available and insisted upon the transfer of the title to the land into his name as the learned trial judge found "as a better security" conceding only the right of repurchase as contained in the option agreement. But such an admission and the fact that Panizza would only make the money available - "finance" Gurfinkel - upon the transfer of the title into his, Panizza's name, leave, in my opinion, untouched the question whether the mutual intention none the less was that the transfer of the title was by way of security for money lent. For, in any case, even if there had been a formal contract of sale preceding the transfer of the land into the name of the respondent Panizza, the question of what was the mutual intention of the parties in entering into that agreement would remain to be investigated. The fact of the agreement would no doubt be itself a weighty consideration in deciding that question but it would not, in my opinion, be conclusive of it. The signature of an agreement to sell may well be, by way of providing security, as much as may be the signature of a conveyance. Indeed, in Douglas v. Culverwell [1] , in which it was held that a conveyance absolute in form and not expressed to be in consideration of money lent was only a security because so intended by the parties, the conveyance was preceded by a contract of sale [1] .

[53]

The evidence showed - and the fact was not disputed - that prior to 1960 the plaintiff had given a first and a second mortgage over the land, that in July 1960 he was in default under both mortgages and that the mortgagees were taking steps to sell the land by auction. The amounts owing under the mortgages and the estimated cost of completing the building totalled about £5,000. The auction was fixed for a date in August 1960 but at the request of the plaintiff it was postponed on a number of occasions, the final date being 18th October 1960. During this period the plaintiff was endeavouring to persuade the defendant to lend him money to meet his obligations under the mortgages and to complete the building but without success. On 18th October 1960, however, and only a few hours before the auction was to be held, an agreement in writing was entered into between the plaintiff and the defendant. It provided for the purchase by the defendant from the plaintiff of the land for £3,760 (that being the approximate amount required by the plaintiff to pay off the mortgages and meet other costs incurred in connexion with them and with the proposed sale). It provided also that the defendant would carry on with the construction of the building on the land and for that purpose would expend not less than £1,240. In fact, for reasons which it is unnecessary to state, none of this expenditure was made. The agreement contained a further provision by which the plaintiff in consideration of £10 paid by him to the defendant was given an option, exercisable within twelve months, to repurchase the land for £5,500 upon giving one month's notice in writing. This written agreement followed upon verbal discussions between the parties which had taken place on the previous day. It is not altogether easy to understand some of the evidence given by the plaintiff whose command of English was not good, but in the course of his evidence he said that during these discussions he had told the defendant that he needed £5,000 to pay off the mortgages and complete the building. "When I said I wanted £5,000 he said he will fix it. He said they were going to see solicitor . He said that this was a way to put it in his name; he would buy it like and in twelve months' time he would return it. He would give me the £5,000 and it would be £5,500 at the end of the year. He would pay out the mortgage - it's supposed to be £3,000 - and the balance he would give me to complete everything. The following day we went to see Kott, Wallace & Gunning. He did make appointment with Mr. Wallace to fix it up." Messrs. Kott, Wallace & Gunning were the defendant's solicitors. The plaintiff said that on the following morning he and the defendant went to see Mr. Wallace and the transcript of his evidence-in-chief goes on:

[95]

When the hearing commenced, counsel for the plaintiff, as the learned trial judge said, virtually abandoned so much of the claim as was based upon the allegation that the plaintiff had exercised the option of purchase given by the agreement of 18th October 1960 and no attempt was made to make out a case based upon the allegations of unconscionable conduct. The issue fought was whether or not the transaction in question was in reality one of loan and the transfer of the land to the defendant made to secure the repayment of that loan or whether it was one of sale with an option of repurchase. Although the statement of claim had alleged that on the true construction of the agreement of 18th October 1960 the relationship of mortgagor and mortgagee was created, a construction which could not be supported, the case was fought on the wider basis which I have mentioned. After saying that neither the plaintiff nor the defendant was a reliable witness, the learned trial judge referred to a number of considerations which led him to conclude that the plaintiff was entitled to succeed. He referred to the fact that the sum of £3,760 which was stated in the agreement as the consideration for the sale was not a figure based upon the value of the land, which his Honour thought was probably worth more than £3,760, but represented the amount required to discharge the mortgages and meet certain costs and expenses in relation thereto. He thought too that the undertaking by the defendant to spend not less than £1,240 on the construction of the building on the land suggested that the transaction was one of loan rather than sale as did the fact that the amount which the agreement fixed as the price to be paid should the plaintiff exercise his option of purchase was £5,500 which, assuming the option was not exercised until it was about to come to an end, would represent £5,000 (the sum of £3,760 and £1,240) with interest at ten per cent. He referred also to the facts that the agreement provided for the plaintiff and not the defendant to pay the costs of the transaction and that, after the transfer, the plaintiff continued to make improvements on the land. But with all respect to his Honour, these considerations do not seem to me, in all the circumstances of the case, to justify the conclusion that the transaction was other than that which it was expressed to be in the written agreement between the parties, an agreement, be it remembered, which was settled by a well-known firm of solicitors acting for the defendant and approved, with minor alterations, by the plaintiff's legal adviser after consultation with his client. And to my mind it is not without significance that the cause of action as originally framed proceeded upon the basis that the document of 18th October 1960 correctly expressed the agreement made between the parties. It is of course evident that the plaintiff needed money and that a stage was reached when the defendant was prepared to make money available to him. One way of doing this would have been for the defendant to lend the money and take a mortgage to secure its repayment, in which event he would have taken the place of the existing first and second mortgagees. But the debt secured by such a mortgage would, in those circumstances, have been £5,000 and, since the plaintiff had been unable to meet his obligations for a much lesser sum under the existing mortgages, this might well have seemed to the defendant to have been an unattractive proposition, more particularly since he knew that the plaintiff was then in default under two other mortgages, one on the Brown Street land, the other on the Welshpool land. An alternative method of making funds available to the plaintiff would have been for the defendant to agree to buy the land at a figure sufficient to enable the plaintiff to discharge the existing mortgages giving the plaintiff an option to repurchase the property at a figure which would show the defendant a profit of ten per cent on his outlay. It was this second alternative which found expression in the agreement of 18th October, and it seems to me, with all respect, that there is nothing in the case to justify the conclusion that the parties intended that what, on its face, was a transaction of sale with an option to repurchase was to operate as a mortgage to secure the repayment of a loan.

At a glance

Court

Decision date

Before

Source

Judgment (98 paragraphs)

Parties

Cited By (2)