Hanson v Perks

Supreme Court of NSW|2005-02-15|Before: Palmer J

CATCHWORDS : CONTRACT - SALE OF LAND - Whether parties had concluded an oral agreement whereby plaintiff would be entitled to acquire an interest in land to be purchased by defendant - whether part performance by plaintiff - question of fact.

Vicki Evelyn Hanson - Plaintiff PARTIES : John Arthur Perks - Defendant

R.D. Wilson - Plaintiff COUNSEL : A.M. Colefax SC - Defendant

1 On 23 August 2001, the Defendant entered into a contract for the purchase of a house in Webb Road, Booker Bay, for a price of $370,000. The contract was completed in October 2001. The Defendant provided $150,000 of the purchase price, the balance coming from a borrowing by the Defendant from St George Bank secured by a mortgage over the property. The property was and remains registered in the Defendant's name as a sole proprietor. 2 The Plaintiff claims a declaration that in June 2001 she entered into an oral agreement with the Defendant whereby each of them would contribute $150,000 towards the purchase of the Webb Road property and each would have a half interest in it. The Plaintiff says that she has partly performed that agreement so that it is enforceable in law notwithstanding the absence of writing. 3 In her Statement of Claim, the Plaintiff sought an order for specific performance of the alleged oral contract to the intent that, upon payment to the Defendant of $150,000, the Defendant be ordered to transfer to her a half-interest in the property. That remedy was abandoned in the Plaintiff's final submissions. The Plaintiff now seeks damages for the Defendant's breach of the alleged contract by failing to transfer a half-interest in the property to her. 4 In the alternative, the Plaintiff had sought in her Statement of Claim a declaration that the Defendant holds the whole of the property upon a constructive trust for her as to an one half interest. The Plaintiff sought a consequential order compelling the Defendant to transfer to her a half-interest on payment of $150,000. Again, that claim for relief has been abandoned and the Plaintiff seeks equitable compensation for the Defendant's alleged breach of trust. 5 The Defendant denies that the alleged oral agreement was made with the Plaintiff at all. Further, he says that if any such agreement was made, it is not enforceable in law since it has not been partly performed by the Plaintiff. Finally, the Defendant says that if there is any enforceable agreement between the parties, the Plaintiff, as a matter of discretion, should not be granted any relief because she has contributed nothing to the value of the property and, in fact, is presently unable to do so. 6 Resolution of this case depends primarily upon the credit of the Plaintiff and of the Defendant but there are some contemporaneous documents which are of assistance. The Plaintiff's version of the facts

7 The Plaintiff is a divorced lady now fifty-two years of age. The Defendant is a single man now aged sixty-one. The Plaintiff and the Defendant met several years ago. The Plaintiff conducted a health food shop in Umina next door to the Defendant's business as a butcher. 8 According to the Plaintiff's pleaded case and to her first affidavit sworn 3 February 2004, in May 2001 a relationship commenced between her and the Defendant. At that time the Plaintiff owned a town-house in Terrigal and the Defendant was renting a villa in Woy Woy. They began staying at each other's houses overnight. The frequency of such occurrences is in dispute but I do not think that this case turns upon the resolution of that dispute. 9 According to Plaintiff's first affidavit, in May 2001, shortly after the relationship commenced, she and the Defendant had a discussion in which the Plaintiff suggested that the Defendant move in permanently with her in her town-house at Terrigal. The Defendant countered with the suggestion that she sell her town-house and that they purchase a property together, each putting in half of the purchase price. The Plaintiff says that she agreed to this suggestion. 10 The Plaintiff says that over the next couple of weeks she and the Defendant inspected a number of properties. In June 2001 they inspected the property in Webb Road, Booker Bay, which comprises a large block of land with a house on it. The property had potential to be subdivided. The price sought was $370,000. 11 On the evening of their first inspection, according to Plaintiff, she had a discussion with Defendant in which they agreed that they should buy the property. The Plaintiff said that she would put her town-house on the market straight away and out of the proceeds she would be able to contribute $150,000 to the purchase price of the Webb Road property. The Defendant said that he would contribute $150,000 so that it would be a 50/50 arrangement and they would borrow the balance of the purchase price from the St George Bank. 12 According to the Plaintiff, about a week later she had another conversation with the Defendant in which it was agreed that, as the Plaintiff had not yet sold her town-house, the Defendant would proceed with the purchase of the Webb Road property in his own name and, once the Plaintiff had sold her house, the Webb Road property would be transferred into their joint names. A possible subdivision and development of the property was discussed. The Plaintiff said that as she could not contribute more than $150,000, they would have to borrow to carry out the subdivision. The Plaintiff suggested that after they moved into the property she would pay the daily living expenses and the Defendant would pay the mortgage commitments. The Defendant agreed, whereupon the Plaintiff said that she would list her town-house for sale straight away. 13 According to the Plaintiff's first affidavit, in reliance on this conversation in June 2001 she listed her Terrigal town-house for sale with real estate agents during August 2001. Contracts for sale of the town-house were exchanged on 15 November 2001 and settlement of the sale took place on 7 December 2001. After discharge of a mortgage and the payment of other expenses, the Plaintiff received the sum of $157,218 from the sale. 14 On 10 December 2001, the Plaintiff placed $154,000 into a Westpac account so that she could pay it immediately to the Defendant in performance of the oral agreement which they had concluded in June 2001. 15 The Plaintiff says that she moved into the Webb Road property with the Defendant in November or early December 2001. After the settlement of the sale of her town-house had been completed, she had a conversation with the Defendant in which she told him that she now had the proceeds of the sale of the town-house available. She asked when the Webb Road property would be transferred into their joint names. The Defendant objected to the transfer on the ground that it would incur $12,000 in stamp duty and that that expenditure would be a waste of money when they could use the money for a holiday. 16 The Plaintiff says that this refusal of the transfer by the Defendant upset her greatly. She insisted that the agreement which had been made be honoured but the Defendant steadfastly refused. 17 The relationship between the parties began to deteriorate. Nevertheless the Plaintiff continued to live in the Webb Road property with the Defendant until April 2002 when the Plaintiff purchased another property and moved out. In the meantime, however, she continued to pay the household expenses while the Defendant paid the mortgage instalments. She helped clear the garden and had discussions with designers about the new house to be built on the property once it was subdivided. These activities, she says, support her assertion that there was an agreement between her and the Defendant in June 2001, and she was to have a half interest in the whole of the Webb Street property. Whether Plaintiff's version accurate

18 The Defendant's version of events is different in significant respects. Whereas the Plaintiff says that she put her town-house at Terrigal on the market in August 2001 after the discussion in June 2001 wherein the parties agreed on the joint purchase of the Webb Road property, the Defendant says that the Plaintiff in fact put her property on the market on 5 May 2001, well before any discussion between them as to the purchase of any property, let alone the purchase of the Webb Road property. 19 Further, the Defendant says that before May 2001 the Plaintiff told him that her business was not doing well. She was having difficulty in meeting expenses and was going to sell her Terrigal town-house and buy something smaller. 20 After the Defendant had filed an affidavit in the proceedings giving this evidence and the Defendant's solicitors had served a subpoena on the real estate agent who had first listed the Plaintiff's town-house in May 2001, namely L.J. Hooker at Terrigal, the Plaintiff swore an affidavit dated 21 June 2004 in which she endeavoured to explain the fact that her property had indeed been listed for sale by L.J. Hooker at Terrigal in May 2001. She said that she had almost finished renovating her town-house in May and that she "wanted to test the waters" to find out how much she could get for that property. She said that she had listed the property with L.J. Hooker for that purpose but she had had no intention of selling the property at that time. 21 I am unable to accept this evidence. First, despite the Plaintiff's denials that she was in any financial difficulty as at May 2001, her tax returns show that her assessable income for the year ended 30 June 2001 was only $10,000. The income for the previous year was the same amount. As at 30 June 2001, her business had incurred a trading loss in excess of $30,000. A year later, an accountant reported to a meeting of the shareholders of the company which ran that business that the business had continued to trade at a loss and that it could not continue trading. Shortly afterwards, the company was wound up. 22 Second, on 8 May 2001, the Plaintiff retained conveyancers to prepare contracts for the sale of the Terrigal town-house. On 5 June 2001, those conveyancers wrote to the solicitors for a purchaser with whom negotiations had been conducted enclosing a contract for sale for the price of $320,000. The Plaintiff conceded in cross examination that offers and counter-offers for the property had been exchanged with that purchaser. 23 Third, the Plaintiff conceded in cross examination that she had purchased the town-house pursuant to a course of conduct in which she had been engaged for some time, that is, purchasing a property, renovating it and re-selling it for a profit. She conceded that she had listed the Terrigal town-house when she had almost completed renovating it and it was simply a question of getting the right price. 24 I find that the Plaintiff put her town-house at Terrigal on the market in early May 2001 with every intention of selling it if she could obtain a satisfactory price and that her decision to list the property was made well before, and had nothing to do with, any discussions with the Defendant about jointly acquiring an interest with him in the Webb Road property or any other property. 25 In reaching this conclusion, I do not overlook the evidence of the Plaintiff's daughter, Caitlin. She said that in about August 2001 the Plaintiff said to her that she was going to sell the Terrigal town-house and put $150,000 into purchasing the Webb Road property jointly with the Defendant. It is quite possible that the Plaintiff made such a statement to Caitlin, but Caitlin was uncertain of the timing of that statement. She said it could have been made as much as a month before or a month after August 2001. The statement, if it were made at all, could have been made quite late in 2001, after the Plaintiff had exchanged contracts for the sale of her Terrigal town-house and certainly after the Defendant had exchanged the contracts for the purchase of the Webb Road property. In my view, the fact that the statement was made to Caitlin does not unequivocally support the Plaintiff assertions that she listed her property for sale in reliance upon an agreement that she had reached with the Defendant in June 2001. 26 Further, I bear in mind the evidence of Mr Batten. He said that the Plaintiff had told him that her reason for selling the Terrigal property was her desire for a property with a space for a yard and garden. I bear in mind also the evidence of the Plaintiff's former business partner, Miss Mulley, who said that the Plaintiff told her that she was selling the Terrigal property because she was having difficulty meeting the mortgage payments and wanted to buy something less expensive. That evidence accords with the Defendant's evidence as to the reasons given to him by the Plaintiff for selling her property. 27 I accept that the Plaintiff made these statements. While the time at which they were made is left uncertain, it is significant that the Plaintiff did not give as her reason for selling her intention to invest the proceeds in a property jointly with the Defendant. 28 The Plaintiff's assertion that she had listed for sale and sold her Terrigal property in reliance upon the alleged oral contract made with the Defendant in June 2001 was at the forefront of her pleaded case that she had partly performed the oral contract so that it was enforceable in law: see Statement of Claim, paragraph 5. The assertion was also at the forefront of her pleaded case that she had acted to her detriment in reliance upon the Defendant's representations: see Statement of Claim, paragraphs 9, 10(b), 12 and, especially, paragraph 13(a), (b) and (c). 29 I have found that that assertion is not correct. The fact that the Plaintiff did not disclose in her first affidavit the time at which the Terrigal property was first listed for sale and the fact that she gave in her second affidavit an incorrect explanation as to "testing the waters" with no intention to sell, coupled with the manner in which she endeavoured to explain away these discrepancies in cross examination, lead to me to the conclusion that the inaccuracies in her evidence on an important point in her case were intentional. This finding reflects adversely on the reliability of the Plaintiff's evidence generally. The Defendant's version of the facts

30 The Defendant denies that there was any agreement between himself and the Plaintiff in June 2001. He concedes that he and the Plaintiff inspected the Webb Road property but he does not concede that that it was in June. He says, however, that at the time of inspection or around that time, there was no conversation at all between himself and the Plaintiff to the effect that the Plaintiff would contribute $150,000 towards the purchase of the property. He says that he had decided at that time to get back into the real estate market. He took the Plaintiff with him to inspect some properties but there was no discussion that the Plaintiff would contribute a substantial sum towards acquisition. 31 The Defendant says that at the time that he inspected the property he knew that the Plaintiff's Terrigal property was on the market. However, the Plaintiff's ability to contribute anything to the purchase of the Webb Road property was uncertain and he says that he decided to go ahead with the purchase of the Webb Road property himself in his own name, with the intention of subdividing it and building another house on one of the lots. 32 The Plaintiff and the Defendant moved into the Webb Road property, as I have said, in either late November or early December 2001. Contracts for the sale of the Plaintiff's property had been exchanged on 15 November 2001 with completion due in December. The Defendant says that, after exchange of contracts but before completion of the Plaintiff's sale, there was a conversation between them to the following effect. The Defendant agreed that after settlement of the sale of the property, the Plaintiff could, if she wished, put between $120,000 and $130,000 towards the cost of the second house which the Defendant intended building on the property once it had been subdivided. The Defendant would put in an equivalent amount and they would borrow the remainder required. Each then would have a half interest in the second house. The Defendant did not want to transfer the title to the second house into their joint names because that would result in a stamp duty liability but he suggested that they should be an agreement drawn up between them to protect the Plaintiff's investment. Findings

33 The Defendant was insistent throughout his cross examination that he had made no agreement with the Plaintiff about jointly investing in the Webb Road property in June 2001. In this, he was not shaken. I find this evidence inherently probable for two reasons. 34 First, in June 2001, although the Plaintiff's property had been listed for sale, no sale had been achieved. Accordingly, the amount which the Plaintiff could contribute from the proceeds of sale and the time at which the contribution could be made were completely uncertain. 35 Second, the intimate relationship between the Plaintiff and the Defendant had developed only a month before the alleged conversation. The Defendant's demeanour in the witness box gives me the impression that he is a man of caution, not likely to surrender to rash impulse particularly in business matters. 36 The inherent probabilities, the Defendant's demeanour, his unshaken evidence under cross examination, and the adverse findings I have made as to the reliability of the Plaintiff's evidence all combine to lead me to the conclusion that I should prefer the evidence of the Defendant that there was no agreement between the Plaintiff and the Defendant in June 2001 or prior to the entry into the contract for the purchase of the Webb Road property, as alleged by the Plaintiff. 37 I find also that there was a discussion between the Plaintiff and the Defendant in November or early December 2001 generally in the terms alleged by the Defendant. At that time it was known that the nett proceeds available to the Plaintiff from the sale of the Terrigal property would be about $150,000 but not all of that amount would be available for investment. Indeed, by the end of December 2001 after the Plaintiff had withdrawn various amounts from the Westpac accounts into which she had paid the proceeds of sale, there was only $134,000 remaining. 38 There is no question but that there was some considerable discussion between the Plaintiff and Defendant in December 2001 and early 2002 about just what interest in what property the Plaintiff might obtain if she contributed some amount towards the subdivision and development of the Webb Road property. But the parties had by this time fallen into disagreement about what had been said previously and what, if anything, had been agreed between them. 39 In early 2002, the Defendant prepared a document which he described as "Agreement of Trust of Deed". He showed it to the Plaintiff before sending it to his solicitor but the Plaintiff emphatically disagreed with its provisions. The document left blank an amount which the Plaintiff was to pay the Defendant for a fifty percent share of "Stage I" of the Webb Road property and it referred to a "Stage II" in which the Plaintiff could acquire an interest by paying a further amount equal to the amount paid in respect of "Stage I". The Plaintiff's position was that she was entitled to an interest in the whole of the property, that is, both stages of the development, upon payment of $150,000 from the proceeds of sale of the Terrigal property. 40 However, at this time she did not have remaining from the proceeds more than about $130,000 and it must have been clear that the total cost of the acquisition of the Webb Road property, its subdivision and the construction of another house would cost considerably more than the purchase price of $370,000 originally paid for the whole of the property. In fact the total cost of the of the development of the property was ultimately $790,000. 41 I find that no agreement was reached between the parties in November or December 2001 as to what interest the Plaintiff could acquire in the Webb Road property and upon what terms. There was certainly frequent discussion about this matter and, doubtless, the Plaintiff felt aggrieved by the Defendant's attitude but there was, I find, nothing more conclusive than discussion comprising statements by the parties of what each wished to occur. 42 My conclusion in this regard is lent some support, in my opinion, by a letter which the Plaintiff's former solicitor wrote on the Plaintiff's instructions to the Defendant on 16 June 2003. The letter was written after a number of attempts at reconciliation between the parties had failed. I think it is a fair inference that the Plaintiff, in seeking legal advice at this time, would have wished to state to the Defendant her central grievances. However, this letter does not refer at all to the alleged agreement made between the parties in June 2001 to the effect that the Plaintiff would be entitled to an acquire a fifty percent interest in the whole of the Webb Road property. Rather, it refers to an alleged agreement, obviously made well after 2001, to the effect that the Plaintiff would be able to purchase one of the two houses on the Webb Road property at a price still to be agreed. The tenor of this letter suggests to me that there had never been a concluded agreement between the parties in the clear and unequivocal terms which the Plaintiff now alleges. Conclusion

43 For these reasons, I find that there was no agreement made between the Plaintiff and the Defendant in or about June 2001 in the terms alleged in paragraphs 2 and 3 of the Plaintiff's Statement of Claim. Likewise, I find that the Defendant did not make promises or representations to the Plaintiff in May and June 2001 in the terms alleged in paragraphs 9 and 10 of the Statement of Claim. 44 I find also that the Defendant did not make a representation and promise to the Plaintiff between about 15 November and 7 December 2001 in the terms alleged in paragraph 12 of the Statement of Claim. 45 I find that there was no common intention of the parties as alleged in paragraph 15 of the Statement of Claim. 46 It follows that the Plaintiff's claims fail on the facts. There must, therefore, be judgment for the Defendant on the Statement of Claim, and I so order. 47 I order the Plaintiff to pay the Defendant's costs of the proceedings. 48 The exhibits maybe returned. ~ oOo ~

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Judgment (11 paragraphs)

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