Hargraves Secured Investments Limited v Sharpe

Correspondence 9Much of what generated and continues to explain the parties' respective contentions is formulated or contained in the considerable correspondence that has passed between them. Some of this correspondence is referred to in what follows. 10Whatever be the correct meaning of the various clauses in the Deed, it is apparent that by 27 August 2012 Mr Sharpe had not complied with the terms of clauses 2.6 or 3.2 of the Deed. Hargraves' solicitor's letter of that date asked that they be provided. 11Mr Sharpe replied by letter dated the same day. In part he said this: "For the record...clause 2.6 is only one of several serious contradictions in the Deed, and that contradiction is with 3.2. Further 3.2, 3.2(a), 3.2(b) and 3.2(c) cannot be achieved without money. Your commitment under clause 3.2 is simply another term of many terms in this Deed IN NEED OF REVIEW. " [Emphasis in original] 12Hargraves' solicitor responded the following day in these terms: "In our view your letter takes matters no further other than confirming your unwillingness to accord with clause 2.6... Our client remains ready, willing and able to conduct the review contemplated by clause 6.1 upon provision of the contract of sale pursuant to clause 2.6. Further, we repeat our request for the documents pursuant to clause 3.2. We look forward to receiving the requested documents and to you providing a date and time on which the teleconference pursuant to clause 6.1 can be conducted." 13That letter provoked a reply on 1 September 2012 that included the following paragraph: "To date we still have no explanation from you as to why your client failed to conduct the review of the deed as pre-arranged and that neglect can only be one of either two types, inadvertent or contrived. Your approach continues to raise more questions that [sic, than] it resolves, frustrates progress under the Deed, and you continue to attempt to absolve your office of any accountability in this matter. If you insist on acting in bad faith under the made Agreement...you and/or your client may stand accused of not negotiating and/or entering into, the Deed of Agreement in good faith." 14That letter went on to seek approval of the incurring of certain nominated expenses described as being "under clause 2.3 of the Deed". These included "$500 upfront for preparation of the contract, plus a further $2,300 at settlement" for Mr Sharpe's solicitor Mr Hegney (who was to act for him on the conveyance) and "marketing expenses to be incurred under clause 2.3" of "$12-13,800 plus Agent's selling commission of 2.5%". 15Hargraves' solicitor sent an email to Mr Sharpe on 3 September 2012 saying in part: "In our view the contents of your letter take matters no further. However, your letter sets out a proposal for the sale of the Dorrigo property. In response to that proposal, whilst reserving my client's rights. I make the following comments... In light of the current position its [sic] appears an Auction date of late October is the earliest achievable. My client is prepared to consent, without limiting any of its other rights, to an Auction to be conducted no later than Friday, 2 November 2012." 16Mr Sharpe wrote to Mr Hegney on 4 September 2012. Relevantly he said this: "The quote obtained from Pru regarding the preparation of a Contract of Sale at aprox $2,800 is good. Upon receiving the upfront deposit of $500 would you please proceed in preparing same... If you could please issue me with an invoice by email for the 'up front' $500 fee, I will attend to it directly. Please also provide your banking details and the 'reference' to be used with the invoice so it may be paid via direct deposit." 17The following day Mr Hegney wrote to Mr Sharpe accepting carriage of the matter "in preparation of the Contract of Sale for your property 'The Old Farm', conditional upon receipt of $500 in trust". Mr Hegney further advised that because "the money is being placed into trust, an invoice is not yet issued". 18On 6 September 2012 Mr Sharpe wrote a curious letter in which he accused Hargraves' solicitor of not acting in accordance with the Deed. He said, among other things, that the solicitor "continue[d] to frustrate the smooth and steady rollout of this Deed (i.e. demanding 2.6 and 3.2 ahead of 2.3)". He went on to say: ""You have one last chance...to stop playing your reckless and shameless games with me, to resolve the issues, and to become collaborative in the process of ENACTING THIS DEED in some fashion which might reflect THE INTENTION OF IT, THE CORRECT SEQUENCE, AND THE TIME LINE". [Emphasis in original]. 19An undated reply to that letter is in evidence. It purports to reply to a letter from Mr Sharpe dated 12 September 2012 as well but that letter is not before me. Part of the letter replying to Mr Sharpe said this: "Pursuant to clause 2.8 you are to make a payment of $120,000 by 15 September 2012. In light of your conduct it now appears you will not be making such payment. In those circumstances the Dorrigo property is to be auctioned prior to 30 September 2012. Please provide as set out in clause 3.2 for my client's approval (and as previously requested): 1. Copies of proposed contracts for the auction sale; 2. Copies of the agency agreement between Sharpe and the Real Estate Agent; and 3. Copies of Sharpe's marketing proposal for the auction. Auction Date As previously set out on the basis you will not be paying $120,000 by 15 September 2012, and on a without prejudice basis, my client is prepared to consent, without limiting any of its other rights, to an auction to be conducted no later than Friday 2 November 2012. However, such an offer is only open until 4.00pm Friday, 14 September 2012." 20Mr Sharpe's apparent frustrations with the progress of the matter led him to write to John [presumably Gorman] directly. He did so on 12 September 2012. The final paragraph of that letter is particularly instructive. After suggesting that the solicitor handling the matter for Hargraves should be removed, Mr Sharpe concluded in these terms: "If you don't [remove the solicitor], I will attempt to, and if not achieved by one of us, my real fear is that we'll all loose [sic, lose] in this process of substantially paying down the debt by selling The Old Farm; the very thing which brought us both to this Agreement." [Emphasis added] 21By letter dated 17 September 2012 Hargraves' solicitor said this: "Pursuant to clause 2.8 of the Deed you were to make a payment of $120,000 prior to 15 September 2012 to extend the auction date of "The Old Farm" Dorrigo to 15 November 2012. This has no occurred. Accordingly, please confirm the property will be auctioned by 30 September 2012. Further, we repeat our requests for the [matters referred to in clauses 2.6 and 3.2]... For the avoidance of doubt our client considers the above three requests to be essential terms of the Deed and demands compliance by the production of such documents by midday Thursday, 20 September 2012. Our client remains ready, willing and able to complete the Deed but requires you to adhere to the Deed as set out above. We look forward to receiving the requested documents and confirmation of the auction date." 22Mr Sharpe would appear to have written a letter in this sequence dated 18 September 2012. It is also not in evidence before me. However, apparently in reply to it, Hargraves' solicitor wrote to Mr Sharpe on 19 September 2012 in terms quite similar to their previous letter dated 17 September 2012. It contained the following additional paragraphs: "By your letter dated 18 September 2012 you appear to be requiring extensions for the provision of the above [clause 2.6 and 3.2] items including an extension of the date for the auction of the property (amongst other things). This is unacceptable. For the avoidance of doubt our client considers your conduct to be a repudiatory breach of the Deed." 23Mr Sharpe then wrote a long and somewhat discursive letter dated 19 September 2012. It is unnecessary to refer to it here. It received a reply seeking, among other things, a confirmation of the auction date by midday the next day. 24That letter prompted this response in reply from Mr Sharpe: "I observe the Date of the Auction in the Deed as the 30th September 2012, and continue to observe the 30th Sep as the date for the auction of the Property. I am endeavouring to get the items under 2.6 and 3.2 of the deed completed, and will have them to you no later than 12.00pm Monday 24th September 2012." 25Mr Sharpe wrote again on 24 September 2012. Part of what he wrote is as follows: "I have spoken to Mr Hegney and he tells me that a solicitor cannot legally issue an invoice prior to the work being done, hence the money in trust. You and your client are both solicitors, and I can only assume you are both already aware of this fact. ... Further, would you please pay the $500 into Hegneys trust as a matter of urgency, as without you performing this act we risk the Auction day occurring with no Contract of Sale." 26Some correspondence was then exchanged upon the topic of amending the Deed. Nothing came of it. On 28 September 2012 Hargraves' solicitor wrote to Mr Sharpe as follows: "Our client rejects your offer to amend the terms of the Deed as proposed in your letter. However, we are instructed to repeat our client's offer that, whilst reserving all of its rights, including the right to continue enforcement steps and/or proceedings, it is prepared to allow you to auction the property in your own name with Elders Real Estate in Dorrigo providing any such auction takes place on or before 30 November 2012. For avoidance of doubt, this does not in any way amend or change the Deed." 27Mr Sharpe's response the same day was relevantly as follows: "For the avoidance of doubt; I accept your clients offer for me to Auction the Property in my name on or before the 30th November 2012, and given the wording of your offer, I accept it with the full anticipation that your client will not elect to act under clause 3.4 & 3.5 of the Deed and hijack my Auction part way through the process... Further, I accept your offer in the full anticipation that your client will not rely on clause 3.1 in court proceedings or under the Deed whilst I am inside the aforementioned Auction Process..." [Emphasis in original] 28After much intervening correspondence of an argumentative kind, Hargraves' solicitor wrote to Mr Sharpe on 9 October 2012 and withdrew the offer contained in the earlier letter dated 28 September 2012. By letter dated 12 October 2012 to Mr Sharpe the solicitor advised that his "conduct in electing not to auction the property...by 30 September 2012 (amongst other things), was a clear and unequivocal repudiatory breach of the Deed". The solicitor's letter dated 22 October 2012 to Mr Sharpe concluded with the following paragraph: "...as a consequence of our client's acceptance of your repudiation, our client is now attending to the process of enforcing its rights and will attend to the necessary arrangements to auction the property on 30 November 2012 as mortgagee in possession." 29The solicitor advised further by letter dated 29 October 2012 that Hargraves was now attending to the process of enforcing its rights. He advised that a writ of possession had been obtained for each property and that the necessary arrangements to auction them as mortgagee in possession were being made.

Mr Sharpe's submissions 30At the hearing before me, Mr Sharpe was represented by a solicitor who had clearly been given insufficient time to master the material that required consideration in this case. That unfortunately placed him in a difficult position and his ability to assist me was compromised through no fault on his part. 31Mr Sharpe essentially relied upon four propositions: (1) Clause 6.1 of the Deed had not been complied with thereby rendering Hargraves' actions invalid. (2) Hargraves was obliged to pay Mr Hegney's costs "upfront" and its failure to do so meant that it could not yet enforce any of the provisions of the Deed. (3) The issue of the writs of possession was invalid because Hargraves did not draw the attention of the Court to the terms of the Deed that were critical to the Court's discretion to issue them. (4) Mr Sharpe had not committed an act of default so that possession of Campbells Hill cannot be taken until 16 May 2014.

Hargraves' submissions 32Hargraves simply relied upon the Consent Judgment. It maintained the position that a proper reading of the Deed of Settlement and the Consent Judgment produced no basis for Mr Sharpe to oppose the sale of both properties and the taking of steps in advance of such sales to recover possession of them from Mr Sharpe. At the heart of that contention is the proposition that the proviso in clause 1.2 of the Deed did not apply, because Mr Sharpe has "committed an act of default pursuant to the terms of [the] Deed". If he had, then the additional restriction contained in clause 1.2 of the Deed upon the otherwise unconditional lifting of the stay contained in order 4 of the Consent Judgment is itself also lifted.

Consideration Clause 6.1 33Mr Sharpe first sought to emphasise clause 6.1 of the Deed. He appears to complain that Hargraves never met with him to review its terms before 30 June 2012. It appears that they never met at all. However, having regard to the terms of clause 6.2, it is a little difficult to understand precisely, or even generally, what flows from this fact. Clause 6.1 is not obviously tied to the operation of any other clauses in the Deed suggestive of precondition or essentiality. Hargraves was not required, and could not be compelled, to make or to agree to any changes in how the Deed operated or to improve Mr Sharpe's position in any discernible way. The clause appears to be no more that an agreement to meet with no obligation to do anything else. 34Moreover, the time for compliance (if that be the correct description) with the clause has long since passed and Mr Sharpe has operated in a way suggestive of an election or waiver if he otherwise contends that he acquired some rights that he was able to enforce. Mr Sharpe has clearly operated since 30 June 2012 upon the basis that the Deed obliged him to do certain things and cannot now maintain that clause 6.1 avails him in any practical way. Whatever comfort this clause may have given to either of the parties when the Deed was executed, it was in my view illusory. Nothing practical or tangible flows from the fact that the meeting or teleconference contemplated by clause 6.1 did not take place. Clause 2.3 35Secondly, Mr Sharpe argued that the whole rationale for the Deed was somehow frustrated or eroded by a failure or refusal on the part of Hargraves to fund Mr Hegney's costs and disbursements on the conveyance. It seems clear, or it is at least not in dispute, that Mr Sharpe did not have sufficient ready funds with which to pay Mr Hegney in advance and Mr Hegney appears not to have been prepared to accept a retainer or to perform the work unless or until his costs were in trust or somehow guaranteed. 36Mr Sharpe contends that clause 2.3 in effect obliged Hargraves to pay Mr Hegney's professional costs on the conveyance in advance and that its failure to do so wholly compromised Mr Sharpe's ability to get the auction process off the ground. He is particularly troubled by the fact that Hargraves would not do anything unless presented with a tax invoice, which failed to take account of the fact that Mr Hegney felt that he was not able to produce one until he had performed the work. This left Mr Sharpe, on his submission, in the middle of a circular problem that he could not solve. In particular, he argued that Hargraves was therefore in breach of either the terms or the spirit of clause 2.3. 37Clause 2.3 required Hargraves to add Mr Sharpe's approved conveyancing and related costs to the judgment debt. No time limit for doing so is nominated. In particular, the clause dos not require Hargraves to pay Mr Sharpe's solicitor in advance of the work being done. On one view, the reference to a tax invoice suggests that the costs will only be reimbursed following performance of the work. 38The clause is clear in my opinion. Hargraves agreed to pay the conveyancing and related costs. It reserved to itself the right to approve the costs in advance. In any event it agreed to lend the amount of the cost to Mr Sharpe and to increase the overall debt by that amount. Hargraves was not required to make any payment to a solicitor retained by Mr Sharpe before the work was done or to deposit the amount of such costs in the solicitor's trust account pending completion. Failure to disclose 39Thirdly, Mr Sharpe submitted that Hargraves was never entitled to apply for the issue of writs of possession without drawing to the attention of the Registrar the fact that the Consent Judgment of 6 June 2012 was affected or modified in some way by the operation of the Deed of Settlement. I was referred to Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839. Mr Sharpe contended that a failure by Hargraves to draw the terms of the Deed to the attention of the Court was a breach of the duty of candour requiring the disclosure of material that would mislead the Court if not disclosed. The principle is not in doubt. The applicability of the principle in these circumstances is in contest. It will be apparent that the operation of the rule in this case will be fundamentally informed by the extent to which, if at all, the terms of the Deed restrict or reduce or even eliminate any rights that Hargraves has purported to exercise in seeking the issue of the writs of possession. 40Although I perceived that Mr Sharpe was not prepared at the hearing before me to concede that the clear purpose and effect of the Deed of Settlement was to facilitate and regulate a scheme whereby The Old Farm could be sold in an ordered and timely way so as to reduce his level of debt to Hargraves, his letters in my view have conceded precisely that. For example, I take his reference in his 12 September 2012 letter to "this process of substantially paying down the debt by selling The Old Farm [as] the very thing which brought us both to this Agreement" to be an express endorsement of that very purpose. 41Mr Sharpe's principal argument, however, is that Hargraves has not yet acquired the right to recover possession of either of the properties. Whether or not that also involved a failure to draw certain contentious matters to the Court when the writs of possession were applied for is to some extent moot. That is because Mr Sharpe was able to move the Court for the orders that he now seeks before the writs were executed and before the alleged failure to disclose of which he complains had resulted in any permanent detrimental consequences. Determination of his final point is therefore going to be decisive of his application in general. No act of default 42Finally, while Mr Sharpe contested the validity of the issue of a writ of possession for The Old Farm, he appeared to adopt as his secondary position that even if Hargraves was entitled to recover possession of it, Hargraves did not, and has not yet, become entitled to recover possession of Campbells Hill or at least not pursuant to the writ of possession issued on 25 October 2012. 43An "act of default" is not defined in the Deed. "Default" is covered by clause 7.1 and is referred to as a failure to make a payment pursuant to clause 5 of the Deed. Any such failure triggers the irrevocable obligation upon Mr Sharpe to consent to Hargraves taking possession of Campbells Hill. That appears to accord with what follows from clause 1.2 of the Deed and orders 3 and 4 of the Consent Judgment. 44Even though clause 3.1 refers to "the land", and even though that expression is not defined, it is clear enough that it only refers to The Old Farm. This follows from the reference in clause 2.8(a) to the date for the auction of that property "in clause 3.1 of this Deed". This fits in with the whole scheme of the arrangement, which contemplates the sale of The Old Farm in order to reduce Mr Sharpe's level of indebtedness while simultaneously retaining Campbells Hill for as long as possible in order that its valuable mineral potential might be exploited by him. 45In my opinion there is nothing in the Deed that operates to qualify or to limit the operation of orders 3 and 4 of the Consent Judgment so far as they relate to The Old Farm. The stay on the judgment for possession of that property did not run past 15 September 2012. There is no reference to the stay on the judgment for possession of The Old Farm in the Deed either expressly or by implication. None of its clauses appears to be tied to the stay or its expiration. The mechanism for the sale of that property at auction, and all of its attendant possibilities in clauses 2 and 3 of the Deed, operate in the light, or perhaps more correctly in the shadow, of the lifting of the stay after 15 September 2012. It seems apparent that the parties were prepared to proceed upon the basis that that property would either be sold, or be in the course of being sold, so that the spectre of Hargraves becoming entitled to enforce its judgment for possession of The Old Farm was just something that was understood and accepted. 46Indeed, the language and structure of clause 2 of the Deed are consistent with Hargraves having the primary right to sell the property. The clause contains no time limit by which it must do so, save the implied constraint in the Consent Judgment that meant that Hargraves could not get possession of the property until after 15 September 2012. It is no mere coincidence that clause 2.8 employs the same date, which ties in Mr Sharpe's concurrent right to auction the property as provided for by clause 3. If Mr Sharpe does not act in a timely way to auction the property as provided for in clause 3, Hargraves can in effect take over the marketing of the property in accordance with clause 3.4 without consulting Mr Sharpe, other than by giving seven days' notice of an intention to do so in accordance with clause 3.5. 47In summary, there does not appear to me to be any impediment to, or condition upon, Hargraves applying for the issue of a writ of possession for The Old Farm in the way that occurred in the circumstances of this case. In particular, it was not necessary to show that Mr Sharpe had breached any of the terms of the Deed, essential or otherwise, or that he had acted in some fashion that amounted to a repudiation of the Deed, which Hargraves was then entitled to treat as a basis for the action that it took. I am doubtful that Mr Sharpe's conduct could be characterised in either of these ways but in view of the conclusions I have reached it does not matter. In my opinion, the stay upon enforcement of the judgment for possession did not operate after 15 September 2012 and nothing in the Consent Judgment, the Deed of Settlement or the conduct of the parties, operating either alone or in combination, had the effect of changing that. 48The position concerning Campbells Hill is different. The stay in the Consent Judgment is subject to clause 1.2 of the Deed. The stay period in the Deed extends until 16 May 2014 provided that Mr Sharpe has not committed an act of default pursuant to its terms. Clause 7.1 contains the only reference to what any such default might be. Clause 1.2, for example, does not speak in terms of mere breach or otherwise suggest that an act of default might have been committed as a result. 49Clause 7.1 necessarily refers to clause 5. In the events that have occurred, only clauses 5.1 and 5.2 could presently be relevant. The balance of the clauses in that group does not strictly impose obligations upon Mr Sharpe, which, if not complied with, could be characterised as a default. 50Clause 5.1 provides for the payment of interest quarterly by Mr Sharpe during the stay period. The stay period runs until 16 May 2014. Nowhere in the evidence relied upon by Hargraves in these proceedings is there a reference to Mr Sharpe being in breach of clause 5.1 or that any such breach was an act of default for the purposes of clause 1.2. Nor does any of the correspondence between the parties that I have seen suggest this. Clause 5.2 simply contemplates the obvious intention of the parties that the proceeds of the sale of The Old Farm should be paid to Hargraves. There are as yet no proceeds that are covered by clause 5.2 and there can accordingly have been no failure by Mr Sharpe to comply with it. 51Having regard to the scheme of the Deed of Settlement, I consider that Hargraves was not entitled to apply for the issue of a writ of possession in respect of Campbells Hill. No act of default has occurred, or at least not one of which there is evidence before me on this application. The stay period in clause 1.2 has not expired and Hargraves cannot enforce order 3(a) in the Consent Judgment as things presently stand "until 16 May 2014". In the event that Mr Sharpe commits "an act of default pursuant to the terms of [the] Deed", then that position may change.

Conclusions and orders 52 I will hear the parties on the form of the orders in due course if required. As presently minded, however, I consider that they should be as follows:

1. Set aside the writ of possession issued at Sydney on 25 October 2012 in respect of the whole of the land described in Certificate of Title Folio Identifier 2/567241 and 3/206327 known as 485 Rimbanda Road, Kentucky in the State of New South Wales.
2. Make no order as to costs. 53I do not consider that there is any utility in making the first declaration sought by Mr Sharpe. I do not consider that the second declaration sought by Mr Sharpe should be made. I am not prepared to make an order that "any action" to enforce the Consent Judgment should be stayed.

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: 11 December 2012