J Cummins Pty Ltd v F & D Bonaccorso

Cummins' case

Cummins' case is predicated upon an agreement having been reached between Mr Hawkins and Mr Frank Bonaccorso on or about 20 June 2010, when, according to Mr Hawkins, in the course of discussing various options relating to the property, there was a conversation in the following terms: "Frank Bonaccorso: 'Gary has prepared this offer. This is what we want. We want to get forward and get moving on it. What do you think?' Hawkins: 'I completely reject no 9 of Option C. I am in a position to proceed with Option A immediately. You're asking me not to exercise my rights. I am prepared to agree to that. I don't have to. Failing an agreement between us as to profit share, I will exchange contracts.' Frank Bonaccorso: 'No no no. We want to be involved. We want to be in a Venture with you in No 5. You put some things to us which are unacceptable, but not all of them. We would like more money and the best way to do that is to stay with you.' Hawkins: 'As long as you allow me credit for the $1.4 million I have already in No 5, I'll agree the price can be amended to $5.7 million … The $5.7 million I'm agreeing to, is less what I've spent on the property and the increased value resulting from my efforts; I say that is $1.4 million. I believe the value and expenditure that I have in the building today totals $1.4 million. If you accept that figure, I will pay $4.3 million instead of $3.9 million I have to pay now, that will account for your loss of rents (estimated [to] be $400,000) and I will agree we will make the contract price $5.7 million; thereby protecting your interest and mine in the event of any acquisition, compulsory or otherwise by the Council.' Frank Bonaccorso: 'We can agree to that. What about expenses? Will I get rent in addition to that from now on?' Hawkins: 'Yes. But the $1.4 million you acknowledge is already my interest in No 5 and will count as deposit if I exchange?' Frank Bonaccorso: 'Of course …'"
Cummins contended that the agreement was confirmed in a further conversation that occurred between then and 7 July 2010, but that the agreement, by oversight, was not embodied in the second option executed on 6 August 2010.
As indicated, Cummins recognised that it must overcome the trial judge's credit findings against Mr Hawkins in order for its argument to succeed. The principal reason advanced as to why Mr Hawkins should have been believed was because, there being no evidence in the increase in the value of the property in mid-2010, Cummins' entry into the second option was irrational unless there was some commercial understanding between parties outside the contract.
Bonaccorso submitted that there was no basis for appellate intervention. On its argument, the evidence pointed to there being no arrangement or agreement such that the parties had a common intention as alleged by the appellant. In particular, Bonaccorso submitted that the conversations that Mr Hawkins had with his solicitors and the instructions he gave them in the days leading up to 30 October, as evidenced in his solicitors' diary notes and in email communications with its solicitor, was unchallenged evidence to the contrary and could lead to only one conclusion, namely, that there was no such common intention.
The first solicitor's diary note upon which the respondent relied was dated 27 October 2010 in respect of an attendance by Ms Cathy Hart of MCW Lawyers on Mr Hawkins. The attendance seems to have been on the telephone. Relevantly, Ms Hart records: "He was going to come in with 12 Contracts + Transfers for Strathfield today but doesn't have i) new SP and ii) spec Condition being prepared by Bannerman re rights to development belonging to Cummins. He will hopefully have all this by Thurs + will ring Kim to drop in then. I stress to him that if he has buyers for any units we need their names + they need to sign Contracts. We cannot put 'or nominee' on Contracts as he will pay s'duty. I say in order to comply with Clause 4 of Put + Call he needs to i) sign Notice of Exercise of Option ii) Contract iii) Nominee Notice, if app iv) Deposit …." (emphasis added)
There was a personal attendance on Mr Hawkins on the following day, 28 October 2010, by Ms Kim Mathieson of MCW Lawyers, who noted that Mr Hawkins had collected the front page of the contract for sale, the notice to exercise option and a nomination form. Ms Mathieson also recorded that Mr Hawkins had six buyers and Cummins was going to buy the other six. Ms Mathieson advised him that everything needed to be done by the following day.
On 3 November 2010, Ms Hart had a telephone conversation with Mr Buda who advised her that he had seen Mr Hawkins the previous Friday and that Mr Hawkins had said he wanted to exercise the option. Ms Hart responded that she had given Mr Hawkins the notice and had advised him that he needed to pay the deposit and sign the contract. Mr Buda responded that his client was "fairly relaxed" but that he wanted to have everything in order before his client returned from overseas.
On the same day, Ms Hart advised Mr Hawkins of her conversation with Mr Buda. Her note of the conversation with Mr Hawkins stated, relevantly: "I say he hasn't paid dep. I say [Mr Buda] really wants details of the other 6 buyers by Thurs so he can have everything in order before the 'primary' vendor returns fr os this Friday." (emphasis added)
Ms Hart also recorded that Mr Hawkins advised that if the other six buyers were not ready by the following day, they would "miss out" and Cummins would buy the 12 units.
On 26 October 2010, Ms Hart wrote to Mr Buda advising that Cummins or a nominee wished to exercise its rights to purchase the property pursuant to the second option. The letter concluded that further instructions would be sought from Mr Hawkins "in respect of the execution of the documents and compliance with clause 4 of [the second option] when he attends our office tomorrow".
Mr Hawkins advised Ms Hart on 29 October that he had exercised the option and that Mr Buda had advised him to prepare a caveat to protect his interests under the contract. On 1 November 2010, a caveat was lodged on the title of the property by Cummins claiming an equitable interest pursuant to a contract for sale dated 20 October 2010.
On 7 December 2010, Mr Buda wrote to MCW Lawyers, as follows: "We refer to the above matter and to your correspondence dated 26th October 2010. We would like the following to be noted: a) a notice of nomination of a buyer was delivered to this office on the 29th October 2010, b) a notice of exercise of call option was delivered to this office on the 29th October 2010, c) a front page of a contract executed by your client was delivered to this office on 29th October 2010. We note that condition 4.1(b) and (c) have not been fulfilled by your client and thus an exchange of contracts cannot take place."
Ms Hart had a telephone attendance on Mr Hawkins on 15 December 2010. On that occasion, Mr Hawkins told her that he had spoken to Mr Buda who had advised him that he, Mr Buda, had put on record the current state of the matter and that he had been instructed to prepare a further amended deed. Mr Hawkins had requested Mr Buda to forward a letter to MCW lawyers advising that he had instructions to do so.
The matter remained unresolved between the parties and on 31 March 2011, Mr Hawkins advised Ms Mathieson that Bonaccorso were claiming that the option had not been exercised and they were "trying to get more money out of him". Ms Mathieson reminded Mr Hawkins that on his instructions to them they were waiting for an amended deed from Mr Buda. She also told him that when he took the exercise of options documents to Mr Buda "he should have paid [the] deposit and signed [the] counterpart contract not just [the] front page of [the] contract". She also advised him that they had not heard anything further from Mr Buda, although Mr Hawkins had advised them that an amended deed was being prepared. Ms Mathieson further recorded, "[Mr Hawkins] has a very uneasy feeling about the matter and thinks Bonaccorso [is] trying to get a lot more money from him for pty".
On 1 April 2011, Ms Hart wrote to Mr Buda referring to the telephone attendances the previous year wherein Mr Buda had advised that he was preparing an amended agreement to reflect an extension of time, and noting that the agreement had not been received. She also observed that there had been continued communication between their respective clients and that Mr Hawkins believed that there continued to be a "full and friendly relationship with regard to the ongoing success of our mutual clients' benefit". She asked that, if that was not Mr Buda's understanding, to "please advise us of his clients' understanding".
On the same day, Mr Hawkins had requested Ms Hart to do a search to check that his caveat was still registered. She ascertained that it was. In this conversation, Mr Hawkins again indicated to Ms Hart that he thought that the Bonaccorsos were going to say "no deal" and wanted more money. Ms Hart pointed out to him that the issue was that he had not exercised the option properly. Mr Hawkins said that was not correct as Mr Buda had not exchanged as he was going to amend the time in the Deed. Ms Hart then recorded: "I say he didn't pay [deposit] - he says it was only $50K - (we previously told him he had to pay deposit when exercising option)" Ms Hart also noted: "See my email re: dep."
The following communications then occurred between Mr Hawkins and his solicitors.
On 4 April 2011, Ms Mathieson made a diary note of a telephone attendance in which Mr Hawkins refuted Mr Buda's claim that he had not exercised the option in accordance with its terms. He contended that he had provided Mr Buda with a counterpart contract and "maintain[ed] vendor has received [deposit] by way of money already spent by Cummins on improving [property] which is in excess of $200,000".
On 5 April 2011 Ms Hart emailed Mr Hawkins enclosing a draft letter for his approval. She stated in the email: "Also the deposit on the front page of the Contract annexed to the Option Agreement is $1,400,000.00. I note you will have advised [Ms Mathieson] you have spent over $200,000.00 in improvements, however, this does not make up the deposit. Was there some other agreement in respect to the deposit with Bonaccorso? It may be necessary therefore to change the draft enclosed in this respect."
The draft letter was in the following terms: "We refer to your letter of 4th April, 2011 and have been instructed to reply as follows:- 1. Our client refutes your claim that the Option has not been exercised in accordance with the terms of the agreement. 2. Our client delivered to your office a counterpart Contract signed by J Cummins Pty Limited on 29th October, 2010. 3. The deposit has been paid by way of funds spent on property improvements which is in excess of $200,000.00. 4. Our client was advised by you that Contracts were exchanged and you further recommended a Caveat be registered against the property to protect its interests under the contract. Based on the above our client is of the view that the option was correctly exercised. Please submit the vendor's counterpart copy of the Contract to complete the exchange."
The letter that Ms Hart sent to Mr Buda was in materially the same terms as the draft except for a significant change made to para 3, which read: "The deposit has been paid by way of consideration spent on the property and improvements. We would also point out that our client agreed to increase the purchase price as per the calculations contained in the agreement for the specific purpose of enhancing your clients' capital gain on the property."
There was also added to para 4 a statement that a caveat had been registered on 9 November 2010.
Mr Buda responded on 6 April 2011, stating that he was waiting for instructions. However, he stated that "this office never advised that contracts were exchanged". MCW Lawyers responded on 12 April, contending that Mr Frank Bonaccorso had assured Mr Hawkins that "the agreement between our clients is binding as he has 'given his word'". Ms Hart requested that the counterpart contract be forwarded immediately and advised that if there was no response by the close of business that day, Cummins would have no alternative other than to issue a notice to complete.
Mr Buda's last communication was a letter dated 14 April 2011, in which he stated his instructions were that no deposit or completed counterpart contract had ever been received and, as such, special condition 4.1(b) and (c) had not been satisfied, and that special condition 4.3 required "strict compliance of" special condition 4.1 for a valid exercise of the option. Mr Buda also advised that Mr Gary Bonaccorso was now the solicitor for Bonaccorso.

Consideration

As Bonaccorso submitted, not once in any of the communications between Mr Hawkins and his solicitors did Mr Hawkins assert that credit in the sum of $1,400,000 million was to be given to Cummins in respect of the deposit having regard to improvements Mr Hawkins had made to the property. To the extent that any assertion of a credit was made, it was in respect of improvements of "more than $200,000", an assertion first made on 4 April 2011 and in respect of a sum, that even in its approximation, was far less than the amount of the deposit specified in the option. In some respects, this accords with evidence given in cross-examination by Gary Bonaccorso, who stated that Mr Hawkins "didn't even renovate the units because they were unfinished, so how could he justify an increase of 1.4 as a credit".
Further, Mr Hawkins on 1 April 2011 told Ms Hart the deposit was $50,000. In the course of seeking instructions, Ms Hart had specifically asked Mr Hawkins whether there was an arrangement outside the contract. Mr Hawkins did not assert to her that there was any such arrangement. Bonaccorso rightly placed emphasis on the communication between Ms Hart and Mr Hawkins on 1 April 2011, in that when Ms Mathieson raised the question of the requirements of the payment of the deposit, Mr Hawkins did not resist that advice or otherwise indicate that some other agreement had been reached.
Another aspect of the dealings between the parties that told against Mr Hawkins' version was that when the parties were renegotiating the terms of the second option, Mr Hawkins did not seek to have any amendment made to the deposit clause or to cl 4.1.
Thus, the diary notes and correspondence revealed that Cummins' solicitor raised with Mr Hawkins on at least four occasions that the deposit was required to be paid at the time of exchange, twice without demur from Mr Hawkins and once when he asserted the deposit was a different amount. The first occasion was 27 October, just before the option expired, when Ms Hart reminded him he was required to pay the deposit. She reminded him again on 3 November, just after the option expired. On 31 March 2011, Mr Hawkins acknowledged that a deposit was payable, but asserted it was in the sum of $50,000. The question of an arrangement outside the contract was specifically raised with him on 1 April 2011. Mr Hawkins did not assert at that time that there was any such arrangement. The first time he contended that there was to be a credit for the deposit was 4 April 2011.
To the extent that Cummins relied upon the irrationality of entering into an agreement in which the price of the property had increased significantly in a short period of time, the evidence of Mr Gary Bonaccorso, that Mr Hawkins had a developer interested in the property at $7-8 million was to the contrary.
Having regard to this evidence, his Honour was justified in not accepting Mr Hawkins' evidence of an arrangement outside the formal contract documents. Indeed, as his Honour remarked, at [103], the communications between Mr Hawkins and Cummins' solicitors, and between the solicitors for each of the parties, "provide[d] no support whatsoever for Mr Hawkins' account".
There was also the absence of any documentary evidence supporting his version. In particular, Mr Hawkins' evidence that he had complained to MCW Lawyers that the contract documentation provided by Mr Buda did not reflect the agreement as to the deposit, was not reflected in the diary notes of Ms Hart or Ms Mathieson. Given the apparent care with which the diary notes were kept, this would have been a most surprising omission. His Honour's rejection of this aspect of Mr Hawkins' evidence was also well based. His Honour catalogued other matters that cast grave doubt on Mr Hawkins' version of events: see especially at [105]-[106].

At a glance

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Before

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Judgment (5 paragraphs)

Parties

Cases Cited (6)